The Foundations of European Private Law 9781472560995, 9781849460651

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General Introduction and Acknowledgements The chapters in this collection were first presented in preliminary form at a conference that took place at the European University Institute, Florence, in September 2009, and have been developed subsequently in the light of the discussions conducted in Florence for the purposes of publication in this book. The book’s key assumption is that there remains an urgent need for a deeper discussion of the theoretical, political, federal and enforcement dimensions of the European private law project. While much valuable work has already been undertaken, the chapters in this volume take as their starting point the proposition that further reflection and critical thought will enhance the quality and efficacy of the ongoing work of the various bodies involved in harmonisation. The volume contains contributions by those intimately involved in the preparation of the ‘Common Frame of Reference’, the Study Group, and the Acquis Group as well as chapters by those who have not been involved in particular projects but who have previously commented more distantly on their work—for instance those belonging to the Trento Group and the Social Justice Group. The chapters between them represent the most comprehensive attempt so far to survey the state of the harmonisation project, its theoretical, political, federal foundations and the future prospects for enforcement and compliance. We thought that an inquiry into the foundations of European private law could be effectively undertaken by focusing on four distinct yet interrelated dimensions: the theoretical, political, federal and enforcement. Each part of the book is preceded by an editorial that introduces the reader to the relevant chapters and their interrelationships. References and individual introductions emphasise interrelationships between the four dimensions. The chapters in Part One of the collection address the theoretical foundations of European private law, with the DCFR acting as a facilitating focal point for such reflections. One of the recurring themes of the papers is that the DCFR (whatever its nature as a toolbox or as an ostensible restatement of the law) is, in various ways, problematic. For example, it is argued that private law initiatives need to be set in the context of the cultivation of a common European culture; or that they should be seen as responding to the global financial crisis, or to the need to re-regulate the market; or that they need to be sensitive to the context-dependence of contractual and tortious disputes, as well as to the difference between juridical and instrumentalist legal rationalities; or that they must be linked to a deeper understanding of private ordering and autonomy. In this light, it is arguable that the root problem with the DCFR is that it proceeds on the assumption that the theoretical foundations of private law are stable and well understood when it is precisely these foundations that need to be examined and reconstructed. The chapter contributions in Part Two address the problematic character of European private law in relation to its political foundations. They offer a map towards an understanding of what one may construe as European private

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vi General Introduction and Acknowledgements law’s political foundations. The contributions offer a variety of perspectives that range from direct to indirect ways in which to engage with the political dimension, including analyses of the relevance of the East–West interface and of the complex role of ‘methodology’ in constructing European texts. The contributions to the federal/multi-level part (Part Three) take as their starting point that the shaping of private law in Europe is driven by a plurality of sources, binding and non-binding, legislation and case law. The special thematic concern animating the chapters in this section is the rise of sources and influences beyond the state—most conspicuously but not exclusively the European Union. The chapters explore the constitutional, institutional and intellectual devices that serve and should serve to frame the interaction of these several sources and influences. The contributions to the enforcement part (Part Four) are united in the idea to develop a common perspective on substance and procedure, on substantive and procedural justice, on public and private enforcement in private law as a means of market regulation, on procedural barriers in national law and whether and how they could be overcome through appropriate means of ADR and collective enforcement. The chapters underline the need for even deeper theoretical reflections on the relationship between the substance of European private law and appropriate enforcement and compliance mechanisms in light of empirical research. The editors gratefully acknowledge the generous support of the Modern Law Review in relation to the conference from which these chapters are drawn. The editors would also like to thank the European University Institute, Florence, for generously co-financing the conference; and Marlies Becker and Magdalena Bober for their administrative support.

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List of Contributors GUIDO ALPA, Professor, University of Rome La Sapienza, President of the Italian Bar Council. ROGER BROWNSWORD, Professor of Law, King’s College London and Honorary Professor in Law at the University of Sheffield. HUGH COLLINS, Professor of English Law, London School of Economics. BÉNÉDICTE FAUVARQUE-COSSON, Professor, University Panthéon-Assas, Paris II. JUAN-JOSÉ GANUZA, Professor of Economics, Universitat Pompeu Fabra, Barcelona, Spain. FERNANDO GOMEZ, Professor of Law and Economics, Universitat Pompeu Fabra, Barcelona, Spain. MARTIN GRAMATIKOV, Senior Researcher, TISCO (Tilburg Institute for Interdisciplinary Studies of Civil Law and Conflict Resolution Systems), Tilburg University. DANIEL HALBERSTAM, Eric Stein Collegiate Professor of Law and Director, European Legal Studies Program, University of Michigan Law School and Professor of Law, European Legal Studies Department, College of Europe, Bruges. MARTIJN W HESSELINK, Professor of European Private Law and Director of the Centre for the Study of European Private Law at the University of Amsterdam. CHRISTOPHER HODGES is Head of the CMS Research Programme on Civil Justice Systems at the Centre for Socio-Legal Studies, University of Oxford, and Erasmus Professor of the Fundamentals of Private Law at Erasmus University, Rotterdam. He is a solicitor (non-practicing), Chairman of the Pharmaceutical Services Negotiating Committee (2008–2011), and a director of the UK Research Integrity Office. EWOUD HONDIUS, Professor of Law, Utrecht University. NILS JANSEN, Professor of Legal History European Private Law and Director in the Institute for Legal History at the University of Münster. DUNCAN KENNEDY, Carter Professor of General Jurisprudence at Harvard Law School. KÅRE LILLEHOLT, Professor, Department of Private Law, University of Oslo. JOHAN LINDHOLM LL.D., Senior Lecturer in Law, Umeå University. BRIGITTA LURGER, Professor of Private Law and European Law, Karl-FranzensUniversity of Graz, Faculty of Law.

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xii List of Contributors MARCO LOOS, Professor of Private Law, in particular of European consumer law, and associated with the Centre for the Study of European Private Law at the University of Amsterdam. RALF MICHAELS, Professor of Law, Duke University School of Law. HANS-W MICKLITZ, Professor for Economic Law at the European University Institute, Professor für Privat- und Wirtschaftsrecht an der Universität Bamberg. LEONE NIGLIA, Reader/Associate Professor of Law and Director of Centre for European Legal Studies, School of Law, University of Exeter. NORBERT REICH, Professor Dr D hc, Emeritus, Universität Bremen; Braudel Senior Research Fellow, EUI, January–May 2009. MATHIAS REIMANN, Hessel E Yntema Professor of Law, University of Michigan Law School, Editor-in-Chief, American Journal of Comparative Law. MAREK SAFJAN, Judge at the Court of Justice of the European Union, Professor at the University of Warsaw, Poland. HANS SCHULTE-NÖLKE, Professor of Law and Director of the European Legal Studies Institute Osnabrück, Germany; Member of the Expert Group on European Contract Law established by the European Commission. REINER SCHULZE, Professor of German and European Civil Law at the University of Münster; Director of the Centre for European Private Law (CEP), Münster, Germany. JAN M SMITS, Professor of European Private Law and Comparative Law, Tilburg University (TICOM) and Research Professor of Comparative Legal Studies, University of Helsinki (Centre of Excellence on Foundations of European Law and Polity). MATTHIAS E STORME, Professor of Civil and Commercial Law, Civil Procedure and Comparative Law at the KU Leuven, member of the Brussels Bar. JULES STUYCK, Professor of law, KU Leuven (Belgium), RU Nijmegen (the Netherlands), visiting Professor Central European University Budapest and Université Panthéon-Assas Paris 2; partner Liedekerke, Brussels. LUBOS TICHÝ, Professor of European Law, Chair of Centre of Comparative Law, Faculty of Law, Charles University in Prague. IANIKA TZANKOVA, Professor of Comparative Mass Claim Litigation at Tilburg University, Tilburg Institute for Interdisciplinary Studies Civil Law and Conflict Resolution Systems (TISCO). WALTER VAN GERVEN, Emeritus Professor KU Leuven, University of Maastricht, University ofTilburg, King’s College London. PAUL VARUL, Professor of Civil Law, University of Tartu. STEPHEN WEATHERILL, Jacques Delors Professor of European Law. He also serves as Deputy Director for European Law in the Institute of European and Comparative Law, and is a Fellow of Somerville College.

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ANETA WIEWIÓROWSKA-DOMAGALSKA, PhD candidate, Utrecht University. FRYDERYK ZOLL, Professor for European and Polish Private Law and Comparative Law at the University of Osnabrück and Professor of Civil Law at the Jagiellonen-University Krakow, Poland.

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Table of Cases European Union Court of Justice Alphabetical Order Alliance for Natural Health Joined Cases C-154/04 and 155/04 [2005] ECR I-6451 .... 310 Alsthom Atlantique SA v Compagnie de construction mécanique Sulzer SA Case C-339/89 [1991] ECR I-107 ............................................................................ 155, 522 Amministrazione delle Finanze dello Stato v Ariete SpA Case 811/79 [1980] ECR 2545......................................................................................................................... 478 Amministrazione delle Finanze dello Stato v Denkavit Italiana Srl Case 61/79 [1980] ECR 1205 ................................................................................................................ 478 Amministrazione delle Finanze dello Stato v SaS MIRECO Case 826/79 [1980] ECR 2559......................................................................................................................... 478 Amministrazione delle Finanze dello Stato v SpA San Giorgio Case 199/82 [1983] ECR 3595 ................................................................................................................ 474 Amministrazione dell’Economia e delle Finanze and Agenzia delle entrate v Fallimento Olimpiclub Srl Case C-2/08 [2009] ECR I-9047 ............................................. 476, 482 AMOK Verlags GmbH v A & R Gastronomie GmbH Case C-289/02 [2003] ECR I-15059 .................................................................................................................... 502 Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing Ltd Case C-253/00 [2002] ECR I-7289.................................... 475 Arnold André GmbH & Co KG v Landrat des Kreises Herford, Case C-434/02 [2004] ECR I-11825.............................................................................................................. 75 Asturcom Telecomunicaciones SL v Maria Cristina Rodríguez Nogueira, 6 October 2009 Case C-40/08 [nyr] ................................................................................... 62, 522 Audiolux SA and Others v Groupe Bruxelles Lambert SA (GBL) and Others, Bertelsmann AG and Others,15 October 2009 Case C-101/08 [nyr] ............................................. 62 Barra v Belgium and City of Liége Case 309/85 [1988] ECR 355.................................. 478 Bayerische Hypotheken und Wechselbank v Dietzinger ECR Case C-45/96 [1998] I-1199 .............................................................................................................. 149, 313 Brasserie du Pêcheur Joined Cases C-46 and C-48/93 [1996] ECR I-1029..................... 524 Caja de Ahorros y Monte de Piedad de Madrid v Asocación de Usuarios de servicios bancarios (Ausbanc) Case C-484/08 [2010] ECR I.................................................. 239 Carpenter v Secretary of State for the Home Department Case C-60/00 [2002] ECR I-6279 ...................................................................................................................... 480 CMC Motorrad-center v Pelin Baskiciogullari Case C-93/92 [1993] ECR I-5009.......... 522 Cofidis Case C-473/00 [2002] ECR I-10875 .................................................................. 522 Comet BV v Produktschap voor Siergewassen Case 45/76 [1976] ECR 2043....... 447, 471, 517 Commission v Austria Case C-320/03 [2007] ECR I-7929/11665/3593......................... 580 Commission v Belgium Case C-471/98 [2002] ECR I-9681 ........................................... 577 Commission v Council of the European Union Case C-176/03 [2007] ECR I-7879 ...... 580 Commission v France Case C-381/93 [1994] ECR I-5145.............................................. 243 Commission v Germany Case C-503/04 [2007] ECR I-6153 ................................. 580, 582 Commission v Germany Joined Cases C-20/01 and C-28/01 [2003] ECR I-3609 .......... 577 Commission v Ireland Case C-494/01 [2005] ECR I-331 ............................................... 582 Concordia Bus Finland Case C-513/99 [2002] ECR I-7213 ........................................... 350

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Costa v ENEL Case 6/64 [1964] ECR 585 ....................................................... 339–41, 496 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others Case C-453/99 [2001] ECR I-6297......................... 453, 462, 476, 521, 524, 536, 567, 574 Crailsheimer Volksbank Case C-229/04 [2005] ECJ I-9293 ........................................... 232 Criminal Proceedings against Joachim Steffensen Case C-276/01 [2003] ECR I-3735................................................................................................................... 480–1 Data Delecta Aktiebolag and Ronny Forsberg v MSL Dynamics Ltd Case C-43/95 [1996] ECR I-4661.............................................................................................................. 480 Dynamik Medien Vertriebs GmbH v Avides Media AG Case C-244/06 [2008] ECR I-505 ........................................................................................................................ 246 Eco Swiss China Time Ltd v Benetton Interanational NV Case C-126/97 [1999] ECR I-3055 ...................................................................................................................... 482 Edlizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze Case C-231/96 [1998] ECR I-4951 .................................................................................................. 481 Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassen Case C-177/88 [1990] ECR I-3941.......................................................................... 469 Elliniki Radiophonia Tiléorassi AE (ERT) et al v Dimotiki Etairia Pliroforissis et al Case C-260/89 [1991] ECR I-2925 .................................................................................. 480 Erich Gasse GmbH v MISAT Srl Case C-116/02 [2003] ECR I-14693 .......................... 406 Eschig v Uniqa Case C-199/08 [2009] ECR I-8295 ........................................................ 526 EVN AG and Wienstrom GmbH v Austria Case C-448/01 [2003] ECR I-14527 .......... 350 Express Dairy Foods v Intervention Board for Agricultural Produce Case 130/79 [1980] ECR 1887 ................................................................................................................ 478 Faccini Dori Case C-91/92 [1994] ECR I-3325 .............................................................. 522 Fantask A/S et al v Industriministeriet Case C-188/95 [1997] ECR I-6783 .................... 479 Feryn v Centrum voor Gelijkheid van Kansen Case C-54/07 [2008] ECR I-05187........ 525 FIAMM and FIAMM Technologies v Council and Commission, 9 September 2009 Joined Cases C-120/06 P and C-121/06 P [nyr]......................................................... 62 FII Group Litigation (Test Claimants) v Commissioners of Inland Revenue Case C-446/04 [2006] ECR I-11753 ................................................................................ 447 Francovich and Others Joined Cases C-6/90 and C-9/90 [1991] ECR I-535 .................. 524 Freiburger Kommunalbauten GmbH Baugesellschaft & Co KG v Ludger Hofstetter and Ulrike Hofstetter Case C-237/02 [2004] ECR I-3403........................... 312, 522–3 Germany v EP and Council Case C-376/98 [2000] ECR I-8419 ............................ 310, 515 Germany v EP and Council Case C-380/03 [2006] ECR I-11573 .................................. 515 Grundig Italiana SpA v Ministero delle Finanze (No 2) Case C-255/00 [2002] ECR I-8003 ...................................................................................................................... 478 Gysbrechts Case C-207/07 [2008] ECR I-9949 .............................................................. 239 Haahr Petroleum Ltd v Åbenrå Havn et al Case C-90/94 [1997] ECR I-4085............... 479 Hamilton v Volksbank Filder eG Case C-412/06 [2008] ECR I-02383............ 61, 231, 299 Hans Just I/S v Danish Ministry for Fiscal Affairs Case 68/79 [1980] ECR 501............ 478 Hayes & Hayes v Kronenberger GmbH Case C-323/95 [1997] ECR I-1711 ................. 480 Heininger & Heininger v Bayrische Hypo-und Vereinsbank Case C-481/99 [2001] ECR I -9945............................................................................................................. 230 Hoffmann v Krieg Case 145/86 [1988] ECR 645 ........................................................... 407 Impact v Minister for Agriculture and Food et al Case C-268/06 [2008] ECR I-2483 .............................................................................................................. 473, 475 International Transport Workers’ Federation (ITF) & Finnish Seamen’s Union (FSU) v Viking Line ABP & Oü Viking Line Eesti Case C-438/05 [2007] ECR I-10779 .... 183, 241–5, 247

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Internationale Handelsgesellschaft mbH v Einfuhr-und Vorratstelle für Getriede und Futtermittel Case 11/70 [1970] ECR 4537 .............................................................. 480 J Nold, Kohlen-und Baustoffgrosshandlung v Commission Case C-4/73 [1974] ECR I-491 ........................................................................................................................ 480 Janecek Case C-237/07 [2008] ECR I-6221.................................................................... 580 Jeroen van Schijndel and Johannes Nicolaas Cornelis van Veen v Stichting Pensioenfonds voor Fysiotherapeuten Joined Cases C-430 and 431/93 [1995] ECR I-4705.............................................................................................. 447, 472, 476, 482 Kadi and Al Barakaat Joined Cases C-402/05 P and C-415/05 P [2008] ECR I-6351 ... 342 Kapferer, Rosmarie v Schlank & Schick GmbH Case C-234/04 [2006] ECR I-2585 ..... 482 KB v The National Health Service Pensions Agency and the Secretary of State for Health Case C-117/01 [2004] ECR I-00541............................................................ 305 Köbler, Gerhardv Austria Case C-224/01 [2003] ECR I-10239...................... 235, 476, 482 Kühne & Heitz NV v Productschap voor Pluimvee en Eieren Case C-453/00 [2004] ECR I-837................................................................................................................ 476 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet Case C-341/05 [2007] ECR-I, 11767 .......................................................................... 183, 241, 243, 245, 247 Levez v T H Jennings (Harlow Pools) Ltd Case C-326/96 [1998] ECR I-7835...... 473, 481 Liga Portuguesa de Futebol Profissional and Baw International, 8 September 2009 Case C-42/07 [nyr]..................................................................................................... 62 Lindqvist Case C-101/01 [2003] ECR I-12971 ............................................................... 516 Manfredi et al v Lloyd Adriatico Assicurazioni SpA et al Joined Cases C-295–298/04 [2006] ECR I-6619 ......................................................... 476, 521, 524, 527, 567, 574 Mangold Case C-144/04 [2005] ECR I-9981 ................................................................. 387 Marleasing SA v La Comercial Internacional de Alimentacion SA Case C-106/89 [1990] ECR I-4135 .................................................................................................. 344 Marshall v Southhampton & South-West Hampshire Area Health Authority (no 2) Case C-271/91 [1993] ECR I-4367.......................................................................... 469 Martin, 17 December 2009 Case C-227/08 [nyr] ........................................................... 239 Masterfoods Ltd Case C-344/98 [2000] ECR I-11369 ................................................... 575 Mediaprint Zeitungs-und Zeitschriftenverlag of 9 November 2010 Case C-540/08 [nyr] ......................................................................................................................... 283 Messner Pia v Firma Stefan Krüger Case C-489/07 [2009] OJ C/265 ...................... 61, 299 Ministero dell’Industria, del Commercio e dell’Artigianato v Lucchini SpA Case C-119/05 [2007] ECR I-6199 .......................................................................... 476, 482 Mostaza Claro Case C-168/05 [2006] ECR I-10421 ........................ 64–5, 421, 522–3, 527 Nils Draehmpaehl v Urania Immobilienservice OHG Case C-180/95 [1997] ECR I-2195 ...................................................................................................................... 469 Océano Grupo Editorial SA v Roció Murciana Quintero (C-240/98); Salvat Editores SA v José M Sánchez Alcón Prades (C-241/98); José Luis Copano Badillo Joined Cases C-240/98 to C-244/98 [2000] ECR I-4941................................ 305, 522–3, 527 Omega Spielhallen-und Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn Case C-36/02 [2004] ECR I-9609................................ 62, 243, 342 Österreichischer Rundfunk and Others Joined Cases C-465/00, C-138/01 and C-139/01 [2003] ECR I-4989 .................................................................................................. 516 Owusu, Andrew v NB Jackson Case C-281/02 [2005] ECR I-1383............... 241, 350, 400 Pannon Case C-243/08 [2009] ECR I-4713.............................................. 64–5, 237, 522–3 Peterbroeck, Van Campenhout & Cie SCS v Belgium Case C-312/93 [1995] ECR I-4599 .............................................................................................................. 476, 482 Pfeiffer Cases C-397/01 to C-403/01 [2004] ECR I-8835............................................... 345 Plus Warenhandelsgesellschaft, 14 January 2010 Case C-304/08 [nyr]........................... 283

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Pontin v T-Comalux SA Case C-63/08 [2009] ECR I-10467 .............................. 469, 473–5 Poulsen Case C-286/90 [1992] ECR I-6019 ........................................................... 341, 344 Preston et al v Wolverhampton Healthcare NHS Trust et al Case C-78/98 [2000] ECR I-3201 ...................................................................................................................... 481 Pupino Maria Case C-105/03 [2005] ECR I-5285.................................................. 345, 347 Quelle v Bundesverband der Verbraucherzentralen Case C-404/06 [2008] ECR I-2685 ...................................................................................................................... 239 R (ex parte Helena Wells) v Secretary of State for Transport, Local Government and the Regions Case C-201/02 [2004] ECR I-723 .............................................................. 473 Republic of Italy v High Authority of the European Coal and Steal Community Case 20/59 [1960] ECR 325.................................................................................... 580 Rewe-Zentralfinanz eG & Rewe-Zentral AG v Landwirtschaftskammer für das Saarland Case 33/76 [1976] ECR 1989................................................... 447, 471, 473 Riccardo Prisco Srl v Amministrazione delle Finanze dello Stato and Ministero delle Finanze v CASER SpA Joined Cases C-219/99 and 222/99 [2002] ECR I-6761 ..... 481 Rosalba Palmisani v Istituto nazionale della previdenza sociale (INPS) Case C-261/95 [1997] ECR I-4025 .......................................................................................... 479, 481 Rubach Case C-344/08 [2009] ECR I-7033 ........................................................... 474, 480 Sabine Von Colson and Elisabeth Kamann v Land Nordrhein-Westfalen Case 14/83 [1984] ECR 1891 ................................................................................................................ 469 Saldanha & MTS Securities Corp v Hiross Holding AG Case C-122/96 [1997] ECR I-5325 ...................................................................................................................... 480 Schmidberger v Austria Case C-112/00 [2003] ECR I-5659........................................... 243 Schulte Case C-350/03 [2005] ECJ I-9215...................................................................... 232 Société thermale d’Eugénie-les-Bains v Ministère de l’Économie, des Finances et de l’Industrie Case C-277/05 [2007] ECR I-06415......................................................... 61 Society for the Protection of Unborn Children Ireland Ltd v Stephen Grogan et al Case C-159/90 [1991] ECR I-5685 .................................................................................. 480 Stauder, Erich v City of Ulm Case 29/69 [1969] ECR 419..................................... 305, 480 Swedish Match AB v Ministre de la Santé, Case C-210/03 [2004] ECR I-11893............. 75 Tele2 Telecommunications GmbH v Telekom-Control-Kommission Case C-426/05 [2008] ECR I-685 .................................................................................................... 476 Telekomunikacja Polska, 11 March 2010 Case C-522/08 [nyr]...................................... 283 Texaco A/S v Middelfart Havn et al and Olieselskabet Danmark v Trafikministeriet et al Joined Cases C-114 and 115/95 [1997] ECR I-4263....................................... 479 Traghetti del Mediterrano v Italian Rep Case C-173/03 [2006] ECR I-5177 ................. 235 Turner v Grovit Case C-159/02 [2004] ECR I-3565....................................................... 400 Unibet (London) Ltd et al v Justitiekanslern Case C-432/05 [2007] ECR I-2271........... 480 Unión de Pequeños Agricultores v Council Case C-50/00 [2002] ECR I-6677 ............... 480 Vereinigte Familiapress Zeitungsverlagsund vertriebs GmbH v Heinrich Bauer Verlag Case C-368/95 [1997] ECR I-3689.......................................................................... 480 Von Colson and Kamann Case 14/83 [1984] ECR 1891 ................................................ 344 VTB-VAB and Galatea Joined Cases C-261/07 and C-299/07 [2009] ECR I-2949 ........ 283 Weber’s Wine World Handels-GmbH et al v Abgabenberufungskommission Wien Case C-147/01 [2003] ECR I-11365 ........................................................................ 478, 481 Zwartveld Case C-2/88 [1990] ECR I-4405 .................................................................. 405 Case Number Order Case 20/59 Republic of Italy v High Authority of the European Coal and Steal Community [1960] ECR 325................................................................................... 580 Case 6/64 Flaminio Costa v ENEL [1964] ECR 585 ........................................ 339–41, 496 Case 29/69 Stauder, Erich v City of Ulm [1969] ECR 419..................................... 305, 480

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Case 11/70 Internationale Handelsgesellschaft mbH v Einfuhr-und Vorratstelle für Getriede und Futtermittel [1970] ECR 4537 ........................................................... 480 Case C-4/73 J Nold, Kohlen-und Baustoffgrosshandlung v Commission [1974] ECR I-491 ........................................................................................................................ 480 Case 33/76 Rewe-Zentralfinanz eG & Rewe-Zentral AG v Landwirtschaftskammer für das Saarland [1976] ECR 1989 ............................................................... 447, 471, 473 Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043....... 447, 471, 517 Case 61/79 Amministrazione delle Finanze dello Stato v Denkavit Italiana Srl [1980] ECR 1205 ................................................................................................................ 478 Case 68/79 Hans Just I/S v Danish Ministry for Fiscal Affairs [1980] ECR 501............ 478 Case 130/79 Express Dairy Foods v Intervention Board for Agricultural Produce [1980] ECR 1887 ................................................................................................................ 478 Case 811/79 Amministrazione delle Finanze dello Stato v Ariete SpA [1980] ECR 2545......................................................................................................................... 478 Case 826/79 Amministrazione delle Finanze dello Stato v SaS MIRECO [1980] ECR 2559......................................................................................................................... 478 Case 199/82 Amministrazione delle Finanze dello Stato v SpA San Giorgio [1983] ECR 3595 ................................................................................................................ 474 Case 14/83 Sabine Von Colson and Elisabeth Kamann v Land Nordrhein-Westfalen [1984] ECR 1891..................................................................................................... 469 Case 14/83 Von Colson and Kamann [1984] ECR 1891 ................................................ 344 Case 309/85 Barra v Belgium and City of Liége [1988] ECR 355.................................. 478 Case 145/86 Hoffmann v Krieg [1988] ECR 645 ........................................................... 407 Case C-2/88 Zwartveld [1990] ECR I-4405 ................................................................... 405 Case C-177/88 Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassen [1990] ECR I-3941 ........................................................................ 469 Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135 .................................................................................................. 344 Case C-260/89 Elliniki Radiophonia Tiléorassi AE (ERT) et al v Dimotiki Etairia Pliroforissis et al [1991] ECR I-2925....................................................................... 480 Case C-339/89 Alsthom Atlantique SA v Compagnie de construction mécanique Sulzer SA [1991] ECR I-107............................................................................ 155, 522 Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR I-535 .................. 524 Case C-159/90 Society for the Protection of Unborn Children Ireland Ltd v Stephen Grogan et al [1991] ECR I-5685 ............................................................................. 480 Case C-286/90 Poulsen [1992] ECR I-6019 ........................................................... 341, 344 Case C-271/91 Helen Marshall v Southhampton & South-West Hampshire Area Health Authority (no 2) [1993] ECR I-4367 ........................................................... 469 Case C-91/92 Faccini Dori [1994] ECR I-3325 .............................................................. 522 Case C-93/92 CMC Motorrad-center v Pelin Baskiciogullari [1993] ECR I-5009.......... 522 Joined Cases C-46 and C-48/93 Brasserie du Pêcheur [1996] ECR I-1029..................... 524 Joined Cases C-430 and 431/93 Jeroen van Schijndel and Johannes Nicolaas Cornelis van Veen v Stichting Pensioenfonds voor Fysiotherapeuten [1995] ECR I-4705 .... 447, 472, 476, 482 Case C-312/93 Peterbroeck, Van Campenhout & Cie SCS v Belgium [1995] ECR I-4599 .............................................................................................................. 476, 482 Case C-381/93 Commission v France [1994] ECR I-5145.............................................. 243 Case C-90/94 Haahr Petroleum Ltd v Åbenrå Havn et al [1997] ECR I-4085............... 479 Joined Cases C-114 and 115/95 Texaco A/S v Middelfart Havn et al and Olieselskabet Danmark v Trafikministeriet et al [1997] ECR I-4263 ............................................ 479

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Case C-43/95 Data Delecta Aktiebolag and Ronny Forsberg v MSL Dynamics Ltd [1996] ECR I-4661 .................................................................................................. 480 Case C-180/95 Nils Draehmpaehl v Urania Immobilienservice OHG [1997] ECR I-2195 ...................................................................................................................... 469 Case C-188/95 Fantask A/S et al v Industriministeriet [1997] ECR I-6783 .................... 479 Case C-261/95 Rosalba Palmisani v Istituto nazionale della previdenza sociale (INPS) [1997] ECR I-4025 .......................................................................................... 479, 481 Case C-323/95 Hayes & Hayes v Kronenberger GmbH [1997] ECR I-1711 ................. 480 Case C-368/95 Vereinigte Familiapress Zeitungsverlagsund vertriebs GmbH v Heinrich Bauer Verlag [1997] ECR I-3689 ............................................................................. 480 Case C-45/96 Bayerische Hypotheken und Wechselbank v Dietzinger ECR [1998] I-1199 .............................................................................................................. 149, 313 Case C-122/96 Saldanha & MTS Securities Corp v Hiross Holding AG [1997] ECR I-5325 ...................................................................................................................... 480 Case C-231/96 Edlizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze [1998] ECR I-4951.............................................................................................................. 481 Case C-326/96 Levez v T H Jennings (Harlow Pools) Ltd [1998] ECR I-7835...... 473, 481 Case C-126/97 Eco Swiss China Time Ltd v Benetton Interanational NV [1999] ECR I-3055 ...................................................................................................................... 482 Joined Cases C-240/98 to C-244/98 Océano Grupo Editorial SA v Roció Murciana Quintero (C-240/98); Salvat Editores SA v José M. Sánchez Alcón Prades (C-241/98); José Luis Copano Badillo (C-242/98) [2000] ECR I—04941.. 305, 522–3, 527 Case C-78/98 Preston et al v Wolverhampton Healthcare NHS Trust et al [2000] ECR I-3201 ...................................................................................................................... 481 Case C-344/98 Masterfoods Ltd [2000] ECR I-11369 ................................................... 575 Case C-376/98 Germany v EP and Council [2000] ECR I-8419 ............................ 310, 515 Case C-471/98 Commission v Belgium [2002] ECR I-9681 ........................................... 577 Joined Cases C-219/99 and 222/99 Riccardo Prisco Srl v Amministrazione delle Finanze dello Stato and Ministero delle Finanze v CASER SpA [2002] ECR I-6761............ 481 Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others [2001] ECR I-6297 ............................. 453, 462, 476, 521, 524, 536, 567, 574 Case C-481/99 Heininger & Heininger v Bayrische Hypo-und Vereinsbank [2001] ECR I -9945............................................................................................................. 230 Case C-513/99 Concordia Bus Finland [2002] ECR I-7213 ........................................... 350 Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others [2003] ECR I-4989 .................................................................................................. 516 Case C-50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I-6677 ............ 480 Case C-60/00 Mary Carpenter v Secretary of State for the Home Department [2002] ECR I-6279.............................................................................................................. 480 Case C-112/00 Schmidberger v Austria [2003] ECR I-5659........................................... 243 Case C-253/00 Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing Ltd [2002] ECR I-7289 ........................................... 475 Case C-255/00 Grundig Italiana SpA v Ministero delle Finanze (No 2) [2002] ECR I-8003 ...................................................................................................................... 478 Case C-453/00 Kühne & Heitz NV v Productschap voor Pluimvee en Eieren [2004] ECR I-837................................................................................................................ 476 Case C-473/00 Cofidis [2002] ECR I-10875 .................................................................. 522 Joined Cases C-20/01 and C- 28/01 Commission v Germany [2003] ECR I-3609......... 577 Case C-101/01 Lindqvist [2003] ECR I-12971 ............................................................... 516

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Case C-117/01 K.B. v The National Health Service Pensions Agency and the Secretary of State for Health [2004] ECR I-00541...................................................................... 305 Case C-147/01 Weber’s Wine World Handels-GmbH et al v Abgabenberufungskommission Wien [2003] ECR I-11365............................................................................... 478, 481 Case C-224/01 Köbler, Gerhardv Austria [2003] ECR I-10239...................... 235, 476, 482 Case C-276/01 Criminal Proceedings against Joachim Steffensen [2003] ECR I-3735................................................................................................................... 480–1 Joined Cases C-397/01 to C-403/01 Bernhard Pfeiffer [2004] ECR I-8835.................... 345 Case C-448/01 EVN AG and Wienstrom GmbH v Austria [2003] ECR I-14527 .......... 350 Case C-494/01 Commission v Ireland [2005] ECR I-331 ............................................... 582 Case C-36/02 Omega Spielhallen-und Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn [2004] ECR I-9609............... 62, 243, 342 Case C-116/02 Erich Gasse GmbH v MISAT Srl [2003] ECR I-14693 .......................... 406 Case C-159/02 Turner v Grovit [2004] ECR I-3565....................................................... 400 Case C-201/02 R (ex parte Helena Wells) v Secretary of State for Transport, Local Government and the Regions [2004] ECR I-723 ..................................................... 473 Case C-237/02 Freiburger Kommunalbauten GmbH Baugesellschaft & Co KG v Ludger Hofstetter and Ulrike Hofstetter [2004] ECR I-3403 .................................. 312, 522–3 Case C-281/02 Owusu, Andrew v NB Jackson [2005] ECR I-1383............... 241, 350, 400 Case C-289/02 AMOK Verlags GmbH v A & R Gastronomie GmbH [2003] ECR I-15059 .................................................................................................................... 502 Case C-434/02 Arnold André GmbH & Co KG v Landrat des Kreises Herford, [2004] ECR I-11825.............................................................................................................. 75 Case C-105/03 Pupino Maria [2005] ECR I-5285.................................................. 345, 347 Case C-173/03 Traghetti del Mediterrano v Italian Rep [2006] ECR I-5177 ................. 235 Case C-176/03 Commission v Council of the European Union [2007] ECR I-7879 ...... 580 Case C-210/03 Swedish Match AB v Ministre de la Santé, [2004] ECR I-11893............. 75 Case C-320/03 Commission v Austria [2007] ECR I-7929/11665/3593......................... 580 Case C-350/03 Schulte [2005] ECJ I-9215...................................................................... 232 Case C-380/03 Germany v EP and Council [2006] ECR I-11573 .................................. 515 Joined Cases C-154/04 and 155/04 Alliance for Natural Health [2005] ECR I-6451 .... 310 Joined Cases C-295–298/04 Manfredi et al v Lloyd Adriatico Assicurazioni SpA et al [2006] ECR I-6619 ......................................................... 476, 521, 524, 527, 567, 574 Case C-144/04 Mangold [2005] ECR I-9981 ................................................................. 387 Case C-229/04 Crailsheimer Volksbank [2005] ECJ I-9293 ........................................... 232 Case C-234/04 Kapferer, Rosmarie v Schlank & Schick GmbH [2006] ECR I-2585 ..... 482 Case C-446/04 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue [2006] ECR I-11753.................................................................................. 447 Case C-503/04 Commission v Germany [2007] ECR I-6153 ................................. 580, 582 Joined Cases C-402/05 P and C-415/05 P Kadi and Al Barakaat [2008] ECR I-6351 ... 342 Case C-119/05 Ministero dell’Industria, del Commercio e dell’Artigianato v Lucchini SpA [2007] ECR I-6199 .......................................................................................... 476, 482 Case C-168/05 Mostaza Claro [2006] ECR I-10421 ........................ 64–5, 421, 522–3, 527 Case C-277/05 Société thermale d’Eugénie-les-Bains v Ministère de l’Économie, des Finances et de l’Industrie [2007] ECR I-06415.......................................................... 61 Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet [2007] ECR-I, 11767 .......................................................................... 183, 241, 243, 245, 247 Case C-426/05 Tele2 Telecommunications GmbH v Telekom-Control-Kommission [2008] ECR I-685 .................................................................................................... 476 Case C-432/05 Unibet (London) Ltd et al v Justitiekanslern [2007] ECR I-2271........... 480

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Case C-438/05, The International Transport Workers’ Federation (ITF) & The Finnish Seamen’s Union (FSU) v Viking Line ABP & Oü Viking Line Eesti [2007] ECR I-10779 ................................................................................................ 183, 241–5, 247 Joined Cases C-120/06 P and C-121/06 P FIAMM and FIAMM Technologies v Council and Commission (ECJ 9 September 2009)................................................................. 62 Case C-244/06 Dynamik Medien Vertriebs GmbH v Avides Media AG [2008] ECR I-505 ........................................................................................................................ 246 Case C-268/06 Impact v Minister for Agriculture and Food et al [2008] ECR I-2483 .............................................................................................................. 473, 475 Case C-404/06 Quelle v Bundesverband der Verbraucherzentralen [2008] ECR I-2685 ...................................................................................................................... 239 Case C-412/06 Hamilton v Volksbank Filder eG [2008] ECR I-02383............ 61, 231, 299 Joined Cases C-261/07 and C-299/07 VTB-VAB and Galatea [2009] ECR I-2949 ........ 283 Case C-42/07 Liga Portuguesa de Futebol Profissional and Baw International (ECJ 8 September 2009) ........................................................................................................ 62 Case C-54/07 Feryn v Centrum voor Gelijkheid van Kansen [2008] ECR I-05187........ 525 Case C-207/07 Gysbrechts [2008] ECR I-9949 .............................................................. 239 Case C-237/07 Janecek [2008] ECR I-6221.................................................................... 580 Case C-489/07 Messner Pia v Firma Stefan Krüger [2009] OJ C/265 ...................... 61, 299 Case C-2/08 Amministrazione dell’Economia e delle Finanze and Agenzia delle entrate v Fallimento Olimpiclub Srl [2009] ECR I-9047 ................................. 476, 482 Case C-40/08 Asturcom Telecomunicaciones SL v Maria Cristina Rodríguez Nogueira (ECJ 6 October 2009)........................................................................................ 62, 522 Case C-63/08 Virginie Pontin v T-Comalux SA [2009] ECR I-10467................. 469, 473–5 Case C-101/08 Audiolux SA and Others v Groupe Bruxelles Lambert SA (GBL) and Others, Bertelsmann AG and Others (ECJ 15 October 2009) ................................... 62 Case C-199/08 Eschig v Uniqa [2009] ECR I-8295 ........................................................ 526 Case C-227/08 Martin, 17 December 2009 [nyr] ........................................................... 239 Case C-243/08 Pannon [2009] ECR I-4713.............................................. 64–5, 237, 522–3 Case C-304/08 Plus Warenhandelsgesellschaft, 14 January 2010 [nyr]........................... 283 Case C-344/08 Criminal Proceedings against Tomasz Rubach [2009] ECR I-7033....... 474, 480 Case C-484/08 Caja de Ahorros y Monte de Piedad de Madrid v Asocación de Usuarios de servicios bancarios (Ausbanc) [2010] ECR I ........................................ 239 Case C-522/08 Telekomunikacja Polska, 11 March 2010 [nyr]...................................... 283 Case C-540/08 Mediaprint Zeitungs-und Zeitschriftenverlag, 9 November 2010 [nyr] ........................................................................................................................ 283 General Court/Court of First Instance Case T-64/89 Automec I [1990] ECR II-367................................................................... 576 Case T-24/90 Automec II [1992] ECR II-2223 ............................................................... 576 Case T-2/03 Verein für Konsumenteninformation v European Commission [2005] ECR II-1121 ........................................................................................................... 575 Civil Service Tribunal Case F-65/07 Aayhan and Others v Parliament, 30 April 2009 [nyr]............................. 346 Case F-134/07 Adjemian and Others v Commission, 4 June 2009 [nyr] ........................ 346

International European Court of Human Rights Hornsby v Greece Series A no 69 (1997) 24 EHRR 250................................................ 403 von Hannover v Germany (2005) 40 EHRR 1 ............................................................... 293

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National Belgium Court of Cassation, 12 February 2003, Journal des Tribunaux 2003, 243 ................... 344 Germany BGH BGHZ 96, 302 .............................................................................................................. 43 BGHZ 106, 269 .......................................................................................................... 228 BGHZ 124, 254 .......................................................................................................... 238 BGHZ 137, 27 ............................................................................................................ 238 BGHZ 150, 248; NJW 2002, 1881............................................................................. 232 BGHZ 169, 109 .......................................................................................................... 235 IX ZR 56–95, NJW 1998, 2356 ................................................................................. 149 NJW 1991, 923 ........................................................................................................... 228 NJW 1991, 2015 ......................................................................................................... 228 NJW 2005, 971 ........................................................................................................... 229 NJW 2009, 2671 ......................................................................................................... 229 NJW 2010, 2789; VIII ZR 178/08 .............................................................................. 238 VI ZR 52/06 ................................................................................................................ 293 WM 2009, 1274.......................................................................................................... 235 XI ZR 104/08 of 29 June 2010, VuR 2010, 382 ........................................................ 235 BVerfG 2 BvE 2/08 of 30 June 2009................................................................................ 294, 386 BVerfGE 13, 58 ........................................................................................................... 398 BVerfGE 89, 214 ........................................................................................... 228, 312–13 NJW 1993, 3047 ......................................................................................................... 340 LG Hamburg WM 2009, 1363.......................................................................................................... 235 OLG Munich 2 June 1998 (1998) Recht der Internationalen Wirtschaft 631 .................................. 406 Italy Constitutional Court decision 349/2007 ...................................................................................................... 255 Poland Supreme Court 6 October 1953 ........................................................................................................... 24 July 1959................................................................................................................ 20 May 1978............................................................................................................... 30 December 1988 ..................................................................................................... United Kingdom Attorney General of Belize v Belize Telecom Limited [2009] UKPC 11 .......................... Director General of Fair Trading v First National Bank [2001] UKHL 52; [2002] 1 AC 481 ......................................................................................................... 183, Heydon’s Case (1584) 76 ER 637................................................................................... Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98..............................................................................................................

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Office of Fair Trading v Abbey National et al [2009] UKSC 6 (on appeal from [2009] EWCA Civ 116)............................................................................................... 167, 236 Transfield Shipping v Mercator Shipping Inc [2008] UKHL 48 .................................... 168 United States Babcock v Jackson [1970], 191 NE 2d279 ..................................................................... Dennis v US 182 F 2d 201 (2d Cir 1950)............................................................... 202, Hodel 505 US 144 (1992)............................................................................................... Hudson County Water v McCarter 209 US 349 (1909) ................................................. Leegin Creative Leather Products, Inc v PSKS 127 SCt 2705 (2007).............................. Planned parenthood of Southeastern Pa v Casey 505 US 833 (1992)............................. Printz v United States 521 US 898 (1997) ...................................................................... Shady Grove Orthopedic Associates, PA v Allstate Insurance (2010) Co 130 SCt 1431......................................................................................................................... Southern Pacific Co v Jensen 244 US 205, 222 (1917)................................................... Swift v Tyson 41 US 1 (1842)................................................................................. 151, Tarasoff v Regents of the University of California 551 P 2d 334 (1976) ............... 209, Tompkins v Erie Railroad (1937) 304 US 64.................................................................. US v Aluminum Co of America 148 F 2d 416 (2d Cir 1945)......................................... US v Carroll Towing Co 159 F 2d 169 (2d Cir 1947)....................................................

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Table of Legislation and Preparatory Instruments European Union Legislation Amsterdam Treaty ........................................................................................................ 471 Brussels Convention Art 2 .......................................................................................................................... 350 Charter of Fundamental Rights of the European Union [2007] OJ C303/01 ... 254–5, 480 Art 28 ........................................................................................................................ 246 Arts 47–50 ................................................................................................................ 480 Art 52 ........................................................................................................................ 342 Art I-2 ....................................................................................................................... 256 Art I-3 ....................................................................................................................... 256 Art II-63 .................................................................................................................... 256 Art II-67 .................................................................................................................... 256 Art II-68 .................................................................................................................... 256 Art II-95 .................................................................................................................... 256 Art II-98 .................................................................................................................... 256 Decision 2001/470 2001/470/EC establishing a European Judicial Network in civil and commercial matters [2001] OJ L174/25 ................................................................ 448 Decision 2002/1513 No 1513/2002/EC concerning the sixth framework programme of the European Community for research, technological development and demonstration activities OJ L232/1 (29 August 2002) ............................................ 74 Decision 2009/568 No 568/2009/EC of the European Parliament and of the Council of 18 June 2009 amending Council Decision (EC) 2001/470/EC establishing a European Judicial Network in civil and commercial matters [2009] OJ L168/35 ................. 448 Decision 2010/233 2010/233/EU setting up the Expert Group on a Common Frame of Reference in the area of European Contract Law [2010] OJ L105/109 ................ 141 Directive 76/207/EEC on the implementation of the principle of equal treatment of men and women as regards access to employment, vocational training and promotion and working conditions [1976] OJ L39/40 ........................................................... 474 Art 6 .......................................................................................................................... 469 Directive 78/855/EEC concerning mergers of public limited liability companies [1978] OJ L295/36 ............................................................................................................ 401 Directive 85/374/EEC concerning liability for defective products [1985] OJ L/307/54 .................................................................................................. 402, 573 Art 10 ........................................................................................................................ 469 Directive 85/577/EEC to protect the consumer in respect of contracts negotiated away from business premises [1985] OJ L372/31 ................ 87, 90, 93, 231–2, 234–5, 402 Directive 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents [1986] OJ L382/17 ................................... 301, 402 Directive 87/102/EEC for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit [1987] OJ L42/48 ....................................................................................... 93, 111, 233, 267 Art 11(2) ................................................................................................................... 233

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Directive 87/344/EEC relating to legal expenses insurance [1987] OJ L 185/77, Art 4(1)(a) ............................................................................................................. 526 Directive 88/357/EEC relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC [1988] OJ L172/1 ....................................... 402 Directive 89/104/EEC relating to trade marks [1989] OJ L40/1 .................................. 402 Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts [1989] OJ L395/33 .............. 518 Art 1 .................................................................................................................... 518–19 Directive 89/666/EEC concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State [1989] OJ L395/36 .......................................................................... 402 Directive 90/314/EEC on package travel, package holidays and package tours (Package Travel Directive) [1990] OJ L158/59 .............................................................. 90, 402 Directive 90/434/EEC on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States [1990] OJ L225/1 ........................................................... 402 Directive 92/49/EEC relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive) [1992] OJ L228/1 .................................................................................................. 402 Directive 92/59/EEC on product safety [2002] OJ L11/4 ......................................... 572–3 Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding [2009] OJ L348/1 .................. 474 Directive 93/7/EEC on the return of cultural objects unlawfully removed from the territory of a Member State [1993] OJ L74 .......................................................... 402 Directive 93/13/EEC on unfair terms in consumer contracts [1993] OJ L95/29 ..... 87, 90, 93, 236–40, 268, 301, 402, 518, 522 Art 3(2) ..................................................................................................................... 239 Art 4(2) ............................................................................................................... 236–40 Art 6 ................................................................................................................. 469, 523 Art 7 .......................................................................................................................... 469 Directive 94/47/EC on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis [1994] OJ L280/83 ......................................................... 90, 268, 402 Directive 96/71/EC concerning the posting of workers in the framework of the provision of services [1996] OJ L18/1 ................................................................................... 402 Directive 97/5/EC on cross-border credit transfers [1997] OJ L43/25 .......................... 402 Directive 97/7/EC on the protection of consumers in respect of distance contracts [1997] OJ L144/19 ................................................................ 87, 90, 93, 268, 402, 500, 502 Art 4(1)(a) ................................................................................................................. 500 Directive 97/80/EC of 15 December 1997 on the burden of proof in cases of discrimination based on sex [1998] OJ L14/6, Art 4 ............................................ 469 Directive 97/80/EC on the burden of proof in cases of discrimination based on sex [1998] OJ L14/6 .................................................................................................... 469 Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers [1998] OJ L80/27 .......................................................... 90, 517 Directive 98/26/EC on settlement finality in payment and securities settlement system [1998] OJ L166/45 ................................................................................................ 402

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Directive 98/27/EC on injunctions for the protection of consumers’ interests [1998] OJ L166/51 ............................................................ 90, 402, 521, 527, 567, 569, 573 Art 2 .......................................................................................................................... 521 Art 3 .......................................................................................................................... 521 Art 4 .......................................................................................................................... 521 Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations [1998] OJ L204/37 ........................... 402 Directive 1999/34/EC amending Council Directive 85/374/EEC concerning liability for defective products [1999] OJ L283/20 .................................................................. 402 Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L 171/12 ......... 87, 90, 93, 268, 493, 499, 518, 535, 539, 571 Art 2(4) ..................................................................................................................... 571 Art 5 .......................................................................................................................... 469 Art 5(3) ..................................................................................................................... 498 Directive 1999/70/EC concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP [1999] OJ L175/43 ................................ 346 Directive 1999/93/EC on a Community framework for electronic signatures [1999] OJ L13/12 .............................................................................................................. 402 Directive 2000/31/EC on certain legal aspects of information society services in particular electronic commerce in the Internal Market (Directive on electronic commerce) [2000] OJ L178/1 ............................................................................ 402 in particular electronic commerce, on certain legal aspects of information society services, in particular electronic commerce, Art 11(2) ......................................... 54 Directive 2000/35/EC on combating late payment in commercial transactions [2000] OJ L200/35 ............................................................................................................ 402 Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin [2000] OJ L180/22 ..................................... 525 Art 8 .......................................................................................................................... 469 Arts 17 and 18 .......................................................................................................... 526 Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation [2000] OJ L303/16 .......................................... 514, 525 Directive 2001/17/EC on the reorganisation and winding-up of insurance undertakings [2001] OJ L110/28 ................................................................................................ 402 Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees [2001] OJ L294/22 ............................................ 402 Directive 2001/95/EC on general product safety [2002] OJ L11/4 ................... 447, 572–3 Directive 2002/8/EC to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid for such disputes [2003] OJ L26/41 .................................................................................................. 402 Directive 2002/47/EC on financial collateral arrangements [2002] OJ L168/43 ....... 355–6 Directive 2002/65/EC concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC [2002] OJ L271/16 .............................................................................. 93, 267–8, 402 Directive 2002/83/EC concerning life assurance [2002] OJ L345/1 .............................. 402 Directive 2003/72/EC supplementing the Statute for a European Cooperative Society with regard to the involvement of employees [2003] OJ L207/25 ........................ 402 Directive 2003/88 concerning certain aspects of the organisation of working time [2003] OJ L229/9 .................................................................................................. 458 Art 18 ........................................................................................................................ 458 Directive 2004/25/EC on takeover bids [2004] OJ L142/12 ......................................... 402

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Directive 2004/35/EC on environmental liability with regard to the prevention and remedying of environmental damage [2004] OJ L143/56 ..................................... 580 Art 10 ........................................................................................................................ 469 Directive 2004/39/EC on markets in financial instruments [2004] OJ L145/1 ..... 111, 564 Directive 2004/48/EC on the enforcement of intellectual property rights [2004] OJ L157/32, L195/16 .................................................................................................. 499 Directive 2004/113/EC implementing the principle of equal treatment between men and women in the access to and supply of goods and services [2004] OJ L373/37 ................................................................................................... 514, 525 Art 8 ...................................................................................................................... 525–6 Directive 2005/14/EC amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and Directive 2000/26/EC [2000] OJ L181/65 relating to insurance against civil liability in respect of the use of motor vehicles [2005] OJ L149/14 ............................................................................................................ 402 Directive 2005/29/EC oncerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC and Regulation (EC) 2006/2004 [2005] OJ L149/22 ..................................................................... 93, 106, 350, 456, 520, 522 Art 5(3) ..................................................................................................................... 106 Art 11 ........................................................................................................................ 520 Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast) [2006] OJ L204/23 ................................................................................ 525–6 Directive 2006/114/EC concerning misleading and comparative advertising (codified version) [2006] OJ L376/22 .................................................................................. 350 Directive 2006/123/EC on services in the internal market [2006] OJ L376/36 ............ 111 Directive 2007/64/EC on payment services in the internal market [2007] OJ L319/1 .............................................................................................................. 111 Directive 2007/66/EC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31 ........................ 518–19 Art 2a ........................................................................................................................ 519 Directive 2008/48/EC on credit agreements for consumers and repealing Council Directive 87/102/EEC [2008] OJ L133/66 .................. 93, 111, 233–4, 267–8, 355–6 Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters [2008] OJ L136/3 .................................................................................................. 449 Directive 2008/122/EC on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts [2009] OJ L33/10 ....................................................................................................... 93, 268 Directive 2009/22/EC on injunctions for the protection of consumers’ interests (Codified version) [2009] OJ L110/3 .................................................... 460, 521, 527 Directive 2009/72/EC concerning common rules for the internal market in electricity (Electricity Market Directive) [2009] OJ L211/55 ................................................. 564 Directive 2009/73/EC concerning common rules for the internal market in natural gas (Gas Market Directive) [2009] OJ L211/94 .......................................................... 564 Directive 2009/136/EC on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive) [2009] OJ L377/11 ................................................................................................................. 564 EC Treaty (former) ....................................................................................................... 514 Art 5(2) ..................................................................................................................... 447 Art 10 ............................................................................................................... 246, 347 Art 30 ........................................................................................................................ 405

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Art 43 ........................................................................................................................ 242 Art 49 ........................................................................................................................ 242 Art 65 ................................................................................................... 401, 470–1, 516 Art 67 ........................................................................................................................ 527 Art 81 ............................................................................. 518–19, 522, 524–5, 575, 587 Art 81(3) ................................................................................................................... 519 Art 82 ............................................................................. 518–19, 522, 524–5, 575, 587 Art 85(1) ................................................................................................................... 575 Art 95 ............................................................................................................... 515, 527 Art 149(4) ................................................................................................................. 343 Art 150(4) ................................................................................................................. 343 Art 151(4) ................................................................................................................. 343 Art 152 ...................................................................................................................... 517 Art 152(4) ................................................................................................................. 343 Art 153 ............................................................................................................. 256, 516 Art 153(3)(b) ....................................................................................................... 516–17 Art 153(5) ................................................................................................................. 517 Art 228 ..................................................................................................... 577, 580, 588 Art 230(4) ................................................................................................................. 580 Art 234 ...................................................................................................................... 519 Art 234(3) ................................................................................................................. 237 Art 288(2) ................................................................................................................. 342 Regulation 17/62 .......................................................................................................... 519 Regulation (EEC) 2137/85 on the European Economic Interest Grouping (EEIG) [1985] OJ L199/1 .................................................................................................. 401 Regulation (EEC) 3921/91 laying down the conditions under which non-resident carriers may transport goods or passengers by inland waterway within a Member State [1991] OJ L373/1 ......................................................................................... 401 Regulation (EEC) 684/92 on common rules for the international carriage of passengers by coach and bus [1992] OJ L74/1 ....................................................................... 401 Regulation (EEC) 881/92 on access to the market in the carriage of goods by road within the Community to or from the territory of a Member State of passing across the territory of one or more Member States [1992] OJ L95/1 .............................. 401 Regulation (EEC) 3577/92 applying the principle of freedom to provide sevices to maritime transport within Member States (maritime cabotage) [1992] OJ L364/7 .............................................................................................................. 401 Regulation (EEC) 3911/92 on the export of cultural goods [1992] OJ L395/1 ............ 401 Regulation (EEC) 3118/93 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State [1993] OJ L279/1 .............................................................................................................. 401 Regulation (EC) 3288/1994 amending Regulation (EC) No 40/94 on the Community trade mark for the implementation of the agreements concluded in the framework of the Uruguay Round [1994] OJ L349/83 ................................................................ 401 Regulation (EC) 2868/1995 implementing Council Regulation (EC) No 40/94 on the Community trade mark [1995] OJ L303/1 ............................................................ 401 Regulation (EC) 1346/2000 on insolvency proceedings [2000] OJ L160/1 .......... 401, 449 Regulation (EC) 1348/2000 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters [2000] OJ L160/37 ........ 401, 406, 449

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Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) [2001] OJ L12/1 ......... 401–2, 404–5, 449, 470, 500–1, 504, 511, 518, 529, 551 Art 1 .......................................................................................................................... 402 Art 2 .......................................................................................................................... 241 Art 4(2) ..................................................................................................................... 402 Arts 15–17 ................................................................................................................ 502 Art 15(1) ................................................................................................................... 500 Art 16(1) and (2) ....................................................................................................... 501 Art 16(2) ................................................................................................................... 503 Art 22(1) ................................................................................................................... 501 Regulation (EC) 1049/2001 regarding public access to European Parliament, Council and Commission documents [2001] OJ L145/43 .................................................. 590 Regulation (EC) 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters [2001] OJ L174/1 ............................................................................................. 401, 449, 470 Regulation (EC) 2157/2001 on the Statute for a European Company (SE) [2001] OJ L294/1 ..................................................................................................... 301, 401 Regulation (EC) 2560/2001 on cross-border payments in euro [2001] OJ L344/13 .... 401 Regulation (EC) 172/2002 [2002] OJ L30/30 .............................................................. 570 Regulation (EC) 484/2002 amending Council Regulations (EEC) 881/92 and 3118/93 for the purposes of establishing a driver attestation [2002] OJ L76/1 .................. 401 Regulation (EC) 743/2002 establishing a general Community framework of activities to facilitate the implementation of judicial cooperation in civil matters [2002] OJ L115/1 ..................................................................................................... 401, 448 Regulation (EC) 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1 ................................ 518–19, 573–4 Art 2 .......................................................................................................................... 469 Art 6 .......................................................................................................................... 519 Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society (SCE) [2003] OJ L207/1 .......................................................................................... 301, 401 Regulation (EC) 2201/2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility, repealing Regulation (EC) No 1347/2000 (Brussels II) [2000] OJ L160/19 ........................................................................................... 401, 404, 470 Regulation (EC) 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 [2004] OJ L46/1 ...................... 401, 522 Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims [2004] OJ L143/15 ............................................................................ 400–1, 449, 470 Regulation (EC) 882/2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules [2004] OJ L165/1 .................................................................................................. 570 Regulation (EC) 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws ..................................... 93, 446, 581–2 Regulation (EC) 183/2005 laying down requirements for feed hygiene [2005] OJ L35/1 ................................................................................................................ 570 Regulation (EC) 1896/2006 creating a European order for payment procedure [2006] OJ L399/1 ..................................................................................................... 449, 502 Recitals (6) and (9) .................................................................................................... 502 Art 1 .......................................................................................................................... 502

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Art 6(2) ..................................................................................................................... 503 Art 16 ........................................................................................................................ 503 Art 17 ........................................................................................................................ 503 Art 19 ........................................................................................................................ 502 Regulation (EC) 717/2007 on roaming on public mobile telephone networks within the Community [2007] OJ L171/32 ............................................................................ 522 Regulation (EC) 861/2007 establishing a European Small Claims Procedure [2007] OJ L199/1 ..................................................................... 470, 498, 503, 511, 518, 527 Recital (12) ................................................................................................................ 506 Recitals (21) and (22) ................................................................................................ 506 Recital (29) ................................................................................................................ 508 Art 1 .......................................................................................................................... 504 Art 2 .......................................................................................................................... 449 Art 2(1) ..................................................................................................................... 503 Art 2(3) ..................................................................................................................... 504 Art 3(1) ..................................................................................................................... 527 Art 4(1) ..................................................................................................................... 505 Art 4(3) ..................................................................................................................... 505 Art 4(4) ..................................................................................................................... 505 Art 5(1) ..................................................................................................................... 506 Art 5(2) ..................................................................................................................... 505 Art 5(3) ..................................................................................................................... 505 Art 5(4) ..................................................................................................................... 505 Art 5(5) ..................................................................................................................... 505 Art 5(7) ..................................................................................................................... 506 Art 6(1) ................................................................................................................. 504–5 Art 6(2) and (3) ......................................................................................................... 504 Art 7(1)(b) ................................................................................................................. 506 Art 8 .......................................................................................................................... 506 Art 9 .......................................................................................................................... 506 Art 9(1) and (2) ......................................................................................................... 506 Art 9(3) ............................................................................................................. 506, 508 Art 10 ........................................................................................................................ 506 Art 11 ........................................................................................................................ 506 Art 13 ........................................................................................................................ 505 Art 15(1) ................................................................................................................... 505 Art 16 ........................................................................................................................ 507 Art 17(1) ................................................................................................................... 505 Ann I ................................................................................................................. 449, 504 Regulation (EC) 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to contractual obligations (Rome II) [2007] OJ l199/40 ............................................................................ 405, 410, 450, 470, 546 Regulation (EC) 1371/2007 on rail passengers’ rights and obligations [2007] OJ L315/14 ............................................................................................................ 522 Regulation (EC) 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6 ........................... 257, 268–9, 325, 331, 405, 410, 450, 470, 501, 551 Art 4(1)(c) ................................................................................................................. 501 Art 6 ................................................................................................................. 268, 501 Art 6(1) ..................................................................................................................... 501 Art 6(4)(c) ................................................................................................................. 501

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Art 9(3) ..................................................................................................................... 399 Regulation (EC) 765/2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) 339/93 [1993] OJ L218/30 .................................................................................... 586 Rome Convention 1980 ........................................................................................ 268, 397 Art 5 .......................................................................................................................... 268 Treaty of Amsterdam ............................................................................................ 401, 470 Treaty of Lisbon ................................................................................. 63–4, 294, 480, 514 Declaration 17 concerning primacy ........................................................................... 341 Treaty on European Union Art 2 ......................................................................................................... 63–5, 69, 388 Art 3(4) ..................................................................................................................... 246 Art 4 ............................................................................................................................ 63 Art 4(2) ..................................................................................................................... 339 Art 4(3) ................................................................................................................. 346–7 Art 5 ............................................................................................................................ 63 Art 5(3) ..................................................................................................................... 329 Art 6 .......................................................................................................................... 246 Art 6(1) ............................................................................................................. 342, 480 Art 6(2) ..................................................................................................................... 345 Art 20 ........................................................................................................................ 389 Art 34(2)(b) ............................................................................................................... 345 Art 101(2) ................................................................................................................. 521 Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality [2008] OJ C115/206 .......................................................................................... 329 Treaty on the Functioning of the European Union (TFEU) ... 346, 366, 470, 515–17, 519, 527–8 Art 2 ........................................................................................................................ 70–1 Art 18 ........................................................................................................................ 410 Art 26 ........................................................................................................................ 400 Art 34 ........................................................................................................................ 405 Art 49 ........................................................................................................................ 242 Art 56 ........................................................................................................................ 242 Art 81 ....................................................................... 395, 401, 412, 470–1, 516, 527–8 Art 81(1) ................................................................................................................... 516 Art 81(2)(e) ............................................................................................................... 471 Art 81(2)(f) ................................................................................................................ 470 Art 101 ............................................................................................ 518–19, 522, 524–5 Arts 101 et seq .......................................................................................................... 366 Art 101(3) ................................................................................................................. 519 Art 102 ............................................................................................ 518–19, 522, 524–5 Art 114 ................................................................................... 154, 310, 515–17, 527–8 Art 115 ...................................................................................................................... 310 Art 157 ...................................................................................................................... 366 Art 165(4) ................................................................................................................. 343 Art 166(4) ................................................................................................................. 343 Art 167(5) ................................................................................................................. 343 Art 168 ...................................................................................................................... 517 Art 168(5) ................................................................................................................. 343 Art 169 ................................................................................................................ 516–17 Art 169(2)(b) ............................................................................................... 516–17, 528

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Art 169(4) ................................................................................................................. Art 263(4) ................................................................................................................. Art 267 ...................................................................................................................... Art 267(3) ................................................................................................................. Art 288 ...................................................................................................................... Art 290 ...................................................................................................................... Art 291 ...................................................................................................................... Arts 326–334 ............................................................................................................ Art 340 ......................................................................................................................

517 580 519 237 306 591 591 389 342

European Union Preparatory Instruments Acquis Principles (ACQP) . 11, 14, 24, 27–8, 32–3, 39–40, 42–3, 46, 48, 91–4, 141, 157, 256, 295, 297–9, 304, 307, 418, 546–7, 555–6, 559–60 Art 2:201 ................................................................................................................. 42–3 Art 2:202 ..................................................................................................................... 42 Art 2:203 ................................................................................................................. 42–3 Art 3:201(2) .............................................................................................................. 256 Draft Common Frame of Reference (DCFR) ..... 3–9, 11–15, 17–20, 22–30, 32–3, 39–41, 43, 46, 48, 53–7, 59–60, 63–71, 73–4, 80–3, 85–7, 91–9, 110–11, 128–9, 140–3, 145, 149, 155, 157–8, 166, 171–2, 174, 180–1, 185–7, 194, 215, 221–2, 249–50, 252–6, 259–63, 272, 286–92, 297–8, 300, 304, 314–16, 319–20, 322–4, 327, 331, 338, 344, 353–4, 359–60, 364, 389, 392, 394, 415, 417–18, 421, 448, 465–8, 477–85, 494, 510, 531–53, 555–8 Art I.-1:102 ................................................................................................................. 65 Art I.-1:109 ............................................................................................................... 534 Art II.-1:109, s 7 ....................................................................................................... 534 Art II.-2:105 .............................................................................................................. 478 Art II.-3:101 .................................................................................................... 47–8, 261 Arts II.-3:101–3:501 .................................................................................................. 261 Arts II.-3:101ff ............................................................................................................ 46 Art II.-3:102 ................................................................................................ 47, 262, 535 Art II.-3:103 ................................................................................................ 47, 262, 535 Art II.-3:104 ...................................................................................................... 262, 535 Art II.-3:104(3) .......................................................................................................... 478 Art II.-3:105 .............................................................................................................. 262 Art II.-3:106 ...................................................................................................... 262, 535 Art II.-3:107 .............................................................................................................. 262 Art II.-3:108 .............................................................................................................. 262 s 2 ............................................................................................................................. 535 Art II.-3:109 .............................................................................................................. 535 Art II.-3:501 .............................................................................................................. 262 Art II.-4:202 ................................................................................................................ 25 Art II.-5:106 .............................................................................................................. 535 Art II.-5:201 .............................................................................................................. 535 Art II.-5:202 .............................................................................................................. 535 Art II.-7:201 .................................................................................................. 45–6, 53–4 Art II.-7:202 ............................................................................................................ 55–6 Art II.-7:205 ............................................................................................................ 46–8 Art II.-7:205(3) ............................................................................................................ 48 Art II.-7:207 ................................................................................................................ 64

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Art II.-9:401 .............................................................................................................. 262 Art II.-9:402 ...................................................................................................... 262, 535 Art II.-9:404 ...................................................................................................... 262, 535 Art II.-9:407 .............................................................................................................. 535 Art II.-9:408 .............................................................................................................. 262 Art II.-9:410 .............................................................................................................. 535 Art III.-1:110 ............................................................................................................... 64 Art III.-2:104 ............................................................................................................. 256 Art III.-3:101 ..................................................................................................... 256, 261 Art III.-3:107 ............................................................................................................. 494 Art III.-3:701 ............................................................................................................. 256 Art IV.A.-1:204 ......................................................................................................... 535 Art IV.A.-2:202 ......................................................................................................... 535 Art IV.A.-2:304 ......................................................................................................... 535 Art IV.A.-2:307 ......................................................................................................... 535 Art IV.A.-2:308 ......................................................................................................... 535 Art IV.A.-2:309 ......................................................................................................... 535 Art IV.A.-4:101 ......................................................................................................... 535 Art IV.A.-4:201 ......................................................................................................... 535 Art IV.A.-4:301 ......................................................................................................... 535 Art IV.A.-5:103 ......................................................................................................... 535 Art IV.A.-6:101/108 .................................................................................................. 535 Art IV.B.-1:102 .......................................................................................................... 535 Art IV.B.-2:103 .......................................................................................................... 536 Art IV.B.-3:105 .......................................................................................................... 536 Art IV.B.-6:102 .......................................................................................................... 536 Arts IV.C.-1:101 et seq ................................................................................................ 25 Art IV.D.-5:101 ......................................................................................................... 536 Art IV.F.-1:104(2) ...................................................................................................... 536 Art VI.-2:203 ............................................................................................................... 64 Art VI.-2:208 ............................................................................................................. 536 Principes contractuels communs (PCC) ................................ 32, 39–40, 45, 51–6, 80, 555 Art 2:102 ..................................................................................................................... 45 Art 4:202 .............................................................................................................. 45, 51 Art 4:205 ..................................................................................................................... 45 Principles of European Contract Law (PECL) ......... 4, 11, 13–14, 17–18, 20, 24–5, 27–8, 31–2, 35, 37, 39–41, 44–6, 48–57, 73, 78–9, 83, 85–6, 140–1, 156, 178–9, 249, 280, 286–9, 291, 295, 302, 304, 354, 371, 394, 418, 536–7, 539–40, 546–8, 550–3, 555 Art 1:102 .............................................................................................................. 83, 85 Art 1:201 .............................................................................................................. 83, 85 Art 1:202 ..................................................................................................................... 85 Art 2:202 ..................................................................................................................... 25 Art 4:103 ..................................................................................................... 45–6, 49–54 Art 4:103(1) ................................................................................................................ 52 Art 4:103(1)(b) ........................................................................................................ 52–3 Art 4:103(2) ................................................................................................................ 56 Art 4:104 ........................................................................................................... 50, 55–6 Art 4:106 ..................................................................................................................... 49 Art 4:107 ........................................................................................................... 44–5, 51 Art 4:107(3) ................................................................................................................ 46 Art 4:117 ..................................................................................................................... 49

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Art 6:111 ..................................................................................................................... 83 Principles of European Tort Law (PETL) ................................................................ 32, 539

International Instruments Council of Europe European Convention on Human Rights ...................................................................... 439 Art 6 .......................................................................................................................... 425 Art 8 .......................................................................................................................... 293 Art 11 ........................................................................................................................ 246 Art 11(2) ................................................................................................................... 246 Art 12 ........................................................................................................................ 293 Art 14 ........................................................................................................................ 293 Art 53 ........................................................................................................................ 341 Hague Convention on Liberalisation of Legislation of foreign public deeds 1965 ....... 400 UN Convention on Contracts for the International Sale of Goods (CISG) ....... 37, 39, 78, 85, 141, 286, 288, 324, 358, 373, 418, 539, 553 Art 1(1) ..................................................................................................................... 373 Art 35 .......................................................................................................................... 44 UNIDROIT Principles of International Commercial Contracts (PICC) ..... 4, 31–2, 35–41, 49–50, 52, 57, 78, 83, 85, 147, 156, 179, 286, 288–9, 370, 418, 536–7, 539, 553 Art 3.5 .................................................................................................................. 45, 52 Art 3.8 ......................................................................................................................... 45

National Legislation Austria Civil Code (ABGB) ............................................................................................... 277, 393 Czechoslovakia Act on Private International and Procedural Law 1963 ............................................... 398 § 9 ............................................................................................................................. 398 § 10(2)(f) ................................................................................................................... 398 Estonia Civil Code ............................................................................................................. 288, 359 Law of Obligations Act, passed on 26 September 2001, Riigi Teataja I 2001, 81, 487 ...................................................................................................... 288–9, 359 France Civil Code ................................................................................................................. 152–3 Germany Civil Code (BGB) .............................................................................................. 152–3, § 138 ......................................................................................................................... § 307(I)(1) ................................................................................................................. § 766 ......................................................................................................................... EGBGB § 29 ...........................................................................................................................

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Italy Civil Code Arts 1337–1338 ........................................................................................................ 261 Art 1341(2) ............................................................................................................... 262 Netherlands Civil Code ............................................................................................................. 152, Art 6:325 ................................................................................................................... Code of Civil Procedure ................................................................................................ Collective Settlement Act ..............................................................................................

422 543 422 422

Norway Lov 17/2004 om finansiell sikkerhetsstillelse ................................................................ 355 Poland Act on Bills of Exchange and Cheques 1924 ................................................................ 277 Act on Combating Unfair Competition 1926 ............................................................... 277 Act on Private international law 1965 .......................................................................... 398 Civil Code ..................................................................................................................... 277 Code of Commercial Companies 2000 ......................................................................... 278 Code of Obligations 1933 ......................................................................................... 277–8 Commercial Code 1934 ............................................................................................ 277–8 Copyrights Act 1926 ..................................................................................................... 277 Family law, decree of 22 January 1946, Dz.U. No 6, item 52 ...................................... 277 General rules of contract law, decree of 12 December 1946, Dz. U. No 67, item 369 ................................................................................................................ 277 Guardianship law, decree of 14 May 1946, Dz.U. No 20, item 135 ............................ 277 Inheritance law, decree of 8 October 1946, Dz.U. No 60, item 328 ............................ 277 Personal matrimonial law, decree of 25 September 1945, Dz. U. No 48, item 270 ..... 277 Proprietary matrimonial law, decree of 29 May 1946, Dz. U. No 3, item 196 ............ 277 Real property law, decree of 11 October 1946, Dz. U. No 57, item 320 ..................... 277 Spain Code of Civil Procedure 2000 ...................................................................................... 513 United Kingdom Co-ordination of Regulatory Enforcement (Enforcement Action) Order 2009/665 ...... 445 Co-ordination of Regulatory Enforcement (Procedure for References to LBRO) Order 2009/670 ............................................................................................................... 445 Co-ordination of Regulatory Enforcement (Regulatory Functions in Scotland and Northern Ireland) Order 2009/669 ........................................................................ 445 Criminal Justice Act 2003 s 142 ......................................................................................................................... 445 Financial Services and Markets Act 2000, ss 382 and 383 ........................................... 445 Human Rights Act 1998 ................................................................................................. 75 Legislative and Regulatory Reform Act 2007 s 21 ........................................................................................................................... 444 s 22 ........................................................................................................................... 444 Powers of Criminal Courts Act 1973 ........................................................................... 445 Powers of Criminal Courts (Sentencing) Act 2000 s 130 ......................................................................................................................... 445

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Table of Legislation and Preparatory Instruments

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Proceeds of Crime Act 2002 ......................................................................................... 444 Regulatory Enforcement and Sanctions Act 2008 ..................................................... 445–6 Pt 3 ............................................................................................................................ 462 s 42(3)(c) ................................................................................................................... 462 s 50(3) ....................................................................................................................... 462 s 50(4) ....................................................................................................................... 462 United States Restatement of the Law of Contracts (1932) .................................................................. 21 Restatement of the Law of Torts (1934–39) ................................................................... 21 Restatement of the Law Second, Contracts (1981) ......................................................... 21 Restatement of the Law Second, Property (1977–2003) ................................................. 22 Restatement of the Law Second, Torts (1965–79) .......................................................... 21 Restatement of the Law Third, Torts (2009–ongoing) .................................................... 21 Restatements of the Law, Property (1936–44) ................................................................ 22 Uniform Commercial Code (UCC) ............................................................... 370, 384, 389

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1 Editorial Introduction ROGER BROWNSWORD

I

MAGINE BEING ASKED what one makes of the theoretical foundations of European private law. Without a frame and a focus, without a context, it is not clear where this question is coming from and, in consequence, it is not clear how broad and how deep one should go in offering a response. However, when, some ten years’ ago, the European Commission launched its consultation on European contract law,1 it did more than initiate debate on the significance of a unified private law environment for the development of the single market; it provoked radical reflection on the foundations of private law itself. Accordingly, for today’s generation of European lawyers, there is a self-selecting context for conversations about the basis of private law, namely the body of work that, during the last decade, has flowed from the Commission’s consultation and that has led, most controversially, to the drafting of a ‘Common Frame of Reference’ (the ‘DCFR’).2 The thought is that by earthing our reflections in work such as the DCFR, we can develop our understanding of the theoretical foundations of private law while, at the same time improving our critical appreciation of the CFR project itself. Opening the chapters in this part of the book, Hans Schulte-Nölke seeks to improve our understanding of the current crop of European ‘restatements’, particularly that presented in the DCFR, by reflecting on the apparently analogous restatements of the law published by the American Law Institute. Helpfully, Schulte-Nölke identifies four common types of complaint about the DCFR process and product. The first complaint—concerning the authors of the work and the methodology adopted—is processual. The remaining complaints—concerning presentation, coverage and substance—relate more to the product. At the core of the chapter, Schulte-Nölke constructs a matrix in which we can plot the intentions of a restatement or parts thereof. Along one axis, the question is whether the rule as restated is close to, or remote from, the positive national law(s); and along the other axis, the question is whether the rule as restated is judged to be a good or bad rule—hence, in principle, the four permutations are: (i) close/good; (ii) close/bad;

1 Commission, ‘Communication from the Commission to the Council and the European Parliament on European Contract Law’ COM (2001) 398 final (11 July 2001). 2 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009).

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Roger Brownsword

(iii) remote/good; and (iv) remote/bad. In practice, we can surely eliminate (iv); to work on stating principles that are both a poor fit as well as being bad rules has little to recommend it. This means that, actually, we are left with the following three kinds of exercise: 1. One-dimensional restatements that aspire, quite simply, to fit as closely as possible with positive law, irrespective of whether that law is judged to be good or bad. 2. Two-dimensional restatements that aspire to state the law in a way that has some degree of fit with positive law while also being guided by a sense of what is a good rule. 3. One-dimensional restatements that aspire, quite simply, to articulate good rules, irrespective of whether the rules so articulated have any fit with positive law. Clearly, if we confine our evaluation of restatements such as the DCFR to the aspirations of their authors, then this will have a significant bearing on the range of our critical comments. For example, if the restatement is intended as a onedimensional articulation of positive law, we would not complain that it includes some bad rules; and, conversely, if the restatement is intended as a one-dimensional articulation of good rules, we would not complain that it does not always fit with the positive law. Similarly, the views that we have about the restatement’s process and methodology are likely to be coloured by our understanding of the intended object of the exercise. The fact of the matter is, however, that we cannot assume that all so-called ‘restatements’ are trying to do the same thing; and our evaluation of these exercises, whether American or European, needs to be sensitive to the different purposes that might be pursued by their authors. One of the problems with the DCFR, Schulte-Nölke concedes, is that it is not always as clear as it might be about its intentions. Accordingly, Schulte-Nölke advocates that in future study groups should be more transparent as to their purposes, clearly signalling to what extent the restatement lays claim to being innovative, prescriptive and practically authoritative. Indeed, with such clarification, when authors and their audiences alike understand the nature of the exercise, we might find that the quality of both restatement process and product together with the materiality of the critical reception is improved. Like Schulte-Nölke, Nils Jansen sees the American Restatements as a comparator for the clutch of modern European restatements (non-legislative codifications) running from the Lando Commission’s Principles of European Contract Law (‘PECL’)3 and the UNIDROIT Principles of International Commercial Contracts (‘PICC’)4 through to the DCFR. In Jansen’s view, both the American Restatements and the PICC have been ‘quite successful in presenting themselves as authoritative

3 O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II (The Hague, Kluwer, 2000); O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). 4 UNIDROIT (ed), The Principles of International Commercial Contracts 2nd edn (Rome, Unidroit, 2004).

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Editorial Introduction

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statements of the rules which nevertheless could be understood as a fair description of the law’5—in other words, as two-dimensional restatements meeting criteria of both fit and good rules. But, what of the DCFR? Here, although Jansen has no doubt that the DCFR, both in its formal presentation and in its underlying normative intention, is to be read as an authoritative codification of the law, he claims that it is less successful than some of its progenitors. According to Jansen, there are no grounds for the presumption that simply because the DCFR builds on earlier restatements, it takes the articulation of European private law to a higher level of perfection. Quite the contrary, Jansen argues that the self-referential methodology that is characteristic of the modern European restatements has generated a counterproductive doctrinal dogmatism. The dogmatism is seen in an unwillingness to review critically earlier restatements (for fear of undermining their authority), a tendency that is aggravated by a willingness to transpose doctrinal features from one restatement to another. Jansen earths this general critique of the process in a detailed discussion of the treatment of pre-contractual information duties and mistake. His conclusion is not so much that European contract law needs less restatement, but that it ‘needs less doctrine and less dogmatism’.6 Following Jansen, Martijn Hesselink leads a procession of critics of the DCFR. In his chapter, Hesselink is principally critical of the foundational product of the DCFR—or, more precisely, he is critical of a shift in foundational position that can be detected between the ‘Interim Outline Edition’7 (which is founded on an open-ended list of 15 core aims and values of equal standing) and the DCFR (which is founded on a mere four ‘underlying principles’ of freedom, security, justice and efficiency).8 According to Hesselink, there is a difference between ‘values’ (which function as external critical standards of law and its operation) and ‘principles’ (which, as famously elaborated by Ronald Dworkin,9 play an internal role in legal reasoning). This presents a double bind for the DCFR: if freedom, security, justice and efficiency are to be understood as principles, they cannot possibly do the job—a mature system of private law simply cannot function with such a meagre stock of principles; and, if they are to be read instead as values, they are hopelessly unrepresentative of a modern European set. Alongside this criticism of the DCFR product, Hesselink expresses concern about the way in which the views of a small group of scholars seemed to be unduly influential in generating the shift. If the task was to reduce the stock of principles, the pool of expertise should have been broadened; and if the task was to identify a set of minimum values, an inclusive and representative process should have been

5 N Jansen, ‘Dogmatising Non-legislative Codifications: Non-legislative Reference Texts in European Legal Discourse’ (ch 3 in this volume) p 38. 6 ibid, p 57. 7 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008). 8 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 9 R Dworkin, Taking Rights Seriously rev edn (London, Duckworth, 1978).

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adopted. For Hesselink, in its critical foundational respects, the DCFR comes up short as a matter of both product and process. In his chapter, Hesselink highlights what he takes to be a helpful set of principes directeurs that were drafted in 2008 by a group of French scholars (the so-called ‘AHC-SLC Group’);10 and—in the same way—he commends the contribution to this volume that is made by Bénédicte Fauvarque-Cosson. Echoing Hugh Collins,11 Fauvarque-Cosson starts by underlining the important role that a European civil code, containing a section on fundamental ‘guiding principles’, could play in building a European civil society and creating a common European identity. In an ideal world, a code with such a cultural mission would cover the entire field of private law. However, Fauvarque-Cosson argues that so long as different areas of European private law are in very different states of preparedness for such an overarching codification, it would be sensible to start with those areas of private law that are most ready for such conversion. Contract law, she suggests, is the area that most invites such codified conversion; and it is her thesis that this is where the work should start and then it can build incrementally. If we adopt Fauvarque-Cosson’s perspective, then the DCFR seems far too broad in its ambitions. Moreover, even where the DCFR is focused on contract law, Fauvarque-Cosson argues that it is too preoccupied with formulating detailed rules at the expense of more general principles. In this context, she commends the aforesaid AHC-SLC principes directeurs, these highlighting the three general principles of freedom (of contract), (contractual) certainty and (contractual) fairness. Under the principle of fairness, we find more particular principles relating to good faith and fair dealing, cooperation and coherence. In other words, we find in Fauvarque-Cosson’s chapter the case for a cultural project, a project that, starting with a focus on contract law, builds from a handful of representative general principles for the legitimate regulation of transactions. Setting her critique of the DCFR (together with the revision of the consumer acquis) in the context of the global economic crisis, Brigitta Lurger finds the project poorly focused and caught up in a conservative intellectual tradition that is no longer fit for purpose. According to Lurger, we should not assume that there is no public interest at stake in ‘private law’; and we should not be afraid to reframe our regulatory approach to those legal regimes (for transactions, for property, for families and so on) that have traditionally been gathered together as ‘private law’. Lurger argues that the reshaping of European private law needs to focus on the development of a market law that properly caters for the interests of the vulnerable. Such a body of market law would extend well beyond those discrete marketplace transactions that are the paradigms of traditional contract law; it would view its subjects as citizens with a range of interests, both material and immaterial; and it would take into account the interests of third parties in the environment, in labour conditions, in access to basic goods and the like. Market law, so conceived, should restore trust and confidence, do justice to the complexity of European values and 10 This is the group that was set up by the Association Henri Capitant des Amis de la Culture Juridique Française and the Société de législation comparée (the AHC-SLC group). 11 H Collins, The European Civil Code: The Way Forward (Cambridge, Cambridge University Press, 2008).

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protect the full sweep of consumers against both individual exploitation and systemic compromise of the kind underlying the global financial crisis. Lurger argues that if the world really is to look different after the crisis, then a radical project of regulatory revision, quite unlike the DCFR project, is what it will take. Fernando Gomez and Juan-José Ganuza also confess to certain scepticism about the project of harmonising private law in Europe. Taking a critical economic standpoint, they consider how the process of harmonisation (or, in some cases, unification) occurs (ranging from spontaneous convergence to sustained and purposeful coordination or prescription). According to Gomez and Ganuza, because it is difficult to identify an optimal substance for harmonisation, criticism will tend to focus on the particular mechanisms used to induce harmonisation—and where harmonisation is not left to spontaneous forces—it will be natural to ask whether concerted convergence makes sense. Two of the general arguments against such concerted harmonisation of private law—arguments of a lack of necessity and of undesirability—are reviewed, with the authors concluding that neither argument, a priori, is compelling. Nevertheless, Gomez and Ganuza doubt the economic wisdom of reducing contract and tort law to harmonised codified statements when these are areas of private law that invite a context-dependent and responsive case-by-case legal approach. Although there are difficulties in specifying an optimal content for harmonised private law rules, Gomez and Ganuza sketch an approach that takes account of both technological (cost function) and consumer preference parameters. Depending on how these variables play, the resulting harmonised rules may be in line with some existing standards or they might reflect some intermediate position or they might exceed any existing standards. In the final two contributions, first, Ralf Michaels and then Roger Brownsword take several steps back from the DCFR to place the attempts to harmonise European contract law in a larger context of legal reasoning and regulatory strategy. At the heart of Michaels’ chapter is the distinction between two ideal types of legal rationality—one ‘juridical’ and the other ‘instrumentalist’. Whereas juridical rationality reasons from an organised body of legal material, instrumentalist rationality operates by reference to some specified extralegal ends. Whereas juridical rationality responds to private law questions by applying the rules and principles of a particular doctrinal system, instrumentalist reasoning is guided by purposes that are specified for private law, the origin of which is external to the law. Although the modern pattern of contract law is that instrumentalist law is found in the European Commission’s initiatives and juridical law is found nationally, this was not always so—prior to the nineteenth century, it was instrumentalist law that was local and juridical law that was European; and, because these rationalities persist over space and time, there is no reason why the current pattern should remain as it is. Moreover, it should not be thought that each of the rationalities is necessarily tied to a particular substantive ideological preference, at any rate not in the simple Left/Right political sense; for, these are structural ideal types that, in principle, can accommodate all shades of individualism and welfarism. At all events, the critical point is that, where both rationalities are instantiated, there will be a major structural problem in the way of creating a coherent and comprehensive body of law. This, Michaels argues, is precisely the structural impasse that confronts the proponents of a harmonised private law in Europe.

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Turning to my own contribution, there are many ways in which my reflections mirror those presented by Michaels—for example, I share the view that there are two quite different projects underway; that there is no reason why an instrumentalist regulatory intervention, such as the proposed Directive on consumer rights, should cohere (other than in a functional way) with other directives or with some general principles of juridical contract law; and that—as Michaels might put it—a democratic deficit matters relatively little for juridical private law, but it matters a lot for instrumentalist private law.12 That said, although there is this intersection between the chapters, my starting point is not quite that of Michaels and certainly not that of other contributors to this part of the collection. The background question for my chapter is not so much, ‘how, in a modern Europe, can we justify applying (non-harmonised) local rules of private law, rule X in this legal system, rule Y in that legal system and rule Z in another legal system?’ but, rather, ‘how can we justify applying any rule of private law, whether it is rule X, rule Y, or rule Z?’ In other words, what are the foundations for the application and enforcement of the rules and principles of private law? In response, I suggest that transactions should be seen as being governed by three layers of legal ordering: first, there is the essential infrastructural ordering (necessary for human social existence); secondly, there is the general regulation that constitutes a community’s distinctive public ordering; and thirdly, there is that layer of law that authorises individuals to privately order their affairs. The law of contract, properly understood, is a body of law that is available for the private ordering of transactions—we are in a realm in which the law that is applicable (the law that governs the particular dealings between the transactors) is so only because the parties have authorised its application. With this three-level scheme as the theoretical backcloth for transactions, we see that the justification for enforcing transactions that are privately ordered is quite different from that which applies to publicly regulated transactions. Private law is about self-regulated (self-imposed) order, not about rules that are externally imposed; whereas application of the latter needs an independent justification, the justification for applying the rules of private orders hinges on the integrity of the parties’ own authorisation. Looking ahead, I caution that if we value the opportunity to privately order our affairs, then we need to be alert to the erosion of a regulatory environment that compromises our autonomy. Seen from this perspective, the revision of the consumer acquis is a plausible exercise in public regulation, but the DCFR—even though it prioritises the value of freedom—neither reaches back to the foundations of autonomy nor reaches forward to the challenges of the information society. At the start of this introduction, the DCFR was presented as a helpful reference point for framing and focusing our thoughts about private law. However, one of the themes that emerges from the chapters in this part of the volume is that the framing in the DCFR is, in various ways, problematic—for example, it is argued that we should set the DCFR in the larger context of the cultivation of a common European culture, or that of responding to the global financial crisis, or the re-regulation of

12 R Michaels, ‘Of Islands and the Ocean: The Two Rationalities of European Private Law’ (ch 8 in this volume) pp 140, 156–57.

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Editorial Introduction

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the market, or a deeper understanding of private ordering and autonomy. In this light, we can conclude that whatever kind of toolbox the DCFR eventually proves to be, it is unlikely to contain tools that directly assist in helping us to understand the theoretical foundations of private law. Indeed, we might conclude that much of the problem with the DCFR is that it proceeds on the assumption that the theoretical foundations of private law are stable and well understood when it is precisely these foundations that need to be excavated and—arguably—repositioned. Of one thing we can be quite sure: if there is more work to do on the DCFR, there is certainly more work to be done on the theoretical foundations of European private law.

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2 ‘Restatements’ in Europe and the US: Some Comparative Lessons HANS SCHULTE-NÖLKE *

I

INTRODUCTION

I

T IS MUCH too early finally to assess the legal and political reactions to the ‘Draft Common Frame of Reference’ (‘DCFR’).1 It may, however, be useful to identify some characteristic categories of arguments that have been brought forward. In doing so, it proves to be illuminating to revisit the debates on the restatements of the American Law Institute, as these works were an important model for the DCFR and its predecessors (such as the Principles of European Contract Law (‘PECL’)2 and the Acquis Principles (‘ACQP’)).3 This throws a light on some surprising similarities, but also on some characteristic differences. The purpose of this chapter is to pick out and to compare some issues from these debates and to draw preliminary conclusions for subsequent works on restatements in Europe, of which several have already started or are being prepared.4 These considerations and observations may contribute to what is needed now: namely, a clearer view about what functions ‘restatements’—or whatever the DCFR and its successors will come to be called in the future—can have in Europe.

* This chapter is an expanded version of my oral contribution at the conference ‘The Foundations of European Private Law’ held at the European University Institute (EUI) in Florence in September 2009. The notes just give some references for further reading, in particular on the discussion in the US, without aiming at a comprehensive bibliography (which is impossible anyway). I owe thanks to the other speakers at the conference, in particular to Nils Jansen and Brigitta Lurger, whose papers gave inspiration to several arguments brought forward in this contribution. 1 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 2 O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II (The Hague, Kluwer, 2000); O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). 3 Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services (Munich, Sellier, 2009). 4 For instance, European principles of succession law and family law; on the latter see K Boele-Woelki, ‘The Principles of European Family Law: Its Aims and Prospects’ (2005) 1 Utrecht Law Review 160.

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Hans Schulte-Nölke

It is impossible, even roughly, to summarise the enormous number of comments that the DCFR has provoked and is still provoking.5 Many readers will be generally aware of this discussion anyway. For the purposes of this chapter, therefore, it may suffice to present a scheme that I usually apply in order to register and structure the bulk of opinions. The great majority of the comments on the DCFR can be categorised into the following four groups, for each of which a few characteristic examples of arguments are given in brackets: 1. Authors and Methodology (for example, wrong or at least non-transparent choice of participants; not enough—or too much—stakeholder participation; too much political influence, non-transparent decision-making; no open debate on political choices, no political or democratic legitimacy of the participating persons and bodies). 2. Presentation (for example, rules too abstract; too detailed; language not easy to understand; structure too complicated; political choices and options not disclosed). 3. Coverage (for example, too broad; too narrow; wrong subjects dealt with). 4. Substance (for example, rules not in line with actual law; too close to actual law; no critical reflection of actual law; criticisms of individual rules or the whole work for various reasons of substance, for example, imprecise, in particular too many open-textured concepts, rules inefficient, too (neo-)liberal, too consumerist, too paternalistic, socially biased etc). It is not the purpose of this chapter to discuss all these valuable arguments. This is a necessary debate for the further ‘Europeanisation’ of private (and possibly also public)6 law. Of course, some of these arguments were not unexpected. Frequently, the debates within the groups which prepared the DCFR anticipated and so foreshadowed the broader discussion which came up after the DCFR had been published.7 In the current state of the debate only a few of the issues which are under discussion allow for some first conclusions. I have tried to pick out such examples. After a few remarks on the problematic notion of ‘restatement’ for the European works (section II), this chapter offers some reflections which follow the scheme introduced above: thus, with regard to authors and methodology of restatements, there are remarks on representativeness (section III) and on the different roles of practitioners and academics (section IV); with regard to the presentation of

5 The European Legal Studies Institute (ELSI) at the University of Osnabrück/Germany is currently preparing a database of comments on the DCFR. To this end, more than 500 articles in journals and several dozens of books have been collected. 6 For the ‘Research Network on EU Administrative Law’ see: www.reneual.uos.de/. 7 The ‘recontractualisation’ debate may serve as an example. For, the ‘Compilation and Redaction Team’ which assembled the DCFR broadly discussed that a ‘recontractualisation’ might be necessary for some possible purposes (in particular for an optional instrument) and found it ‘a quick and simple task’ to adjust the DCFR to apply only to contracts (cf the ‘Introduction’ to the Outline Edition, above (n 1) nr 74, 44). This discussion continued after the publication of the DCFR: cf MW Hesselink, ‘The Common Frame of Reference as a Source of European Private Law’ (2009) 83 Tulane Law Review 919, 968; R Schulze, ‘Problèmes et perspectives du droit européen des contrat’ in G Mäsch, D Mauzaud and R Schulze (eds), Nouveaux defis du droit des contrat en France et en Europe (Munich, Sellier, 2009) 5, 14.

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‘Restatements’ in Europe and the US

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restatements, there are remarks on their usual scheme, that is, the structuring into rules, comments and notes (section V) and the corresponding questions whether restatements should mainly be presented as finding aids (section VI) or should also aim at becoming a source of law (section VII). With regard to the coverage of restatements, some consideration is given to whether the macrostructure of the DCFR as a broad and systematic code is helpful (section VIII). On what is probably the most important category of arguments—that is, concerning the substance of the rules—the chapter does no more than touch on the basic question of whether a restatement should limit itself to reflecting the actual law or whether it should do more by attempting to develop and improve it (section IX).

II

THE NOTION OF A EUROPEAN ‘RESTATEMENT’

The DCFR is the latest fruit of a mainly academic movement which seeks to transfer and to adapt the model of the restatements of the American Law Institute (ALI) to European needs. The forerunner was the now famous (Lando Commission’s) Principles of European Contract Law (‘PECL’) elaborated by the so-called Lando Group8 which followed the American model in several aspects. The Lando Group itself seems to have avoided calling its work a ‘restatement’.9 It is, however, often said that the PECL are a sort of ‘European’ restatement,10 although it is evident that this label is not wholly accurate. In the same way, the DCFR has been characterised as a European ‘restatement’— again, though, without any intention of denying the considerable differences between it and its American comparators.11 Although some scholars have vehemently objected to this characterisation,12 this is not the occasion once again to take a position in this discussion. The correct generic term for the PECL or the DCFR and their US models simply depends on the preliminary question what is or what should be a ‘restatement’. This is subject to—obviously varying—personal views. In this chapter, it is for want of a better term and for reasons of simple language and pragmatism that the term (European) ‘restatement’ is used; and here it is used in the broad and common sense as a generic term covering all the works 8 Lando and Beale (eds), Principles of European Contract Law, above (n 2); Lando, Clive, Prüm and Zimmermann (eds), Principles of European Contract Law, above (n 2). 9 In contrast, cf Project Group on a Restatement of European Insurance Contract Law (ed), Principles of European Insurance Contract Law (PEICL) (Munich, Selllier, 2009). 10 O Lando, ‘European Contract Law’ (1983) 31 American Journal of Comparative Law 653, 656; ‘Die Regeln des Europäischen Vertragsrechts’ in P-C Müller-Graff (ed), Gemeinsames Privatrecht in der Europäischen Gemeinschaft 2nd edn (Baden-Baden, Nomos, 1999) 567; O Remien ‘Ansätze für ein Europäisches Vertragsrecht’ (1988) 87 Zeitschrift für vergleichende Rechtswissenschaft 105; R Zimmermann, ‘Die “Principles of European Contract Law” Teile I und II’ (2000) Zeitschrift für Europäisches Privatrecht 391; ‘Die “Principles of European Contract Law” Teil III’ (2003) Zeitschrift für Europäisches Privatrecht 707; C Herresthal, ‘Europarechtliche Bezüge des Vertragsrechts’ in K Langenbucher (ed), Europarechtliche Bezüge des Privatrechts 2nd edn (Baden-Baden, Nomos, 2008) 41, 48. 11 H Schulte-Nölke, ‘Arbeiten an einem europäischen Vertragsrecht: Fakten und populäre Irrtümer’ (2009) Neue Juristische Wochenschrift 2161; C von Bar, ‘Die Struktur des Draft Common Frame of Reference’ in R Schulze, C von Bar and H Schulte-Nölke (eds), Der akademische Entwurf für einen gemeinsamen Referenzrahmen: Kontroversen und Perspektiven (Tübingen, Mohr, 2008) 35. 12 eg, N Jansen and R Zimmermann, ‘“A European Civil Code in all but Name’”: Discussing the Nature and Purposes of the Draft Common Frame of Reference’ (2010) 69 Cambridge Law Journal 98.

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which follow the style of presentation of the American Restatements, that is to say, the PECL, the ACQP, the DCFR and the many others which might fall into this category.13 III

REPRESENTATIVENESS

The composition of some groups working on European restatements could be criticised for being too exclusive. For instance, the Lando Group was mostly composed of a small circle of professors from about 15 European jurisdictions and—as far as one can see from the outside—it did not seek a broader forum for discussion with practitioners, stakeholders or external scholars during its work. However, the less exclusive a group, the greater is the need for justification of its composition. For example, the ‘Network of Excellence’ that was entrusted with the elaboration of the DCFR14 was much broader. It consisted of more than 150 lawyers and some economists, the majority academics, from more than 30 countries. The composition of this network has, not unsurprisingly, been commented on. Among those issues brought forward have been, for example, that eminent scholars did not participate, that the geographical coverage was not ideal and that practical experience was underrepresented. Similarly, the ALI, which has thousands of members, the majority being practitioners, has been criticised for its composition. However, the problem was very different. It was not said that eminent professors were excluded from participation, or that the professors excluded practitioners. Rather, the American discussion reflected inequalities of American society.15 It was said that the ALI was dominated by white men from the east coast who attended Ivy League law schools—and, to a lesser extent, possibly the same criticism might still be expressed. A further problem seems to be that decisions on ALI restatements are taken in the general meeting with a rather haphazard attendance. It is sometimes even suspected that some ALI members may even have acted more in the interests of their clients than in the interests of the ALI as a whole.16 A first lesson to be learned from both the American and the European examples is that future works on European restatements may need, during the process of elaboration, a broader discussion in which the relevant voices within the legal profession (and perhaps even beyond) are well represented and which, at least in theory, gives interested stakeholders the opportunity to be heard. The exclusive model of the Lando Group which worked in the 1980s in a much smaller EC and which had hardly any competitors at that time will probably not be accepted any more as an appropriate way for the elaboration of a European restatement. The 13 Some further recent examples: A Laude and D Tabuteau, Code européen de la santé (Paris, Editions de Santé, 2009); European Copyright Code cf www.copyrightcode.eu; Avant-projet de Code européen des contrats de l’Académie des privatistes européens (Pavia); Livre deuxieme, Des contrats en particulier, Titre premier, De la vente (2006), cf www.accademiagiusprivatistieuropei.it. 14 ‘Joint Network on European Private Law’ (EU 6th Framework Programme Network of Excellence), DG Research, Reference no 513351 (coordinator: Hans Schulte-Nölke). 15 On the development of the membership see JP Frank, ‘The American Law Institute, 1923–1998’ (1998) 26 Hofstra Law Review 615 (in particular under point IV). 16 See WT Barker, ‘Lobbying and the American Law Institute’ (1998) 26 Hofstra Law Review 573.

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massive and still ongoing enlargement of the EU, the much advanced state of Europeanisation of legal scholarship and, despite all the criticisms, the not entirely negative experience with the much broader and multifaceted network for the DCFR has created a new situation which requires new responses. Given the size and complexity of the political and academic structures within the EU, a working group will need a minimum of 20, more probably about 30 members, in order to ensure at least basic representativeness with regard to geographic coverage, academic milieus and different branches of the legal profession. Due to the much greater public attention that is paid to such works, the group will from time to time also have to present and to allow for discussion of its preliminary drafts in an even broader forum, which will have to include practitioners and stakeholders. IV

PRACTICAL MOTIFS AND THE ROLE OF PRACTITIONERS AND ACADEMICS

With a greater representativeness in the groups that elaborate restatements, the participation and the roles of academics and practitioners may need some further attention. Re-reading the reports on the foundation of the ALI creates the impression that it was mainly practical problems which gave reason for beginning the work on restatements.17 The first meeting of the ALI in 1923 received a groundbreaking report, which became the basis of its future programme.18 The report set forth the need for an institute to deal with the unsatisfactory state of the law.19 First and foremost, there was the ‘great volume to the annual increase of the already overwhelming mass of reported cases’, which the report concluded, ‘cannot be directly checked by any action which may be taken by the profession’. The report continued that, in addition to the proliferation of cases, ‘badly drawn statutory provisions and the unnecessary multiplication of administrative provisions’ caused great uncertainty and complexity. To the mind of the authors of the report, the ultimate problem was the ‘lack of agreement among lawyers concerning the fundamental principles of the common law’ and ‘the lack of precision in the use of legal terms’. The report concluded that it was the legal profession that has the greatest control over these causes of uncertainty and complexity. 17 From the rich literature on the American Law Institute and the restatement process, see, eg, ‘Symposium on the American Law Institute: Process, Partisanship, and the Restatements of Law’ (1998) 26 Hofstra Law Review 567; Frank, ‘The American Law Institute’, above (n 15); NEH Hull, ‘Restatement and Reform: A New Perspective on the Origins of the American Law Institute’ (1990) 8 Law & History Review 55, 60; WP LaPiana, ‘A Task of No Common Magnitude’ (1987) 11 Nova Law Review 1085; HA Linde, ‘Courts and Torts: “Public Policy” without Public Politics?’ (1994) 28 Valparadiso University Law Review 821, 840, 844; H Wechsler, ‘Restatements and Legal Change: Problems of Policy in the Restatement Work of the American Law Institute’ (1968) 13 St Louis University Law Review 185; J Zekoll, ‘Das American Law Institut—Ein Vorbild für Europa?’ in R Zimmermann (ed), Globalisierung und Entstaatlichung des Rechts, Vol II (Tübingen, Mohr, 2008) 101. 18 American Law Institute (ALI), ‘Report of the Committee on the Establishment of a Permanent Organization for the Improvement of the Law Proposing the Establishment of an American Law Institute’ (1923) 1 Proceedings of the American Law Institute 1; reprint in (1973) The American Law Institute 50th Anniversary 269. 19 The following from the ‘Report’ (ibid) and from Frank, ‘The American Law Institute’, above (n 15) 615, 617.

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Thus, in the US, it was the ‘legal profession’ that was seen as needing the ALI. Consequently, there was no dominance of scholars. In principle, judges, lawyers and law professors had their equal roles in the ALI’s work from the beginning. However, scholars had a specific function; as it was usually a professor, who was designated as reporter for ALI projects. It was also the case that the first claims for the foundation of an ALI came from academics, in particular from the Association of American Law Schools. According to legend, all the necessary organisational steps towards the foundation of the ALI were planned20 when William Draper Lewis,21 a law professor from Pennsylvania who later became the ALI’s first director, met the former secretary of state and Nobel Peace Prize winner Elihu Root, one of the leading members of the American Bar, at the latter’s Fifth Avenue apartment. For a comparison with the situation in Europe it may be useful to recall that in the US, in particular, private law was and is mainly state law, not federal law. Courts and advocates pleading before them are not limited in their search for relevant precedents to decisions of the higher courts in the same district or circuit. They can also take into account decisions from other districts, states or circuits as persuasive authority. Decades before databases were invented, there was obviously a severe problem in finding the relevant cases from the more than 50 individual jurisdictions in the US. It seems that these practical problems contributed to the widely shared impression of American lawyers at the beginning of the twentieth century that the existing case law had become more and more unclear and contradictory.22 Characteristically, the ALI’s Certification of Incorporation of 1923 and its bylaws speak of ‘the law’ (thus in singular form) for the multitude of more than 50 individual jurisdictions.23 The authors of these texts seem to have had the unspoken presupposition that there is actually just one law which can be found in, and which underlies, the thousands of cases from the different US jurisdictions. As the core problem to be solved was a practical problem, in particular how to find the relevant cases, restating the law was primarily meant in the sense of re-establishing clarity as to what is the law. The idea was that the former and original clarity, now blurred by the multitude of cases and badly drawn legislation, should be restored by an aid for judges and lawyers that should help them to find out what the law is and to identify the relevant cases to establish it. The main working method for the elaboration of ALI restatements corresponded with this analysis. Usually the ALI appointed just one reporter for a restatement project, always an outstanding scholar in the field, to collect the cases and to prepare a first draft. Moreover, other

20 J Gordley, ‘European Codes and American Restatements: Some Difficulties’ (1981) 81 Columbia Law Review 140. 21 cf also WD Lewis, ‘How We Did It’ in Restatement in the Courts: History of the American Law Institute and the First Restatement of the Law (American Law Institute, 1945) 1. 22 AJ Rosenthal, ‘Uniform State Laws’ (1997) 22 Oklahoma City University Law Review 257, 302. 23 cf the ALI’s Certification of Incorporation (www.ali.org/doc/charter.pdf): ‘The particular business and objects of the society are educational, and are to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work’.

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than the first series, the ALI Restatements were also published together with ‘reporters’ notes’ on the relevant case law (and statutes, if any) from all jurisdictions. In Europe, the initiators and authors of restatements such as the PECL, the DCFR and many others were mainly academics. It is not just the difference of status and function of judges and professors in the common law and in the civil law systems which caused this divergence. European judges were never under a methodological obligation to take into account cases from foreign jurisdictions as persuasive authority. European judges and advocates, therefore, did not have the same need of a finding aid, in particular for cases such as the American Restatements became for American lawyers. The group most interested in European restatements were comparative lawyers, thus mainly professors, who experienced the difficulties of finding out something about the law in other European jurisdictions. Moreover, the European works could not start from the assumption, that there is ‘the law’, thus one singular law, which can be detected in the different European jurisdictions. Although the approach of the European restatements is based on the presumption that there are some commonalities in the European jurisdictions, it is obvious that the extent of such commonalities is far more limited than in the US and that—contrary to the US—one cannot speak in Europe of ‘the law’ in singular form. For this reason, the method of elaborating restatements had to be different from the beginning. In Europe, no one can propose, as the ALI usually does, the appointment of just one reporter who collects all cases from the different jurisdictions and turns his findings into a first draft. Necessarily, European restatements must be elaborated by a group in which the different jurisdictions are represented. These observations on the different roles in elaborating, and the different interest in the results of, restatements on the part of academics and practitioners in the US and in Europe allow for the conclusion that in Europe it might be more appropriate for a higher percentage of academics to take part in such works than in the US. Until now, the international working groups that have elaborated the first drafts of European restatements have mainly consisted of academics. Indeed, for the reasons explained, it would be a surprise if any body or conference dealing mainly with restatements in Europe would reach the quota of more than fifty per cent practitioners, as is the case in the ALI membership. However, this does not mean that the participation of practitioners is of lower importance in Europe. The opposite is true. In my view, the DCFR would certainly have gained from a more systematic discussion by practitioners. Moreover, whereas the ALI allows only practitioners to participate who give an undertaking of personal independence from any interest of their clients or employers, the stakeholder participation organised by the European Commission for the DCFR did not require such an undertaking of personal independence. In the future, one could therefore imagine that, in line with ALI practice, practitioners (ie, judges, advocates, notaries etc) would be integrated into the works on restatements only if they give such an undertaking. Other stakeholders who represent interest or pressure groups and therefore cannot give such an undertaking could be given observer status allowing them to comment on a draft restatement from their perspective. The model of the ALI invites the making of a step towards more transparency by

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distinguishing more clearly personally independent participants (both scholars and practitioners) from lobbyists. Both groups should have an important and legitimate role in the elaboration of restatements, but it should be clearer who is speaking in which interest. V

THE MICROSTRUCTURE—RULES, COMMENTS AND NOTES

The style of presentation of American and European restatements is rather similar. Today the American Restatements consist of the ‘Black Letter Rules’, then a ‘Commentary’ to each rule, also with illustrations, and the ‘Reporters Notes’ on the relevant cases and statutes. The PECL and the DCFR follow this pattern closely. As mentioned above, the first ALI Restatements did not display their underlying case material and also had rather brief commentaries. They were ‘authoritative without authorities’.24 This has been criticised from the beginning. As long ago as 1924, the ALI Council had requested the reporters to prepare parallel treatises in connection with their drafts. This was an unrealistic demand as the reporters were too much burdened by their work on the restatement itself. Therefore, the full first series of restatements were finalised without the reporter’s notes. However, in some cases accompanying works set out the relation of the rules to the jurisdictions of individual states. This changed with the second, and even more with the third series of restatements which have rather comprehensive reporter’s notes, giving the supporting cases and other data relevant for the text. However, other than the Black Letter Rules and the Commentaries, which are dealt with by all ALI bodies, the notes remain in the reporter’s prerogative. Thus, it comes as no surprise that sometimes sharp disputes arise as to whether the notes really support what is said in the rules and the comments. In a similar way, the DCFR has been criticised because of the lack of comments and comparative notes in the ‘Interim Outline Edition’ (March 2008)25 and the ‘Outline Edition’ (March 2009).26 The Comments and Notes to the DCFR were not published before the ‘Full Edition’ came out in October 2009,27 that is to say, 18 months after the very first publication of the rules. However, the DCFR and its predecessor the PECL, have learned their lesson from the ALI Restatements since it was planned from the beginning to elaborate not only rules and comments, but also notes. In the case of the PECL, all rules, comments and notes were published at the same time. In the case of the DCFR, the reasons for the time lag between comments and notes were simply practical. Because of the more political framing of the works there was an enormous (and well justified) demand for the publication of interim results. It should be noted, however, that most of the preliminary drafts, which were later built into the DCFR, were immediately published online as well as 24

Frank, ‘The American Law Institute’, above (n 15) 615, 621. C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008). 26 Von Bar, Clive, Schulte-Nölke et al (eds), Principles, Outline Edition, above (n 1). 27 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009). 25

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shortly afterwards in print with full comments and notes.28 When the interim ‘rules only’ versions of the DCFR came out, the momentary lack of their comments and notes was at least partly compensated by the many preliminary drafts that had been previously published with full commentary and notes. Therefore, it came as a surprise that the early publication of interim results without notes was criticised by some authors.29 One wonders whether the alternative, ie, to delay publication until all parts of the work including the comments and notes were ready, would have been more appreciated. The lesson to be learned from this is rather clear. Notes are considered to be a highly desirable part of a restatement. Publication of a restatement without notes may frustrate the readers. In particular, European restatements will have a rather limited value (and consequently reputation) if they are elaborated without notes. Notes should be published at the same time as the rules and comments.

VI

RESTATEMENTS AS FINDING AIDS

The discussion on notes reveals one clear similarity between many US and European restatements. Both the American and most of the European restatement projects aim (inter alia) to gain knowledge about the laws of other jurisdictions. In those American and European restatements, which contain references to cases and statutes of the individual jurisdictions, the black letter rules have (among others) the function of a gateway, similar to the headwords in an encyclopaedia, for finding information about foreign jurisdictions and in particular about cases and statutes. Both in the American and the European discussion there is a permanent danger that this important function of the black letter rules, being a gateway to the comparative information on the underlying jurisdictions, is overshadowed by discussions concerning whether the rules are right or wrong. The vast majority of issues discussed with regard to restatements deal with the question whether one individually accepts or opposes the content of the black letter rules and the underlying policy decisions. These are, of course, important issues, but in the long run, in particular if several restatements on the same subject compete, those restatements which also properly fulfil the function of an encyclopaedia for the underlying jurisdictions will have a competitive advantage.

28 Series ‘Principles of European Law’ (Munich, Sellier, 2006 et seq): Benevolent Intervention in Another’s Affairs (C von Bar, 2006); Commercial Agency, Franchise and Distribution Contracts (M Hesselink et al, 2006); Service Contracts (M Barendrecht et al, 2006); Personal Security (U Drobnig, 2007); Lease of Goods (K Lilleholt et al, 2007); Non-contractual Liability arising out of Damage caused to Another (C von Bar, 2009); Sales (E Hondius et al, 2008); Unjustified Enrichment (C von Bar and S Swann, 2010); further volumes on donation, trusts, mandate contracts, loan contracts, acquisition of ownership and proprietary security will be published in 2010 and 2011. 29 cf N Jansen and R Zimmermann, ‘Was ist und wozu der DCFR?’ (2009) 47 Neue Juristische Wochenschrift 3401, 3404.

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AVOIDING THE PRACTICAL AUTHORITY OF THE AMERICAN RESTATEMENTS

As the authors of restatements are not politically legitimated to make the law, their product can—from a theoretical point of view—not be an authoritative source of the law itself. In theory, it is methodologically wrong to say, without any further reference: ‘This is the law, because a restatement says so’. In particular, from a statist perception of law, a rule in a restatement, drawn up by a group of private persons, can have no better authority than the opinion of an author (even a highly reputed author) of a legal treatise. In this view, a restatement can only be a finding aid and, particularly relative to the black letter rules, no more than the expression of an opinion as to what the law is or should be. Such a tool needs to be used in an autonomous, critical and responsible way, in particular by the courts when they apply, find (and often make) the law itself. However, the American Restatements go, without much theoretical foundation, one step further. From the beginning, the intention was to state the law in a way that, although the restatements were ‘less than a code’, they were to be viewed as ‘more than a treatise’;30 and, in practice, they enjoy a degree of practical authority in the sense that they are sometimes applied by courts as if they were a source of law itself.31 The main reason for this seems to be that, at least for the older restatements, their black letter rules have been widely acknowledged to properly reflect the actual law or at least to contain rules which should be the law. Following the classical explanation for the development of customary law, thus inveterata consuetudo and opinio necessitatis, the existence of a restatement replaces the proof of consuetudo. In other words—and of course very much simplified—one can state that the American Restatements became practical authority to the extent they are backed by an opinio necessitatis. Not surprisingly, this tension between the purely private origin of the restatements and their function as practical authority has caused a lot of discussion as to the political legitimacy of such private law-making. In Europe, too, there is a parallel discussion as to the possibility that the European restatements could become a politically non-legitimated sort of practical authority. One could even speculate that the vehemence of some contributions on the DCFR might be caused by fears that it could become such practical authority. However, one would expect—and hope—that the situation is very different in relation to the European restatements; they should not become a source of law in the way that we have seen happen in the US. The groups which made, for example, the PECL and the DCFR, never expressed as did the ALI32 that their works should have ‘the same authority as it is now accorded to the highest court of the jurisdiction’.

30

BN Cardozo, The Growth of the Law (New Haven, Yale University Press, 1924) 9. Zekoll, ‘Das American Law Institute’, above (n 17) 101, 115; see now also N Jansen, The Making of Legal Authority (Oxford, Oxford University Press, 2010) 53. 32 American Law Institute, ‘Report of the Committee’ in The American Law Institute 50th Anniversary, above (n 18) 269. 31

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My impression is that in Europe the existing restatements are far from becoming a sort of practical authority comparable to the situation in the US.33 In particular, European courts usually do not apply restatements as if they were the law. The very few exceptions seem more to prove the rule than to constitute evidence for an upcoming turnaround. There are many obvious reasons for this difference which can only be hinted at here. In Europe, there is no such institution as the ALI which has an undisputed monopoly for the elaboration of restatements. By contrast, in the core areas of private law—that is to say, in contract and tort—there is a multitude of restatements drawn up by different, sometimes competing, groups. In most EU Member States, the core areas of private law are codified leaving much less room for the courts to resort to restatements than is the case with the common law. Moreover, in Europe, there is usually no perception of the existence of ‘the’ one European law lying behind the different jurisdictions and being in need as in the US, for generic elaboration. Most areas of law are, contrary to the US, not just state law but national law—and thus they are embedded in an ideology of the European nation states having their peculiarities and their originality. Within the majority of European nation states, there is no comparable intra-state parallelism of jurisdictions which need to be held together by restatements. Indeed Spain, which is perhaps the only country in Europe where the Supreme Court often cites and follows restatements, is characterised by autonomous regions that enjoy a broad competence to enact regional private law statutes and even codifications. It is highly improbable—and in my view also not desirable—that in Europe restatements will follow the US example and acquire a similar practical authority. A lesson to be learned from this is that European restatements should clearly flag up that the work is only meant as a statement of its authors with regard to what the law is or should be, that is not intended to be used as a direct source of law without further references such as statutes or cases and that it will remain the user’s responsibility to ascertain (with the help of the references given and other references to sources of law) to what extent the stance taken in the rules and comments of the restatement actually reflects the law in force.

VIII

COVERAGE AND SYSTEMATIC MACROSTRUCTURE

If a series of restatements intends to cover broad areas of private law, how then should individual subjects be structured? The ALI Restatements were not very ambitious insofar as the core areas of private law were presented in several medium-sized blocks. Examples of individual ALI Restatements in the realm of the continental civil codifications are: — Restatement of the Law of Contracts (1932), Restatement of the Law Second, Contracts (1981). — Restatement of the Law of Torts (1934–39), Restatement of the Law Second, Torts (1965–79), Restatement of the Law Third, Torts (2009–ongoing). 33 On this now, seemingly drawing not very different conclusions, see also Jansen, The Making of Legal Authority, above (n 31) 59, 64.

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— Restatements of the Law, Property (1936–44), Restatement of the Law Second, Property (1977–2003). Other restatements deal with, for example, agency, conflict of laws, employment law, restitution and unjust enrichment, security, suretyship and guaranty, or trusts, as well as—partly going beyond private law—foreign relations law of the United States, judgments and the law governing lawyers. These restatements were drafted, in principle, as stand-alone works. The ALI did not attempt to integrate its individual restatements, for example, those on contracts and torts into one bigger piece. One could therefore call the American Restatements ‘mini-codes’ or partial codifications—although there is an ongoing discussion in US legal writing as to whether the style of the restatements has come too close to the generally unwanted style of European continental codifications.34 The DCFR goes the opposite way and strives for more integration. The basic idea was to have a first round of individual stand-alone drafts and then to integrate them into a more ambitious system. One can say that this idea was inspired by the technique of the continental civil law codifications. The DCFR, therefore, assumes a form of presentation which does not exist in the US (except perhaps in Louisiana), but which is frequently to be found, although not ubiquitous, in Europe. The motifs for this decision, as well as some of the consequential decisions concerning where to put the materials and to what extent to generalise them, were more practical than ideological.35 However, already in the internal discussions of the Study Group and the Acquis Group it turned out that some members of the research teams saw some questions of principle here. Therefore, a way had to be found which, on the one hand, does not too much predetermine any potential user, in particular a legislator while on the other, leaving as many options as possible. In the end, this argument was significant, not least for supporting the rather high level of integration that the DCFR has opted for, offering the chance to elaborate notions, definitions and rules which are useful for contractual and extra-contractual relations. The DCFR, thus, chose the more ambitious option. It is, at the same time, drafted in a way that it should be a quick and easy task to pick out individual pieces and to ‘de-generalise’ these parts according to the individual needs of the user. The approach of the DCFR has, of course, advantages and disadvantages. Moreover, the issue can be considered from a more practical as well as from an ideological viewpoint. The major practical advantage is that the high level of integration forces the drafters to aim at substantial terminological coherence across the full work. It is not the place here to assess to what extent this aim has been met in the DCFR. However, again just on a practical level, it turned out that the enormous size of the work has some disadvantages in handling the material and coping with it in a rather short time. For example, it was not possible fully to ensure that the comparative notes all date from the same point in time. There are, therefore, some differences in the relative up-to-dateness of the work. Moreover, it is foreseeable that any update, in

34 K Adams, ‘Blaming the Mirror: The Restatements and the Common Law’ (2007) 40 Indiana Law Review 205, 226ff. 35 See von Bar, Beale, Clive and Schulte-Nölke, ‘Introduction’ in Principles, Outline Edition, above (n 1) 1, 25.

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particular of the notes, will be confronted with the same problems. For the future, a way could be sought that avoids some of the practical disadvantages without giving up the idea of overarching terminological coherence. Therefore, it could be helpful to cut the DCFR, for the first update, into medium size blocks, following the US model—thus, for instance, a restatement on contract (possibly, contrary to the US, including some common specific contracts), a restatement on tort and a restatement on property law. Such a division of the work might also help to ease the more ideological criticisms that target the codification model of the DCFR. However, the aim to use common notions over the whole work and to seek coherency also with regard to similar questions (ie, commonalities of contractual and extra-contractual obligations, prescription etc) should not be given up. IX

THE ‘IS’ OR THE ‘OUGHT’—RESTATEMENT, PRINCIPLES OR MODEL LAW?

When drafting the black letter rules of restatements, the core question is always what the substantial content of each rule should be. In theory, there are two basic options: first, to draft rules which aim at reflecting, as closely as possible, the actual laws in force (often called ‘common rules’) and secondly, to draft rules which express the collective or majority view of the authors of the restatement as to what a good rule should be, irrespective whether such rules are actually the law or just de lege ferenda. This latter approach is often called the ‘best rules’ approach, although it can only produce rules which were finally accepted by a particular working group and which are not necessarily the ‘best rules’ which other groups would agree on. Many arguments have been made concerning the extent to which the rules, for example, the rules of the DCFR, but also of American Restatements, really restate the commonalities of the national jurisdictions or whether they are just rules that the group found acceptable (the ‘best rules’, but remote from many or all existing rules in the underlying jurisdictions). If one combines the question of the extent to which a rule reflects commonalities (or at least frequent examples) of the underlying actual laws with the question to what extent the same rule is considered to be a good rule (ie, fair, just, efficient, coherent with other rules, expressing right political choices, etc) from a standpoint of legal policy, one gets the following matrix: Good rule

Bad rule

(I)

(II)

(III)

(IV)

Rule is close to (commonalities or frequent examples of) the actual national laws Rule is remote from (commonalities or frequent examples) of the underlying national laws

Given the (rather theoretical) situation that there is agreement whether a certain rule is a good rule or not, the simple matrix shows that one can best live with rules

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which fall into quartile (I) whereas a restatement should certainly not formulate rules falling in quartile (IV). With regard to the rules that are placed in quartiles (II) and (III), the nature of a restatement will depend on its purpose. If the main purpose is to reflect the existing laws—irrespective of any need for reform—then the restatement will also have to formulate rules belonging in quartile (II). If, however, the restatement aims more at ‘best rules’, then it should only formulate rules which belong in quartiles (I) and (III). In practice the situation is, of course, not so simple. In particular the first option, just reflecting commonalities or the majority of the actual laws, is often not feasible, at least in Europe. Sometimes it is simply unclear what the actual law on a certain question is in a certain jurisdiction, because there is contradictory case law or dispute among scholars. But, even more often, the different national laws do not have much in common. By contrast with the position in the US, there is not ‘the law’ in singular form that one could restate. Rather, in many areas, the laws of the EU Member States considerably deviate, in particular with regard to their presentation, but sometimes also with regard to the outcome. A European restatement falling into the quartiles (I) or (II) is only possible where there are enough commonalities one could restate. It is often said that this is the case in the area of contract law. However, the notes to the PECL and to the DCFR show that, even in this area, there is considerable variation as to presentation, and sometimes even as to outcome. Reflecting the actual laws is possible only if there are broad similarities between the jurisdictions in question, which, at least in Europe, is more often the exception than the rule. However, where they are shaped by EU legislation, the actual laws of the EU Member States show broad similarities. When making the DCFR, a general policy decision was therefore that in those areas the rules should generally reflect the existing law without making many efforts to improve it. The reason was that a ‘common’ frame of reference fails in its purpose if it does not reflect what is actually common in the relevant jurisdictions. It was not seen as the purpose of the exercise that the authors of the DCFR should replace the common actual laws with something they personally found better. However, since many of the directives in the area of the DCFR are only minimum directives and, moreover, some are rather old and therefore could be seen to some extent as outdated, it was important to have a very close look at the transposition laws in the Member States. Where, for instance, many Member States had gone beyond the minimum standards set by the directives, the DCFR and already the ACQP, which were the predecessor in many fields of the aquis communautaire, went beyond the minimum standard and tried to reflect similarities of the Member States’ laws. In areas where there are not so many similarities, in particular where there are no EU regulations or directives, the situation is even trickier. In many areas of the DCFR, one cannot seriously say that the rules reflect a common ground of the European jurisdictions. In these areas, the DCFR clearly follows not the ‘common rules’ but the ‘best rules’ approach. It contains rules, although elaborated on a broad comparative basis, which have been proven acceptable in large international groups of comparative lawyers. These rules could, therefore, be characterised as ‘best rules’ in the sense of ‘best internationally acceptable rules’. The latter are either a choice from the varying national laws or, sometimes, pure inventions or

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compromises reached within the drafting group. They therefore fall in the quartiles (II) or (IV). This has the remarkable consequence that some rules finally agreed on for the Draft ‘Common’ Frame of Reference are not common in the sense that they do exist in all or many of the European jurisdictions. Often, the opposite is the case—indeed on occasions rules in the DCFR do not even exist in any of the actual laws. These rules just express the hope that they could function as common starting points or rules of reference for a debate on what common future rules might look like. If ‘restatement’ were to be understood in the very narrow sense of the verb ‘to restate’, thus to state or to affirm these ‘best internationally acceptable rules’ would certainly not be a restatement. If one does not look so much at the presentation, but at the outcomes that these rules produce for concrete cases, a more positive judgment might be made. From this perspective one can often reach very similar results by applying the rules of PECL or the DCFR and many national rules.36 The tension between the aim of formulating ‘common’ and ‘best internationally acceptable’ rules is not unique to the DCFR. One might find some examples in the American Restatements; and, in the PECL, there are instances where one cannot say that the rules are ‘common’ to the European jurisdictions. Sometimes one can discern that a compromise must have been negotiated within the group, as is shown for example by Article 2:202 PECL (Article II.–4:202 DCFR) on the question of whether an offer to a contract may be revoked.37 However, within the DCFR, the spread between rules which closely reflect the commonalities of all jurisdictions in the EU and rules which are innovations not existing as actual law in any EU Member State is much broader. In particular for some specific contracts38 and even more in the areas outside of contract law many of the rules in the DCFR are rather innovative. If one asks to what extent the DCFR reflects the actual law (thus contains ‘common rules’) and to what extent it contains ‘best internationally acceptable rules’, the answer can be different for each rule. The DCFR does not, therefore, offer a clear-cut solution. In practice, the participating groups felt their way forward. Some rules reflect the actual law, others try to express a mediate position given the background of different national laws and sometimes the rules suggest an innovative solution. Generally speaking, the authors of the DCFR felt bound to the actual law in areas where there was a rather clear picture of the situation in Europe containing much commonality. In the other cases, which were the majority of cases, just reflecting the actual law was no option. In these cases it became important to make rules by adopting a two-step approach. The first step was to explore carefully the actual situation in the European jurisdictions and then, in a second step, to make a choice following the ‘best rules’ approach. This was not simply a free

36 This has very convincingly been demonstrated for Belgian law at a conference on 10 and 11 June 2010 at Kortrijk. A conference volume is under preparation. 37 Art 2:202 PECL mixes the English idea of the non-binding offer (plus mailbox-rule) with the German idea of a generally binding offer; see Comments and Notes to Art II.–4:202 DCFR. 38 See for services (Arts IV.C.–1:101 et seq DCFR): C Wendehorst, ‘Das Vertragsrecht der Dienstleistungen im deutschen und künftigen europäischen Recht’ (2006) 206 Archiv für die civilistische Praxis 205, 290–97; critically H Unberath, ‘Der Dienstleistungsvertrag im Entwurf des Gemeinsamen Referenzrahmens’ (2008) 16 Zeitschrift für Europäisches Privatrecht 745, 764.

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choice; it was always the attempt to reflect at least what is frequent or at least seemed acceptable from the viewpoint of several, different, legal orders. Of course, this method can be criticised as being not sufficiently theoretically grounded and therefore erratic. The only question is whether there was an alternative other than simply to refrain from any attempt to formulate a rule. The real issue is whether the comparative notes clearly lay out to what extent the rules reflect actual law and to what extent they innovate. As long as the notes do their job (which is not invariably the case) it is clear that the DCFR contains proposals and fulfils, in its notes, the function of a finding aid (in the sense of encyclopaedia) for the different national laws within Europe. For the purposes of this finding aid function of the DCFR it does not really matter which rule was formulated. What matters is that the comparative notes to each rule show a reliable picture of the variety of the corresponding national laws and how they relate to the rule in question. There are several consequences to be drawn from this discussion and experience for future works. First, as already stated, such works should not claim any practical authority as a source of law. Even if well-reputed scholars and practitioners participate, a European restatement is not and should not be an authoritative source of law. It should, in contrast to the ALI Restatements, not aim to be ‘more than a treatise’. There is a further respect in which Europe can learn something from the American model. Over time, the ALI has developed three main categories of works. The ALI itself examines its subjects with two types of publications.39 First, there are the ‘Restatements of the Law’, in which the black letter rules seek to reflect ‘the law as it presently stands or might plausibly be stated by a court’. By contrast and secondly, the ALI produces works called ‘Principles of the Law’. Such Principles deal with legal areas thought to be in need of reform and aim to express ‘the law as it should be’. Both types of work use the same presentation technique, namely black-letter statements of recommended legal rules, supported by comments, including illustrations, and reporter’s notes. Moreover, as a third category of output, to which the American Law Institute—often together with the National Conference of Commissioners on Uniform State Laws (NCCUSL)—contributes, is the elaboration of Model Laws, which are—unlike the Restatements and the Principles of the Law—meant to be a concrete ready-made proposal for legislation by the states, or in some cases the federal legislator.40 These three categories of output, each quite different in its particular claim to reflect the actual law and the purpose it serves for legislation, could also be useful for the European discussion. In fact, the DCFR might be a mixture of all three categories, without clearly flagging up—at least on the level of the black letter rules—which part falls into which category. Only with the help of the notes can one usually find out to what extent a rule in the DCFR reflects a rule in certain jurisdiction or commonalities of many jurisdictions (thus is a restatement in the

39 The quotations in inverted commas are to be found under www.ali.org/index.cfm?fuseaction= projects.main. 40 For a full list of all ALI projects see www.ali.org/doc/past_present_ALIprojects.pdf.

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sense of the word) or whether it has been invented by the authors (and would belong in the category of Principles in the sense of the ALI). Somewhat surprisingly, there has been some controversy about whether, and in which parts, the rules of the DCFR are meant also to serve as a model law in the sense of a concrete proposal for (European) legislation (that is, as a European civil code). The DCFR itself, in particular its introduction, is very clear on the point that the work is not meant to be understood as a proposal for legislation.41 However, several authors have understood the work as a proposal for a European civil code and have based their (mostly sceptical) comments on this presupposition.42 The simple reason for this may be that some of the European restatements, in particular works on which the DCFR is partially based, have been drafted with a view to their possibly functioning as a model for a European civil code. This is in particular true for the Principles of European Law (PEL) which form the basis of Books IV–X of the DCFR and which were elaborated by the Study Group on a European Civil Code. Several members of this group are well known for their opinion that a European civil code should be enacted. It should, however, be noted that even this group understood itself simply as a ‘study group’ in which there was a considerable variance in opinions as to both the feasibility and desirability of a European civil code. Moreover, my impression was that, during the work on the DCFR, the initial optimism that some members of this group might have had about producing a result that could straightforwardly function as a draft for a European civil code faded considerably. The crucial reason why the DCFR cannot seriously be understood as a ready-made draft for legislation is that the other main building blocks, namely the PECL and the ACQP, which form the basis of the general parts of the DCFR on contracts and on obligations in Books I, II and III, were never meant to be a model law ready for legislation. It is beyond doubt that these works—of which much went into the DCFR nearly unmodified or only slightly altered—had rather different purposes than that of serving as model laws. This is also the main reason why, as far as I can see, none of the participants ever claimed that the DCFR as it stands should be treated as a model law ready for enactment by the EU or by national legislators. No doubt, the DCFR has been drafted with a view to becoming a source of inspiration and to provide building material for legislation. I am, however, not aware that anyone who participated in its elaboration would be so overconfident to call it a fully fleshed out draft civil code for patrimonial law. This was just a bugaboo some saw when the DCFR came out but which should have vanished by now. Irrespective of what the authors of the DCFR have—collectively or individually— said about the suitability of their work as a ready-made model for legislation, one can of course ask which parts are formulated in a way that one could imagine them to be enacted as statutory law. My answer to this question can already be surmised 41 C von Bar, H Beale, E Clive and H Schulte-Nölke, ‘Introduction’ in von Bar and Clive (eds), Principles, Full Edition, above (n 27) 49–62, 19ff. 42 In particular, some German authors, cf H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 (4) Oxford Journal of Legal Studies 659: ‘Notwithstanding its unwieldy name, the text is nothing less than the draft of the central components of a European Civil Code’.

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from what has been said above. I would distinguish between two big parts of the DCFR, namely Books I–III on the one hand and Books V–IX on the other, whereas Books IV and X—for reasons, which cannot be explained here—might need a more differentiated answer. Reading Books V–VII (namely, the parts on negotiorum gestio, tort and unjustified enrichment) and, with a slightly different style, also Book VIII (‘Acquisition of ownership of goods’) and Book IX (‘Security rights in movables’) one might get the impression that this is meant to be draft legislation, although this is not claimed expressly. By contrast, Books I–III are very different in style. These books are, as I have said, a combination of an amended version of PECL and the ACQP. Although the DCFR has made a large effort to integrate the acquis based materials into the general contract law rules harvested from PECL, there are still quite a lot of redundancies and rough edges. In particular, the entwinement of the (acquis based) pre-contractual information duties with the more classical rules on misrepresentation and fraud and, moreover, with the rules on non-performance, evidently still needs a lot of fine-tuning. One cannot seriously claim that these parts are ready for enactment as part of a European contract or civil code. However, these parts might function very well as a toolbox and a source for inspiration, thus as a CFR, and perhaps also as a restatement (in the broad sense). Moreover, the efforts made towards integration and coherence in Books I–III might be a good starting point for the elaboration of a draft for legislation (for example, an optional European contract code) if there should be a political will to do so. On the basis of these observations it could be useful if future works were much more clearly labelled to show in which of the three categories they are intended to fall (ie, Restatement, Principles or Model Law). By contrast with the US, it may be useful not to fully separate the different categories of works. One can find good reasons to mix the three categories. Just one example taken from the DCFR may illustrate this. One could, for instance, label in Books I–III of the DCFR the acquis based rules as a restatement in the narrow sense, the PECL based rules as Principles of the Law (perhaps some of them also as a restatement on the narrow sense) and, for example, the definitions of ‘consumer’, ‘business’, ‘in writing’ in Book I as a model for EU legislation. It is not very difficult to imagine techniques for such labelling which can be applied both in print and for the purposes of online presentation. A simple example would be to use black ink for rules with the character of a restatement (in the narrow sense) and grey ink for those which are meant to be just principles of the law. If a rule, irrespective whether restatement or principles, is meant to be a draft for legislation one could add a margin line. It goes without saying that one would have quite a lot of demarcation problems. However, the comments and notes would then have to explain carefully why the rule in question has been qualified as indicated and, if it is a borderline case, what other qualifications have been contemplated. Such labelling would not only be useful for legislators, but for those courts that make use of the restatement (in a broad sense) as a source of inspiration.

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‘Restatements’ in Europe and the US X

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SUMMARY—PRELIMINARY CONCLUSIONS FOR FURTHER WORKS ON RESTATEMENTS

The observations made here on the basis of the American and European discussion on restatements, in particular on the DCFR, allow for the following recommendations that groups engaged in the elaboration of European restatements might want to consider: — Representativeness instead of exclusiveness: Working groups should include the relevant voices within the legal profession (and perhaps even beyond with regard to, for example, law and economics) from a multitude of jurisdictions. Given the size and complexity of Europe (EU Member States and beyond) such groups will necessarily have no less than 20 members, more probably about 30, and they might need an even broader forum, including stakeholders, where drafts can be presented and discussed from time to time. — Quota and roles of practitioners and academics: Participation of practitioners, in particular judges and advocates, is essential. However, because of the different situation in Europe, a higher quota of academics than in the US, in particular with a specialisation for comparative law, might be appropriate. Also stakeholders, in particular from pressure groups, need to be involved, but ways should be sought to distinguish and to clearly flag up whether participants have undertaken to act independently from any economical client’s interest or whether they represent such interests. — The microstructure (rules, comments and notes): The presentation of restatements using the scheme of rules, comments and comparative notes is a well-established practice and it should be maintained. The notes should be available at the same time as the rules and comments. — Transparency of purpose I: is the creation of a finding aid intended? When embarking on and announcing restatement projects it should clearly be decided and flagged up to what extent the restatement is intended to be used as a finding aid for information on national laws. This is of particular importance for the question whether and, to what extent, notes should be elaborated. Restatements without notes cannot have the function of a finding aid. — Transparency of purpose II: is it intended that the restatement should become a practical authority? Contrary to the US experience, there is neither need nor justification for the making of legal authority by way of private restatements in Europe. Improving on previous practice, European restatements should expressly clarify that the work is just meant as a statement of its authors with regard to what the law is or should be and that is not intended to be used as a direct source of law without further references (such as statutes or cases). One might even add a sort of warning or instruction for proper use, saying, for example, that it will remain the user’s responsibility to ascertain, together with the help of the references given and other references to sources of law, to what extent the stance taken in the rules and comments of the restatement actually reflects the laws in force. Restatements without such a disclaimer will be

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understood and judged as an attempt privately to create legal authority and should be received as such, that is, with great scepticism and perhaps even mistrust. — Coverage and systematic macrostructure: The DCFR, as the—until now—most comprehensive example of a European restatement, reveals some practical disadvantages of such broad coverage. In the future, including with regard to necessary updates, it might be better to tailor medium-sized blocks, following the US model, for instance, a restatement on contract (possibly—in contrast to the US—including some common specific contracts), a restatement on tort and a restatement on property law. However, following the idea of the DCFR, the restatements should be drafted in such a way that they smoothly interact and that they have basic notions in common. Ways would have to be sought to ensure that the different groups that are responsible for drafting the restatement use the same terminology. — Clearer labelling—to what extent restatement intends to innovate or just to restate: Future restatements should be much more clearly labelled to indicate whether they intend (i) simply to reflect commonalities of the actual laws (‘common rules’, ie, re-stating in the sense of the word), or (ii) to state ‘best rules’ in the sense of the US Principles of the Law or (iii) irrespective whether ‘common rules’ or ‘best rules’, to offer a draft for legislation (‘model law’). Unlike in the US, it may be useful to assemble the three categories in one hybrid work, using typographical means to indicate what is meant for each rule. If these proposals, which are, to repeat, still rather preliminary and far from comprehensive, have a leitmotif, one could call it a plea for more transparency, clearer labelling and better communication of such works from the announcement to the publication. For many reasons, the works on the DCFR have not met—and probably could never have met in the given situation—such demands, given that the aims of many of the participants were rather different in the beginning and did in fact change over the years due to the influence of the fast moving political situation. If the requirement of clear labelling and communication is fulfilled, the issue of the correct generic term for the European restatements loses much of its importance. For my own part, I see no problem in calling the European works a ‘restatement’ as long no better term has been suggested. I would, however, understand the term slightly different. The word ‘restatement’ could be understood in Europe in the sense of a ‘reference statement’. This would clarify that a restatement intends, not so much to restate the existing European law, but to form a European common basis of reference when comparing and discussing the laws in Europe. The need for such works will increase. At the same time, the need for a broad pan-European forum of lawyers, where restatements can be discussed—and some perhaps even approved—will become all the more urgent as a multitude of competing restatements foils the original idea of having (one or a few) European restatement(s) as a common basis for discussion among lawyers from all over Europe. In the long run, too, Europe will need a European law institute, which will, however, have to look rather different from the American Law Institute in order to meet the needs of Europe’s lawyers.

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3 Dogmatising Non-legislative Codifications: Non-legislative Reference Texts in European Legal Discourse NILS JANSEN

I

INTRODUCTION

I

T IS WIDELY known that medieval and early modern law was based on non-legislative reference texts such as the Corpus iuris civilis, the Decretum Gratiani, and the Saxon Mirror. These texts were generally regarded as the most important sources of the law, although they were not based on a political sovereign’s legislative will.1 Legal authority was independent of political domination; rather, it was based on processes of recognition in professional debate. However, with the development of modern codifications, which were not least based on the idea that the law should be an expression of the political will of a national people, it seemed that the earlier forms of legal authority had been consigned to history.2 It is remarkable, therefore, that modern European private law is characterised by the re-emergence of a growing number of non-legislative codifications. The model for these modern non-legislative codifications is the American Restatements which have been formulated by the American Law Institute (ALI) since the 1930s.3 The most important modern examples are the Lando Commission’s Principles of European Contract Law (‘PECL’)4 and the UNIDROIT Principles of International Commercial Contracts (‘PICC’).5 Despite their name, these latter Principles are not backed by the authority of UNIDROIT, as they were 1

See below (nn 35ff). N Jansen and R Michaels, ‘Private Law and the State. Comparative Perceptions, Historical Observations, and Basic Problems’ (2007) 71 Rabels Zeitschrift für ausländisches und internationales Privatrecht 345–97, 377ff, 380. 3 See R Michaels, ‘Restatements’ in J Basedow, KJ Hopt and R Zimmermann (eds), Handwörterbuch des Europäischen Privatrechts (Tübingen, Mohr, 2009) 1295–99; N Jansen, The Making of Legal Authority. Non-legislative Codifications in Historical and Comparative Perspective (Oxford, Oxford University Press, 2010) 50ff. 4 O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II (The Hague, Kluwer, 2000); O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). 5 UNIDROIT (ed), The Principles of International Commercial Contracts 2004, 2nd edn (Rome, Unidroit, 2004) (1st edn 1994). 2

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formulated by a group of mostly academic lawyers which—despite having been entrusted with its work by UNIDROIT—worked independently and with complete autonomy. In addition, there are the Principles of European Tort Law (‘PETL’) of the European Group on Tort Law6 and, most recently, a number of Principles drafted on the basis of the PECL. These are the Principes contractuels communs (PCC)7 which were presented in 2008 by the French Association Henri Capitant des Amis de la Culture Juridique Française, and the ‘Draft Common Frame of Reference’ (‘DCFR’) which was presented first in an ‘Interim Outline Edition’ (2008)8 and one year later in a more complete and partly revised ‘Full Edition’ (2009).9 Also the Acquis Group’s Acquis Principles (‘ACQP’, 2007/2009)10 belong to this PECL-family. Although the Acquis Group wanted to base its Principles exclusively on the modern European acquis communautaire, it had to use a revised version of the PECL for filling gaps, where it could not find a basis in the acquis for rules which were seen as necessary for completing a workable system of contract law rules. II

NON-LEGISLATIVE CODIFICATIONS

All these texts have been written by ‘private’ groups of lawyers or by ‘privately’ established institutions; hence, they have been characterised as ‘private codifications (codification privée, Privatkodifikation)’.11 However, such characterisation may be downplaying the actual significance of these texts. It is somewhat misleading to describe the professional activity of legal scholars, the main actors in this process, as ‘private’. Indeed, European academics are usually based at state universities; and although their academic activity may be protected by the constitutional guarantee of academic independence, they have often identified themselves 6 European Group on Tort Law, Principles of European Tort Law. Text and Commentary (Vienna, Springer, 2005). 7 Association Henri Capitant des Amis de la Culture Juridique Française, Projet de Cadre Commun de Référence—Principes contractuels communs (Paris, Société de Législation Comparée, 2008) and English (only the rules, no Comments); B Fauvarque-Cosson and D Mazeaud (eds), European Contract Law. Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules (Munich, Sellier, 2008) 573ff. 8 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008). 9 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009). 10 Research Group on the Existing EC Private Law (Acquis Group), Principles of the Existing EC Contract Law (Acquis Principles), Contract I: Pre-contractual Obligations, Conclusion of Contract, Unfair Terms (Munich, Sellier, 2007); Principles of the Existing EC Contract Law (Acquis Principles), Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services (Munich, Sellier, 2009). 11 C Kessedjian, ‘La codification privée’ in A Borrás et al (eds), E Pluribus Unum. Liber Amicorum Georges A.L. Droz (The Hague, Kluwer, 1996) 135–49; R Michaels, ‘Privatautonomie und Privatkodifikation. Zu Anwendbarkeit und Geltung allgemeiner Vertragsrechtsprinzipien’ (1998) 62 RabelsZ 580–626, 590f; for further references, see R Michaels, ‘Preamble I’ in S Vogenauer and J Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC-Commentary) (Oxford, Oxford University Press, 2009) [5]; cf also DV Snyder, ‘Private Lawmaking’ (2003) 64 Ohio State Law Journal 371–449; G Bachmann, Private Ordnung. Grundlagen ziviler Regelsetzung (Tübingen, Mohr, 2006) 37ff.

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with their respective state to a remarkable degree.12 Similarly, most American lawyers, who engaged themselves in the ALI, strongly identified with American society and acted out of a feeling of ‘public duty’,13 although they were either professors at private law schools or worked for private law firms. Such jurists do not promote their own individual interests or the interests of a particular pressure group when drafting a system of transnational principles (they may have an interest in having their name on the codification, though). It is, therefore, misleading to characterise them as ‘private actors’ in the legal system. The specific feature of such texts is not their alleged ‘private’ character, but rather the fact that they are established outside parliaments and thus constitute non-legislative law. In the present context, however, it is much more important that these texts, in terms of formal presentation and normative intention, are codifications. They state the law in an authoritative form, rather than merely describing an existing legal system. The law is presented in the form of comprehensive bodies of rules which systematically cover a central field of private law; furthermore, these rules are intended to be applied by participants to transnational or European legal discourse. It is apparent that these texts do not aim at being understood as scholarly contributions to actual discussions.14 This can be concluded not only from the fact that they are formulated in the form of legal rules; it can also be seen from the Comments and Notes ‘officially’ explaining these rules. These Comments and Notes are not aimed at providing the reader with detailed comparative or other scholarly information. True, in the European context,15 some authors have claimed that the Principles had primarily such an academic function.16 Yet, the relevant comparative literature, such as the International Encyclopedia of Comparative Law or the textbooks by Hein Kötz, Christian von Bar or Filippo Ranieri,17 is only 12 cf S Lepsius, ‘Taking the Institutional Context Seriously’ in N Jansen and R Michaels (eds), Beyond the State. Rethinking Private Law (Tübingen, Mohr, 2008) 233–43; H-P Haferkamp, ‘The Science of Private Law and the State in Nineteenth Century Germany’ in Jansen and Michaels, ibid, 245–67, 258ff, both with further references. 13 American Law Institute (ALI), ‘Report of the Committee on the Establishment of a Permanent Organization for the Improvement of the Law Proposing the Establishment of an American Law Institute’ (1923) 1 Proceedings of the American Law Institute 1–109, 29: ‘fulfillment [sic!] of a public duty’. 14 N Jansen and R Zimmermann, ‘“A European Civil Code in all but Name”. Discussing the Nature and Purposes of the Draft Common Frame of Reference’ (2010) 69 Cambridge Law Journal 98–112, 104ff. 15 In the American discourse, in contrast, the Restatements were never presented as a means of comparative information. Here, it was clear from the outset that the Restatements were rather an act of informal, ‘soft’ legislation; indeed, this was never seen as inappropriate. 16 H Schulte-Nölke, ‘Ziele und Arbeitsweisen von Study Group und Acquis Group bei der Vorbereitung des DCFR’ in M Schmidt-Kessel (ed), Der gemeinsame Referenzrahmen: Entstehung, Inhalte, Anwendung (München, Sellier, 2009) 9–22, 14; cf also H Schulte-Nölke, ‘Die Acquis Principles (ACQP) und der Gemeinsame Referenzrahmen: Zu den Voraussetzungen einer ertragreichen Diskussion’ in R Schulze, C von Bar and H Schulte-Nölke (eds), Der akademische Entwurf für einen Gemeinsamen Referenzrahmen: Kontroversen und Perspektiven (Tübingen, Mohr, 2008) 47–71, 67f; H Schulte-Nölke, ‘Arbeiten an einem europäischen Vertragsrecht: Fakten und populäre Irrtümer’ (2009) Neue Juristische Wochenschrift 2161–67. 17 H Kötz, European Contract Law (Oxford, Oxford University Press, 1997); F Ranieri, Europäisches Obligationenrecht, 3rd edn (Vienna, Springer, 2009); C von Bar, The Common European Law of Torts (Oxford, Clarendon Press, 1998/2000); C van Dam, European Tort Law (Oxford, Oxford University Press, 2006); P Schlechtriem, Restitution und Bereicherungsausgleich in Europa (Tübingen, Mohr, 2000/01). See also the Ius Commune Casebooks for the Common Law of Europe, such as

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exceptionally mentioned despite often being much more detailed and precise. Similarly, the reader does not usually find detailed arguments on the pros and cons of the respective rules or specifically doctrinal considerations. Indeed, the usual forms of legal argument such as conceptual reflection, discussion of alternatives, and case-by-case reasoning are absent. Lex iubeat, non disputet. Rather, we find authoritative explanations of the rules’ meaning and intended applications and— occasionally—policy considerations. Such arguments can also be found in a government’s proposal of new legislation. All this makes it apparent that these Principles must primarily be seen as political documents that are intended to shape the future course of private law in Europe. Indeed, this was the purpose of their model, the American Restatements, which were conceived not as purely academic but as genuinely political documents. The ALI is not, and has never been, an organisation of a scholarly character. Rather, it is widely regarded as a ‘quasi-legislator’.18 Even if the restatements are of course not acts of legislation, it was a core aim for the founding fathers of the Institute that the restatements were to become the primary reference text of future law. The intention was that they were to be attributed such authority ‘as is now accorded a prior decision of the highest court of the jurisdiction’.19 For common law lawyers that was certainly something more than merely a contribution to an academic discussion. The restatement project was about establishing authoritative texts contributing to legal certainty; and that means that it was about rule-making. At the beginning of the twentieth century, there were good reasons for such a project as the American legal system was in an utterly unclear and confusing state. The common law had become so complex and unclear that its reliability seemed seriously endangered, and an increasing amount of unsystematic and often contradictory statutory legislation substantially contributed to this state of affairs.20 About one half of the cases reaching appellate courts were reversed.21 Attempts in the nineteenth century to systematise and clarify the law by means of civil codes had failed.22 According to influential observers, the American common law was therefore rightly standing ‘indicted for uncertainty’.23 Here, the Americans designed their restatements as a remedy against this deplorably uncertain state of the law.

H Beale, A Hartkamp, H Kötz and D Tallon (eds), Cases, Materials and Text on Contract Law (Oxford, Hart Publishing, 2002); W van Gerven, J Lever and P Larouche, Cases, Materials and Text on National, Supranational and International Tort Law (Oxford, Hart Publishing, 2000); J Beatson and E Schrage (eds), Cases, Materials and Texts on Unjustified Enrichment (Oxford, Hart Publishing, 2003). Likewise, the extensive contributions by the Trento-Group and the detailed comparative studies of the Centre of European Tort and Insurance Law in Vienna must be mentioned in this context. 18 J Zekoll, ‘Das American Law Institute—ein Vorbild für Europa?’ in R Zimmermann (ed), Nichtstaatliches Privatrecht: Geltung und Genese (Tübingen, Mohr, 2008) 101–27, 117 with further references concerning the American discussion. 19 ALI, above (n 13) 25; cf also 29. 20 ibid, 6ff, 66 ff, 69ff, 77f. 21 American Bar Association, ‘Report of the Special Committee Appointed to Consider and Report whether the Present Delay and Uncertainty in Judicial Administration can be Lessened, and if so, by What Means’ (1885) 8 Annual Report of the American Bar Association 329ff. 22 Jansen and Michaels, ‘Private Law and the State’, above (n 2) 383ff; further references in Jansen, The Making of Legal Authority, above (n 3) 16, 51f. 23 BN Cardozo, The Growth of the Law (New Haven, Yale University Press, 1924) 3: ‘Our law stands indicted for uncertainty, and the names of weighty witnesses are endorsed upon the bill’.

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Today, it may be said that they have in fact served their purpose rather well. In many fields, the restatements are acknowledged as legal authorities. They provide the basis for law school courses and for doctrinal discussion, and often they are applied by the courts as if they had the force of statutes.24 Similarly, the PICC and the PECL have long achieved the status of textual authorities. True, these Principles were added to well-administered national legal systems that all have a strong national legal tradition supported by an influential national legal profession. This sharply distinguishes the present situation in Europe from the state of American law in the first half of the twentieth century: European legal systems cannot be consolidated or stabilised by non-legislative codifications. Rather, such Principles may be perceived, from an internal, national perspective, as an external irritation. Nevertheless, legislators regularly accept these Principles as models as they want to overcome an alleged parochial state of national law. Likewise, in academia, these Principles are today seen not only as an expression and result of comparative research, but as an ‘object of European scholarship’ in themselves.25 Despite their evident lack of political or ‘democratic’ legitimacy, the PECL have been recognised, even by traditional national scholars, as a source of law in a broad sense;26 and they have even been treated as authoritative reference texts by European courts.27 Even more remarkable is the success of the PICC in transnational arbitration. True, choosing these rules or only a non-national legal standard continues to be exceptional.28 Yet, despite this reluctance on the practitioners’ side, the PICC have 24 See MA Eisenberg, ‘The Concept of National Law and the Rule of Recognition’ (2002) 29 Florida State University Law Review 1229–63, 1251ff; Zekoll, ‘Das American Law Institute’, above (n 18) 115ff; further, eg, AT von Mehren, Law in the United States: A General and Comparative View (The Hague, Kluwer, 1988) 21f; JP Frank, ‘The American Law Institute, 1923–1998’ (1998) 26 Hofstra Law Review 615–39, 638ff; M Rheinstein, ‘Leader Groups in American Law’ (1971) 38 University of Chicago Law Review 687–96, 692f; Snyder, ‘Private Lawmaking’, above (n 11) 381f. 25 R Zimmermann, Die PECL als Ausdruck und Gegenstand Europäischer Rechtswissenschaft (Bonn, Zentrum für Europäisches Wirtschaftsrecht der Universität Bonn, 2003); cf also R Zimmermann, ‘Ius Commune and the Principles of European Contract Law: Contemporary Renewal of an Old Idea’ in H MacQueen and R Zimmermann (eds), European Contract Law: Scots and South African Perspectives (Edinburgh, Edinburgh University Press, 2006) 1–42, 33ff; R Zimmermann, ‘The Principles of European Contract Law: Contemporary Manifestation of the Old, and Possible Foundations for a New, European Scholarship of Private Law’ in F Faust and G Thüsing (eds), Beyond Borders: Perspectives on International and Comparative Law, Symposium in Honour of Hein Kötz (Cologne, Heymann, 2006) 111–47. 26 See, eg, C-W Canaris, ‘Die Stellung der “UNIDROIT Principles” und der “Principles of European Contract Law” im System der Rechtsquellen’ in J Basedow (ed), Europäische Vertragsrechtsvereinheitlichung und deutsches Recht (Tübingen, Mohr, 2000) 5–31, 13ff, 29ff: ‘Rechtsgewinnungsquelle’; Canaris uses the UNIDROIT Principles and the PECL as a basis for introducing a contractual remedy for disgorging profits, although there is no legislative basis for such a remedy in the German BGB. He does not, however, treat the Principles as an ultimate legal authority, which could be used without further justification in legal argument. 27 Zimmermann, PECL als Gegenstand Europäischer Rechtswissenschaft, above (n 25) 49ff, with further references. Remarkable developments, in this respect, are reported from Spain, where the PECL are used by the Tribunal Supremo and also by lower courts as a driver for change and as an authoritative reference text in a process of modernising contract law. See C Vendrell Cervantes, ‘The Application of the Principles of European Contract Law by Spanish Courts’ (2008) 16 Zeitschrift für Europäisches Privatrecht 534–48, analysing twelve decisions of the Tribunal Supremo and nine decisions of other courts, all of them but one between 2005 and 2007. 28 This point is emphasised by Vogenauer ‘Introduction’ in id and Kleinheisterkamp, PICCCommentary, above (n 11), [40]f; see also, D Oser, The Unidroit Principles of International Commercial

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nevertheless become a well-acknowledged instrument of international arbitration. This is a paradox only at first sight: from an international arbitrator’s perspective, ‘the PICC are the most comprehensive and regularly updated statement of internationally recognized legal rules applicable to international commercial contracts’.29 Thus, there is evidence that arbitrators are increasingly inclined to apply the Principles if the parties’ choice of law allows them to do so.30 What is more, as these Principles have been formulated independently of national governmental influence, they are seen as a neutral standard of transnational justice and as an expression of a global legal consensus.31 Arbitrators apply them as ‘a set of backup provisions’,32 or take them as a standard for validating, or controlling, decisions that have been reached under domestic law.33 It follows, according to some observers, that they are even changing the value basis of international commercial contract law.34 All this reveals a remarkable similarity with the use of Justinian’s Corpus iuris and other non-legislative codifications during the ius commune.35 Clearly, jurists must give priority to particular legislation, be it because the parties have chosen to do so, or because there is specific statutory law backed by the political authority of a legislator.36 But the non-legislative reference texts are nonetheless applied in a subsidiary (or supplementary) role and inform the interpretation of a particular law. Such an understanding of the law was dominant in Europe until private law was codified in the Code civil and the subsequent national civil codes. Today, again, European and global principles are increasingly seen as ‘General Principles of Law’: as an instrument for the interpretation and supplementation of uniform and

Contracts.A Governing Law? (Leiden, Nijhoff, 2008) 28f; F Dasser, ‘Mouse or Monster? Some Facts and Figures on the lex mercatoria’ in Zimmermann (ed), Nichtstaatliches Privatrecht, above (n 18) 129–58, 139ff. In fact, the actual number of courts and reported arbitration awards applying the PICC may even be in decline; see the record on: www.unilex.info/dynasite.cfm?dssid=2377&dsmid= 13618&x=1, which reports only 13 cases for 2008 and 14 cases for 2009 (as of 4 October 2010). 29

M Scherer, ‘Preamble II’ in PICC-Commentary, above (n 11) [27]. F Bortolotti, ‘The UNIDROIT Principles and the Arbitral Tribunals’ (2000) Uniform Law Review 141–52, 142. 31 cf E Brödermann, ‘The Growing Importance of the UNIDROIT Principles in Europe—Review in Light of Market Needs, the Role of Law and the 2005 Rome I Proposal’ (2000) Uniform Law Review 749–70, 756ff; Oser, A Governing Law?, above (n 28) 57ff, 154; more reluctantly Bortolotti, ‘The UNIDROIT Principles’, above (n 30) 143ff. 32 Scherer, ‘Preamble II’ in PICC-Commentary, above (n 11) [60]. 33 Scherer, ‘Preamble II’ in PICC-Commentary, above (n 11) [55]f; F Marella, ‘Choice of Law in Third-Millennium Arbitrations: The Relevance of UNIDROIT Principles of International Commercial Contracts’ (2003) 36 Vanderbilt Journal of Transnational Law 1137–88, 1169, with examples where the PICC were used for giving ‘transnational status’ to decisions reached under domestic law. 34 P Berger, ‘The Relationship between the UNIDROIT Principles of International Commercial Contracts and the New Lex Mercatoria’ (2000) Uniform Law Review 153–70. 35 Concurring R Michaels, ‘Umdenken für die UNIDROIT-Prinzipien: Vom Rechtswahlstatut zum Allgemeinen Teil des transnationalen Vertragsrechts’ (2009) 73 RabelsZ 866–88. On the use of non-legislative codifications such as the Corpus iuris civilis, the Decretum Gratiani, or the Saxon Mirror, in medieval times and early modernity, see Jansen, The Making of Legal Authority, above (n 3) 20–49; id. ‘Das gelehrte Recht und der Staat’ in Zimmermann (ed), Nichtstaatliches Privatrecht, above (n 18) 159–86. 36 Jansen, The Making of Legal Authority, above (n 3) 33f, 41ff, 74. 30

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national law.37 Influential lawyers and courts increasingly listen to an ‘echo of universalism’:38 they take recourse to transnational principles if those principles look attractive and if they have been assigned sufficient authority in European legal discourse. Until the present day, the Principles’ lack of democratic or political legitimacy has not given rise to constitutional doubts that occasion disquiet about this practice. Nobody doubts that lawyers do no wrong when applying such Principles, because it is assumed that constitutional limitations only apply to the states’ legislation; and non-legislative reference texts undoubtedly lack the binding force of a state’s law. Whether the participants to professional legal discourse are nevertheless taking such texts as legally binding, is an aspect which has not yet been considered as constitutionally relevant. III

DOGMATISING NON-LEGISLATIVE CODIFICATIONS

These observations are all the more remarkable as the authority of such texts does not normally depend primarily on the superiority of their rules. Rather, a historical and comparative analysis reveals other factors proving decisive. This is not the place for a more detailed analysis; rather it is sufficient to summarise the results of recent research.39 Apparently, a first decisive factor is the perception of a crisis in the law’s administration; such crises have often made lawyers willing to recognise new reference texts as an authoritative textual foundation for their legal system. Even if most European legal systems appear to be working rather smoothly, however, the many differences between the national legal systems may be perceived—more by politicians and academic lawyers than by practitioners—as an inappropriate state of law within a Common Market and a unified political Union. Another important factor is the codification’s fitting in with the professional and social identity of the legal profession. Lawyers will only then be prepared to recognise a codification, be it legislative or non-legislative, if they can understand it as a fair expression of their concept of the law and of their legal system’s value basis. Here, it is clear that the European Principles may well be perceived as giving expression to a desire for a legal symbol of European legal identity. A third factor to be mentioned in this context is the professional excellence and reputation of the texts’ authors; and in more recent times, the procedural ideals of fair representation and discursively open, transparent decision-making have become important authority factors also for non-legislative codifications. 37 J Basedow, ‘Uniform Law Conventions and the UNIDROIT Principles of International Commercial Contracts’ (2000) Uniform Law Review 129–39, 133ff, 135; F Burkart, Interpretatives Zusammenwirken von CISG und UNIDROIT Principles (Baden-Baden, Nomos, 2000) 209–53. More reluctantly, though with regret, F Ferrari in I Schwenzer (ed), Schlechtriem/Schwenzer. Kommentar zum Einheitlichen UN-Kaufrecht, 5th edn (München, Beck, 2008) Art 7 [59]ff. For national law see above (n 26); Michaels, ‘Preamble I’ in PICC-Commentary, above (n 11) [88]ff, [100]ff, [111]ff, with further references. 38 JM Smits, ‘The Principles of European Contract Law and the Harmonisation of Private Law in Europe’ in A Vaquer Aloy (ed), La Tercera Parte de los Principios de Derecho Contractual Europeo. The Principles of European Contract Law Part III (Valencia, Tirant lo Blanch, 2005) 567–90, 580. 39 Jansen, The Making of Legal Authority, above (n 3) especially 95–137.

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More importantly, however, the form of a text has proved to be a key, though underestimated, authority factor for non-legislative codifications. On the one hand, the usefulness and hence the application in daily practice of reference texts depends on whether they offer a consistent, orderly and easily applicable expression of the actual law. On the other hand, the formal presentation of a reference text may symbolically contribute to its recognition as an authoritative source of the law, ie, as a legal institution. Non-legislative codifications do not look like textbooks or novels. Well-known texts of legal authority, such as the medieval standard glosses, a modern commentary to a civil code, or the American Restatements show clearly that the authority both of reference texts and their commentaries depends to a significant degree on their success in being presented as legitimate and authoritative legal institutions. Lawyers will only then treat such texts as authorities if they can reasonably expect their colleagues to do the same. Yet, such expectation can only be justified if such texts have been widely acknowledged, and if they seem to be independent of the individual behaviour of others and in this sense become effective as legal institutions. Normally, this means that a reference text must be visible in legal discourse not as a usual doctrinal contribution, such as a textbook or a learned article, but rather as a legitimate textual authority in itself. Indeed, the fact that social institutions come to be routinely perceived by citizens as objective social phenomena is based on their being presented in symbolic form wherever citizens are confronted with them.40 Here, a more detailed analysis reveals that both the American Restatements and the modern PICC were quite successful in presenting themselves as authoritative statements of rules which nevertheless could be understood as a fair description of the law.41 Their status as legal authorities cannot be explained without taking this factor seriously. In any event, the authority of non-legislative reference-texts does not depend on the authority of legislators, but rather on the texts’ reception and recognition in 40 B Stollberg-Rilinger, Des Kaisers alte Kleider (München, Beck, 2008) 9ff, 10: ‘erscheinen Institutionen … den Einzelnen selbst in der Regel als etwas Festes, Objektives … Das liegt daran, dass Institutionen den Einzelnen immer schon auf Schritt und Tritt in symbolischen Formen gegenübertreten’; cf also B Stollberg-Rilinger, ‘Verfassungsgeschichte als Kulturgeschichte’ (2010) 127 Zeitschrift der Savigny-Stiftung für Rechtsgeschichte (germanistische Abteilung) 1–32, 5ff. For an analysis of the presentation of legal texts under such a perspective, see Jansen, The Making of Legal Authority, above (n 3) 111–36; N Jansen, ‘Methoden, Institutionen, Texte. Zur diskursiven Funktion und medialen Präsenz dogmatisierender Ordnungsvorstellungen und Deutungsmuster im normativen Diskurs’ 1–71, 41ff in (2011) 128 Zeitschrift der Savigny-Stiftung für Rechtsgeschichte (germanistische Abteilung) 55ff. 41 By using a normative, prescriptive language for their Rules and by presenting them in the form of legislation, the American Law Institute and UNIDROIT implicitly staged their Rules as authoritative statements of the law. Yet, these institutes did not make an obviously illegitimate claim of making new law. The Rules were published under the well-chosen title of a ‘Restatement’ of the common or transnational law, rather than as the result of quasi-legislative decision-making. In this way, the formal and conceptual presentation of the Restatements (First) and the PICC blurred the difference between a descriptive representation (‘restatement’) of rules actually in force and a prescriptive statement of legislation. Thus, they consciously ignored, or rather transgressed, the traditional European institutional distinction between the law and its description. The rules were presented neither as a description of the courts’ practice, nor as a legislative command, but rather as an authoritative expression of the legal profession’s considered view of the law. This resulting ambiguity in formal meaning made it possible for the legal profession to accept the restatements and the PICC as authoritative statements of the law without, however, inappropriately treating them as legislation. See, for more detailed discussion, Jansen, The Making of Legal Authority, above (n 3) 133ff.

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professional discourse. These texts are recognised as legal authorities by becoming reference texts within professional discussion. Here, it is remarkable that lawyers are today confronted with a broad range of concurring non-legislative codifications of equal formal qualities, among which they have to choose. Yet, those texts were not formulated independently of one another, but rather are part of one normative discourse and thus relate to one another. The PICC and the PECL are both strongly influenced by the UN Convention on Contracts for the International Sale of Goods (‘CISG’). Also both sets of Principles were mutually considered during the drafting processes; often provisions are similar or even identical. And the DCFR, the PCC, and—to a lesser extent—also the ACQP are based on the PECL or present a considered reformulation of those former rules. As a result, the process of non-legislatively codifying European contract law has, within a rather short period, become highly self-referential. The continuous, and continuing, process of redrafting Principles of European contract law might stabilise this group of Principles as the exclusive textual authorities of European private law. European jurists increasingly assume that European private law is today based on the Lando Commission’s PECL or a derivative version of those rules. Those latter Principles derive their legitimacy from presenting themselves as an improved version of the PECL42 and at the same time add to the earlier Principles’ authority by doing so, ie, by treating them as authorities. The European rules, as they are found in the PECL, the PCC and the DCFR, shall thus gain in authority by being acknowledged as authoritative in the current process of redrafting the PECL’s heritage. European lawyers stand witness to a process in which supposedly old rules and new textual authorities are recognised as the common basis of European contract law. This is apparently the reason why the authors of the DCFR refused to explain the—often significant—changes to the PECL’s wording.43 They did not want to diminish the PECL’s authority on which the DCFR’s authority is supposedly based. What European lawyers presently perceive is hence a remarkable non-discursive process of dogmatisation. Indeed, the question whether the PECL or other Principles should be treated as sources of European contract law is only exceptionally asked.44 The actual processes of recognition appear to be beyond argument.

IV

THE LEGAL POINT OF VIEW

In more legal, doctrinal terms, the authority of the new European Principles may be expressed by means of a presumption of reasonableness. The basic assumption would be that a rule commonly acknowledged in the different Principles should be taken as an expression of a European consensus and as a reasonable solution to the 42 C von Bar, H Beale, E Clive and H Schulte-Nölke, ‘Introduction’ in von Bar and Clive (eds), DCFR Full Edition, above (n 9) 1–23, [40]. 43 There is only a highly general explanation of how the DCFR relates to the PECL; see von Bar, Beale, Clive and Schulte-Nölke, ‘Introduction’, ibid, [40]ff. The many, often significant, changes made to the PECL’s rules are mostly not specifically justified in the DCFR’s Comments. Rather, the DCFR often adds a shortened version of the PECL’s Comments even where a rule has been changed. 44 But see Michaels, ‘Privatautonomie und Privatkodifikation’, above (n 11).

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problem in question. Where a more recent version departs from an older one, the new version should be taken as a reconsidered and hence prima facie better version of the old rule. This would be of particular importance for the DCFR. Even if the more innovative parts of the DCFR, such as service contracts,45 negotiorum gestio (‘benevolent intervention in another’s affairs’),46 restitution (‘unjustified enrichment’)47 and torts (‘non-contractual liability arising out of damage caused to another’),48 have met fierce critique and hence cannot be taken as giving expression to a European consensus, other considerations might prevail in the field of contract law. Indeed, the DCFR might prima facie be taken as an improved restatement and hence as the basis of modern European contract law. This is even more the case, as also the new European acquis communautaire has found its way—via the ACQP— into this text. Thus, it might become a dogma of European private law that the DCFR’s rules on contract law should be seen as an improved version of both the PECL and the ACQP.49 It is difficult to predict whether the DCFR will in fact be recognised in this sense as an ultimate textual source of European contract law—predictions of future developments are particularly difficult where processes of recognition are concerned. In any event, it is not for the lawyer to make such a prediction. European lawyers should not ask whether future lawyers will in fact recognise the DCFR; rather, lawyers should ask whether they should acknowledge the mentioned presumption of reasonableness in favour of the new European Principles in general or even in favour of the DCFR as the ultimate expression of those Principles. Here, my central thesis is that such a presumption is, from a legal point of view today, utterly unfounded. First, European lawyers should not treat European Principles as ultimate legal authorities. Of course, those rules are often giving expression to a well-considered European consensus. But this is not always the case; hence further argument is necessary when relying on such Principles. Secondly, it cannot be assumed that more recent, reconsidered Principles are more reasonable or technically better than the original PICC or PECL. Indeed, the more recent version of a particular rule is often less convincing; this is particularly true for the DCFR. In general terms, this thesis is based on the observation that the recent processes of redrafting the European Principles (PCC and DCFR) obviously suffered from severe structural deficiencies resulting in an often poor quality of more recent versions of a rule. Everybody knows that the Principles were redrafted under

45 H Unberath, ‘Der Dienstleistungsvertrag im Entwurf des Gemeinsamen Referenzrahmens’ (2008) 16 Zeitschrift für Europäisches Privatrecht 745–74, 759ff, 774. 46 N Jansen, ‘Negotiorum Gestio und Benevolent Intervention in Another’s Affairs: Principles of European Law?’ (2007) 15 Zeitschrift für Europäisches Privatrecht 958–91. 47 C Wendehorst, ‘Ungerechtfertigte Bereicherung’ in Schulze, von Bar and Schulte-Nölke (eds), Der akademische Entwurf für einen gemeinsamen Referenzrahmen, above (n 16) 215–60; JM Smits, ‘A European Law of Unjustified Enrichment?’ in A Vaquer Aloy (ed), European Private Law beyond the Common Frame of Reference (Groningen, Europa Law Publishing, 2008) 151–63. 48 G Wagner, ‘Deliktsrecht’ in Schulze, von Bar and Schulte-Nölke (eds), Der akademische Entwurf für einen gemeinsamen Referenzrahmen, above (n 16) 161–214; G Wagner, ‘The Law of Torts in the DCFR’ in G Wagner (ed), The Common Frame of Reference: A View from Law and Economics (Munich, Sellier, 2009) 225–72. 49 cf MW Hesselink, ‘The Common Frame of Reference as a Source of European Private Law’ (2009) 83 Tulane Law Review 919–71, 927f.

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extreme time pressure. Mostly, the changes were based on discussions in—smaller or larger—working groups. Yet, not every member of these groups could always be perfectly informed about the state of European discourse. Indeed, the existing genuinely European literature on the elder PICC and PECL, which emerged during the last 20 years,50 is only exceptionally cited in the DCFR. Usually, it appears as if this literature was not at all taken into consideration—be it for reasons of time pressure, or be it for questions of language competence, where this literature was not written in English. Yet, this literature often contains thorough and insightful arguments. Of course, there may be reasons for not citing such literature and for presenting a rule as a statement of the law rather than as a scholarly argument.51 But a more recent rule cannot be seen as an expression of a European consensus, where its authors apparently did not even take the existing European literature into consideration. This is especially the case where the more recent formulation of a provision departs from a former version although the prior provision was commonly welcomed by observers while at the same time not responding to a common critique of other parts or sections of this provision. Of course, this argument is of a rather abstract nature. It needs to be substantiated with more specific, detailed doctrinal argument. In what follows, two sets of rules will be taken as examples for such analysis. These examples relate to intensively discussed central parts of European contract law, namely the questions of pre-contractual information duties and mistake. Here, it will be seen that the different Principles are not giving expression to a European consensus. What is more, the more recent versions of the Principles cannot be assumed to be a better considered version of the earlier ones.

A

Pre-contractual Information Duties

Information duties are one of the most intensively discussed aspects of modern European contract law as it is obvious that information duties have become a core instrument of European consumer protection.52 Most directives in the field of

50 It is not possible here to give an overview of the relevant articles—much of this literature is mentioned in the Handwörterbuch des Europäischen Privatrechts, above (n 3); cf also below at IV.A. and IV.B. Besides, there are especially Kötz, European Contract Law, above (n 17) and a couple of commentaries to the PECL; see especially D Busch and HN Schelhaas (eds), The Principles of European Contract Law and Dutch Law. A Commentary 2 vols (The Hague, Kluwer, 2002/06); L Antoniolli and A Veneziano (eds), Principles of European Contract Law and Italian Law. A Commentary (The Hague, Kluwer, 2005); MacQueen and Zimmermann (eds), European Contract Law, above (n 25). For the PICC, see recently Vogenauer and Kleinheisterkamp, PICC-Commentary, above (n 11). 51 Indeed, the feeling that the authority of the Principles would suffer, if they were presented as a contribution to scholarly discourse rather than as a statement of the law was the reason for the authors of the first series of the American Restatements to refrain from references to literature and case law; see S Williston, ‘The Restatement of Contracts: Statement by Samuel Williston’ (1932) 18 American Bar Association Journal 775–77, 777: ‘(i)t seemed that the Restatement would be more likely to achieve an authority of its own … if exact rules were clearly stated without argument’. 52 B Heiderhoff, ‘Informationspflichten (Verbrauchervertrag)’ in Handwörterbuch des Europäischen Privatrechts, above (n 3) 858–61.

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contract law impose information duties; and European consumer lawyers have even spoken of a new ‘information paradigm’ of the European Union’s acquis communautaire.53 i

ACQP

The Acquis Group’s attempt to generalise such duties in the form of general clauses may be seen as a doctrinal consequence of this new perspective on consumer protection.54 Article 2:201 ACQP: Duty to inform about goods or services Before the conclusion of a contract, a party has a duty to give to the other party such information concerning the goods or services to be provided as the other party can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances. Article 2:202 ACQP: Information duties in marketing towards consumers (1) Where a business is marketing goods or services to a consumer, the business must, with due regard to the limitations of the communication medium employed, provide such material information as the average consumer can reasonably expect in the given context for a decision on any steps to take towards concluding a contract for those goods or services. (2) Where a business uses a commercial communication which gives the impression to consumers that it contains all relevant information necessary to make a decision about concluding a contract, it must in fact contain all the relevant information. … Where it is not already apparent from the context of the commercial communication, the information to be provided comprises: (a) the main characteristics of the goods or services, the identity and address, if relevant, of the business, the price, and any available right of withdrawal; (b) peculiarities related to payment, delivery, performance and complaint handling, if they depart from the requirements of professional diligence; (c) … Article 2:203 ACQP: Information duties towards disadvantaged consumers (1) In the case of transactions that place the consumer at a significant informational disadvantage because of the technical medium used for contracting, the physical distance between business and consumer, or the nature of the transaction, the business must, as appropriate in the circumstances, provide clear information about the main characteristics of the goods or services, the price including delivery charges, taxes and other costs, the address and identity of the business with whom the consumer is transacting, the terms of the contract, the rights and obligations of both contracting

53 T Wilhelmsson, ‘Private Law Remedies against the Breach of Information Requirements of EC Law’ in R Schulze, M Ebers and HC Grigoleit (eds), Informationspflichten und Vertragsschluss im Acquis communautaire (Tübingen, Mohr, 2003) 245–65, 246ff; cf also K Kroll-Ludwig, ‘Die Zukunft des verbraucherschützenden Widerrufsrechts in Europa’ (2010) 18 Zeitschrift für Europäisches Privatrecht 509–35, 514ff, 523ff. 54 The second edition of the Acquis Principles presents a significantly redrafted version of the first edition, which maintains central features of the original approach, however.

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parties, and any available redress procedures. This information must be provided at the latest at the time of conclusion of the contract. (2) Where more specific information duties are provided for specific situations, these take precedence over general information duties under paragraph (1).

It is not necessary in the present context to analyse these rules in more detail. In order to understand why these rules are far too broad, it suffices to recall the main points of the critique which has been explained elsewhere in more detail.55 Giving and receiving information is always costly: not only for businesses, but also, and more importantly, for consumers. There can be no doubt anymore that the usefulness of information decreases with an increase in the amount of information, and that its marginal utility may even become negative.56 Therefore, a general principle of parsimony should be applied, according to which information duties should only be imposed if the information is presumably really necessary for the consumer. It would be misguided, therefore, to abolish the general principle of European contract law according to which each party is normally itself responsible for supplying itself with information required.57 Generalising the acquis communautaire’s specific information duties is hence the wrong way; it neither finds a sufficient basis in the acquis communautaire 58 nor in the acquis commun.59 There is no good reason why businessmen should be under a duty vis-à-vis each other to inform the purchaser of a car about the fact—normally generally known—that a new model will soon be produced,60 and why sellers are prevented—also vis-à-vis a businessman—to escape liability by pointing out that they do not know about the quality of the object sold.61 And there is no good reason to impose genuine

55 For a critique of the rules of the first edition, see N Jansen and R Zimmermann, ‘Restating the Acquis Communautaire? A Critical Examination of the “Principles of the Existing EC Contact Law”’ (2008) 71 Modern Law Review 505–34, 532f. The rules were redrafted in the second edition of the ACQP, however, without fundamentally changing the Principles’ approach and policy judgements; cf also, with regard to the DCFR, H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659–708, 694ff. 56 H Eidenmüller, ‘Der homo oeconomicus und das Schuldrecht: Herausforderungen durch Behavioral Law and Economics’ (2005) Juristenzeitung 216–24, 218; M Rehberg, ‘Der staatliche Umgang mit Information. Das europäische Informationsmodell im Lichte von Behavioral Economics’ in T Eger and H-B Schäfer (eds), Ökonomische Analyse der europäischen Zivilrechtsentwicklung (Tübingen, Mohr, 2007) 284–354, 319ff, both with further references. 57 cf also F Faust, ‘Informationspflichten’ in Schulze, von Bar and Schulte-Nölke (eds), Der akademische Entwurf für einen Gemeinsamen Referenzrahmen, above (n 16) 115–34, 131ff. 58 Jansen and Zimmermann, ‘Restating the Acquis’, above (n 55) 532f. 59 Eidenmüller, Faust, Grigoleit, Jansen, Wagner, Zimmermann, ‘The Common Frame of Reference’, above (n 55) 694ff. 60 Comments on Art 2:201 ACQP, [13] (example 3). But see Bundesgerichtshof (27 November 1985) 96 Entscheidungen des Bundesgerichtshofs in Zivilsachen (BGHZ) 302, 311f; BW Feudner, ‘Aufklärungspflicht des Verkäufers bei Modellwechseln, technischen Änderungen und Preisveränderungen’ (1989) Betriebsberater 788–92. 61 See the discussion by K Riesenhuber, ‘Party Autonomy and Information in the Sales Directive’ in S Grundmann et al (eds), Party Autonomy and the Role of Information in the Internal Market (Berlin, de Gruyter, 2001) 348–70, 353, on the one hand, and C Twigg-Flesner, ‘Information Disclosure about the Quality of Goods—Duty or Encouragement?’ in G Howells et al (eds), Information Rights and Obligations (Farnham, Ashgate Publishing, 2005) 135–53, 144f, on the other.

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information duties—at least in the context of contract law62—where the relevant information such as the price and the identity of the business is necessary for concluding a contract. As no contract would be concluded without such information, there is sufficient incentive for businesses to give the relevant information. ii

PECL

With regard to a comparative evaluation of the different Principles, however, a more important point is that pre-contractual information duties are not a ‘new invention’ of the modern acquis communautaire.63 The information given by one party to the other is an important aspect of many institutions of contract law; obvious examples are the rules on liability for non-conformity of goods, where a seller may avoid liability by pointing out any defect or specific qualities of the object sold (cf Article 35 CISG), or the rules on undisclosed agency. Even if it may be difficult to speak in these contexts of genuine information ‘duties’,64 such duties have long been discussed with regard to culpa in contrahendo and to defects of consent (mistake and fraud).65 Accordingly, in PECL, which is based on the acquis commun, rather than on the acquis communautaire, there are general information duties. Yet, these rules are not placed in the sections on pre-contractual duties, but rather—perhaps somewhat surprisingly—in the context of fraud. And these Principles rightly proceed from the assumption that there cannot be a general duty of full disclosure of all information which might possibly be useful for the other party. In a market economy, the general principle is that each party is itself responsible for obtaining relevant information. Article 4:107 PECL: Fraud (1) A party may avoid a contract when it has been led to conclude it by the other party’s fraudulent representation, whether by words or conduct, or fraudulent non-disclosure of any information which in accordance with good faith and fair dealing it should have disclosed. (2) … (3) In determining whether good faith and fair dealing required that a party disclose particular information, regard should be had to all the circumstances, including: (a) whether the party had special expertise; 62 There may be reasons to establish and enforce such duties in the context of unfair competition, however. 63 Apparently, the Acquis Group’s work was based on the contrary assumption; cf C Twigg-Flesner, ‘Pre-Contractual Duties—From the Acquis to the Common Frame of Reference’ in R Schulze (ed), Common Frame of Reference and Existing EC Contract Law, 2nd edn (Munich, Sellier, 2009) 95–124, 98, 102. 64 For critique of the ACQP’s approach in this respect, see Jansen and Zimmermann, ‘Restating the Acquis’, above (n 55) 532f. It would be a mistake to assume that a transformation of liability for non-conformity into information duties would not change much in legal systems (see, for this argument, Twigg-Flesner, ‘Pre-Contractual Duties’, above (n 63) 103). Rather, it is a consequence of this approach that non-disclosure of information is not only sanctioned with the usual remedies for non-conformity, but also gives rise to a claim for all kinds of damages and entitles the buyer to avoid the contract even in case of a minor defect; see Faust, ‘Informationspflichten’, above (n 57) 125f. 65 H Fleischer, Informationsasymmetrie im Vertragsrecht (München, Beck, 2001); HC Grigoleit, Vorvertragliche Informationshaftung. Vorsatzdogma, Rechtsfolgen, Schranken (München, Beck, 1997).

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(b) the cost to it of acquiring the relevant information; (c) whether the other party could reasonably acquire the information for itself; and (d) the apparent importance of the information to the other party.

Here, the criteria mentioned in section (3) enrich the general clause as established by section (1). Of course, such criteria cannot be applied in a mechanical way. However, they give some direction to the judge determining whether one party was under an obligation to disclose information. In international discourse, these criteria have quickly found general approval;66 commentators even recommend these criteria when applying Article 3.8 PICC 67 where no such criteria are mentioned.68 Nevertheless, the PECL’s rules are not beyond criticism. It may be doubted whether it was wise to place the general clause on pre-contractual information duties in the rather narrow provision of fraud. Pre-contractual information duties may likewise be decisive in the context of mistake with regard to non-fraudulent non-disclosure of information (Article 4:103 PECL; Article 3.5 PICC; Article II.-7:201 DCFR). Here, it is obvious that similar questions as to the existence of an information duty must be asked.69 Even if there is no general duty of disclosing all relevant information to the other party, the question of under which circumstances such duties arise is of a general nature and should be addressed by a general, overarching rule. iii

PCC

The general nature of the question of information duties was recognised by the French PCC which contain a general rule on pre-contractual information duties. This rule finds no support in the PECL; it is meant to be applied also in the context of misrepresentation and fraud.70 Article 2:102 PCC: Duty of Information (1) In principle, each of the parties to a contract must inform itself of the conditions of the conclusion of the contract. (2) During pre-contractual negotiations, each of the parties is obliged to answer with loyalty any questions put to it, and to reveal any information that may influence the conclusion of the contract.

66 Fleischer, Informationsasymmetrie, above (n 65) 959ff, 985ff; Kötz, European Contract Law, above (n 17) 199ff with further references on the European discussion. 67 Art 3.8 PICC: ‘A party may avoid the contract when it has been led to conclude the contract by the other party’s fraudulent representation, including language or practices, or fraudulent non-disclosure of circumstances which, according to reasonable commercial standards of fair dealing, the latter party should have disclosed’. 68 J du Plessis in PICC-Commentary, above (n 11) Art 3.8, [19]ff, [21]: ‘useful list’. 69 See P Huber in PICC-Commentary, above (n 11) Art 3.5, [21], referring in this context to the commentary to Art 3.8 by Du Plessis (cf n 68); cf also U Huber, ‘Irrtum und anfängliche Unmöglichkeit im Entwurf eines Gemeinsamen Referenzrahmens für das Europäische Privatrecht’ in Perspektiven des Privatrechts am Anfang des 21. Jahrhunderts. Festschrift für Dieter Medicus zum 80. Geburtstag (Cologne, Heymann, 2009) 199–223, 204. 70 cf Art 4:202, 4:205 PCC.

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(3) A party which has a particular technical competence regarding the subject matter of the contract bears a more onerous duty of information as regards the other party. (4) A party who fails to comply with its duty of information, as defined in the preceding paragraphs, or who supplies inaccurate information shall be held liable unless such party had legitimate reasons to believe such information was accurate.

However, in its present form, this norm creates more problems than it solves. First, section (2) leads astray. Personal information and information which was acquired with noticeable effort may deserve legal protection; this was rightly acknowledged in the PECL.71 Contract parties may need protection against undue questions and hence must—at least in some cases—be vested accordingly with a right to lie. This can clearly be seen in the German jurisprudence on questions concerning pregnancy in the course of job interviews.72 Similarly, also section (2) is formulated in a misleading way; it does not conform to internationally acknowledged principles. Especially in cases where information has been acquired with considerable effort investors may need protection, because otherwise socially desirable investments would not be made. This is clearly shown by the American cases where oil companies had invested huge amounts for detecting new oil resources and then bought land without informing the owners about their research. If the law would impose a duty of information, such investments would not be made.73 Here, Article 4:107(3) PECL is clearly the better rule: It is a more correct restatement of actual European contract law; the criteria are more convincing in terms of moral evaluation and policy; and they have been approved in transnational discourse. iv

DCFR

A different, more doctrinal, approach was chosen by the authors of the DCFR. On the one hand, the Acquis Principles’ general information duties were integrated in a modified, though not fundamentally different,74 form into the chapter on ‘Marketing and pre-contractual duties’ (Article II.-3:101ff. DCFR). On the other hand, however, the provision on fraud (Article II.-7:205 DCFR), despite referring to the general information duties in its section (1), maintains the basic rule of Article 4:107(3) PECL.

71

Comment E on Art 4:103 PECL; similarly Comment E on Art II.-7:201 DCFR. See G Wagner, ‘Lügen im Vertragsrecht’ in R Zimmermann (ed), Störungen der Willensbildung bei Vertragsschluß (Tübingen, Mohr, 2007) 59–102, 93ff with further references on the discussion. In some countries, such as France, the question appears not yet having become a problem. 73 Comment E on Art 4:103 PECL; see recently H Fleischer, ‘Zum Verkäuferirrtum über werterhöhende Eigenschaften im Spiegel der Rechtsvergleichung’ in Zimmermann (ed), Störungen der Willensbildung, above (n 72) 35–58, 51ff; see also Wagner, ‘Lügen’, above (n 72) 76ff. 74 cf Twigg-Flesner, ‘Pre-Contractual Duties’, above (n 63) 95, 102ff; B Jud, ‘Die Principles of European Contract Law als Basis des Draft Common Frame of Reference’ in Schmidt-Kessel (ed), Der gemeinsame Referenzrahmen, above (n 16) 71–92, 81ff; Faust, ‘Informationspflichten’, above (n 57) 116ff. True, the DCFR departs from the formulations in the ACQP I and opts for an irritatingly narrow formulation of the information duties of businesses (Art II.-3:102 DCFR: a ‘duty not to give misleading information’ should not be restricted to B2C-contracts; cf Faust, ‘Informationspflichten’ 118). The basic duty of Art II.-3:101 DCFR, however, corresponds with the far too broad Art 2:201 ACQP I/II; and also the Comments are taken from this rule. 72

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Article II.-3:101 DCFR: Duty to disclose information about goods, other assets and services (1) Before the conclusion of a contract for the supply of goods, other assets or services by a business to another person, the business has a duty to disclose to the other person such information concerning the goods, other assets or services to be supplied as the other person can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances. (2) In assessing what information the other person can reasonably expect to be disclosed, the test to be applied, if the other person is also a business, is whether the failure to provide the information would deviate from good commercial practice. Article II.-3:102 DCFR: Specific duties for businesses marketing to consumers (1) Where a business is marketing goods, other assets or services to a consumer, the business has a duty not to give misleading information. Information is misleading if it misrepresents or omits material facts which the average consumer could expect to be given for an informed decision on whether to take steps towards the conclusion of a contract. In assessing what an average consumer could expect to be given, account is to be taken of all the circumstances and of the limitations of the communication medium employed. (2) Where a business uses a commercial communication which gives the impression to consumers that it contains all the relevant information necessary to make a decision about concluding a contract, the business has a duty to ensure that the communication in fact contains all the relevant information. Where it is not already apparent from the context of the commercial communication, the information to be provided comprises: (a) the main characteristics of the goods, other assets or services, the identity and address, if relevant, of the business, the price, and any available right of withdrawal; (b) peculiarities related to payment, delivery, performance and complaint handling, if they depart from the requirements of professional diligence; and (c) the language to be used for communications between the parties after the conclusion of the contract, if this differs from the language of the commercial communication. (3) . . . Article II.-3:103 DCFR: Duty to provide information when concluding contract with a consumer who is at a particular disadvantage … Article II.-7:205 DCFR: Fraud (1) A party may avoid a contract when the other party has induced the conclusion of the contract by fraudulent misrepresentation, whether by words or conduct, or fraudulent non-disclosure of any information which good faith and fair dealing, or any precontractual information duty, required that party to disclose. (2) … (3) In determining whether good faith and fair dealing required a party to disclose particular information, regard should be had to all the circumstances, including: (a) whether the party had special expertise; (b) the cost to the party of acquiring the relevant information;

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Nils Jansen (c) whether the other party could reasonably acquire the information by other means; and (d) the apparent importance of the information to the other party.

Thus, the DCFR inserts the Acquis Principles’ rules into the PECL without, however, revising the acquis and without rethinking the PECL’s traditional approach in view of modern European policies.75 Thus, both bodies of rules are doctrinally added to one another, rather than being integrated into a coherent system. It is a consequence of this additive approach that the reader finds himself confronted with incompatible policies and evaluations in the DCFR and especially in the context of misrepresentative non-disclosure of information. Whereas Article II.-3:101 DCFR expressly approves the Acquis Principles’ duty of businessmen to inform also professional purchasers of a car about the fact that a new model will soon be produced,76 it is clear that no such duty could arise under Article II.7:205(3) DCFR. Here it would be decisive that there is no special expertise on the seller’s side, where the buyer is also a trader (a), and that the buyer could easily acquire the information by other means (c). Altogether, the DCFR thus presents an unsystematic and contradictory approach; it is neither an improvement to the PECL nor a valid basis for European contract law.77 For the time being, it must be concluded, therefore, that the PECL present— despite their unsystematic approach—the best solution and the most adequate restatement of European private law. B

Mistake

The law of mistake has always been a hard topic for contract lawyers. Since the Natural law debates in the seventeenth and eighteenth centuries, there has not been a European consensus on this question.78 Interestingly, the old positions can easily be recognised in modern law. On the one hand, there is the continental model which is based on the idea of contractual obligations being an expression of the parties’ wills. On the other, there are more contract-friendly conceptions, such as the common and Austrian law, which put emphasis on the protection of the other party’s reliance; here only mistakes, for which the other party is responsible, are recognised as a ground for avoiding a contract. Of course, the picture is much more 75 For general critique along these lines, see already Eidenmüller, Faust, Grigoleit, Jansen, Wagner, Zimmermann, ‘The Common Frame of Reference’, above (n 55) 693ff. 76 Comment B, Illustration 3, on Art II.-3:101 DCFR. 77 For further critique of the DCFR’s pre-contractual information duties, see Faust, ‘Informationspflichten’, above (n 57) 123ff, arguing that the DCFR’s duties are solely based on the acquis and do not take the general information-duties into account, that they are sanctioned with a wrongly designed set of remedies and that they are altogether drafted in a far too excessive and unclear way. 78 See EA Kramer, ‘Bausteine für einen “Common Frame of Reference” des europäischen Irrtumsrechts’ (2007) 15 Zeitschrift für Europäisches Privatrecht 247–59; J Gordley, Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment (Oxford, Oxford University Press, 2006) 307ff; R Zimmermann, The Law of Obligations. Roman Foundations of the Civilian Tradition paperback edn (Oxford, Oxford University Press, 1996) 587ff, 609ff; further references on the history of the modern rules in N Jansen and R Zimmermann, ‘Vertragsschluss und Irrtum im europäischen Vertragsrecht. Textstufen transnationaler Modellregelungen’ (2010) 210 Archiv für die civilistische Praxis 196–250, 229ff. The following section is based on this article.

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complex if details are taken into consideration; most questions are disputed also within the national jurisdictions. i

PECL

In view of this state of the law, the Lando Commission chose a rather restrictive approach which was inspired by the common and Austrian law but also by some more recent codifications.79 Article 4:103 PECL: Fundamental mistake as to facts or law (1) A party may avoid a contract for mistake of fact or law existing when the contract was concluded if: (a) (i) the mistake was caused by information given by the other party; or (ii) the other party knew or ought to have known of the mistake and it was contrary to good faith and fair dealing to leave the mistaken party in error; or (iii) the other party made the same mistake, and (b) the other party knew or ought to have known that the mistaken party, had it known the truth, would not have entered the contract or would have done so only on fundamentally different terms. (2) However a party may not avoid the contract if: (a) in the circumstances its mistake was inexcusable, or (b) the risk of the mistake was assumed, or in the circumstances should be borne, by it.

Normally each party has to bear the consequences of his or her own mistake unless the other party can exceptionally be made responsible for the mistake or made the same mistake (Article 4:103(1)(a) PECL). Furthermore, the right to avoid the contract is limited to essential errors, the relevance of which the other party should have been aware of (Article 4:103(1)(b) PECL); it is excluded if the mistake fell into the responsibility of the erring party (Article 4:103(2) PECL). The adaptation of the contract is given priority over the avoidance (Article 4:105 PECL). This restrictive approach is balanced by a rather generous provision on damages for culpa in contrahendo: Article 4:106 PECL: Incorrect information A party who has concluded a contract relying on incorrect information given it by the other party may recover damages in accordance with Article 4:117 (2) and (3)80 even if the information does not give rise to a fundamental mistake under Article 4:103, unless the party who gave the information had reason to believe that the information was correct.

79 Kramer, ‘Bausteine’, above (n 78) 255ff; Ranieri, Europäisches Obligationenrecht, above (n 17) 1037; A Wittwer, Vertragsschluss, Vertragsauslegung und Vertragsanfechtung nach europäischem Recht (Bielefeld, Gieseking, 2004) 253ff, 259ff; see also Fleischer, Informationsasymmetrie, above (n 65) 951ff, 962 ff; Huber in PICC-Commentary, above (n 11) Art 3.5, [3]f, for the similar rule in the PICC. 80 Art 4:117 PECL (Damages): ‘(2) If a party has the right to avoid a contract under this Chapter, but does not exercise its right or has lost its right …, it may recover … damages limited to the loss caused to it by the mistake … The same measure of damages shall apply when the party was misled by incorrect information in the sense of Article 4:106’. S (3) refers to the general rules on damages.

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These rules have been criticised,81 mostly in matters of detail, and they have met fundamental approval.82 This is especially true for the restrictive approach and for the principle that priority is given to an adaptation of the contract and to a financial compensation.83 In this respect, the PECL conform to the PICC and thus are an expression of an international trend; hence, they may be seen as an anticipated restatement. However, the rather narrow formulation of section (1)(a)(i) appears more problematic; this formulation gives the impression that the violation of information duties is sanctioned only under the rather narrow conditions of section (1)(a)(ii). Furthermore, it has been criticised that inaccuracies in communication are treated as analogous to the general rule on mistakes concerning the motive of the parties:84 Article 4:104 PECL: Inaccuracy in communication An inaccuracy in the expression or transmission of a statement is to be treated as a mistake of the person who made or sent the statement and Article 4:103 applies.

Indeed, it is doubtful whether inaccuracy in communication can be caused by the other party. Furthermore, if there is a genuinely common misunderstanding of the relevant terms the rules on interpretation of contract apply; hence no problem of mistake arises. Nevertheless, the PECL address the main normative aspects of this part of the law without unnecessarily burdening the text of the rules with elements of scholarly doctrine. Neither do they give doctrinal definitions, or ultimately decide the question under which circumstances the mistaken party shall bear the risk itself. Also, despite being based on the idea of misrepresentation, they do not define the relation between avoidance for mistake and pre-contractual information duties. In the early 1980s, it was felt that such questions could not be answered on the basis of present legal knowledge.85 Hence, such questions were left to international legal scholarship for further discussion.86 81 JD Harke, ‘Irrtum und culpa in contrahendo in den Grundregeln des Europäischen Vertragsrechts: Eine Kritik’ (2006) 14 Zeitschrift für Europäisches Privatrecht 326–34; HC Grigoleit, ‘Irrtum, Täuschung und Informationspflichten in den European Principles und in den Unidroit-Principles’ in Schulze, Ebers and Grigoleit (eds), Informationspflichten, above (n 53) 201–30, 207ff; cf also Kramer, ‘Bausteine’, above (n 78) 247, 258. 82 See especially, Kramer, ‘Bausteine’, above (n 78) 247f, 255ff; Wittwer, Vertragsschluss, above (n 79) 253ff, 259ff, 283f. But see also Grigoleit, ‘Irrtum, Täuschung und Informationspflichten’, above (n 81) 211ff; Fleischer, Informationsasymmetrie, above (n 65) 950ff, 963ff. 83 M Wolf, ‘Willensmängel und sonstige Beeinträchtigungen der Entscheidungsfreiheit in einem europäischen Vertragsrecht’ in Basedow (ed), Europäische Vertragsrechtsvereinheitlichung, above (n 26) 85–128, 93; Fleischer, Informationsasymmetrie, above (n 65) 950ff, 963; Kramer, ‘Bausteine’, above (n 78) 256ff; Wittwer, Vertragsschluss, above (n 79) 259ff, 284. 84 W Ernst, ‘Irrtum: Ein Streifzug durch die Dogmengeschichte’ in Zimmermann (ed), Störungen der Willensbildung, above (n 72) 1–34, 31f; Ernst, ‘Irrtum’ in Handwörterbuch des Europäischen Privatrechts, above (n 3) 909–13, 912; Grigoleit, ‘Irrtum, Täuschung und Informationspflichten’, above (n 81) 218, 220; Harke, ‘Irrtum und culpa in contrahendo’, above (n 81) 328; cf also Huber, ‘Irrtum und anfängliche Unmöglichkeit’, above (n 69) 208f, 222. But see also Kramer, ‘Bausteine’, above (n 78) 256, fn 65. 85 Grigoleit, ‘Irrtum, Täuschung und Informationspflichten’, above (n 81) 213f; EA Kramer, ‘Ein Blick auf neue europäische und aussereuropäische Zivilgesetzbücher oder Entwürfe zu solchen—am Beispiel des Rechts der Irrtumsanfechtung’ in Tradition mit Weitsicht. Festschrift für Eugen Bucher (Bern, Stämpfli, 2009) 435–53, 451f. 86 cf, eg, Huber in PICC-Commentary, above (n 11) Art 3.5, [20]f with further references on the discussion.

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It is precisely this openness of the PECL, which made them an appropriate reference text for the European discussion. As legislative standards, however, these rules can only be appreciated by those who fully put their trust in the judges.87 At any rate, much could be improved: there is an expectation that legislators will put more emphasis on the clarity and applicability of rules than an international group of academics working on a reference text that is primarily designed to be understandable and generally acceptable for European lawyers as a basis for future discussion. ii

PCC

The French Group followed the PECL’s basic approach, but nonetheless reformulated Article 4:103 PECL in many points: Article 4:202 PCC: Mistake (1) A mistake of fact or law existing when the contract was concluded may be invoked by a party only if: (a) the other party caused the mistake; (b) the other party knew or ought to have known of the mistake and it was contrary to the principles of good faith and fair dealing to leave the mistaken party in error; or (c) the other party made the same mistake. (2) However a party may not invoke the mistake if (a) its own mistake was inexcusable in the circumstances; or (b) the risk of the mistake was assumed, or should have been borne by such party, having regard to the circumstances and the position of the parties; (c) or that, subject to the requirements of good faith and fair dealing, the mistake only affects the value of the property. (3) A party may only avoid a contract on the basis of mistake if the other party knew or ought to have known that the mistaken party, if it had known the truth, would not have contracted or only done so under fundamentally different conditions. (4) When the mistake does not concern a fundamental element of the contract, the mistaken party must prove that the other party knew or ought to have known of the mistake in question.

Here, section (1)(a) —‘caused the mistake’ modifies the respective narrow formulation in the PECL (‘mistake … caused by information given’). This is a plausible extension as far as misrepresentation by non-disclosure of information or other forms of communicative behaviour are concerned. But it raises problems as far as the mistake was caused by non-communicative behaviour. Here, the PECL’s Comments to Article 4:107 make clear that only fraud can be committed by mere non-communicative behaviour. If the seller of a house paints the walls in order to conceal moisture, he clearly acts fraudulently.88 Yet, where the owner renovates his 87 Different assumptions in this respect probably explain the diverging evaluations by Grigoleit, ‘Irrtum, Täuschung und Informationspflichten’, above (n 81) 211ff, and Kramer, ‘Bausteine’, above (n 78) 255ff; Kramer, ‘Zivilgesetzbücher’, above (n 85) 449ff. 88 Comment C on Art 4:107 PECL.

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house without being aware that defects might be concealed, which would have been detected by buyers, this shall not be a ‘mistake … caused by information given’ under Article 4:103 PECL. Here, the PCC take a contrary position significantly extending the right of avoiding the contract for mistake. Yet, this extension is difficult to explain. It is a matter of course that everybody has to bear full responsibility for representations made in contractual negotiations. But strict responsibility also for non-representative, non-communicative behaviour, independently of fault, is not an acknowledged principle of European private law. This is confirmed by the PICC which also chose the PCC’s broad formulation of ‘causing’ the mistake, but make clear, in their Official Comment, that this refers only to misleading communicative action, ie to ‘specific representations made by the latter party … or to conduct which in the circumstances amounts to a representation’.89 In the PCC, no such restrictive explanation can be found. Highly problematic, too, is the exclusion of mistakes concerning the value of the object of the contract (section (2)(c)). This is a specifically French view90 reviving the old differentiation of different types of mistakes, which had for centuries caused difficulties.91 The PECL wisely abstained from any such distinction and only argued in the Comments that errors concerning the value were normally not essential under section (1)(b).92 Now, this argument is probably misleading; irritatingly, this becomes apparent from the very Illustration which is given by the PECL for this rule: Here, precious antiques are sold at a price which conformed to the value of the antiques some years earlier. However, as a result of a sharp decline of the prices, the actual value is only one half of the contract price. If the buyer knows of the earlier prices but not of the intermediate decline and therefore accepts the contract price, there can be no doubt that the requirements of Article 4:103(1)(b) PECL are met. Nobody would normally conclude a contract at such terms if he were aware of the decline in prices. If a right of avoiding the contract must nevertheless be denied, this is based on different considerations.93 Yet, also these considerations found a clear expression in the PECL. First, none of the alternatives of Article 4:103(1) PECL is met: there was no common mistake, or a mistake of which the other party should have been aware; neither was the mistake caused by the other party. Secondly, in a market economy, each party can normally be expected to bear, on his or her own account, the risk of a mistake concerning the economic value of the object of the

89 Art 3.5 PICC, Official Comment 2: ‘[T]he error of the mistaken party is caused by the other party … whenever the error can be traced to specific representations made by the latter party … or to conduct which in the circumstances amounts to a representation’; likewise restrictive also Huber in PICCCommentary, above (n 11) Art 3.5, [13]. According to Kramer, however, preference should in this respect be given to the PICC’s formulation, as only this broad wording also embraces cases, where information was not given. But this is a question of information duties (s (1)(ii)); it is not necessary to abandon the requirement of wrong information. See, more clearly, Kramer, ‘Zivilgesetzbücher’, above (n 85) 450. 90 Principes contractuels communs, above (n 7) 342, 346. The change is based on the actual French reform of the law of obligations. 91 Zimmermann, Obligations, above (n 78), 609ff. 92 Comment G on Art 4:103 PECL. 93 See also Huber in PICC-Commentary, above (n 11) Art 3.5, [8] on the parallel problem in the Official Comment on the PICC.

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contract94 (section (2)(b)). However, this is not always the case. The PCC therefore re-qualify their exception with an additional good faith clause. But such a rule does not add precision to the PECL and unnecessarily breaks with their plausible basic approach. Only the Comments to Article 4:103 PECL should have been revised. Likewise, the new section (4), which is based on French law,95 is a step backwards.96 The requirement of an essential mistake has been approved by nearly all observers because the unwinding of contracts is often difficult and always costly. It should therefore be avoided if there is an alternative option of compensating the other party.97 iii

DCFR

The most recent version of Article 4:103 PECL is now Article II.-7:201 DCFR: Mistake.98 (1) A party may avoid a contract for mistake of fact or law existing when the contract was concluded if: (a) the party, but for the mistake, would not have concluded the contract or would have done so only on fundamentally different terms and the other party knew or could reasonably be expected to have known this; and (b) the other party; (sic!) (i) caused the mistake; (ii) caused the contract to be concluded in mistake by leaving the mistaken party in error, contrary to good faith and fair dealing, when the other party knew or could reasonably be expected to have known of the mistake; (iii) caused the contract to be concluded in mistake by failing to comply with a pre-contractual information duty or a duty to make available a means of correcting input errors; or (iv) made the same mistake. (2) However a party may not avoid the contract for mistake if: (a) the mistake was inexcusable in the circumstances; or (b) the risk of the mistake was assumed, or in the circumstances should be borne, by that party.

It can be seen, at a first glance, that the norm has been put into a new doctrinal order; most parts have been reformulated. Apparently, most of these reformulations were not meant to change the substance of the rules, but there are some 94 Kötz, European Contract Law, above (n 17) 183f; Fleischer, Informationsasymmetrie, above (n 65) 954ff; EA Kramer in International Encyclopedia of Comparative Law, vol VII. Defects in the Contracting Process (Tübingen, Mohr, 2001) ch 11, [85], with further comparative findings. 95 cf Beale, Hartkamp, Kötz and Tallon, Contract Law, above (n 17) 371. 96 But see the Principes contractuels communs, above (n 7) 346, 403, arguing that this was only a rule on the burden of proof for the requirement of causation in s (3) viz Art 4:103(1)(b) PECL. However, if the Comment C on Art 4:103 PECL is taken into account, it becomes clear that the modification significantly weakens the requirement of an essential error. 97 Wittwer, Vertragsschluss, above (n 79) 259ff, 284; Grigoleit, ‘Irrtum, Täuschung und Informationspflichten’, above (n 81) 215ff. Grigoleit convincingly argues that a more precise formulation of the rule would have been possible. 98 For an earlier version of this rule (as of 2005), still closer to the PECL, see Ernst, ‘Irrtum’, above (n 84) 28, critically discussing this version (28ff.).

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modifications which do apparently amount to such a change. Yet, these changes are not explained in the Comments99 because of the Comments not having been systematically revised. The Comments were only abridged and occasionally complemented with a new argument. Thus, even the obviously misleading Illustration for a mistake concerning the value of the contract object found its way also into the DCFR’s Comments.100 This combination of new rules and old explanations inevitably leads to irritation. Analysing the new rules in detail, it must be approved that the DCFR has integrated the violation of pre-contractual information duties into the regime on mistake in section (1)(b)(iii) Alt 1. Here, the PECL were indeed too narrowly drafted. True, the rules on pre-contractual information duties are not based on a convincing approach; this has been explained above.101 But, the rules concerning mistake as such are not affected by such critique: If the rules on mistake are based on misrepresentation, the violation of pre-contractual information duties must be sanctioned by a right of avoiding the contract if the mistake was fundamental under section (1)(a), (2)(a). None the less, it is important to realise that this effect of information duties must be taken into consideration when introducing new information duties. A less felicitous change, however, is the second alternative of section (1)(b)(iii). Clearly, this provision was meant to transpose Article 11(2) of the E-CommerceDirective,102 yet, it causes a wide range of problems. First, the norm belongs to the context of the cases of inaccuracy in communication (Article 4:104 PECL/Article II.-7:202 DCFR): the Directive concerns ‘input errors’, not problems concerning the motives of the buyer. Furthermore, it is doubtful whether the rule of the E-Commerce-Directive fits well into a provision severely limiting the right of avoidance to instances of fundamental mistake. At the same time, however, it is not clear whether a right of avoidance for mistake is at all necessary for transposing the directive. From the European Union’s point of view, the right of withdrawal and a claim for damages should be sufficient. All in all, the rule therefore appears at the same time too narrow (because of excluding the right of avoidance in cases of non-fundamental mistake) and too broad (because no right of avoidance is necessary). Furthermore, the reformulation of Article 4:103(1)(a)(i) PECL in Article II.-7:201 (1)(b)(i) DCFR turns out to be a failure. The new formulation corresponds to Article 4:202 (1)(a) PCC which has been criticised before. However, in the DCFR, the new formulation cannot even be explained with the wish also to cover misleading non-disclosure of information. These cases are covered in section 99 The policy considerations of the Comments A–H on Art II.-7:201 DCFR are widely identical with those on the PECL (Art 4:103, Comments A–G). Wholly new are only the short remarks F to the new s (1)(b)(iii). 100 Comment H on Art II.-7:201 DCFR. 101 See above (nn 55ff, 75ff). 102 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market. The provision is formulated as follows: ‘Member States shall ensure that, except when otherwise agreed by parties who are not consumers, the service provider makes available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors, prior to the placing of the order’.

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(1)(b)(ii) and (iii). It must be concluded, therefore, that the new provision particularly aims at non-communicative behaviour where the other party has not made a misrepresentation. But such an extension is neither well-considered nor an adequate restatement of European contract law.103 Finally, the requirement of causation has become a general element of section (1)(b); this change is an expression of the comprehensive doctrinal dogmatisation of the rules on mistake: Whereas the PECL just listed three different types of mistake that are not doctrinally related to one another, the DCFR’s new norm distinguishes specifically between the causing of the mistake (section (1)(b)(i)) and the causing of the mistaken contract (section (1)(b)(ii) and (iii)). Even those authors defending the DCFR against its critics find this difficult to understand.104 Purely doctrinal elements are unnecessary in a codification; and they create difficult problems. Thus, it is unclear what the requirement of causation actually means in section (1)(b)(ii), as the duty of disclosure presupposes that one party has already made a mistake. Indeed, the rule was designed for cases where the mistake was caused independently of the violation of an information duty. Hence, the requirement of causation must normally be irrelevant—and if it is relevant, it may be misleading. The practical effect of this new element is that the other party may argue that the erring party would also have concluded the contract if all relevant information had been fully disclosed. Such cases will remain exceptional. However, if such a case nevertheless happens—perhaps because the erring party had been under pressure from a third party to conclude the contract, or because it felt for any else reason obliged to do so—it may be unwise strictly to deny a right of avoidance. An example is a case where the erring party would have concluded the contract even when having been fully informed because it would then have wanted personally to examine the object of the contract and would therefore have relied on its right of withdrawal. Now—for lack of information—it did not closely examine the object and hence did not make use of its right of withdrawal. Here, it is clear that the conclusion of the contract was not caused by the non-disclosure of information; yet there can be no doubt that a right of avoidance should be granted. Of course, such cases are of a rather theoretical nature. But it is difficult to imagine more practical cases where this requirement of causation might become relevant. In any event, such cases could easily be solved on the basis of the old requirement of a fundamental mistake. The additional requirement of causation is therefore unnecessarily doctrinal, difficult to understand, and possibly misleading. iv

Some Results

In the final analysis, both the PCC and the DCFR leave those points unchanged which had been criticised in previous discourse; this is especially true with regard to inaccuracies in communication (Article II.-7:202 DCFR leaves Article 4:104 PECL

103 104

See above (nn 88f). Kramer, ‘Zivilgesetzbücher’, above (n 85) 450: ‘konzeptionell nicht sehr durchsichtig’.

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basically unchanged)105 and with regard to Article 4:103(2) PECL (exclusion of a right of avoidance). On the other hand, the substantial changes to the PECL’s text were mostly a step backwards—this is especially true for the PCC—or a step in the wrong direction. It should be emphasised in this context that the substantial arguments made in the preceding sections were not really new; most arguments can either be found in the standard literature, such as Kötz or Ranieri,106 or in a handful of articles specifically relating to the PECL’s rules on mistake. Thus, it can safely be said that a thorough revision of the PECL on the basis of the existing European literature would have led to different results.

V

CONCLUSION

It has been shown that the present process of revising, and thus stabilising, the non-legislative codifications of European contract law exhibits remarkably strong characteristics of dogmatisation. Indeed, the process of revising these Principles has become highly self-referential and it is detached from academic discourse. This process has been analysed as a non-discursive process of dogmatisation in which these texts are established as new legal authorities for European contract law. Of course, there are obvious explanations for this development becoming increasingly self-referential: the drafters of the DCFR did not want to criticise the PECL; this is the reason why most changes have not been justified. Furthermore, the drafters of both the PCC and the DCFR laboured under strict time pressure. This may be an excuse—though no justification—of the fact that the literature was not taken into account, especially if written in languages other than English. And finally, most changes were discussed in larger working groups which by their structure give preponderance to oral, ad hoc argument over better-considered academic writing.107 The future of European private law, however, should not depend on such factors. At the same time, the European contract law rules are reformulated, especially in the DCFR, in an increasingly doctrinal way; this is the second aspect of the present dogmatisation process. Scholarly definitions and assumptions which students might expect in textbooks are becoming elements of legal rules where they are established, however, without reasons or juridical explanations being given. Also this development is not a felicitous one as such doctrine is not always convincing and in any event tends to ossify the law when becoming part of authoritative reference texts and rules. True, the law can never do without doctrinal assumptions that cannot be

105 Art II.-7:202 DCFR: Inaccuracy in communication may be treated as mistake. An inaccuracy in the expression or transmission of a statement is treated as a mistake of the person who made or sent the statement. For Art 4:104 PECL, see above (n 84). 106 See above (n 17). 107 On the working methods of the different groups, see R Zimmermann, ‘“Wissenschaftliches Recht” am Beispiel (vor allem) des europäischen Vertragsrechts’, forthcoming, at 6.

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doubted in normal legal discourse.108 Lawyers need dogmatised doctrinal assumptions as a basis on which they formulate their legal arguments. Yet, such elements should be developed and stabilised in professional legal discourse. They should not be embodied in legal rules, unless this is really necessary for formulating the rules in a clear and precise way. However, this is exactly what the DCFR does not do. There is a lot of legal uncertainty resulting from the frequent use of open-ended general clauses.109 To dogmatically ossify doctrine while formulating uncertain rules, however, is certainly a wrong way for future European law. For the time being, European lawyers should therefore continue to treat the PECL—and perhaps also the PICC—as a starting point of their argument:110 not because these Principles are an ideal piece of non-legislative codification, but rather because those Principles present reference texts that are generally acceptable and do not suffer from the deficiencies of the later texts. Similarly, it will be impossible convincingly to ‘re-contractualise’ the DCFR111 without thoroughly taking these rules into consideration and without comparing and evaluating, in every single case, these different versions of a rule embodied in the different texts.112 Often it will be seen that the prior, less doctrinal formulation provides the more convincing solution. European contract law needs less doctrine and less dogmatism.

108 cf N Jansen, ‘Dogmatik, Erkenntnis und Theorie im europäischen Privatrecht’ (2005) 13 Zeitschrift für Europäisches Privatrecht 750–83, 753ff; Jansen, ‘Methoden, Institutionen, Texte’, above (n 40). 109 Eidenmüller, Faust, Grigoleit, Jansen, Wagner, Zimmermann, ‘The Common Frame of Reference’, above (n 55) 669ff, 676f. 110 Jansen and Zimmermann, ‘Textstufen’, above (n 78) 250 and passim. 111 R Schulze and T Wilhelmsson, ‘From the Draft Common Frame of Reference towards European Contract Law Rules’ (2008) 4 European Review of Contract Law 154–68, 165. 112 See Jansen and Zimmermann, ‘Textstufen’, above (n 78) 247ff and passim.

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4 If You Don’t Like Our Principles We Have Others On Core Values and Underlying Principles in European Private Law: A Critical Discussion of the New ‘Principles’ Section in the Draft Common Frame of Reference* MARTIJN W HESSELINK

I

INTRODUCTION

I

N MARCH 2009, the ‘Outline Edition’ of the ‘academic’ ‘Draft Common Frame of Reference’ (‘DCFR’) was published.1 The Outline Edition is very similar to the ‘Interim Outline Edition’ published a year earlier.2 One important difference, however, is that in addition to the part on ‘Model Rules’, which forms the bulk of the DCFR, and the part dedicated to ‘Definitions’, the latest edition contains a new part called ‘Principles’. The content of this new part is quite different from what the introduction in the Interim Outline Edition had to say about ‘principles, aims and values’.3 Whereas the Interim Outline Edition contained an open-ended list of 15 core aims and values of equal standing, the new Principles section in the Outline Edition contains only four ‘underlying principles’ of freedom, security, justice and efficiency. Nevertheless, these principles are assigned an important task in the interpretation and development of the model rules. The remaining principles, such as ‘solidarity and social responsibility’, that were mentioned in the 2008 edition as core aims and values of European private law, are now said to be ‘generally of a rather high political nature’ and, therefore, primarily relevant to an assessment, from the * This chapter was presented at the conference ‘The Foundations of European Private Law’ held in September 2009 at the European University Institute in Florence (EUI). 1 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 2 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008). 3 Nos 15–42.

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outside, the DCFR as a whole. In other words, in just one year, there has been a reduction from 15 to four and a transformation from values into underlying principles. The new Principles section in the DCFR raises several questions. This contribution addresses three of them. First, are these ‘principles’ really principles in the usual sense or are they better understood by their original denomination, that is, as values? Secondly, does Europe need a limited set of private law principles or values? And, thirdly, how can the 2009 version of the DCFR be so different from the 2008 version on such a fundamental subject?

II

A MATTER OF PRINCIPLE?

The main reason for this new separate section dedicated to Principles in the Outline Edition of the DCFR seems to have been at the explicit request by the European Commission for such principles. However, it is doubtful that the Principles as presented in the 2009 Outline Edition are what the Commission had in mind. These four ‘underlying principles’ are not really principles in the usual sense. They look more like (underlying) values. Indeed, some of the ‘underlying principles’ contained in the 2009 Outline Edition of the DCFR already figured in the Interim Outline Edition, but as underlying ‘values’. Principles are usually understood (quite literally) as starting points, in this case for legal reasoning. According to Dworkin, legal principles have ‘a dimension of weight’ which makes them differ from legal rules, such as the model rules in the DCFR, which have an ‘either or’ character.4 One of Dworkin’s well-known private law examples is the principle that no one should benefit from his own wrong.5 This principle can assist us, for example, in answering the question whether a murderer should be denied an inheritance from the deceased even if the relevant statutory rules seem to point in the opposite direction. In contrast, our values express our conceptions of the good. These may be individual or political. Some commonly held political values include freedom, equality and solidarity. Although values and principles obviously are closely connected, these concepts can also be distinguished. Principles belong to the law, values to the law-makers. While principles play a role in the (interpretative) internal perspective (the legal system seen from within), values operate in the (evaluative) external perspective (the legal system seen from the outside). While people differ in holding different (interpretative) views concerning the fundamental principles that make their legal system coherent, at the same time they may evaluate their legal system in the light of different sets of values (that is, of different conceptions of the good).6

4 See R Dworkin, Law’s Empire (Cambridge, Mass, Harvard University Press, 1986). See, earlier, his Taking Rights Seriously (Cambridge, Mass, Harvard University Press, 1977) and A Matter of Principle (Cambridge, Mass, Harvard University Press, 1985). 5 Another one that figures prominently in Law’s Empire is the private law principle that people should not be held responsible for causing injury they could not reasonably foresee. 6 In turn, on a liberal view, values are constrained by principles of justice. See J Rawls, A Theory of Justice 1971 rev edn (Belknap Press, Cambridge, Mass, 1999) 398: ‘rational plans of life which

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For international contracts, Berger has listed 120 principles of transnational law.7 These include, for example, the principle of simultaneous performance (Zug um Zug); the principle that no one may claim restitution if he knew that his performance was illegal (nemo auditur turpitudinem suam allegans); the property law principle that no one may transfer more rights than he actually has (nemo plus iuris transferre potest quam ipse habet), and so on. Something very similar was expected, it seems, when the European Commission announced that the CFR would contain a set of ‘common fundamental principles of European contract law’. In its 2004 communication, The Way Forward,8 the follow-up to its 2003 Action Plan,9 the Commission, describing the possible structure of the CFR, wrote: The first part of the CFR could provide some common fundamental principles of European contract law and exceptions for some of these principles, applicable in limited circumstances, in particular where a contract is concluded with a weaker party. Example: Principle of contractual freedom; exception: application of mandatory rules; Principle of the binding force of contract; exception: eg right of withdrawal; principle of good faith.10

Contract law principles with exceptions seems to be the format that the Commission had in mind; not competing abstract values. The ‘general principles of civil law’ that the European Court of Justice has referred to in a number of recent cases also are of a similar nature. In 2007, in Société thermale d’Eugénie-Les-Bains, the Court cites ‘the general principle of civil law’ that ‘each contracting party is bound to honour the terms of its contract and to perform its obligations thereunder’;11 in 2008, in Hamilton, it mentions as ‘one of the general principles of civil law’ the (frankly somewhat opaque) principle ‘that full performance of a contract results, as a general rule, from discharge of the mutual obligations under the contract or from termination of that contract’.12 In his Opinion in the same case, Advocate General Poiares Maduro, pointed out that the placing of a time limit on the exercise of a right is ‘a principle common to the laws of the Member States’. ‘That principle’, he said, ‘might well ultimately appear at Community level in the context of the creation of a common frame of reference for European contract law’. In 2009, in Messner, the Court invoked ‘the principles of civil law, such as those of good faith or unjust enrichment’,13 and in the same year, in Asturcom, it referred to the ‘basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure’ and to ‘the importance, both for the Community determine what things are good for human beings, the values of human life so to speak, are themselves constrained by the principles of justice’. 7 See: www.trans-lex.org. See earlier K-P Berger, The Creeping Codification of the Lex Mercatoria (The Hague, Kluwer, 1997). 8 Commission, ‘European Contract Law and the Revision of the Acquis: the Way Forward’ (Communication) COM (2004) 651 final (11 October 2004). 9 Commission, ‘A More Coherent European Contract Law, an Action Plan’ (Communication) COM (2003) (12 February 2003). 10 COM (2004) 651, Annex I, 15. 11 Case C-277/05 Société thermale d’Eugénie-les-Bains v Ministère de l’Économie, des Finances et de l’Industrie [2007] ECR I-06415, para 24. 12 Case C-412/06 Annelore Hamilton v Volksbank Filder eG [2008] ECR I-02383, para 42. 13 Case C-489/07 Pia Messner v Firma Stefan Krüger [2009] OJ C/265, para 26.

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legal order and for the national legal systems, of the principle of res judicata’,14 while in Audiolux, again in 2009, the Court rejected the existence of a ‘general principle of Community law’ on the protection of minority shareholders.15 At the same time, human dignity is referred to by the Court in the Omega case as a ‘fundamental value’.16 As to the Council of the European Union, in 2008, the Justice and Home Affairs Council expressed itself twice on the CFR.17 Concerning the structure of the CFR the Council said the following:18 [T]he CFR should consist of three parts: (i) one part containing definitions of key concepts in contract law; (ii) a second part setting out common fundamental principles of contract law, possibly including guidance when exceptions to such fundamental principles could be required; (iii) finally, a third part containing ‘model rules’ inspired by those principles and using those definitions … The identification of fundamental principles would reveal the fundamental values underlying European contract law and help to make the CFR a consistent whole. The aim of the ‘model rules’, which follow the philosophy of the fundamental principles, is to provide model provisions governing the main contractual situations which arise.

Clearly, if the identification of fundamental principles is supposed to reveal the fundamental values underlying European contract law, then these principles cannot themselves already be of the nature of values. Moreover, if they are meant to assist in making the CFR a consistent whole, then that indeed seems to be very similar to the role that Dworkin attributes to principles. Finally, it is difficult to see how the model rules can follow the philosophy of the fundamental principles if these principles are actually nothing more than a very limited set of four values. In relation to Article 288 EC, according to which any non-contractual liability of the Community for damage caused by its institutions or by its servants must be established ‘in accordance with the general principles common to the laws of the Member States’, the ECJ has consistently held that this non-contractual liability of the Community depends on the satisfaction of a number of conditions, relating to unlawfulness, damage and causal link.19 14 Case C-40/08 Asturcom Telecomunicaciones SL v Maria Cristina Rodríguez Nogueira (ECJ 6 October 2009), paras 35 and 38. 15 Case C-101/08 Audiolux SA and Others v Groupe Bruxelles Lambert SA (GBL) and Others, Bertelsmann AG and Others (ECJ 15 October 2009). In this case the Court pointed out that general principles of Community law have ‘the general, comprehensive character which is naturally inherent in general principles of law’ (paras 42, 50), ‘have constitutional status’ (para 63), and are not ‘characterised by a degree of detail requiring legislation to be drafted and enacted at Community level by a measure of secondary Community law’ (para 63). 16 Case C-36/02 Omega Spielhallen- und Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn [2004] ECR I-09609. See also the recent Case C-42/07 Liga Portuguesa de Futebol Profissional and Baw International (ECJ 8 September 2009), where the Court held that ‘the legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of Community harmonisation in the field, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected’ (emphasis added). 17 Conclusions of the Justice and Home Affairs Council, 18 April 2008; Conclusions of the Justice and Home Affairs Council, 28 November 2008. 18 Conclusions of the Justice and Home Affairs Council, 28 November 2008, nos 5–8. 19 See Joined Cases C-120/06 P and C-121/06 P FIAMM and FIAMM Technologies v Council and Commission (ECJ 9 September 2009), para 106, with further references.

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Also in the Treaty of Lisbon principles are of a similar nature. For example, the consolidated version of the Treaty of European Union refers to a number of principles, such as the principle of sincere cooperation (Article 4) and the principles of conferral, subsidiarity and proportionality (Article 5) which are indeed starting points with a dimension of weight and which are very different from the values expressed in Article 2 of the Treaty (on which see below). In sum, the European Commission asked for principles such as the binding force of contract, nemo auditur, nemo plus and so on. Instead, they got values. Does this matter? I think that it will for the Commission and for the other political institutions of the European Union that are planning to rely on the CFR for legislation. For example, I expect an MEP to say: ‘We know what our values are and they are not a matter of expertise, but what we need is a set of underlying principles that are fundamental to contract law and you, as experts, should instruct us about those’. However, if this is their reaction, then the next question is whether it was at all realistic to expect from the DCFR drafters that they provide a set of fundamental principles which (in the words of the Council) ‘would … help to make the CFR a consistent whole’. Clearly, the compilation of a set of principles that could resolve all the gaps and ambiguities in the DCFR would be a formidable task. Indeed, in his theory, Dworkin reserves this task for ‘an imaginary judge of superhuman intellectual power and patience who accepts law as integrity’, a judge whom he calls Hercules.20 In other words, not only does the call for a set of underlying principles seem to imply the endorsement of a widely held but nevertheless controversial position in legal theory (law as integrity), but even within that theory principles seem to be of the nature that they can hardly be listed in advance, before the interpretation and further development of the DCFR starts (except by a Herculean judge). It is not until we are actually confronted in a specific case with the ambiguities and gaps in the CFR, that it will become apparent what kind of principles will be needed. As we saw, for commercial contract law alone, Berger has listed 120 principles and it is probable that—given all the subjects that the DCFR deals with—many more can be found.21

III

A CLOSED VALUE SYSTEM?

Quite apart from what the European institutions may have expected, we can ask the separate question of what is desirable. Although they are unconvincing as ‘underlying principles’, freedom, security, justice and efficiency may still be appropriate as a set of underlying values. Are they? Our values are what we find important. Contract law may be related to what we value in different ways. Of course, we may value contract law per se. But beyond (and even within) the circle of contract lawyers there will not be many who attach any intrinsic value to contract law. Rather, we would like contract law somehow to 20

Dworkin, Law’s Empire, above (n 4) 239. For an overview of the principles and values discussed in this section, see the table of principles and values in European (private) law in the annex to this chapter. 21

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express or encourage or respect whatever we happen to value. Since different people value different things, it is not clear that legislators or drafters who produce rules of contract law should compile a limited list of values on which these rules are said to be based. And, if such a list is made (for example, because it is thought to be requested by the European Commission), it seems at least that such a list should be very inclusive. Indeed, it should include as far as possible the values (or at least the most important ones) that inspired whoever drafted or enacted the rules. Moreover, for reasons both of justice and expedience, there seems to be a case for also taking into account the values of those who will be affected by these rules. In a democracy, at least in relation to private law, these two groups of authors and addressees happen to coincide.22 Therefore, one would expect a European set of private law rules to be based on the values held by European citizens. As said, only four values made it to the Outline Edition of the DCFR, namely: justice, freedom, security and efficiency. That seems rather poor as an expression of common European values. In particular, there is a sharp contrast with Article 2 of the new Treaty of European Union (ie, the consolidated version following the Treaty of Lisbon) on the founding values of the European Union, which refers to: respect for human dignity, freedom, democracy, equality, the rule of law, respect for human rights, including the rights of persons belonging to minorities, pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men. Is there anything in this 14 item list, that incidentally looks quite similar to the DCFR’s original list of 15 core aims and values, that we do not value so much that we regard it as an indispensable basis for European private law? Or, moving from the normative to the positive, should it not be acknowledged that these values, on which the European Union is said to be founded, are indeed fundamental values on which also the DCFR is based? The answer is positive. Of course, the DCFR is also based on equality. It is difficult to conceive of any acceptable set of private law rules that is not. Indeed, not only are the rules of general contract law based on the idea of formal equality. There are also many provisions, including the ones on ‘unfair exploitation’ (Article II.-7:207 DCFR), ‘variation or termination by court on a change of circumstance’ (Article III.-1:110 DCFR) and those on consumer protection (for example, the one in section II.9.4 DCFR on ‘unfair terms’), that aim at restoring substantive equality.23 Similarly, many rules in the DCFR clearly express the value of human dignity. Indeed, Article VI.-2:203 DCFR on ‘infringement of dignity, liberty and privacy’ explicitly refers to it. And what else other than solidarity can explain strict liability in tort (see section VI.3.2 on ‘accountability without intention or negligence’) or certain rules on the plurality of debtors, such as Article III.-4:102 DCFR on ‘solidarity, divided and joint obligations’? Or, for yet another example, does the DCFR accept discrimination of ethnic minorities or between men and women? Of course not; Book II (on ‘Contracts and other 22 See J Habermas, Faktizität und Geltung; Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats 5th edn (Frankfurt, Suhrkamp, 1997) 52. 23 In recent cases the ECJ has underlined that the Unfair Terms Directive, ‘taking into account the weaker position of one of the parties to the contract, aims to replace the formal balance which the latter establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them’ (Case C-168/05 Mostaza Claro [2006] ECR I-10421, para 36; Case C-243/08 Pannon (ECJ 4 June 2009), para 25).

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juridical acts’) even contains a separate chapter on ‘non-discrimination’ (chapter 2). In sum, there is no reason why all the values that the new article 2 of the Treaty on European Union refers to should not also be included in any meaningful list of fundamental values underlying the DCFR. The DCFR is meant to be a living document. It contains provisions which explicitly aim to regulate how the DCFR should be interpreted and further developed. The relevant Article reads as follows: I.-1:102: Interpretation and development (1) These rules are to be interpreted and developed autonomously and in accordance with their objectives and the principles underlying them. … (4) Issues within the scope of the rules but not expressly settled by them are so far as possible to be settled in accordance with the principles underlying them.

Note that the Article refers only to the four ‘underlying principles’, not to the longer list of ‘overriding principles’ and remember that the drafters thought the latter to be ‘generally of a rather high political nature’. In other words, this is a clear attempt to de-politicise the interpretation and further development of the DCFR. Courts, when dealing with gaps and ambiguities in the DCFR, should find their solutions inspired only by freedom, security, justice and efficiency, and should pay no attention, for instance, to ‘solidarity and social responsibility’, one of the ‘overriding principles’.24 The idea is familiar. It is the old paradigm of private law as an autonomous, self-contained value system. However, that idea has long been superseded, both in theory and practice.25 There is really no reason why European private law should be inspired by values that are categorically different from those underlying other branches of our law. Therefore, if a limited set of underlying values for European private law is necessary then at least these values should be those on which the European Union is based. However, it is doubtful that European private law (or indeed any other part of European law) should be based on a closed system of values at all. Why should not lawmakers, when trying to make the best possible rules, be inspired by whatever it is they value most? We may even want to be inspired by values that are not (yet) ours. As Sen has pointed out, societies often have much to gain from openness towards the experiences of other societies and may wish to be inspired by what these other societies have learned to value.26 In other words, our private law need not be based exclusively on a social contract made by those who are, directly or indirectly, affected by it.

24

‘Introduction’, DCFR Outline Edition, above (n 1) no 18. See H Collins, Regulating Contracts (Oxford, Oxford University Press, 1999); Habermas, Faktizität und Geltung, above (n 22) 479 and the ECJ which underlines, in Mostaza Claro, para 38 and Pannon, para 31, ‘the nature and importance of the public interest underlying the protection which the Directive [on unfair terms] confers on consumers’. 26 A Sen, The Idea of Justice (London, Penguin, 2009). 25

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In her contribution (chapter five in this volume) Bénédicte Fauvarque-Cosson underlines the important role that a European civil code containing a section on fundamental ‘guiding principles’ could play in building a European civil society and creating a common European identity.27 This is undoubtedly true. However, such a Euro-nationalist attempt at inventing common traditions,28 for which I have great sympathy as long as this European identity is conceived of as being merely one of the many identities that a person may subscribe to,29 surely should be based on an open-minded conception of a Europe built on many values and experiences both from within and from outside current borders. Is there really no more to European identity than our common longing for liberty, security and loyalty?30 In sum, it is not clear that European private law needs a limited set of officially recognised private law principles or values or even a more flexible and open-ended canon. However, to the extent that there will be such a set or canon—and the European institutions have reiterated that there will be one—it is, of course, crucial that this set be well balanced. A more inclusive European canon of fundamental private law values would include, at least, values almost universally cherished such as dignity, equality and solidarity which are currently excluded from the list.

IV

THE POLITICS OF PRINCIPLE

The Interim Outline Edition, in 2008, listed 15 core aims and values: justice; freedom; protection of human rights; economic welfare; solidarity and social responsibility; establishing an area of freedom, security and justice; promotion of the internal market; protection of consumers and others in need of protection; preservation of cultural and linguistic plurality; rationality; legal certainty; predictability; efficiency; protection of reasonable reliance; and the proper allocation of responsibility for the creation of risks. Of these values, the Interim Outline Edition said:31 Any attempt to work on principles of private law will at least have to deal with the following core aims and the values expressed in them: Justice, Freedom, Protection of Human Rights, Economic Welfare, Solidarity and Social Responsibility.

One year later ‘solidarity and social responsibility’ prove to be dispensable for the work on principles of European private law and only four values survive as the underlying principles of freedom, security, justice and efficiency that should determine the interpretation and further development of the DCFR. 27 B Fauvarque-Cosson, ‘The Need for Codified Guiding Principles and Model Rules in European Contract Law’. See also H Collins, The European Civil Code: The Way Forward (Cambridge, Cambridge University Press, 2008) and H Collins, ‘Does “Fragmented Europeanisation” require a European Civil Code?’ (2009) 3–4 Jurdiska Föreningen I Finland (special issue for Thomas Wilhelmsson) 213–24, 219–22. 28 cf B Anderson, Imagined Communities rev edn (London, Verso, 2006). 29 On multiple identities see A Sen, Identity and Violence; The Illusion of Destiny (London, Penguin Books, 2006); EJ Hobsbawm, Nations and Nationalism; Programme, Myth, Reality (Cambridge, Cambridge University Press, 1990). 30 On the ‘principes directeurs’ see further below. 31 ‘Introduction’, DCFR Interim Outline Edition, above (n 2) no 22.

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The editors explain the dramatic reduction from 15 to four as follows:32 [T]he many fundamental principles listed in the introduction to the Interim Outline Edition can be organised and presented in a more effective way. A small group of them (corresponding to some extent to those identified in the Principes directeurs) can be extracted and discussed at greater length. These are the principles which are all-pervasive within the DCFR. They can be detected by looking into the model rules. They are underlying principles. They furnished grounds for arguments about the merits of particular rules. The remaining principles mentioned in the introduction to the Interim Outline Edition are generally of a rather high political nature. They could be said to be overriding rather than underlying. Although some of them are strongly reflected in parts of the DCFR, they are primarily relevant to an assessment from the outside of the DCFR as a whole.33

This is a rather puzzling explanation.34 If these four principles furnished the grounds for arguments about the merits of particular rules, does this not make these principles political by definition, much more so than the remaining principles which instead are said to be ‘generally of a rather high political nature’? Indeed, if it were really true that the drafters of the DCFR had only been inspired by freedom, security, justice and efficiency as grounds for arguments about the merits of particular rules, then the DCFR would certainly be of a very peculiar (and highly controversial) political nature. The explanation is also implausible. What really seems to have made the difference was a very critical article by a group of scholars led by Reinhard Zimmermann that was published in the Juristenzeitung in the summer of 2008 and was reported extensively in the Frankfurter Allgemeine Zeitung (in the ‘Science’ section!).35 In that article, the Zimmermann group denounced the DCFR’s value pluralism and, in particular, the reduction of private autonomy to merely one value among many others, including the ‘political’ notion of solidarity and social responsibility. It is striking that one article by a group of conservative German scholars (almost a pleonasm) can have such an impact on the editors of the DCFR—leading the editors to discard from the list of considerations that should be taken into account when interpreting and further developing the DCFR all those principles at which these particular scholars took offence (and which are now labelled as ‘highly political’).36 This eminently political move overnight from 32 Although the DCFR is a collective work, the ‘Introduction’ was signed separately by Christian von Bar, Hugh Beale, Eric Clive and Hans Schulte-Nölke. 33 ‘Introduction’, DCFR Interim Outline Edition, above (n 2) no 14. 34 The underlying principles furnished grounds for arguments about the merits of particular rules: is that not what one would expect from values rather than from principles? See above. There is more conceptual confusion. For example, according to the ‘Introduction’, ‘the principle of contractual loyalty’ (one of the principes directeurs) is covered to a large extent by ‘the wider principle of justice’ (no 14). Both loyalty and justice are important values, and many would regard them both as virtues, but is loyalty really an aspect of justice rather than, eg, of friendship, to mention another Aristotelian virtue (see Nicomachean ethics). 35 See H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘Der Gemeinsame Referenzrahmen für das Europäische Privatrecht—Wertungsfragen and Kodifikationsprobleme’ (2008) 63 Juristenzeitung 529–84, and ‘Ungesteuerte Richtermacht; ist die Zeit schon reif für ein europäisches Zivilgesetzbuch? ’ (Frankfurter Allgemeine Zeitung, 5 June 2008). 36 In the same sense D Kennedy, ‘A Transnational Genealogy of Proportionality in Private Law’ (ch 11 in this volume); H Collins ‘Does “Fragmented Europeanisation” require a European Civil Code?’, Juridiska Föreningen I Finland (2009) 3–4 (special issue for Thomas Wilhemsson) 213–224.

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representative to conservative values shows—more than any theory of the politics of private law could do—how important it is that such value choices are made by elected politicians rather than by scholars. A different role was played by the principes directeurs that were published in 2008 by a group of French scholars who had a political mission of their own. The drafters of the principes directeurs openly had the double aim of increasing the (until then rather modest) French contribution to the DCFR and of raising enthusiasm for European private law among French legal scholars which, until that time, had been predominantly Euro-sceptic (if not Euro-hostile).37 As to the former aim, one of the two sponsors of the project was the Association Henri Capitant des Amis de la Culture Juridique Française, a well known vehicle of benign French legal imperialism (the other sponsor was the Société de législation comparée);38 and the project is supported by the Fondation pour le Droit Continental, the more recent French response to the much more aggressive projects for the propaganda of American law that go under less straightforward names such as ‘rule of law’, ‘legal origins’, ‘doing business’.39 In spite of its all-French authorship, and probably due to the comparative method that was adopted, the result has a surprisingly European outlook. The four ‘principes directeurs’ are further elaborated in a small set of 11 Articles (with sub-sections) which are proposed as a preliminary title to the DCFR.40 These rules look very familiar. Indeed, so much so that the drafters of the DCFR saw no use for them since the substance of these 11 Articles was already dealt with in various places in the DCFR, only organised in a different way. This may explain, in part, why the principes directeurs were not so very influential after all, in spite of the generous lip service paid to them in the introduction to the Outline Edition.41 Overall, the (German/British) editors of the Principles section in the DCFR proved much more resistant to the French proposals than to the German criticism. Having said that, the low number (ie, three) of the principes directeurs has certainly been helpful for the drafters of the DCFR in limiting the number of their fundamental principles as well (as said, to four). Also the counter-revolutionary move by the French team of substituting equality with security has doubtlessly contributed to the distinctly reactionary outlook of the four fundamental values that the editors of the DCFR are now proposing.

37 See, eg, G Cornu, ‘Un code civil n’est pas un instrument communautaire’ (2002) Dalloz 351–52; Y Lequette, ‘Quelques remarques à propos du projet de code civil européen de M von Bar’ (2002) Dalloz 2202–14; P Malaurie, ‘Le code civil européen des obligations et des contrats; Une question toujours ouverte; Colloque de Leuven (Belgique)’ (2002) Juris-Classeur Periodique 281–85. 38 The Association Henri Capitant des Amis de la Culture Juridique Française has recently undergone a transformation into an association of friends of ‘la culture juridique romaniste’. 39 See: www.doingbusiness.org. 40 See 197–98. 41 See, eg, ‘Introduction’, DCFR Outline Edition, above (n 1) no 14: ‘Lessons learned from the Principes directeurs’.

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CONCLUSION

The inclusive and open-ended statement of 15 ‘aims and underlying values’ in the DCFR of 2008 was transformed overnight into a closed set of four rather conservative ‘underlying principles’. The irony is that by removing the nonconservative values and labelling them as ‘political’ the editors of the DCFR made their favourite set of values become much more ‘political’, in the sense of politically controversial, because it is so openly conservative. Zimmermann denounced the DCFR in its 2008 Interim Outline Edition for giving too little guidance and too much freedom to judges. However, it should not be forgotten that the DCFR is meant in the first place to become a toolbox for the European legislator rather than for judges. The 2009 Outline Edition raises the more troubling question whether legal scholars should really try to convince the European Commission, Council of the European Union and the European Parliament that European private law is exclusively a matter of freedom, security, justice and efficiency. The fact that so-called ‘fundamental principles’ could be exchanged so easily for others not only evokes Groucho Marx’s famous quip, ‘those are my principles, and if you don’t like them … well, I have others’,42 it also reveals something fundamental. If, within only one year, they can be reduced from 15 to four, modified from representative into conservative, and transformed from values into principles, then it seems unlikely that this year’s list really consists of fundamental principles. Rather, the principles of freedom, security, justice and efficiency seem to be a contingent set of values, the choice of which is highly dependent on their authors and on the varying responsiveness by these to criticism from different angles. This further suggests that any rigid distinctions between, on the one hand, a limited set of fundamental principles which may play an exclusive role in interpreting and further developing the DCFR, and on the other, overriding principles, underlying values and indeed anything else that may inspire those who will have to interpret and further develop the DCFR, may be not so desirable after all. Compiling a complete list of underlying principles in the Dworkinian sense before the interpretation of the DCFR starts seems impossible. And any limitative list of values that should guide the interpretation seems undesirable. Maybe the best we can hope for now is a much less ambitious and more general, inclusive, and open-ended list of values that could inspire the interpretation and further development of the DCFR—something along the lines of Article 2 of the new Treaty of European Union. The irony is that the original list of core aims and values in the 2008 edition of the DCFR was just that. In my view, it should be restored.

42

Although commonly attributed to Groucho Marx, the precise source of this quote is elusive.

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Guiding principles

Underlying principles

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Efficiency

Security

Sécurité contractuelle

Respect for human rights

Protection of human rights

Efficiency

Predictability

Legal certainty

Rationality

Preservation of cultural and linguistic plurality

Promotion of the internal market

Solidarity and social responsibility

Economic welfare

Freedom

Freedom

Freedom

Values on which the union is founded

Art 2, TfEU 2009

Justice

Core aims and underlying values

DCFR 2008

Justice Liberté contractuelle

Association Capitant & Société de législation comparée 2008

Contractual freedom

Common fundamental principles of European contract law

The Way Forward 2004

General principles of civil law

ECJ, Eugénie-LesBains 2007; Hamilton 2008; Messner 2009

Legal certainty

Basic principles of the domestic judicial system

ECJ, Asturcom 2009

Fundamental values

ECJ, Omega 2004

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Association Capitant & Société de législation comparée 2008

Proper allocation of responsibility for creation of risks

Protection of reasonable reliance

DCFR 2008

Human dignity

Art 2, TfEU 2009

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Democracy Rule of law

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DCFR 2009

Good faith

Good faith

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Discharge by performance or termination

Unjust enrichment

Binding force of contract

ECJ, Eugénie-LesBains 2007; Hamilton 2008; Messner 2009

Binding force of contract

The Way Forward 2004

Proper conduct of procedure

Protection of rights of defence

ECJ, Asturcom 2009

Human dignity

ECJ, Omega 2004

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5 The Need for Codified Guiding Principles and Model Rules in European Contract Law* BÉNÉDICTE FAUVARQUE-COSSON I

INTRODUCTION

R

EFLECTING ON THE theoretical foundations of European private law raises the question of the appropriate sources and legitimate processes for the construction of principles and model rules in Europe. A substantive body of rules is already codified. However, when reference is made to ‘European private law’, there is a good chance that reference is implicitly made to the unification projects which are neither institutional nor political but of a scholarly nature, such as the Principles of European Contract Law (‘PECL’) and the ‘Draft Common Frame of Reference’ (‘DCFR’), two sets of rules which have been drafted by European scholars. The PECL only cover contracts in general, they contain 191 articles and take up 850 pages of text, with Comments and Notes. The DCFR covers the law of obligations and some aspects of the law of property; it comprises more than a thousand articles and is accompanied by several thousands of pages with Comments and Notes. This is an impressive achievement. However, for practical, academic and political reasons, a more concise ‘Common Frame of Reference’ (‘CFR’), within the scope of contract law, might have been, at least temporarily, a much wiser choice. As European scholars, our role is primarily to train students to think comparatively, in order to build a common legal culture all over Europe (in spite of the considerable efforts that have been made in this respect, the situation is still far from being satisfactory). As European jurists, our task goes beyond comparative teaching; it is also to help the European legislator to set up the theoretical foundations of European private law. Over the past few years, legal scholarship has rightly claimed and accepted its role as a guide to the European legislator. European academics have organised themselves into various workgroups with the task of drafting legal texts which, for some of them, have become well-known private codifications. Some important networks have been set up. One of them received a mandate to elaborate the * This paper was written for the conference that took place in Florence in September 2009; limited updates have been made but they do not include all the recent developments that have taken place since.

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Common Frame of Reference, in accordance with guidelines set by the European Commission. In 2005, a contract was established under the Sixth Framework Programme for Research and Technological Development between the Commission and the ‘CoPECL Network of Excellence’.1 A Draft Common Frame of Reference (DCFR) has been published, together with other works.2 This DCFR has been much advertised and commented on. All over Europe, comparatists will continue to comment on the DCFR, at least until the Commission clearly indicates what its final choice will be. At this point, two questions may be raised. First, does a code/common frame of reference constitute proper material for building the theoretical foundations of European private law? Secondly, how detailed should this instrument be? In response to these questions, Part II of this chapter advocates a codification of guiding principles and model rules in the field of private law in Europe. It suggests an incremental approach, starting with contract law where a lot of work has already been accomplished. Part III of the chapter considers what has been achieved in the CoPECL Network of Excellence, with a view to preparing the route for the elaboration, by the European Commission, of the final CFR. It pays special tribute to the work of one of the ‘evaluative and supportive groups’ which operated within this network, namely the French group that was set up by two leading associations in the field of legal science, that is, the Association Henri Capitant des Amis de la Culture Juridique Française and the Société de législation comparée (the AHC-SLC group).

II

THE NEED FOR A CODE TO FORGE THE THEORETICAL FOUNDATIONS OF EUROPEAN PRIVATE LAW

Drafting a European civil code is a highly controversial project. It has encountered various kinds of criticisms that have already been expressed many times all over Europe. It is therefore important, first, to specify why, in spite of all the criticism it attracts, a code is needed and secondly, to better explain how such a code should be elaborated.

A

Why a Code is Required

The idea of a European codified body of rules, which would be complete, coherent and structured, gives rise to strong opposition. Before turning to the arguments in favour of a code, a few preliminary remarks ought to be made as regards some of the criticism that is often expressed.

1

Decision No 1513/2002/EC, OJ L232/1 (29 August 2002). See, in part III of this chapter, the references to the work of the ‘Evaluative Group’ which, within the network, advocated a different approach from the CFR and urged for a ‘recontractualisation’ of the DCFR, with clearer and simpler model rules. 2

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i Preliminary Remarks with Regard to some of the Criticism Expressed against a Code It is often objected that, at least for the time being, codification of European private law would exceed the powers held by European institutions. Such an objection presupposes that a European civil code would be imposed on Member States, by way of a binding instrument which leaves no space for national laws. There are other routes for the codification of private law in Europe. In some fields of the law, particularly in contract law, an optional instrument is a possible solution. It is sometimes also objected that codification is not compatible with the common law systems. However, there is no longer that strong repugnance to the idea of a codification in common law systems and it is doubtful that English law would be deeply threatened, in its very core, by a codification project at European level.3 This is demonstrated by the creation of the Law Commission whose task is precisely to reform the law by codifying it for the simple reason that ‘the law would be more accessible to the citizen, and easier for the courts to understand, through a series of statutory codes’.4 Besides, major statutes, which operate in a similar way to codes, have been enacted even in the UK (not to mention the United States and other common law countries). For instance, the Civil Procedure Rules formulate fundamental principles in civil procedure, just like a civilist Code de procedure would. Nowadays, the experience of integration of EC law or of the Human Rights Act shows how, even if it is difficult, the common law system can adapt in order to integrate European law, whatever its juridical nature. ii

The Economic and Cultural Arguments in Favour of a Code

The economic argument, based on the building and completion of the internal market, has been put forward many times by the European institutions, particularly by the European Commission in its various communications on European contract law, in order to promote the idea of a civil code or at least a codification of some important branches of the civil law, such as the law of contract and torts. This economic argument, however, has its weaknesses. First, it does not conform to the Treaty or recent ECJ case law. Indeed, the ECJ is clearly of the view that a Community act must genuinely have as its object the improvement of the conditions for the establishment and functioning of the internal market, and therefore it is not sufficient to find disparities between national rules or to point out the abstract risks of obstacles to the exercise of fundamental freedoms or of distortions of competition liable to result therefrom to justify the process of European harmonisation of law.5

3 Another question is whether a European civil code would threaten the allegedly dominant position of English law in Europe. See Lord Falconer’s speech in September 2005 in London: ec.europa.eu/ consumers/cons_int/safe_shop/fair_bus_pract/cont_law/conference092005/falconer2005.pdf. 4 See: www.lawcom.gov.uk/about.htm. 5 Allemagne c. le Parlement européen et le Conseil [2000] ECR I-8419, points 83 and 84; C-434/02 Arnold André GmbH & Co. KG c. Landrat des Kreises Herford, Recueil [2004] I-11825; C-210/03 Swedish Match AB c. Ministre de la Santé, Recueil [2004] I-11893.

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Secondly, this argument lacks a thorough demonstration that legal unity would indeed bring more economic prosperity. Some authors argue that competition between legal systems provides impetus for reform and improvement of the existing laws and that, if the law were unified, such impetus would no longer exist. Thirdly, the economic argument fails to answer the criticism, often voiced by practitioners and by common lawyers, that a code is irrelevant as it is international practice which determines contractual rules. More fundamentally, the emphasis placed on legal coherence to the detriment of diversity of laws and cultures has been denounced. This brings us to our point which is precisely about culture and law. The major reason for promoting the idea of a code is cultural and political. Indeed, the construction of Europe, with a truly transnational civil society, would greatly be served by a large codification process, as already well explained by Collins.6 As Collins puts it, ‘the first reason for constructing a European civil code is that it will help to build a transnational community in which there is a shared identity of being European’. He then adds that a code (as opposed to a mere common framework of principles of private law) ‘will help to address the problem that citizens of the European Union do not on the whole readily identify themselves as Europeans’ and further argues that, instead of proposing constitutional treaties and augmented powers for the current European institutions … a crucial way in which to address this task of building a European polis or sense of common identity among the peoples of Europe comprises the broadening and deepening of a European civil society. Private law in the forms of a Code or common principles to govern dealings between citizens can provide the foundations for the construction of a European civil society.7

There is also a second reason for constructing a European civil code: namely, the promotion of social and economic progress and cohesion. In this respect, again to quote Collins, ‘in order to construct and defend this social model against the forces of globalization, it will be necessary to articulate and institutionalize the model through principles of private law, together with other kinds of economic and social regulation’.8 History shows well how codification projects have helped to construct a framework for a civil society, particularly in France where the Code civil is, following the famous saying of Carbonnier, considered the ‘constitution civile de la nation’. Undoubtedly, the European Union lacks such a framework. The stage we have now reached in Europe, with integrated legislation scattered all over the place, is not satisfactory. It creates many problems, well exposed by the European Commission itself. Moreover, partial and inconsistent legislation cannot favour the

6 H Collins, ‘Why Europe needs a Civil Code: European Identity and the Social Model’ in Liber Amicorum Guido Alpa. Private Law Beyond the National Systems (London, British Institute of International and Comparative Law, 2008) 259; and H Collins, ‘The European Economic Constitution and the Constitutional Dimension of Private Law’ (2009) 5 European Review of Contract Law 71. 7 Collins, ‘Why Europe needs a Civil Code’, above (n 6) 259 et seq. 8 Collins, ibid, 261.

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promotion of a true European civil society.9 More than ever, the rapid development of fundamental rights and more generally the pluralism of the sources of law reveal the necessity for a code. These factors also reveal its limits: no matter how complete, a code will never be the exclusive source of the law. The process of building a code, as a central founding stone in Europe, is a long and difficult one, which cannot be separated from that of ‘building a transnational civil society’.10 Networks of academics, thus, have their part to play in order to formulate common principles and model rules that meet largely shared expectations and facilitate the rise of a common framework, embodied in a code that preserves legal traditions and cultures. How this should be done, however, is yet another question the answer to which also depends on various political factors.

B

How the Code should be Elaborated

The question of the scope of the code and that of its legal nature are difficult and important questions. i

The Scope of the Code

In any codifying process, there is a good case for trying to encompass all legal fields, at least all private law matters. Indeed, the very idea of a European civil code seems to call for such an overarching instrument. However, a code capable of forging a shared European identity requires time and preliminary steps. Legal traditions are too different and law has become too complex to promote, all at once, in all fields of private law, effective and comprehensive legal unification. The codification process should take place incrementally. A first question appears immediately: what field of law should be privileged? The status and capacity of natural persons as well as family law (both in its patrimonial and extra patrimonial aspects) is an important subject, especially in view of the internationalisation of life. And yet, the differences between national laws are still too large, and the discrepancies between national cultures too wide to unify this whole part of the law in a European civil code. More preparatory work needs to be done in this respect. It is on its way and the considerable achievements that have already been made in the field of private international law pave the way for more substantial unification in the future. Employement relationships constitute a world apart, where national laws differ considerably and where some harmonisation would be necessary. This is, however, yet another project, with great economic and political impact. In the civilist tradition (and still in most countries), labour law is dealt with in a separate code, dedicated to labour law (code du travail). Property law, contract and torts and unjust enrichment constitute the heart of European private law. In the field of property law and unjust enrichement, there 9 Contra, H-W Micklitz, ‘Review of Academic Approaches to the European Contract Law Codification Project’ in Liber Amicorum Guido Alpa, above (n 6) 699. 10 Collins, ‘Why Europe needs a Civil Code’, above (n 6) 263.

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still is a lot to be achieved in view of a European harmonisation, while in contract and tort a lot has been achieved already: first, with the UN Convention on Contracts for the International Sale of Goods (‘CISG’), secondly with the PECL and the UNIDROIT Principles of International Commercial Contracts (‘PICC’). This is the reason why contract law—which is only one of the branches of the law of obligations, together with tort and unjust enrichment—should be given priority as the subject for a European unification of law. Some may object that general contract law is essentially of a non-mandatory nature and that this may seem a good argument for not drafting a code. In other words, practice would suffice to bring harmonisation. If practice does indeed effectively bring about some harmonisation, this is not sufficient. In order to show a common direction and to preserve certain values, a transnational society needs some guiding principles and model rules. In reality, there are various solid arguments in favour of a European or even international codification of contract law: First, due to commercial practice, the subject of contracts lends itself to unification. There is a true need for unification, at a European but also international level, strongly felt by businesses. Secondly, the disadvantages of a sectorial European approach, tirelessly denounced by the Commission are real. They call for a more coherent and more complete set of rules to govern contracts and the emphasis currently placed on the revision of the ‘Community acquis’, largely made up of directives for consumers’ rights, makes the unification project even more relevant. Thirdly, contract law is a core subject in private law; European contract law has a high symbolic dimension in legal education. Fourthly, contract law rests on core principles, such as freedom of will, binding force of contract, good faith, and the like. These principles are already widely shared in national legal systems. Fifthly, a lot of comparative work has already been achieved, and this paves the way for a successful codification. Specifically in the field of contract law, the two most well-known doctrinal codifications are the PICC, elaborated by UNIDROIT, also named the Unidroit Principles (‘UP’)11 and the PECL elaborated by the Lando Commission (named after its founding father, Ole Lando).12 Moreover, one should also mention the draft ‘European code of contracts’, prepared by the Academy of European private law specialists.13 The PECL published by the Lando Commission are, to date, probably the most well-known work carried out by European academics. Largely inspired by the laws of the different member states, they were elaborated by legal scholars who compared national laws. According to the experts who drafted them, they were intended to ‘provide a foundation to contract law within the European Union, on

11 UNIDROIT (ed), The Principles of International Commercial Contracts 2004 2nd edn (Rome, Unidroit, 2004). 12 O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II, combined and revised, prepared by the Commission of European Contract Law (The Hague, Kluwer, 2000); and O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). In French: Principes du droit européen du contrat (2004), 16ff (avec le concours de G Rouhette, I de Lamberterie, D Tallon, C Witz, Société de législation comparée). 13 P Stein, ‘Introduction, XLVI’ in G Gandolfi (ed), Code européen des contrats—Avant-projet livre I (Milan, Giuffré, 2001).

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the basis of which more specific harmonization measures can be elaborated’.14 Very often, these ‘principles’ are drafted in terms which have come to be so precise and structured that they resemble a set of rules which are ready to be introduced into a civil code, in the part dealing with contracts (this is particularly true of the third part of the Principles). At the time the PECL were elaborated, the debate on the political, economical and social implications of contract law was not as strong as it is now. This partly explains why the PECL contain general contractual rules, without stating expressly what main principles underlie the law. In particular, in view of all academic thinking and legislative enterprises in the field of the protection of the weak party, any future European instrument in the field of contracts should give special consideration to these questions. Indeed, the policy choices that are made must be properly explained, as a number of fundamental questions will be raised immediately. For example, how can contract law promote an economy in which social responsibility and solidarity have a place? More concretely, which protective rules are to be included in the general law of contract and should consumer law form part of general contract law?15 What place do the principles of contractual autonomy and contractual freedom, so characteristic in EU law, leave for the principles of justice and protection of the weaker party? There is no single answer to these much debated questions which are highly political and yet cannot and should not be avoided in an attempt to codify contract law in Europe. In the field of contract law, the principle of freedom of contract partially conflicts with others, such as the fairness and good faith principles.16 However, while codifying European contract law, clear and precise directions must be expressed. Otherwise, the most diverse fears will thrive with regard to any codified set of European contract rules. Inevitably, practitioners, who are strong believers in contractual freedom, are worried that the harmonisation of European contract law will entail further restrictions on the contractual autonomy of the parties, while on the contrary, academics usually insist on the necessity of promoting more social justice in European contract law.17 There is a need for a code to forge the theoretical foundations of European private law and this code should contain clear guiding principles, as well as general model rules. Such a code would not replace national laws of contract as it would most probably take the legal form of an optional instrument. ii

The Legal Nature of a Code—An ‘Optional Instrument’ on Contract Law

A code is a coherent set of rules in a specific field of the law. A codification may be optional in the sense that it applies only if designated by the parties. In the field of 14

See ‘Introduction’ in Principles of European Contract Law, above (n 12). MW Hesselink, ‘The Politics of a European Civil Code’ in MW Hesselink (ed), The Politics of a European Civil Code (The Hague, Kluwer, 2006) 142–70, 143–56ff; C Jamin, ‘Vers un droit européen des contrats ? (Réflexion sur une double stratégie)’ (2006) 3 RJCom 94ff, 97ff. 16 B Lurger, ‘The Social Side of Contract Law and the New Principle of Regard and Fairness’ in A Hartkamp and MW Hesselink et al (eds), Towards a European Civil Code 3rd edn (The Hague, Kluwer, 2004) 273, 286. 17 Social Justice Group, Manifesto, (2004) 10 ERL, 653ff; (2005) RTDciv. 713ff. 15

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contract law, where respect for the parties’ autonomy is a core principle of European private international law, parties could be given the freedom to choose an ‘optional instrument’ (in addition to their existing freedom) as the applicable law for their contracts. Pluralism and national legal systems would thus be maintained. Although the optional instrument would derive its binding force from the parties’ choice, it could itself provide for mandatory rules.18 Should it include consumer rules, it should then provide a high level of protection for the weaker party.

III

GUIDING PRINCIPLES AND MODEL RULES IN A CODE ON CONTRACT LAW

In the second part of this chapter, I shall not only argue in favour of guiding principles and model rules in a codified European contract law, but present the various options that have been chosen, in this respect, by a number of the research groups involved in the elaboration of the DCFR. Two different views have been submitted to the Commission. One is embodied in the DCFR, drafted by the Study Group on a European civil code and the Acquis Group; the other is embodied in the ‘Materials for a CFR’, elaborated by the AHC-SLC Group. As a matter of information, a few introductory remarks may be necessary regarding the work of the group composed of members of the Association Henri Capitant des Amis de la Culture Juridique Française and of the Société de législation comparée (AHC-SLC). Within the same academic network, the AHCSLC have constituted a group—named an ‘evaluative group’—the function of which was to evaluate the work of the drafting group and, if possible, express other views. This evaluative group has produced an important work, named (in its English version) ‘European Contract Law: Materials for a Common Frame of Reference. Terminology, Guiding Principles, Model Rules’. Rather than concentrating mainly on the draft model rules—like the DCFR—this work attaches importance to each of the three drawers of the toolbox that was requested by the European Commission: terminology, principles and model rules. The entire work has been published in French, in two volumes19 and a major part of it is available in English (namely, the first and second parts on terminology as well as the guiding principles; in the third part, only the model rules have been translated and not the extensive comparative comments that accompany these rules in the French version).20

18 See H Heiss and N Downes, ‘Non-Optional Elements in an Optional European Contract Law: Reflections from a Private International Law Perspective’ (2005) 13 European Review of Public Law 693, 699. 19 Association Henri Capitant et Société de législation comparée (ed), Projet de cadre commun de référence. Terminologie contractuelle commune, Collection Droit privé européen et comparé, vol 6 (Paris, 2008); Association Henri Capitant et Société de législation comparée, Projet de cadre commun de référence. Principes contractuels communs, Collection Droit privé européen et comparé, vol 7 (Paris, 2008) (www.legiscompare.com). 20 B Fauvarque-Cosson and D Mazeaud (eds), European Contract Law. Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules (Munich, Sellier, 2008).

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The work on terminology is most valuable for comparative law but also as a drafting tool. Moreover, it will give guidance to the translators when the time comes to translate the DCFR or CFR into all the languages of the Member States. The work on the guiding principles and the model rules has a greater political value and could influence the Commission in its choice as to the content and scope of the final CFR. A

Guiding Principles

The expression ‘guiding principles’ (principes directeurs) means no less and no more than fundamental principles which are all-pervasive in contract law. These principles could have been called underlying principles or fundamental principles or general principles of contract law, or even ‘overriding principles’.21 My purpose here is not to present, nor to comment on, the substantial policy choices adopted by the DCFR in this respect, but to pay special attention to the way in which the DCFR has decided to deal with the question as to whether or not ‘guiding principles’ should be introduced as such, and to contrast it with the approach taken by the AHC-SLC Group. As for the major policy choices of the DCFR, much criticism has been expressed and it is difficult to know where the truth lies.22 The Notes and Comments, now published, may help to sort this out. First, I will focus on the ‘Introduction’ to the DCFR which provides some explanation for the choice made not to insert the Principles that had been proposed by the AHC-SLC Group; and secondly, I will present the guiding principles that have been elaborated by this group. i

Guiding Principles in the DCFR

The Interim Outline Edition of the DCFR did not include a separate part containing a statement of basic principles and values underlying the model rules; it merely suggested that such principles could be formulated ‘as recitals, ie, an introductory list of reasons for the essential substance of the following text, or in a discursive preface’. It also outlined some fundamental principles in its Introduction (paragraphs 23–26) and listed 15 items (paragraphs 22 and 35) without ranking them in 21 The ‘Introduction’ to the DCFR attempts to differentiate the ‘underlying principles’ from those that are mentioned in the ‘Interim Outline Edition’, which are ‘generally of a rather high political nature’ and ‘could be said to be overriding rather than underlying’ (para 13). The Introduction cites, in this category, ‘the protection of human rights, the promotion of solidarity and social responsibility, the preservation of cultural and linguistic diversity, the protection and promotion of welfare and the promotion of the internal market’ (para 16). 22 In CFR and Social Justice: A Short Study for the European Parliament on the Values Underlying the Draft Common Frame of Reference for European Private Law: What Roles for Fairness and Social Justice? (Munich, Sellier 2008) Hesselink evaluates the DCFR in terms of social justice and asks whether the rules in the DCFR are neo-liberal (as was feared by the Social Justice group) or socialist (H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner, R Zimmermann (eds), ‘Der Gemeinsame Referenzrahmen für das Europäische Privatrecht—Wertungsfragen and Kodifikationsprobleme’ (2008) 63 Juristenzeitung 529, 544. This important and critical article was also published in English; see: ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659–70; and in French, ‘Le cadre commun de référence pour le droit privé européen’ (2008) Revue Trimestrielle de Droit Européen 761.

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any order of priority.23 Since all these principles would inevitably conflict with one another, the Introduction left it to the model rules to strike the appropriate balance (paragraph 23). After the publication and submission to the Commission of the work of the AHC-SLC Group on the ‘principes directeurs’, the question was raised as to whether the DCFR should introduce such principles. In April and June 2008, this question was thorougly examined by the team in charge of the final edition (the Compilation and Redaction Team and the Co-ordinating Committee of the Study Group). Finally, a negative answer was given. The Introduction to the second edition of the DCFR pays tribute to the ‘[l]essons learned from the principes directeurs’ (paragraph 14) and gives two reasons for not having the principles in a distinct part. It explains, first, that ‘the Principes directeurs relate only to contract law’ and that the scope of the DCFR goes beyond contract law. This entails that ‘[f]or the purpose of the DCFR a statement of underlying principles has to be wide enough to cover also non-contractual obligations and aspects of property law’.24 Secondly it explains that ‘it does not seem appropriate to incorporate the governing principles as a block of actual model rules at the beginning of the DCFR. They function at a different level. They are a distillation from the model rules and have a more descriptive function. They sometimes overlap and often conflict with each other’.25 In paragraph 15 of the Introduction, it is suggested that, for the broader purpose of the DCFR, the underlying principles should be grouped under the headings of freedom, security, justice and efficiency (rather than liberté contractuelle, sécurité contractuelle et loyauté contractuelle as in the principes directeurs). It then purports to explain that ‘this does not mean that the principle of “contractual loyalty” is lost’. A different view is favoured by the AHC-SLC Group which elaborated such principles. This view is that in order to promote a European legal culture, some common guiding principles need to be stated. Model rules should then be inspired by them, not the opposite. This approach is supported by the mission that was given by the European Commission to the academics in charge of the preliminary work towards the final CFR. Indeed, the European Commission placed emphasis on the elaboration of common principles, as well as concepts and definitions. Initially, drafting detailed rules was only presented as a third (possible) drawer of the ‘toolbox’, the first two drawers of which would contain principles and definitions.26 In focusing on the third drawer, the DCFR has focused on very detailed rules, which cover very large parts of European private law and do not limit themselves to contract law. In these two respects, it has exceeded the mission that had been given by the Commission.

23 See the list in this Introduction to the Interim Outline Edition of the DCFR (Munich, Sellier, 2008) and one year later, in para 12 of the Introduction to the the Outline Edition (Munich, Sellier, 2009). 24 ‘Introduction’ in Outline Edition, 12, [para 13]. 25 ibid. 26 At that time, the CFR had even been compared to a mere legal dictionary containing explanatory notes, in which parties could find inspiration to draft other documents.

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The European Commission is now faced with the elaboration of the final Common Frame of Reference (CFR). In order to do this, it has to choose between various options and different models. The options and model favoured by the AHC-SLC Group have the merit of being more in conformity with what was ordered by the Commission. ii

Guiding Principles in the Materials presented by the AHC-SLC Group

In its proposed model rules, the AHC-SLC Group has followed the structure of the PECL, which resembles the structure of the Unidroit Principles (both instruments are internationally well known and serve as models for legislators). Such a choice relies on two main ideas which deserve some debate and profoundly deviate from the approach adopted in the DCFR: first, the CFR should only deal with contract law; and, secondly, the notion of contract (and not that of ‘juridical act’) should be the key notion of such a set of model rules. The AHC-SLC Group suggests the introduction of a chapter dedicated to the ‘Guiding Principles of European Contract Law’ in the Principles of European Contract Law.27 The text of these guiding principles, expressed in three sections and eleven articles, is reproduced below. It starts with the most fundamental principle of European private law: freedom of contract.28 Section I. Freedom of Contract Article 0–101: Freedom of the parties to enter into a contract Each party is free to contract and to choose the other party. The parties are free to determine the content of the contract and the rules of form which apply to it. Freedom of contract operates subject to compliance with mandatory rules. Article 0–102: Respect for the freedom and rights of third parties Each party can only contract for themselves, unless otherwise provided. A contract can only produce an effect in as much as it does not result in an infringement or unlawful modification of third party rights. Article 0–103: Freedom of the parties to modify or put an end to the contract By their mutual agreement, the parties are free, at any moment, to terminate the contract or to modify it. Unilateral revocation is only effective in respect of contracts for an indefinite period.

27 The PECL’s first chapter contains some General Provisions. Freedom of Contract is provided for in Art 1:102, Contractual Fairness in Art 1:201 (good faith and fair dealing). Certainty is not provided for in the General Provisions, but it can be inferred from provisions such as Art 6:111 on change of circumstances. 28 J Basedow, ‘Freedom of Contract in the Eurpean Union’ (2008) 16 European Review of Private Law 901.

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Section II. Contractual Certainty Article 0–201: Principle of binding force A contract which is lawfully concluded has binding force between the parties. In addition to the performance of the contractual obligations, each party is bound to comply with the duties which can be implied from the principle of contractual fairness. In the course of performance, the binding force of the contract can be called into question if an unforeseeable change in circumstances seriously compromises the usefulness of the contract for one of the parties. Article 0–202: Right to performance Each party can demand from the other party the performance of the other party’s obligation as provided in the contract. Article 0–203: Rights and duties of third parties A contract creates a situation which third parties must respect and upon which they may rely without being able to require performance. Article 0–204: Principle of favouring the maintenance of the contract When a contract is subject to interpretation, or when its validity or performance is threatened, the effectiveness of the contract should be preferred if its destruction would harm the legitimate interests of one of the parties. Section III. Contractual Fairness Article 0–301: General duty of good faith and fair dealing Each party is bound to act in conformity with the requirements of good faith and fair dealing, from the negotiation of the contract until all of its provisions have been given effect. The parties may neither exclude this duty, nor limit it. Article 0–302: Performance in good faith Every contract must be performed in good faith. The parties may avail themselves of the contractual rights and terms only in accordance with the objective that justified their inclusion in the contract. Each party is rquired not to do anything that prevents the performance of the contract or that infringes the rights that the other party acquires from the contract. Where one of the parties, without compromising the performance of the contract, has acted in such a way as to reduce the benefit that the other party could legitimately expect from the contract, the party is required, at the request of the other party, to renegotiate the contents of the contract. Article 0–303: Duty to cooperate The parties are bound to cooperate with each other when necessary for the performance of their contract. Article 0–304: Duty of coherence

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No party shall act inconsistently with any prior statements made by the party or behaviour on the part of the party, upon which the other party may legitimately have relied.

In the work of the AHC-SLC Group, the Principles are intended to complete the PECL and serve as a guide to their interpretation and application. The General Introduction to these guiding principles thus specifies that these principles were identified ‘from the text and contents of the Principles of European Contract Law’ and that, ‘although the first chapter (of PECL) makes perfectly clear the importance of freedom of contract29 and contractual fairness,30 a study of all the provisions showed that the PECL are equally permeated by the principle of contractual certainty’.31 Since the aim of the group was to ‘identify a common core within the national laws’, a deep comparative analysis was made, including an examination of national legal systems,32 of the Vienna Convention of 11 April 1980 on Contracts for the International Sale of Goods (CISG), of EC law (particularly in the acquis communautaire) and of various codifications of legal scholarship (Unidroit Principles, the European Code of Contract Preliminary Draft and the Proposals for Reform of the Law of Obligations and the Law of Prescription). This comparative research enabled the group to ‘equip the principles of freedom of contract, contractual fairness and contractual certainty with a concrete content’. Indeed, as explained in the Introduction, ‘[a]lthough the aim of the proposed text is to prescribe general principles, it appeared nonetheless preferable not to proceed by way of abstraction. As a result the provisions have been written in the hope that the rule posed is accessible and intelligible’.33 There is nothing revolutionary in these principles which are already present in the laws of all the Member States of the European Union, even if their scope varies from one country to another. There is, however, a highly symbolic value in expressing them in the form of guiding principles at the beginning of a code which would also state some model rules. B

Model Rules

The Common Frame of Reference (CFR), made up of three drawers, should only concern the law of contracts. First, this was what the European Commission specifically asked for; secondly, as already mentioned, there are good reasons for not going too fast and starting with model rules in the law of contracts. These ‘model rules’ should, as indicated by the expression itself, serve as models. Various meanings can be given to the adjective ‘model’. The Introduction to the DCFR (paragraph 24) explains that ‘the adjective “model” indicates that the rules are not put forward as having any normative force but are soft law rules of the kind 29

See Art 1:102. See Arts 1:201 and 1:202. 31 Part II, ‘General Introduction’ 421. 32 The study essentially concentrated on the laws of Germany, the Netherlands, Switzerland, France, Italy, Spain and England and Wales. 33 B Fauvarque-Cosson and D Mazeaud (eds), European Contract Law. Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules, above (n 20) 30

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contained in the Principles of European Contract Law and similar publications’. Usually, the word ‘model’ has a different meaning. It refers to something that can be imitated or serve as a source of inspiration. Rules can serve as models in many respects: they can be models for parties who draft their contracts, for national legislators who modernise their law of contract or for the European legislator (particularly in view of the revision of the acquis communautaire in the field of consumer law). It is then another question to decide whether such rules should be binding or not. This entirely depends on the binding force of the instrument in which they are contained: a mere common frame of reference, an optionnal instrument, a binding code. The rules, if enacted in a binding code, no longer constitute soft law. However, while some of them are mandatory for the parties, others are not and the parties, provided they can freely dispose of their contractual rights, can set them aside. ‘Model rules’, in the usual meaning of the term, should present some characteristics which enable them to serve as models. In the field of contract law, where some models already exist, they should not endeavour to depart from the basic common frame of reference, constructed on the concept of contract. Indeed, the well-known and largely resorted to notion of contract should serve as the key notion. This is a major difference with the DCFR which not only covers a wider scope, but is based on a distinction between the contract itself (a ‘juridical act’ among others, all of them dealt with in Book II) and the ‘obligations and rights’ which result from it (Book III). The AHC-SLC Group favours a CFR which follows the structure of the Principles of European Contract Law (drafted by the Lando Commission). In fact, it is both simple and logical to have texts on ‘contract law’, to understand the concept of contract as a whole (the instrument itself and the rights and obligations which result from it) and to adopt a chronological order (formation, content, performance and non-performance). This structure is familiar to many national legal systems. The PECL adopted it. While there is no decisive reason to change this, there are many arguments in favour of keeping such a structure in an instrument which should seve as a ‘model’. Model rules, in order to play their role as a future source of inspiration for all legislators and all forms of contracts, should not try to encompass all sorts of situations. They should remain clear, concise and not too numerous. In this respect, they should not present a set of very detailed rules for consumer law. The CFR or the European code of contracts will probably also integrate consumer provisions; this however is not an easy task. The acquis communautaire is currently made up of detailed texts which sometimes contradict one another and these texts should not be reproduced as such in a European instrument on contracts. In the DCFR, the integration of the acquis communautaire raised various problems, already well explained.34 The current discussions on the consumer directives show how difficult a task it is to draw general principles and model rules from all these texts. The way the integration of the acquis communautaire was

34 R Schulze, Le nouveau Cadre commun de reference et l’acquis communautaire, RDC 2008, p 922.

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carried out by the DCFR has raised some criticism.35 Some further thought is needed in this respect. Moreover, the extent of such integration also depends on the scope of the instrument (general contract law only or specific contracts also encompassed). This thought process must be conducted in light of the Commission Proposal of 8 October 2008 for a ‘Directive on consumer rights’,36 which intends to combine and amend the four older directives on doorstep selling,37 distance selling,38 unfair contract clauses39 and consumer guarantees.40 It should also be conducted in light of the responses that will be given to the consultation launched on 1 July 2010 by the Commission’s Green Paper ‘on policy options for progress towards a European Contract Law for consumers and businesses’.41 The political process towards a European contract code needs to be pragmatic and realistic. The time is not yet ripe for an instrument that would supersede national legal systems; and the way forward is probably that of a European ‘optional instrument’. The way to success in the codification process of European private law implies that efforts should concentrate on the law of contract and, more precisely, on some specific contracts (primarily on sales). The rules on all the various existing specific contracts cannot be codified over a reasonable period of time. Therefore, this codification process should not only lead to an optional instrument, it should also take place incrementally.

IV

CONCLUSION

There are three recurring themes in this chapter. First, the codification of private law could assist in the development of a common cultural identity in Europe. Secondly, although the project should eventually span the full range of private law, it needs to start with a focus on contract law. Thirdly, the aim of the project should be to articulate shared general and guiding principles rather than detailed rules. However one looks at the DCFR, relative to this sense of the mission and strategy of European private lawyers, it hardly seems the appropriate model for a future optional instrument in European contract law.

35 Eidenmüller et al, ‘Der Gemeinsame Referenzrahmen für das Europäische Privatrecht’, above (n 22) 544; N Jansen and R Zimmermann, ‘Grundregeln des bestehenden Gemeinschaftsprivatrechts’ (2007) Juristenzeitung 1113, 1120 et seq. 36 Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614 final. 37 Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negoti-ated away from business premises [1985] OJ L372/31. 38 Council Directive 97/7/EC of 20 May 1997 on the protection of consumers in respect of distance contracts [1997] OJ L144/19. 39 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993] OJ L95/29. 40 Council Directive 99/44/EC of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L171/12. 41 COM (2010) 348/3.

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6 Old and New Insights for the Protection of Consumers in European Private Law in the Wake of the Global Economic Crisis BRIGITTA LURGER I

INTRODUCTION

W

HEN THE GLOBAL economic crisis was at its peak, it was frequently said: ‘After the crisis the world will look different’. Such a sentiment could be heard and read in the media on many occasions. However, by the end of 2009, when the crisis seemed to be reaching its end, these voices became more muted. Accordingly, the following questions should be posed: what has really changed? Does the world really look different? Have we learned our lessons? I will try to answer this last question for the area of consumer protection law in the EU as well as considering further important issues that will characterise the consumer protection law of the future. I will start with an assessment of the status quo of consumer protection law in the legislative texts and proposals in the EU (in part I); continue with a discussion of the different approaches in legal theory that explain the guiding principles and underlying values of European private law and consumer law (in part II); and finally reach the heart of the paper (in part III), in which I will try to describe some lessons that could be learned from the global economic crisis. A number of changes and questions for further research and investigation are suggested that could improve consumer protection law in general, some of which could also help to avoid old mistakes that contributed to the crisis. In part IV, there is a short summary of the chapter. II

A

STATUS QUO OF EUROPEAN LEGISLATIVE TEXTS—(D)CFR AND MAXIMUM HARMONISATION

EU Directives and Regulations

Numerous EU directives and regulations protecting consumers and other weaker market participants exist in the areas of contract law, product safety, antitrust, financial services and markets, unfair competition law and so forth. In EU law, as

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well as in national legal systems, consumer protection law is embedded in a larger environment of the protection of other weaker parties (like bank and insurance customers, commercial agents, commercial creditors, internet users and so forth) in contract law and beyond. The EU legal provisions relevant to the protection of the consumer are not limited to EU directives dealing exclusively with consumer contract issues (these would be only seven directives). B

The (D)CFR/Acquis Project 2005–09

The whole project started as a large academic codification project covering almost all areas of ‘patrimonial’ private law (contract law, tort law, unjust enrichment, movable property etc). This project was welcomed and supported by the European Parliament1 and initially also by the Commission which concluded an FP 6 Contract with the researchers (SGECC,2 Acquis Group3 and others) in 2005, thus providing them with substantial financial support until the completion of their work in 2009 (CoPECL Network of Excellence).4 The Directorate General Health and Consumer Protection (DG SANCO) of the Commission declared that its main purpose was little more than improving the so-called ‘consumer acquis’ (a narrow set of 8 particular EC/EU directives leaving out a lot of other directives and regulations also shaping consumer contract law).5 It intended in particular to render the ‘acquis’ more ‘coherent’ with the help of a non-binding ‘Common Frame of Reference’.6 No ‘European contract code’ or even ‘civil code’ would be realised. 1 See B Lurger, ‘The Common Frame of Reference/Optional Code and the Various Understandings of Social Justice in Europe’ in T Wilhelmsson, E Paunio and A Pohjolainen (eds), Private Law and the Many Cultures of Europe (The Hague, Kluwer, 2007) 177, 178. 2 Study Group on a European Civil Code (chairman, Christian von Bar). 3 Research Group on the Existing EC Private Law (chairman, Hans Schulte-Nölke). 4 The Common Principles of European Contract Law (CoPECL) ‘Network of Excellence’ was established under the Sixth Framework Programme for Research and Technological Development (Decision No 1513/2002/EC, OJ L232/1 (29 August 2002). 5 Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negoti-ated away from business premises (Doorstep Selling Directive) [1985] OJ L372/31; Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (Package Travel Directive) [1990] OJ L158/59; Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (Unfair Contract Terms Directive) [1993] OJ L95/29; Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis (Timeshare Directive) [1994] OJ L280/83; Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (Distance Selling Directive) [1997] OJ L144/19; Council Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (Price Indication Directive) [1998] OJ L80/27; Council Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers’ interests (Injunctions Directive) [1998] OJ L166/51; Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees (Consumer Sales Directive) [1999] OJ L171/12. For the other regulations and directives concerning consumer contracts, but yet excluded by the Commission seebelow. 6 Commission, ‘A More Coherent European Contract Law, an Action Plan’ (Communication) COM (2003) 68 final (12 February 2003); Commission, ‘European Contract Law and the Revision of the Acquis: the Way Forward’ (Communication) COM (2004) 651 final (11 October 2004); Commission,

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In January 2008, the SGECC and the Acquis Group7 published their ‘Interim Outline Edition’ of the ‘Draft Common Frame of Reference’ (‘DCFR’)8 which was followed by their more complete ‘Outline Edition’ in February 2009.9 The DCFR Outline Edition of 2009 consisting of the ‘Black Letter Rules of ten books, covering areas from contract law, torts, unjustified enrichment, to real security, movables and trusts, without any Comments or Notes (which will be published later) contains over 600 pages. Book II on ‘Contracts and other juridical acts’ integrates selected issues of consumer protection into general contract law, issues which are now found in the EC/EU directives (for instance pre-contractual information duties, rights of withdrawal, unsolicited goods, unfair terms in consumer contracts). The following deficits of the (D)CFR-project—which have already been quite amply discussed in the literature10—seem to be relevant in this context: — Old-fashioned concepts and values: Books II and III take up basic concepts of German pandectistic doctrine, like the ‘Rechtsgeschäft’ (‘juridical act’), the concept of a general law of obligations.11 The text in most parts takes a neo-liberal stance (with party autonomy as the central and dominating principle of private law).12 In the DCFR introduction the authors endorse the market-functionalism of the Commission.13 They see themselves as academic experts whose proposals are in essence non-political and merely technical. The never clearly expressed basic ideas underlying the DCFR seem to be close to ordoliberal concepts and the concept of a private law society which is detached

‘First Annual Progress Report on European Contract Law and the Acquis Review’ COM (2005) 456 final (23 September 2005); Commission, ‘Green Paper on the Review of the Consumer Acquis’ COM (2006) 744 final (8 February 2007); Commission, ‘Second Progress Report on the Common Frame of Reference’ COM (2007) 447 final (25 July 2007). 7 The major publications of the Acquis Group are: H Schulte-Nölke, C Twigg-Flesner and M Ebers (eds), EC Consumer Law Compendium. The Consumer Acquis and its Transpostion in the Member States (Munich, Sellier, 2008); Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract I: Pre-contractual Obligations, Conclusion of Contract, Unfair Terms (Munich, Sellier, 2007); Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract II: Performance, Non-performance, Remedies (Munich, Sellier, 2008). 8 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008). 9 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law. Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 10 See A Somma (ed), The Politics of the Draft Common Frame of Reference (Alphen, Kluwer, 2009) and numerous articles in: (2008) 3 European Review of Contract Law; (2009) 2 European Review of Contract Law; (2009) 4 European Review of Private Law; H-W Micklitz, ‘Europäisches Regulierungsprivatrecht: Plädoyer für ein neues Denken’ (2009) 6 Gemeinschaftsprivatrecht 254. 11 A Vaquer, ‘Farewell to Windscheid? Legal Concepts Present and Absent from the Draft Common Frame of Reference (DCFR)’ (2009) 4 European Review of Private Law 487, 490 et seq. 12 R Sefton-Green, ‘The DCFR: A Technical or Political Toolbox?’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 40, 42 et seq. 13 C Schmid, ‘The Instrumentalist Conception of the Acquis Communautaire in Consumer Law and its Implications on a European Contract Law Code’ (2005) 1 European Review of Contract Law 211 et seq; B Lurger, ‘The Future of European Contract Law between Freedom of Contract, Social Justice and Market Rationality’ (2005) 4 European Review of Contract Law 442, 452; Lurger, ‘The Common Frame of Reference’, above (n 1) 181 et seq.

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from the political conflicts and democratic legitimacy processes dominating all other areas of law.14 — Narrow scope: with respect to consumer protection and modern types of contracts: only a small part of consumer protection regulation—even in the field of contract law—was taken into account and integrated in the Acquis Principles and the DCFR.15 Most long-term contracts were excluded; most general and special contract law rules in the DCFR focus on the simple exchange contract (sales, services). In particular, long-term contracts for the satisfaction of basic needs of consumers like credit contracts, landlord-tenant contracts, nursing home contracts with the elderly and labour contracts are not included. The same applies to network relationships, ie, contracts which involve more than two parties in different functions, even though these networks are omnipresent in the lives of consumers and businesses. Contracts which focus on a pooling of interests of the parties (corporations, companies and other co-operations) and the manifold intersections between such organisation contracts and exchange contracts are ignored by the DCFR contract law, as well.16 And last but not least, all areas of EU law outside contract law which protect consumers and customers, like antitrust law, unfair competition law, regulations of services of general economic interest and so forth, are missing. Considering that the Commission declared the improvement of the quality of consumer protection law in the so-called ‘consumer acquis’ to be the main purpose of the [D]CFR-project, it is astonishing that the DCFR as well as the recent Commission Proposal for a Directive on consumer rights leave almost all relevant EU consumer protection law outside their scope. — Consumer protection provisions included in the DCFR not convincing: the few provisions of EC/EU consumer contract law which were included in the DCFR were, for the most part, not altered, improved or developed any further, but rather copied from the texts of the respective EU directives. While the integration of consumer protection provisions in the general rules of contract law as such appears as an important signal and a positive step forward for consumer protection, the way the integration was carried out is far from ideal:17 at the centre of every systematic integration of consumer protection

14 A Somma, ‘Some Like it Soft: Soft Law and Hard Law in the Shaping of European Contract Law’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 51, 57, 60. 15 B Lurger, ‘Much Ado About (Almost) Nothing: The Integration of the So-Called “Consumer Acquis” in the Draft Common Frame of Reference’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 131, 141 et seq; H-W Micklitz, ‘The Visible Hand of European Regulatory Private Law’ EUI Working Paper LAW No 2008/14, 4; H-W Micklitz, ‘(Selbst-)Refektionen über die wissenschaftlichen Ansätze zur Vorbereitung einer europäischen Vertragsrechtskodifikation’ (2007) 1 Gemeinschaftsprivatrecht 2, 12; Micklitz, ‘Europäisches Regulierungsprivatrecht‘, above (n 10) 254 et seq. 16 B Lurger, Grundfragen der Vereinheitlichung des Vertragsrechts in der Europäischen Union (Vienna, Springer, 2002) 448 et seq; S Grundmann, ‘Grand European Code Napoléon or Concise Uniform Contract Law? Defining the Scope of a Common Frame of Reference’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 19, 34 et seq. 17 H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘Der Gemeinsame Referenzrahmen für das Europäische Privatrecht—Wertungsfragen and Kodifikationsprobleme’ (2008) 63 Juristenzeitung 529, 544; N Jansen and R Zimmermann, ‘Grundregeln des bestehenden Gemeinschaftsprivatrechts’ (2007) Juristenzeitung 1113, 1120 et seq.

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rules into general contract law you have to place a thorough examination of the particular need for protection and the effectiveness and appropriateness of the protective means employed by a certain rule. The final question of the examination should be, is the need for protection limited to contract parties that are consumers or is it also present for business parties in similar situations? The Acquis texts and the DCFR integrated texts reveal that these examinations, which should result in evaluations, corrections, restrictions or generalisations where necessary and appropriate, were not undertaken most of the time. The Acquis/DCFR texts very much stick to the original texts of the directives, in many cases generalisations or changes seem rather arbitrary.18

C Maximum Harmonisation and the Commission’s Proposal for a Consumer Rights Directive 2008 The last consumer protection directives—in the areas of distance selling of financial services (2002),19 consumer credit (2008)20 and timesharing (2009)21—the Unfair Commercial Practices Directive 2005,22 and the Commission Proposal of 8 October 2008 for a ‘Directive on consumer rights’,23 which intends to combine and amend the four older directives on doorstep selling,24 distance selling,25 unfair contract clauses26 and consumer guarantees,27 show the Commission’s new strategy to turn all former minimum directives into maximum harmonisation instruments.28 The technique of maximum harmonisation is, however, not only detrimental to the higher standards of protection presently in force in many Member States, but it creates new sources of imprecision and uncertainty for the construction and application of the directives, and prevents the Member States from adapting the EU rules to the structures and categories used in their respective national private law systems.29 18 For a thorough comparison of the Acquis Principles and the respective DCFR rules see C Twigg-Flesner, S Leible, E Terryn and T Pfeiffer in R Schulze (ed), Common Frame of Reference and Existing EC Contract Law (Munich, Sellier, 2008) 97 et seq. 19 Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC [2002] OJ L271/16. 20 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC [2008] OJ L133/66. 21 Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts [2009] OJ L33/10. 22 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC and Regulation (EC) 2006/2004 (Unfair Commercial Practices Directive) [2005] OJ L149/22. 23 COM (2008) 614 final. 24 Doorstep Selling Directive, above (n 5). 25 Distance Selling Directive, above (n 5). 26 Unfair Contract Terms Directive, above (n 5). 27 Consumer Sales Directive, above (n 5). 28 For the Commission’s declared belief in maximum harmonisation see the Commission’s Consumer Policy Strategy 2002–2006, COM (2002) 208 final, 12; EU Consumer Policy Strategy 2007–2013: Empowering consumers, enhancing their welfare, effectively protecting them, COM (2007) 99 final, 7. 29 H-W Micklitz and N Reich, ‘Crónica de una muerte anunciada: The Commission Proposal for a “Directive on Consumer Rights”’ (2009) 46 Common Market Law Review 471, 474 et seq; N Reich,

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The Commission’s 2008 Proposal for a Directive on consumer rights,30 stating that no external expert knowledge was needed, denies all links to the Acquis Group Principles (‘ACQP’)31 and the resulting DCFR consumer protection rules. The Proposal’s main arguments for the positive effects of the new directive are derived from the directive’s nature as a maximum harmonisation instrument,32 the claim being that the simplification and radical unification of legal rules will considerably lower the costs for the trade sector all over Europe. III OLD INSIGHTS—VALUES AND PRINCIPLES IN CONTRACT LAW, FUNDAMENTAL RIGHTS, CONSTITUTIONALISATION, PRIVATE LAW AND MARKET LAW

A

Neo-liberalism, Ordo-liberalism and Economic Analysis of Law

The above-mentioned concepts and basic values underlying the DCFR show a proximity to the theories of neo-liberalism and ordo-liberalism.33 The traditional liberal concept of contract law was mainly shaped by the liberalism of the nineteenth century.34 Private law or market law are supposed to be based on the core principle of party autonomy; regulation by mandatory legal provisions is only ‘Der Common Frame of Reference und Sonderprivatrechte im “Europäischen Vertragsrecht”’ 1 (2007) Zeitschrift für Europäisches Privatrecht 161, 171 et seq; N Reich, ‘A Common Frame of Reference (CFR)—Ghost or Host for Integration?’ (2006) Zentrum für Europäische Rechtspolitik Discussion Paper 7, 33 et seq; SR Weatherill, ‘Do we need a European Contract Law?’ in 4. Europäischer Juristentag, Sammelband 3 (2008) 27, 36; T Wilhelmsson, ‘Full Harmonisation of Consumer Contract Law?’ (2008) 16(2) Zeitschrift für Europäisches Privatrecht 225; M Dougan, ‘Minimum Harmonization after Tobacco Advertising and Laval un Partneri’ in M Bulterman, L Hancher, A McDonnell and H Sevenster (eds), Views of European Law from the Mountain Liber Amicorum for Piet Jan Slot (The Hague, Kluwer, 2009) 3 et seq; Lurger, ‘The Common Frame of Reference’, above (n 1) 185 et seq; MW Hesselink, CFR and Social Justice (Munich, Sellier, 2008) 34 et seq; O Lando, ‘Liberal, Social and “Ethical” Justice in European Contract Law’ (2006) 43 Common Market Law Review 817, 827; V Mak, ‘Review of the Consumer Acquis—Towards Maximum Harmonization?’ (2009) 17 European Review of Private Law 55, 59 et seq; B Gsell and H-M Schellhase, ‘Vollharmonisiertes Verbraucherkreditrecht—Ein Vorbild für die weitere europäische Angleichung des Verbrauchervertragsrechts?’ (2009) 1 JuristenZeitung 20, 26 et seq; B Zypries, ‘Der Vorschlag für eine Richtlinie über Verbraucherrechte’ (2009) 2 Zeitschrift für Europäisches Privatrecht 225, 227 et seq. 30 COM (2008) 614 final. For details see Micklitz and Reich, ‘Crónica de una muerte anunciada‘, above (n 29) 471 et seq. 31 Schulte-Nölke, Twigg-Flesner and Ebers (eds), EC Consumer Law Compendium, above (n 7); Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract I, above (n 7); Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract II, above (n 7). 32 For the Commission’s declared belief in maximum harmonisation see the Commission’s Consumer Policy Strategy 2002–2006, COM (2002) 208 final, 12; EU Consumer Policy Strategy 2007–2013: Empowering consumers, enhancing their welfare, effectively protecting them, COM (2007) 99 final, 7. 33 Somma, ‘Some Like it Soft’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 14) 57 et seq; Sefton-Green, ‘The DCFR: A Technical or Political Toolbox?’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 12) 42 et seq; Lurger, Grundfragen, above (n 16) 396 et seq with further references. 34 B Lurger, ‘Das vertragsrechtliche Prinzip der Rücksichtnahme und Fairness zwischen Sozial- und Wirtschaftspolitik und privatrechtlichem Interessenausgleich’ in G Peer and W Faber et al (eds), Jahrbuch Junger Zivilrechtswissenschaftler 2003. Die soziale Dimension des Zivilrechts (Munich, Boorberg, 2004) 9, 11; B Lurger, ‘Die Europäisierung des Vertragsrechts aus vertragstheoretischer und

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justified where needed to correct market failures and to eliminate obstacles to cross-border trade in the internal market.35 Issues of social justice, fundamental rights of redistribution of wealth or money are generally assumed to be restricted to the area of public law and to have no place in private law which is seen as neutral, a-political and non-instrumentalist. The ‘Private Law Society’ (Privatrechtsgesellschaft) is a society separated from the rest, guided by its own set of values (namely party autonomy and its protection) and not subjected to the general restraints and conflicts of public life, politics and the constitution. The theory of economic analysis of law wants to shape legal rules in accordance with the goals of efficient use of economic resources and the maximisation of economic welfare. The promotion of ‘market efficiency’ is considered as one of the underlying principles of the DCFR.36 Economic theorists tend to favour liberal markets as well. Consumer protection regulation is efficient only where it restores the freedom of decision or bargaining power of the consumer and is not outweighed by the additional costs it creates for the consumers. The critics of this theory argue that economic welfare, growth of the gross national product, economic efficiency or similar categories are too narrow as goals for evaluating a legal system. Legal rules that are not as efficient as others might realise other goals which it is worth pursuing. Economic analysis most often does not take into account the role of fundamental or constitutional rights and values in the area of private law and contract law in particular.

B

Market-functional Approach of EU Institutions

The EC/EU fundamental freedoms and partly also the EC/EU directives led to a process of functional orientation of (national) private law towards the internal market goal: private law is checked against the standard of optimal or smooth functioning of the internal market. The market-functional approach to private law is mainly followed by the Commission and the EU legislator.37 Liberal, ordo-liberal and economic analysis concepts fit very well into this approach and are frequently used to support this position. With respect to the need to protect weaker market participants, all these views share the strong emphasis on information rights and duties and are rather hesitant to allow other remedies in favour of weaker parties that imply a stronger restriction of the freedom of contract. The EU’s marketfunctionalism represents only a very narrow aspect of possible policies that could be taken into account in a general materialisation or policy orientation of contract law. This kind of narrow one-aspect instrumentalisation of contract law is

verfassungsrechtlicher Perspektive’ in H Kopetz, J Marko and K Poier (eds), Soziokultureller Wandel im Verfassungsstaat (Wien, Köln, Graz, 2004) 305, 307. 35 Von Bar, Clive, Schulte-Nölke et al (eds), Draft Common Frame of Reference (DCFR), Outline Edition, above (n 9) 62 et seq. 36 ibid, 96 et seq. 37 Schmid, ‘The Instrumentalist Conception of the Acquis Communautaire’, above (n 13) 211 et seq; Lurger, ‘The Common Frame of Reference’, above (n 1) 181 et seq; Micklitz, ‘Europäisches Regulierungsprivatrecht’, above (n 10) 254, 256 et seq.

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justifiably criticised by a number of authors38 because of its disintegrative and impoverishing effects on national contract law systems.39 C

Political Stakes in Contract Law and the Principle of Regard and Fairness

It has been amply explained in the literature that the illusion of academic neutrality is an inappropriate concept for European private law as are the ‘Private Law Society’, or the narrow goals of market functionalism or economic efficiency.40 As the many voices in contemporary private law literature point out, private law is political; it raises questions of social justice and the distribution of welfare, both material and immaterial, in our society; it shapes and regulates the behaviour of market participants, determines what they will win or lose by their particular market activities. Private law, in particular the law of contract, is characterised by the balancing between the principle of freedom of contract and the ‘principle of regard and fairness’.41 These two principles are in partial conflict with each other; they are of the same rank, neither one can be considered superior to the other.42 How far should we go in protecting ‘weaker’ parties and in demanding regard and fairness of the other side? When is the pursuit and promotion of a party’s own interests still legitimate and when is it to be considered unfair and inconsiderate? Does the fairness principle require the parties to take into account the interests of 38 Schmid, ‘The Instrumentalist Conception of the Acquis Communautaire’, above (n 13) 211 et seq with further references. 39 The same critique applies to economic analysis of law, which is equally narrowly oriented only towards the goal of economic efficiency of the legal system. 40 Study Group on Social Justice in European Private Law, ‘Social Justice in European Contract Law: A Manifesto’ (2004) 10 European Law Journal 653 et seq; Lurger, ‘The Future of European Contract Law‘, above (n 13) 442, 447 et seq; Schmid, ‘The Instrumentalist Conception of the Acquis Communautaire’, above (n 13) 226; MW Hesselink, ‘The Politics of a European Civil Code’ (2004) 10 European Law Journal 675 et seq; O Lando, ‘The Structure and the Legal Values of the Common Frame of Reference (CFR)’ (2007) 3 European Review of Contract Law 245, 251; Lando, ‘Liberal, Social and “Ethical” Justice’, above (n 29) 817, 822; R Sefton-Green, ‘Social Justice and European Identity in European Contract Law’ (2006) 2 European Review of Contract Law 275, 278; Sefton-Green, ‘The DCFR: A Technical or Political Toolbox?’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 12) 39, 43; H Collins, ‘The European Economic Constitution and the Constitutional Dimension of Private Law’ (2009) 5 European Review of Contract Law 71, 82 et seq; Micklitz, above (n 15, The Visible Hand of European Regulatory Private Law, EUI Working Paper LAW No 2008/14) 8, 14; Eidenmüller et al (eds), ‘Der Gemeinsame Referenzrahmen’, above (n 17) 529, 534; all with references to many others. 41 Lurger, Grundfagen, above (n 16) 376 et seq; Lurger, ‘Das vertragsrechtliche Prinzip der Rücksichtnahme und Fairness’ in Peer and Faber et al (eds), Jahrbuch Junger Zivilrechtswissenschaftler 2003, above (n 34) 9, 18; B Lurger, ‘The Social Side of Contract Law and the New Principle of Regard and Fairness’ in A Hartkamp and M Hesselink et al (eds), Towards a European Civil Code 3rd edn (The Hague, Kluwer, 2004) 273, 286; B Lurger, ‘Die Europäisierung des Vertragsrechts aus vertragstheoretischer und verfassungsrechtlicher Perspektive’ in H Kopetz, J Marko and K Poier (eds), Soziokultureller Wandel im Verfassungsstaat (Wien, Köln, Graz, 2004) 305, 315. 42 Mandatory protective provisions, such as information duties, can succeed in restoring the full substantive freedom of contract of the weaker party and thereby render any further intervention into the contractual stipulations unnecessary. Additionally, the exercise of regard and fairness can also be in the interest of, and thus intended by, the entrepreneur, who wants to win new and keep old customers. If this is not the case (no restoration of contractual freedom, no self-interest of the business to comply with fairness standards) mandatory protective provisions must intervene directly in order to compensate the weaker party’s restricted freedom at the expense of the freedom of the entrepreneur. It is only in this latter situation that a direct conflict between the two principles arises.

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third persons or public interests affected by their decisions (for instance environmental protection, protection of workers)? The answers to these questions are of great import, not only for the proper functioning of our markets, which are to a great extent driven by individualistic choices of free market actors, but for the shaping of large fields of social life. What conditions can customers expect in their professional or everyday consumer markets? From which dangers are they protected and from which not? Which of their interests and choices will be supported by the law?43 Unfortunately, these core issues of national and European contract law are not openly discussed by the DCFR, the EU legislator, the Commission or any other actors in the [D]CFR-project. There is no consensus among the Member States on the answers to these questions. Some of them tend to more social or protective (for instance Nordic countries, Austria); others to more liberal approaches (for instance Great Britain, Ireland), most of them having long traditions in their respective market policies.

D Fundamental Rights and Constitutionalisation of European Markets and Society Fundamental rights and the constitutions are highly relevant for and shape private law legislation which, in turn, influences and shapes the behaviour of market participants.44 This insight goes hand in hand with the idea that consumers should not only be regarded as demand factors stimulating our national and cross-border markets, but as citizens, subjects of fundamental rights of different kinds.45 In the European context, no comprehensive ‘constitution’ yet exists. Even though the ratification of the Lisbon Treaty will provide us with an EU catalogue of fundamental rights, other constitutional rules will have to be inferred from other parts of the treaties or from secondary legislation. It is justified to argue that the process of constitutionalisation of European markets and market law is partly shaped or supplemented by European private law provisions themselves. They can be seen as an articulation of the economic or social constitution of the EU.46 The interplay and partial conflict between the two guiding principles of party autonomy and of regard and fairness in the area of contract and market law is—on the level of constitutional law—mirrored in the relationship between fundamental freedom rights (freedom of entrepreneurial activities, free movement of goods, 43 H Collins, The Law of Contract 3rd edn (London, Butterworths, 1997) 9, 22, 101 et seq; H Collins, ‘Social Markets and the Law of Contract’ in WW Miller (ed), Socialism and the Law. Archiv für Rechts- und Sozialphilosophie-supplement 49 (Franz Seiner, Stuttgart, 1992) 85 et seq. 44 C Mak, ‘The Constitutional Momentum of European Contract Law’ (2009) 4 European Review of Private Law 513 et seq. 45 MW Hesselink, ‘European Contract Law: A Matter of Consumer Protection, Citizenship, or Justice?’ (2007) 3 European Review of Private Law 323, 328 et seq. 46 H Collins, ‘The European Economic Constitution and the Constitutional Dimension of Private Law’ (2009) 5 European Review of Contract Law 71, 91 et seq; B Lurger, ‘DCFR, CFR, Common Core etc: Wege oder Irrwege zu einem Europäischen Privatrecht?’ in A Fischer-Lescano, F Rödl and CU Schmid (eds), Europäische Gesellschaftsverfassung—Zur Konstitutionalisierung sozialer Demokratie in Europa (Baden-Baden, Nomos, 2009) 55 et seq.

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protection of property and the like) and fundamental equality and social rights (right to equality or equal treatment/protection, state support for citizens in need, social security, consumer protection and the like). Thus, the above-mentioned central question of a more liberal individualistic orientation of market law or a more social altruistic orientation must be seen as a question that has to be answered against the background and within the borderlines that are provided by the relevant fundamental freedom, equality and social rights of the constitution.

E

Restructuring of Private Law

The old ‘pandectistic’ system divides ‘civil law’ (‘Bürgerliches Recht’) into five areas: general part, law of obligations, property law, family law and succession. It was developed by German doctrine and is used by the German Civil Code and other legal systems influenced by German doctrine; it can also be found in the structure of the DCFR. Its rules cover almost all issues of the first three areas of law, leaving apart only family law and succession. Grundmann is right in diagnosing that the pandectistic structure of private law no longer corresponds to the needs of modern private law and contemporary markets.47 Family law and succession law have little contact with markets and the economy. Non-contractual obligations (like, for instance, torts) only partly have a closer link to market activities and behaviour, namely when they somehow relate to contracts or market behaviour. At the same time, many areas of private law which are highly relevant for markets and market transactions, like consumer protection, antitrust law, unfair commercial practices, financial services and markets, tenancy law, labour law, corporations and company law, are not included in the traditional civil law codifications. Together with the law of contracts, these areas of private law will be called ‘market law’ for the purposes of this chapter. Therefore, a modern contemporary national or European private law should avoid the separation between classical contract law in civil codes and protection of weaker parties in particular contracts with consumers, customers, employees, tenants and others. The protection of weaker parties is an integral part of contract law, but also of antitrust law, unfair trade practices law, civil procedure, administrative law and constitutional law. As far as private law is concerned, the old categories must be revised. All areas of private law that fulfil an important constitutive (enabling) or regulatory function for the markets should be discussed as one system of ‘market law’ (see above).48 The same combination of values and guiding principles can be observed in all those areas of market law. The totality of rules of market law and their underlying values form the basic structure of the market order.

47 Grundmann, ‘Grand European Code Napoléon or Concise Uniform Contract Law?’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 16) 19, 30 et seq; S Grundmann, ‘The Structure of the DCFR—Which Approach for Today’s Contract Law?’ (2008) 3 European Review of Contract Law 225 et seq. 48 Consumer protection, antitrust law, unfair commercial practices, financial services and markets, tenancy law, labour law, corporations and company law.

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The DCFR approach of singling out allegedly ‘central’ areas of market law, like contract law, security rights in movables and trusts, and isolating them from the rest of market law, while combining them with less market relevant areas of private law, like tort, unjust enrichment and benevolent intervention, does not seem to be optimal. If the EU wants to reform, improve or render more coherent the dispersed rules of European private law or even only of consumer protection law, it should have a look at the totality of European market law rules, it should take into account the strong interrelations between the different areas of market law and it should discuss their basic common values and orientation (more or less liberal or social) before moving to the details of new concepts and amendments.

IV

NEW INSIGHTS—THE GLOBAL ECONOMIC CRISIS AND BEYOND

In summary, one can say that the DCFR follows old tracks and fails to take up the ideas and characteristics of modern private law systems and contemporary legal theory. Its content is heavily influenced by the over one-hundred-year old German pandectistic school and the liberal laissez-faire and ‘private law society’ concepts of that time, on the one hand; and on the other, it mainly copies the texts of the EC/EU consumer protection directives without any comprehensive analysis or improvement of their rules. The political choices underlying the DCFR rules are not openly discussed, but hidden under the authors’ pretence of a technical, academic, non-political character of the texts. The structure of the DCFR—derived from the traditional division in general part, obligations, property, family, succession, of German origin as well—cannot cope with the needs of highly differentiated contemporary markets, because important relations to other fields of private law (antitrust, unfair competition law), even to parts of contract law (long term and network contacts, contracts to satisfy basic needs of consumers/citizens) are completely neglected. The recent directives, proposals and communications of the EU legislator and the Commission show that the EU institutions presently share an approach to European private law which is similar to that of the authors of the DCFR: a neo-liberal, party autonomy oriented approach which wants to reduce those market regulations—such as, for instance, consumer protection rules—which realise goals of social justice rather than goals of market efficiency. The DCFR’s general tendency of adopting and supporting rather old or oldfashioned legal theories, rules and structures as well as the Commission’s neoliberal market orientation, could be observed already before the advent of the global economic crisis in the second half of 2008. Both approaches have not been changed or corrected in any way until this day. The following deliberations show that this rather negative evaluation of the DCFR’s and EU institutions’ backward orientation49 must be even reinforced in the light of the insights gained and the lessons learned in the wake of the global economic crisis.

49 Micklitz, ‘(Selbst-)Reflektionen’, above (n 15) 2, 12, made the point that the whole European private law codification is backwards oriented.

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The recent dramatic market developments seem to teach that additional legal concepts and instruments of market regulation and consumer protection must be introduced to tame the dangers of unrestricted party autonomy and liberal markets. Of course, some markets are more in need of appropriate restrictions and regulations (financial markets) than others. The dangers of under-regulated financial markets are greater than previously anticipated by most experts and the general public. The counterweights to party autonomy and unrestricted laissez faire markets, namely the principle of regard and fairness in contract law, the goals of social justice and solidarity in our societies and in our markets and the protection of fundamental rights in private law, have become rehabilitated. Even liberals have to accept now that these counterweights are not illusions of leftist theories or leftist political orientations that, if realised, would cause harm to the functioning of our markets and the growth of our economy and welfare. The opposite is the case. Ole Lando, ‘le doyen’ of European contract law, summarises the positive effects of the principle of regard and fairness on our market economies as follows:50 Experience seems to show that societies, which build on a market economy combined with solidarity, fairness and loyalty, fare better than those where the law of the jungle governs. Strong ethical standards establish trust, and trust enhances trade and production. Solidarity and fairness not only further people’s economy but also their feeling of security and peace of mind.

A

General Direction

i

What is the Basis of Economic Growth?

Our economy seems to require steady growth; it is supposed to grow every year. However, the sources and the substance of this growth seem shaky or questionable in some cases. In an already highly developed, rich and productive economy, growth can be generated only by the increase of products and services sold abroad to customers on foreign markets or, on domestic markets, by the sale of additional newly-invented products and services. A well-known marketing technique designed to trigger such additional consumption is the creation of new needs and desires of consumers which are instantly satisfied by the appropriate products. When trying to generate growth, the market actors in unregulated markets tend to be very creative. Besides this relatively harmless strategy of creating new needs, other forms of increase in turnover and of economic growth seem to have even less substance and are thus sometimes characterised as bubbles. One example is the invention of financial instruments based for instance on all kinds of speculations on future events, on a trade with debts and so forth. As the growth of the economy based on real streams of goods and services gradually reached its ecological and other limits, the financial sector discovered that growth could be easily generated by the creation of financial bubbles—papers, certificates and the trade with 50 Lando, ‘The Structure and the Legal Values of the Common Frame of Reference’, above (n 40) 245, 251.

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them—decoupled from real economic streams. These bubbles finally exploded with the known consequences for the global economy. Other parts of our gross national product or our consumption seem to be anticipations of the future, or rather consumption at the cost of future generations. They are based on debts that have to be repaid in the future, or on the destruction of natural resources and the environment that we will painfully miss in the future. Also, the protection of intellectual property contributes a great deal to the growth of our gross national product. Copyrighted knowledge including software, inventions as the basis of machines or medicine, as well as the name and reputation of companies in the form of trademarks are commercialised. Trademarks create the illusion that certain goods turn us into more interesting individuals with an enhanced attractiveness for others. For the copyright on software in particular, the question has to be posed whether we would not be better off with the alternative concept of free software which considers knowledge to be a common good rather than merchandise. Developing countries certainly would be better off without patent law protecting the products of pharmaceuticals industries, thus raising the prices of vital medicines for their populations. This leads me to the following questions and conclusions. First, economic growth as the growth of the aggregate turnover numbers of a national economy should not be seen as an absolute goal of our societies. The definition and calculation of the achievement or result of an economy should be modified: (a) broadened on the one hand with the addition of further criteria which take into account the production of satisfaction and happiness of the citizens; and (b) restricted on the other hand with respect to those parts of the turnover that involve dangers and costs for present or future citizens. Secondly, not everything that market actors, namely businesses, invent to increase their turnover should find its way to the markets. But which burdens on our future or the commercialisation of which of the above-mentioned fictions, ideas, pretence, or speculations should be restricted? Which of them are really harmful or dangerous? Which contribute to our welfare and the wellbeing of our citizens? Thirdly, unrestricted markets can become dangerous, not only for their weaker market participants, customers and consumers, but for other ‘external’ interests (apart from the interests of the parties to a transaction). They may harm the environment and natural resources. The crash of whole markets or financial institutions may affect the whole economic system and large parts of our population. This so-called ‘erga omnes’ view on interests outside the contractual relationship between the parties should become an integral part of every analysis of contracts and market transactions. Fourthly, this erga omnes view widens up when we take into account that, in most cases, transactions on one market affect the interests of people and countries worldwide. This is an effect of the so-called globalisation of our economies. For example, the raw materials stem from country A in Africa, the goods are produced by workers in country B in Asia, the seller is the German daughter of a US company. Domestic enterprises and communities invest their money worldwide. Financial markets are global, not national (even though the costs for their failure are born by single states). This makes an erga omnes analysis even more complicated. Whose interests are affected by particular market transactions: child labour

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in Bangladesh, environmental damage in Africa and so forth? And when we evaluate certain market transactions and pose the question of their positive or negative effects on our—national or European—welfare or wellbeing of our citizens, should we not rather ask for the positive or negative effects on citizens worldwide? ii New Awareness of the Various Dangers created by a Free Market Economy and of the Importance of Regulation of Markets, State Intervention and the Realisation of Social Justice The global economic crisis has enhanced public awareness of the various dangers created by unrestricted financial and other markets and the public awareness of the nationwide and global effects such lack of necessary market regulation can have. This means that the role of regulation and restriction of party autonomy has to be re-evaluated; it has more and more important tasks than previously thought. This is an issue also for the shaping of European private law which is characterised by the core question of balancing party autonomy against its counter-principles of regard and fairness—solidarity, equality, social justice, fundamental rights—which are regularly the subject of market regulation. The global economic crisis also drew public attention to the question of distribution and redistribution of wealth in our societies. Which distribution can be considered just and desirable? Have some European countries not departed from a just distribution scheme a long time ago without noticing the change?51 A just distribution of wealth among the countries worldwide is, of course, still another even more difficult issue. Private law plays—among other areas of law—an important part in the functioning of markets and thus also in the distribution of wealth among market participants, as the following examples will show. Are the bonus payments to CEOs always justified because they have been stipulated in the employment contract? Why are the employees and small customers of banks and big companies always more heavily affected by the failure of the enterprise than its managers and shareholders? Employees earn less money or lose their jobs; customers lose their savings or investments and pay the taxes used for state subsidies to the banks and big companies. And why do the employees and customers not receive their share in the subsequent success of the bank or big company, whereas the managers and shareholders seem to take all the profits? Will the state subsidies financed by the tax payer be paid back by banks that meanwhile managed to escape the crisis? Why is it that banks and CEOs are not held liable for their wrong investment decisions and advice? An old insight relating to the contribution of wealth could be now seen in a new light: as the experience of many countries worldwide shows, liberal market economies tend to produce a huge gap between the rich and the poor in the population. In recent years, this gap kept growing also in the Member States of the EU.

51 For the distributive effects of state subsidies see below, ‘State and other Measures taken against the Crisis’.

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State and other Measures taken against the Crisis

a State Subsidies Billions of euros have been invested in state subsidies to the huge banks and partly also to big companies (such as the car industry) in the EU Member States and many other countries. This investment of state or the tax payer’s money raises doubts with respect to its social or distributive justice. The state had to borrow the money. In case the subsidies are not repaid by the banks and companies, the state debts will have to be repaid by future generations of tax payers. Assuming that the subsidies were really necessary to avert greater harm from the population, their distributive effects should now be controlled and corrected by state legislation ensuring repayment to and a share in the profits for the state and the employees. In some cases the state even nationalised banks to ensure the reflux of value to the state. Some state subsidies for companies or customers were conditioned on additional positive effects of the subsidised market transactions on the protection of the environment, the income of the employees, or the security of the jobs of the employees. An additional issue of distribution of wealth in relation to the huge state subsidies in the financial and industrial sectors arises. Some economists predict that the enormous state expenditures based on state debts in the course of the economic crisis will necessarily cause a heavy inflation in the long run. This inflation would lead to an expropriation of large parts of the population in countries worldwide. b Income and Bonus Payments to CEOs There will be European, international and/or national restrictions of party autonomy in this field.52 These are restrictions of party autonomy that take into account the interests of the parties involved— incentives for the manager to act in the long-term interest of the company—but also external interests: the destabilising effects on the economy of short-term management decisions of enterprises and distributive justice. c Liability in Tort and Criminal Law In many countries, bank customers and shareholders instituted legal proceedings against managers, supervisory boards and banks. No description of the particular claims based on national law and their success can be given here. d Regulation of Financial Markets A better scheme of regulation of financial markets is presently under discussion at national, European and international levels. One major problem here is the question of competences: financial markets are global markets, but there is no appropriate global institution that could be granted the power to regulate and control them (IMF, World Bank, WTO?).53 The costs of the failure of the financial markets are borne by the nation states, as clearly exemplified by the current economic crisis. The states paying the costs and bearing

52 Commission Recommendation C (2009) 3177 of 30 April 2009 complementing Recommendations 2004/913/EC and 2005/162/EC regarding the regime for the remuneration of directors of listed companies, SEC (2009) 580, 581. 53 The Commission suggests the establishment of EU administrative authorities in the field of state supervision of financial markets: Commission Communication on European financial supervision, COM (2009) 252 final (27 May 2009).

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the risks of failure do not necessarily want to shift their competences of control and regulation to a supranational authority. Apart from competences, it seems to be clear that financial markets should be subjected to much stricter regulation and control to avert the next financial bubble. Financial streams and transactions must be brought closer to real economic streams of goods and services, and be partly made dependent on the existence of such real streams (prohibition of certain types of transactions, and of issuance of certain papers and financial instruments, amendments of valuation provisions and so forth). iv New Light shed on Deficits of Economic Sciences, Economic Analysis of Law and Neo-liberal Concepts of Market Law It has been explained above that the global economic crisis has provided further evidence of the defects of markets which lack sufficient regulation to safeguard other political goals against the dangers of unrestricted exercise of party autonomy. The neo-liberal belief in the overall importance of party autonomy, free competition and its protection only against major disruptions like in antitrust law has thus been shattered. With respect to economic analysis of law, one has to ask whether its notions of economic efficiency and welfare or wealth of an economy will not have to be revised. They are strictly linked to the traditional mathematical formulae of macroeconomic categories like the growth of the gross national product and the like. But does this kind of economic growth really contribute to the welfare, wealth and wellbeing of the population in all cases? It certainly does not: additional, immaterial, factors of welfare and wealth have to be taken into account when evaluating a legal rule or market transaction, like the influence on the environment, on the protection of fundamental rights both within and outside the national economy, the environment of social security, safety or general wellbeing, satisfaction or happiness that is created for customers or citizens.

B i

New Legal Concepts and Instruments The Importance of Trust and Ethical Standards for the Markets

A highly important factor or value in contract law and market transactions is ‘trust’ and ‘confidence’. Unlike other factors, such as contractual freedom, free decisions, information and so forth, ‘trust’ is hardly ever mentioned by the theory of contract law. The amount of information digestible for consumers is very limited, the most important factor for making their contract decisions is normally ‘trust’ in the other party, the business, or trust in particular markets known to the consumer. The introduction, support, control and enforcement of those ethical standards which are mirrored in the customers’ trust can often not be achieved by free markets themselves, through self-regulation or competition mechanisms, but have to be realised by mandatory legal rules adopted by the state: rules that protect fair and regardful behaviour of contracting parties or of competitors. As one of the consequences of the economic crisis, consumers and customers have lost confidence in banks and financial investors, in the stability of markets, in

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their future income and in the top managers and owners of big enterprises. Despite their very doubtful fulfilment of their duties, their wrong decisions, CEOs of big companies receive incomes that are incomprehensible for average citizens. On the other hand, banks and other creditors, too, have lost confidence in financial institutions and in their potential debtors. As we all know, this lack of trust has far-reaching negative consequences for the whole national and global economy. Interdisciplinary research should examine ‘trust’ and ‘confidence’ more closely. How can trust be strengthened or reintroduced if it has been lost? Which (political and) legal instruments are able to create and maintain trust of market participants? How can we make consumers feel safeguarded against unfair and disloyal behaviour of businesses by the legal system? It has been recently suggested that banks that are over-cautious, thus refusing credits to other banks and businesses that are creditworthy, should be found to abuse a dominant position in the sense of antitrust law, and should consequently be forced by law (court, administrative authority) to enter into the required credit contracts.54 Is antitrust law a reasonable instrument to create trust? ii

Reshaping the Role Model of the European Average Consumer

Legal regulation in favour of consumers creates a certain role model for consumers (Verbraucherleitbild) which expresses expectations pertaining to their behaviour. Consumers meeting these expectations will be protected; those who do not, will not be protected. European private law uses the well known, but controversial standard of the ‘average consumer, who is reasonably well informed and reasonably observant and circumspect’. This concept has been justifiably criticised for its failure to protect the most vulnerable consumers, for its disregard of the cultural differences that exist in the Member States and for its obvious effect of lowering the standards of protection in many Member States.55 a Vulnerable Consumers The standard of the ‘informed average consumer’ excludes consumers whose capabilities and behaviour are for whatever reason below average. They may be financially weaker than the average citizen (persons receiving social aid), not well educated, inexperienced, handicapped or the like. What is the justification for excluding precisely those consumers from legal protection who would need it most? A tendency to exclude the problem of protection of vulnerable consumers and of basic needs of consumers, and to deal instead only with problems of ‘luxury consumers’, who can afford to buy additional goods and services, can be observed also in the [D]CFR-project: only 54 Fikentscher, ‘Finanzkrise, Wettbewerb und Regulierung’ 2009 Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil (GRURInt) 635, 642 et seq. 55 Lurger, ‘The Common Frame of Reference’, above (n 1) 177, 193; B Lurger and S Augenhofer, Österreichischen und Europäisches Konsumentenschutzrecht 2nd edn (Wien, Springer, 2008) 43 et seq; T Wilhelmsson, ‘The European Average Consumer—A Legal Fiction?’ in Wilhelmsson, Paunio and Pohjolainen (eds), Private Law and the Many Cultures of Europe, above (n 1) 243 et seq; Micklitz, above (n 15 The Visible Hand of European Regulatory Private Law, EUI Working Paper LAW No 2008/14) 7; H-W Micklitz, ‘Jack is out of the Box—the Efficient Consumer-Shopper’ (2009) 3–4 Tidskrift Utgiven av Juridiska Foreningen i Finland (JFT) 417, 424 et seq; Hesselink, CFR and Social Justice, above (n 29) ch 5.1.

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consumer directives and contracts that are based on the spot exchange models of sales and service contracts are taken into account. By contrast, all long-term contracts which are essential to satisfy basic needs of consumers like credit contracts, tenancy contracts and labour contracts, and are particularly vital to poor and vulnerable consumers, are excluded. The term ‘vulnerable consumer’ is used by the EU institutions for the markets of services of general economic interest (energy, postal services, telecommunication, water, public transport).56 Consumers with low income need to receive special protection when it comes to services which make up our basic living standard, like the above-mentioned services. In future, European private law should also include the particularly weak or vulnerable consumer on its agenda. How can he/she be better protected against the over-indebtedness, loss of supply with basic services, the poverty trap and the like? Article 5(3) of the Unfair Contract Practices Directive 200557 only allows account to be taken of the particular vulnerability of consumers, if a commercial practice is addressed ‘only’ to ‘a clearly identifiable group of consumers’ who show this vulnerability. If the practice also influences the behaviour of other consumers (without this particular vulnerability) the usual standard of the well informed average consumer must be used for all. b National or European Consumers There exist regional and national differences in consumer expectations and behaviour: businesses in one national market may behave differently from those in other national markets. What can be expected of consumers in some countries, is unthinkable in others. Even multinational firms adapt their products to national/regional differences in taste or other preferences in order to enhance their profits. Why shall the consumer be ‘Europeanised’ by European private law?58 Is this possible at all? Real consumers will not automatically behave in accordance with the uniform European legal model: this results in some consumers being over-protected and others under-protected. The same seems to apply to old and young consumers. There has to be a differentiation between average, above average and vulnerable consumers, between consumers in different national markets, and between old and young consumers. Old consumers tend to be more credulous, more vulnerable to aggressive trade practices and less able to understand information given to them. They must be seen as a separate category that has to be afforded more protection than others. The picture drawn of an average consumer by national or European legal systems is also influenced by the vision of markets and of society that underlies the legal rules. Thus, the consumer role model of a particular legal system can be seen as a mirror of this society’s vision of its market and social system. The consumer, seen as a citizen, should be reduced to a demand factor whose only interest and function it

56 H-W Micklitz, ‘Universal Services: Nucleus for a Social European Private Law’ EUI Working Paper LAW No 2009/12, 9 et seq; P Rott, ‘A New Social Contract Law for Public Services?—Consequences from Regulation of Services of General Economic Interest in the EC’ (2005) 3 European Review of Contract Law 323, 330 et seq; P Rott, ‘Consumers and Services of General Interest: is EC Consumer Law the Future?’ (2007) 30 Journal of Consumer Policy 49. 57 Unfair Commercial Practices Directive, above (n 22). 58 Wilhelmsson, ‘The European Average Consumer’ in Wilhelmsson, Paunio and Pohjolainen (eds), Private Law and the Many Cultures of Europe, above (n 1) 243 et seq.

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is to consume a maximum number of goods of reasonable quality at a low price, or of high quality at a reasonable price. However, the welfare of consumers cannot be reduced merely to their financial interests. A new consumer and market model should be developed in which also the immaterial interests of consumers are taken into account. Consumers feel more or less safe in their market environment, they are confident or anxious consumers, satisfied with their living conditions or not. A maximum of consumption increases the companies’ profits and causes the growth of the national economy, but it does not necessarily mean an increase in the consumers’ welfare or wellbeing. Also, less consumption can mean more consumer wealth or welfare, if understood in its wider sense—encompassing also immaterial interests of consumers such as the protection of human rights of the consumers as well as the people involved in the production of goods, the safeguarding of the environment, the general wellbeing of a consumer and her/his conviction to lead a meaningful life or/and to live in a reasonably just society. Thus, consumer protection could be eventually altered in a way that helps to guard against the deficits of the contemporary economic system. Market systems should not only guard for the freedom of competition, for party autonomy and for the maximum growth of the gross national product, but for the fairness and justice of their outcomes, in terms of wealth distribution within a market and also in terms of justice and fairness of external effects on foreign countries. iii Integration of External Interests, ‘Erga Omnes’ View and the Product Safety Model It is suggested here that the integration of so-called ‘external interests’ in the legal analysis of business-to-consumer transactions might help to reconstruct the trust of market participants on a long-term basis (see above, III.B.i ‘The Importance of Trust and Ethical Standards for the Markets’). The term ‘external interests’ includes all interests which are not the immediate personal interests of the parties to a contract, such as: — Public interest in the protection of the environment. — Interest in decent working conditions for employees involved in the production of goods and services. — Interest in a reasonable income balance worker-manager-shareholder. — Interest in the protection of human rights of persons involved in the production chain or affected by production (other than the business and the consumer). One could also say that we adopt an ‘erga omnes’ view on a consumer contract: Which interests apart from the interests of the contract parties are affected by the contract? This view can achieve results on two sides: companies are freed from the one-dimensional character of their activities for which they are justifiably criticised, especially in the wake of the events that led to the global economic crisis. They are expected to care not only for the maximum increase of the profits of their shareholders and top managers at the expense of all other interests involved, but—to a certain degree—to care also for the interests of their employees, their customers, the natural resources they use and the conditions of production in

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foreign countries. Consumers, on the other hand, can develop further what was already initialised by the introduction of biological and fair trade products: they will be enabled to gain more information on the external effects of the products they buy and can thus make their decisions on the basis of a larger spectrum of arguments. This will increase their contractual freedom, if understood in a substantive sense. A crucial question of this approach is, which legal instruments should be used to bring these external interests into play? The spectrum of instruments reaches from voluntary measures taken by the businesses themselves to establish a competitive advantage on the market, to mandatory state regulation that forces businesses to comply with certain standards of protection of external interests. Self-regulation of a branch can consist of codes of conduct or certificates which inform consumers about the effects of the product on the various external interests. These systems of self-regulation should be controlled by independent institutions like consumer organisations or administrative authorities of the state. A duty to give standardised information on the label of the product about its effects on external interests could be imposed by mandatory law. This information duty would not create the duty to comply with a certain standard of protection of external interests, it would only create transparency. Under a mere information model, a company that causes certain damage to the environment in the chain of its production or uses child labour in developing countries would only be forced to declare this. The measure most intrusive on the freedom to contract is the ban of products from the market. It is useful to think of the product safety regulation as a standard of comparison, taken from the realm of ‘internal’—which means party—interests: a product must meet certain standards of safety which protect the customer’s health and any dangers to the health of the customer must be excluded. All indirect or uncertain effects the product might have on the consumers’ health as well as all effects on its financial interests and the freedom of decision only lead to labelling and information duties. This means that a distinction has to be made between vital qualities of a product, which must be there at any rate, and other qualities which are important for the decision of the consumer and entail an information duty. They could be called ‘essential qualities’ and ‘transparency qualities’. In the US, the Democrats proposed the establishment of a Financial Product Safety Commission and to adopt the surrounding regulations modelled on the example of product safety regulation. This, in my view, is a very good idea. Or, quoting Barack Obama and Elisabeth Warren:59 ‘Existing product safety regulations ensure that there are no toasters on the market with a one-in-five chance of exploding. But it has been very easy overall in the US to buy mortgages or financial papers based on mortgages with a one-in-five foreclosure rate, and the broker did not even have to tell the consumer the odds. Financial products should not explode in the consumers’ faces financially.’ Financial products that are highly dangerous for consumers should not be offered on the market at all. All minor dangers will have to be made completely transparent. State authorities will have to be set up to control compliance with these safety regulations.

59

Harvard Law Today (April 2009) 5.

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The same analysis could apply, in principle, to all products and services, also with respect to their external interest effects. Major violations of external interests like heavy environmental damage or the violation of human rights of farmers or workers abroad should bring about a ban of the products; they are not externally safe enough to be sold on our markets. Other effects which are less intense should only lead to information duties which, of course, should also be intensely controlled. The discussion that decides which external effects should fall into the category of ‘essential qualities’, and which only in the category of ‘transparency qualities’ could be a very exciting one. Another issue in this context is the legal sanctions that should follow from a violation of mandatory legal information duties or a legal prohibition to sell certain products or to provide certain services. The alternatives cover the total or partial voidness or avoidability of the contract, to claims for damages (what is the damage?), claims based on unfair competition law, administrative fines and the like.60 It must be noted that the concept of external interests extends the analysis not only to interests of (third) persons or public interests within a country or the internal market of the EU, but to the interests of all persons and countries affected by the offer and production of a particular product or service. In this respect, the concept is close to the already existing voluntary certification of ‘fair trade’ products: child labour, and other human rights violations, environmental damage and the like in the developing countries of production are guarded against in ‘fair trade’ production chains. The concept, thus, takes into account that most companies produce, assemble and sell worldwide in a globalised economy, a fact which is most often ignored by traditional private law doctrine. The erga omnes view could be seen also as a concept that extends contemporary contract law analysis, as described above, as a balancing between the principles of freedom of contract and of regard and fairness, to the whole network of relations that surround a single consumer contract. The principle of regard and fairness is not only relevant for the protection of the interests of the weaker party of a contract, but for third-party interests affected: the protection of the environment, of the employees of the seller and so forth. How fair is the contract to these third-party interests? With respect to capital investment one could ask: what stands behind the product I bought? Which loans, which debtors, which intermediaries, which banks and insurances, which employees? Which are the effects on the economy as a whole? This type of transparency might strengthen the fair and ethical players on the market and it may provide an incentive to make products simpler and more easily intelligible to consumers. iv

Long-term Contracts for Satisfaction of Basic Needs

Authors like Nogler and Reifner61 have convincingly pointed out that a new category of contracts which share common traits should be established and become

60 T Wilhelmsson, ‘Consumer Law and the Environment: From Consumer to Citizen, (1998) 21 Journal of Consumer Policy 45 et seq. 61 L Nogler, ‘Why do Labour Lawyers ignore the question of Social Justice in European Contract Law?’ (2008) 14 European Law Journal 483, 498; U Reifner, ‘Comment to Luca Nogler: Social

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the object of closer investigation. They could be called ‘long-term social contracts’, ‘basic long-term contracts’ or ‘long-term contracts for the satisfaction of basic needs’ (of consumers or citizens). This category shall comprise contracts like consumer credits, landlord–tenant contracts, labour contracts and probably also contracts for accommodation and nursing in old peoples’ homes. The common characteristics of these contracts are: — The satisfaction of basic needs of consumers or citizens (or the provision of basic living conditions through those contracts). — A certain weaker position of the consumer vis-à-vis a stronger contract party. — Their long-term character. — The element of rent: to rent a house, to rent money, to rent one’s human capital (labour). In my view, the first three characteristics should be considered the most important; the last one should rather be dropped. Following this idea, other long-term contracts concerning basic living conditions could be included, especially contracts for services of general (economic) interest, like water and energy supply, basic telecommunication and postal services. Even access to a private bank account and long-term capital investments which are made by citizens to satisfy basic living conditions like old-age provision could belong to this category.62 The same applies to contracts concluded in the areas of healthcare, education and social security.63 In all these special long-term contracts consumers are particularly vulnerable for two reasons: (1) they are in a weak market position and (2) the contracts concern basic needs of everyday life: housing, employment and income, nursing and medical care, electricity, water and telephone. Where these contractual relationships fail or are defective, the damage for the respective consumers/citizens is enormous. It is remarkable that the EU has made little attempt so far to protect consumers in these particularly important contractual relationships, whereas much more effort has been undertaken to protect consumers in ordinary sales and services contracts which do not expose consumers to such fundamental risks. The DCFR avoided this type of contract altogether. A remarkable exception is the area of services of general (economic) interest or universal services (energy, water, public transport, telecommunication, postal services), where the EC/EU introduced the notion of ‘vulnerable’ consumers (see above, III.B.ii ‘Reshaping the Role Model of the European Average Consumer’) and the new principles of accessiblity, affordability, continuity and equal treatment. This exception led Micklitz to speculate that this new concept of a vulnerable consumercitizen might take over the lead in the area of European consumer protection law while the old consumer-shopper full harmonisation model of the DCFR might die

Contract Law through Labour Law?’ (2008) 14 European Law Journal 500 et seq; L Nogler and U Reifner, ‘Lifetime Contracts—Rediscovering the Social Dimension of the Sales Contract Model’: eusoco.com/wp-content/uploads/-2009/12/-reifner-noglerfswilhelmsson. 62 63

Micklitz, ‘Universal Services’, above (n 56) 27. Micklitz, ibid, 26.

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out in the long run.64 This would, of course, also imply changes to the ‘European social model’.65 Therefore, future research efforts in the area of European private law should be invested in the various questions relating to these basic long-term contracts. Should there be European legal measures to improve the protection of citizens in these contracts, or can adequate or better protection be ensured by the national law of the Member States? What is the standard of protection desirable in this area? To what extent do the national rules of the Member States differ in this area? Can common principles be detected or is there a huge gap between liberal and socially oriented Member States? How can the field of basic long-term contracts and its underlying principles be linked to that of consumer spot exchange contracts that is more strongly influenced by EU law? What are the effects of the integration of this type of contract into the doctrine of European consumer law (role model of consumer, European social model)? What effects does the EC/EU regulatory private law existing in some areas—universal services—have on general contract law doctrine, legal methodology and legal theory? v

Improvement of the Position of Consumers investing their Capital

There is no coherent body of consumer financial services law in EU law; neither does the DCFR deal with contracts concerning financial services. The existing directives in the field are the Consumer Credit Directive 2008,66 Services Directive 2006,67 Payment Services Directive 2007,68 Markets in Financial Instruments Directive (MiFID) 200469 and others. Nevertheless, some issues crucial for consumers with respect to credit contracts are still not dealt with in the EC/EU Consumer Credit Directive, but at national level: such as mortgage credits, usury, overpriced credits, default interests, or consumer insolvency. Other directives follow this example and are extremely selective with respect to consumer protection concerns. It is not only the global financial crisis that has shown that financial investments of consumers and professionals are extremely important for the functioning of our economies. Private investments and consumer financial service contracts also become more important to the extent that many states withdraw from or privatise parts of the social security system, as for instance health insurance or old age provision, as many European Member States have done. Financial services markets are, therefore, an important field for legal innovations and new legal provisions 64 Micklitz, ‘Jack is out of the Box’, above (n 55) 417, 433 et seq; Micklitz, ‘Universal Services’, above (n 56) 27 et seq. 65 H-W Micklitz, ‘Judicial Activism of the European Court of Justice and the Development of the European Social Model in Anti-Discrimination and Consumer Law’ EUI Working Paper LAW No 2009/19, 20 et seq. 66 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC [2008] OJ L133/66. 67 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market [2006] OJ L376/36. 68 Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market [2007] OJ L319/1. 69 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments [2004] OJ L145/1.

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ensuring the stability and reliability of the markets and improving the protection of consumer interests. A first important point is that consumers will, of course, indirectly profit from a much stricter regulation of financial markets that will hopefully be put into place by national or international legislators (see above, III.A.iii ‘State and other Measures taken against the Crisis’). A second point is that the position of consumers vis-à-vis banks, intermediaries, issuers of financial papers, boards and CEOs of corporations in which they have invested, must be improved by amending the rules of private law, especially tort law, contract law and the law of evidence and civil procedure (collective enforcement of consumer claims). All further details must be left to specialised publications on this issue.

V

CONCLUSIONS

The neo-liberal stance of the EU is anachronistic and should be changed into a legislative policy which better integrates social values and the human rights of EU citizens. Maximum harmonisation in consumer law should be stopped and, where necessary, revised. If the EU wishes to improve consumer protection and the coherence of European contract law, the [D]CFR-project is not the fulfilment of this wish, but will have to be corrected and expanded in many respects (old-fashioned concepts and values, narrow scope, no serious analysis of the issues of protection of weaker parties). A few suggestions for the future development and improvement of European consumer law are listed below. The basic lessons of the global economic crisis are: ‘Economic growth’—as commonly measured at the moment—should not be the only goal of national or global economies. The notion and the substance of economic growth will have to be put under much closer scrutiny in the future, in the sector of financial transactions, but also in other respects (intellectual property, credits, public spending, wellbeing and happiness of citizens). Every single market transaction has effects that reach far beyond the simple party-to-party relationship: on the distribution of wealth, on workers and the environment, on domestic, national or European markets and society, but also on the environment, workers and human rights worldwide depending on the chain of production involved. The distributive effects of state subsidies as well as the distributive effects of the rules of private law are important issues when it comes to the evaluation of the appropriateness of legal rules affecting the markets. Distributive and social justice is an important aspect in market law (relationship consumer-corporation-manager-shareholders-employees with respect to profits, losses and bankruptcy of corporations, liability in tort and criminal law). In the future, financial markets will have to be subject to much stricter regulation and control. The translation of these more general lessons into the language of consumer protection law produces the following results: party autonomy, free competition and their protection by the legal order are not absolute goals. They are important principles of market law that have to be balanced against other important principles like the principle of regard and fairness for the interest of the other party to a transaction, or for external interests (third persons, environment, public interests). This latter principle highlights the fact that trust and ethical standards

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are highly important factors for our markets. The importance of trust and confidence in contractual relations should be the object of future interdisciplinary research. The role model of the European informed average consumer should be superseded by a more differentiated consumer model which allows the special characteristics of old and young citizens, of particularly ‘vulnerable’ and less ‘vulnerable’ consumers and the regional and national differences in expectations and traditions to be taken into account. Thus, European consumer law would be rendered capable of protecting also the interests of ‘below average consumers’. Additionally consumer contract law should be broadened to comprise the ‘erga omnes’ view on all external interests that are affected by a certain consumer contract, such as, for instance, the public interests in the protection of the environment, in decent working conditions of employees, in a reasonable income balance worker-manager-shareholder and in the protection of human rights of persons involved in the production chain or affected by production. The product safety regulation model should be extended to financial services and finally also to the external interest dangers and costs of all consumer contracts. The category of long-term contracts for the satisfaction of basic needs of citizens—consumer credit, bank account, labour, tenancy, old-age provision, services of general economic interest, education, health care, social security—must be included in the analysis of general contract law and consumer protection law (at the national, European and international levels). At the EU level, a number of further measures in the areas of tort law, contract law, the law of evidence and civil procedure have to be taken to improve the position of consumers in financial markets.

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7 The Economics of Private Law Harmonised Law-making: Mechanisms, Modes and Standards* FERNANDO GOMEZ AND JUAN-JOSÉ GANUZA

I

INTRODUCTION

H

ARMONISATION OF PRIVATE law in Europe is almost a catch-all expression, given the variety of phenomena and processes that can be patched up inside it. Most of its components are crucial for private law academics, in Europe but also elsewhere, for comparative lawyers, and also for those individuals and groups that may be affected by the implementation of its potential outcomes. It has already been extensively discussed and analysed from a whole range of disciplines (private law, comparative law, European Union law) and angles (EU constitutional framework, political impact, to a smaller extent economic welfare). It has also been subject to considerable attention from a law and economics perspective.1 In this chapter we do not purport to offer a comprehensive economic analysis of such a complex phenomenon, not even to present a comprehensive survey of the economic dimensions or factors that play an important role in evaluating harmonisation of European private law. We are essentially interested in * We are grateful to the Spanish Ministry of Innovation and Science for financial support and to Carlos Alberto Ruiz for excellent research assistantship. 1 See: G Wagner, ‘The Economics of Harmonization: The Case of Contract Law’ (2002) 39 Common Market Law Reports 995; M Faure, ‘How Law and Economics may contribute to the Harmonization of Tort Law in Europe’ in R Zimmermann (ed), Grundstrukturen des Europäischen Deliktsrechts (Baden-Baden, Nomos Verlagsgesellschaft, 2003) 31; H Wagner, ‘Economic Analysis of Cross-Border Legal Uncertainty—The Example of the European Union’ in J Smits (ed), The Need for a European Contract Law: Empirical and Legal Perspectives (Groningen, Europa Law Publishing, 2005) 27; R van den Bergh and L Visscher, ‘The Principles of European Tort Law: The Right Path to Harmonization?’ (2006) 14 European Review of Private Law 511; N Garoupa and A Ogus, ‘A Strategic Interpretation of Legal Transplants’ (2006) 35 Journal of Legal Studies 339; W Kerber and S Grundmann, ‘An Optional European Contract Law Code: Advantages and Disadvantages’ (2006) 21 European Journal of Law and Economics 215; H Wagner, ‘Costs of Legal Uncertainty: Is Harmonization of Law a Good Solution?’ (University of Hagen, Department of Economics Working Paper, 2007); F Gomez, ‘The Harmonization of Contract Law through European Rules: A Law and Economics Perspective’ (2008) 4(2) European Review of Contract Law 89; F Chirico, ‘The Function of European Contract Law: An Economic Analysis’ (Tilburg Institute of Law and Economics Working Paper, 2008); W van Boom, ‘Harmonizing Tort Law: A Comparative Tort Law and Economic Analysis’ (Rotterdam Institute of Private Law Working Paper Series, 2008) available at: www.ssrn.com; and P Parisi and V Fon, The Economics of Lawmaking (Oxford, Oxford University Press, 2009) 51.

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Fernando Gomez and Juan-José Ganuza

shedding some light on how the harmonising dimension of European private law relates to the economic basis and the economic effects of law-making. In this law making dimension of harmonisation, an important one, but not the solely decisive, we will try to argue that there are some issues that deserve particular attention to fully grasp its likely consequences. First, the way in which the various mechanisms underlying the processes conducive to similarity of content in legal rules emerge in the current processes of harmonisation of private law in Europe, and how they may lead to different evaluations. We are also concerned about the codification or recodification component in the harmonisation exercise, which seems crucial for an evaluation of the likely long-run effects of the outcomes from harmonisation. Finally, there is the important matter of how to build harmonised behavioural standards—after all, many, if not most rules of private law set standards for behaviour by individuals and firms. Surprisingly, this issue has attracted relatively little attention both in the legal and in the economic literature. Thus, even if one takes for granted that some degree of harmonisation is desirable or, at least, that it has been legitimately decided in the political process that some harmonisation has to take place, the normative choice of the behavioural standards is by no means self-evident, given that one has to choose between many different national pre-existing standards, and sometimes, even also a minimally harmonised European one contained in an existing directive. The chapter will be organised as follows: in section II, we will examine the different layers and dimensions of harmonisation in the context of European private law, and we will link them with several under-appreciated weaknesses underlying some of the major economic arguments against legal harmonisation processes. In section III, we will examine the codification dimension. Section IV deals with the economic analysis of building harmonised standards of starting from a variety of existing ones, and section V briefly concludes.

II

THE VARIOUS PROCESSES LEADING TO HARMONISED RULES

The tem ‘legal harmonisation’ is not univocal. By legal harmonisation, at least when used in a broad sense, one may refer to many different phenomena and processes, even if all of them share an initial stage of—assumedly, at least—high degree of legal fragmentation, and a final stage of a reduced level of fragmentation, even of strong similarity or identity as far as the content of legal rules goes. We can take as a starting point the existence of different legal systems or jurisdictions that, concerning a given area of the law, show a visible, maybe a large, degree of divergence in terms of their doctrinal content. In the end, the legal systems involved may end up as a result of some process or the effect of some mechanism with the same set of reasonably harmonised legal rules.

A

Legal Harmonisation through Convergence

First, one may encounter a sort of spontaneous and uncoordinated—and not centrally controlled, agreed or fostered—trend towards the adoption of the rules

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that have been successfully applied in a different jurisdiction, or a kind of eclectic mixture of the rules of all countries involved, or a combination of rules introduced by the major, more efficient, more reputed, or simply more audacious jurisdictions. One could use the term spontaneous convergence, or simply convergence, to refer to this unruly process of approximation of legal rules.2 Three main mechanisms, in turn, may be apt in theory3 to drive different countries to independently and non-cooperatively adopt similar substantive legal rules: informational cascades, competition and knowledge transfer. Notice that we are not saying, nor assuming, anything about the costs of the processes themselves, nor about the costs—or benefits, for that matter—that may result from the final harmonization or convergence of substantive legal rules.4 We are also reserving judgement about the relative importance of the mechanisms in fostering convergence in legal rules. i

Rational Herding and Information Cascades5

When facing a choice of legal regime under conditions of limited information about what the best solution would be (typically, for new contingencies or circumstances requiring brand new legal response: new technologies, changing social attitudes, unforeseen threats) legal systems lacking a strong determination to adopt one or the other of the potentially available legal options, or lacking substantial private information about costs and benefits arising from the available options, may simply—and rationally, given they do not have better information on their own, and do not have powerful prior disposition in favour or against any of the choices—follow upon the steps of other countries who have earlier adopted a legal rule on the matter. Countries imitate one another in finding legal solutions to new problems. The economic models of herd behaviour and informational cascades show that the equilibrium in which, in the end, all players—here, the legal systems—adopt the same action—here, the same legal rule—following the prior 2 Part of the literature uses the term ‘convergence’ precisely to label these kinds of processes: see, eg, W van Gerven, ‘Harmonization of Private Law: Do We Need It?’ (2004) 41 Common Market Law Reports 505; and Garoupa and Ogus, ‘A Strategic Interpretation of Legal Transplants’, above (n 1). 3 We are agnostic towards the empirical significance of the three different forces that we will describe in the text. We think that there might be examples and illustrations, even important ones, of actual levels of harmonisation produced by such forces, but we are unaware of a general assessment of the importance of the harmonised outcome, or the empirically supported causal contribution of herd behaviour, competition and knowledge of diffusion. 4 See, for an economic examination of such costs, L Ribstein and B Kobayashi, ‘An Economic Analysis of Uniform State Laws’ (1996) 25 Journal of Legal Studies 131; and Garoupa and Ogus, ‘A Strategic Interpretation of Legal Transplants’, above (n 1). Costs may be even endogenous to the harmonisation process, so they may be strategically raised by countries to improve their positions in the harmonisation exercise: see E Carbonara and F Parisi, ‘The Economics of Legal Harmonization’ (2007) 132 Public Choice 367. 5 For (somewhat dated) surveys of the economic literature on herd behaviour and informational cascades, see S Bikhchandani, D Hirshleifer and I Welch, ‘Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades’ (1998) 12 Journal of Economic Perspectives 151 and D Hirshleifer, ‘Information Cascades and Social Conventions’ in P Newman (ed), The New Palgrave Dictionary of Economics and the Law vol II (London, Macmillan, 1998). The founding contributions of this literature are: A Banerjee, ‘A Simple Model of Herd Behavior’ (1992) 107 Quarterly Journal of Economics 797; and S Bikhchandani, D Hirshleifer and I Welch, ‘A Theory of Fads, Fashion, Custom and Social Change as Informational Cascades’ (1992) 100 Journal of Political Economy 992.

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players may well not be optimal, if the initial movers adopting what turns out to be the equilibrium behaviour of all players made a bad choice. In other words, the moral is one, as in the old parable, of the blind leading the blind. Informational cascades can occur not only by legislators in one jurisdiction disregarding their own views and information and mimicking the solutions by earlier legislators in other jurisdictions, but they may also afflict courts, both inside a given jurisdiction and across the borders of a national court system. In fact, some analysts argue that, in the legal context, cascades are particularly likely to afflict courts, and these will also be particularly resilient, when the equilibrium is inefficient, against a positive available change in the equilibrium produced by additional information on the benefits and costs of the legal solutions involved.6 ii

Competition

The orthodox view among economically-minded scholars is that, at least in some areas of the law (corporate law would be the most prominent example) competition among jurisdictions will force them to improve the quality of their legal rules to satisfy the preferences of their ‘consumers’ or ‘buyers’ (companies, in the case of corporate law). In their drive to attract customers, the ‘sellers’ (the jurisdictions) will be under competitive pressure to adopt rules that provide maximum benefits to their prospective customers. Just as in other markets, in the market for legal rules, product quality would in the end be optimal.7 Competition would provide a forceful engine towards finding the legal solution that maximises the satisfaction of legal customers. In addition, provided that the preferences of the median customers are not significantly heterogeneous, the satisfaction-maximising legal response would be essentially similar across jurisdictions. This would lead to a sort of competitively harmonised legal regime: for, given that the efficient solution would be roughly the same for all jurisdictions, with the relevant median preferences being quite similar in different countries, the competitive process would push all jurisdictions to choose the uniquely efficient legal regime. Some influential commentators8 argue that this is likely to be the case in areas that may be called 6 See A Daughety and J Reinganum, ‘Stampede to Judgement: Persuasive Influence and Herding Behavior by Courts’ (1999) 1 American Law and Economics Review 26. 7 Though it is, to some extent, dated, this view of the corporate law market has been (and still is) very influential in the US. See F Easterbrook and D Fishel, ‘The Race to the Bottom Revisited: Reflections on Recent Developments in Delaware’s Corporation Law’ (1982) 76 Northwestern University Law Review 913 and R Romano, ‘Law as a Product: Some Pieces of the Incorporation Puzzle’ (1985) 1 Journal of Law, Economics and Organization 225. Many do not share the idea that such a competitive market exists in corporate law, at least in a recognisable form: see M Kahan and E Kamar, ‘The Myth of State Competition in Corporate Law’ (2002) 55 Stanford Law Review 679; M Roe, ‘Delaware Competition’ (2003) 117 Harvard Law Review 588; O Bar-Gill, M Barzuza, and L Bebchuk, ‘The Market for Corporate Law’ (2006) 162 Journal of Institutional and Theoretical Economics 134; F Gomez and M Saez, ‘Competition, Inefficiencies and Dominance in Corporate Law’ (2006) 162 Journal of Institutional and Theoretical Economics 161; and E O’Hara and L Ribstein, The Law Market (Oxford, Oxford University Press, 2009) ch 6. 8 See A Ogus, ‘Competition between National Legal Systems: A Contribution of Economic Analysis to Comparative Law’ (1999) 48 International & Comparative Law Quarterly 405, 410. In a similar vein, although less specific about the legal fields in which harmonised legal rules are expected to be observed, see Parisi and Fon, The Economics of Lawmaking, above (n 1) 69. Some commentators strongly deny that such convergence has occurred more than superficially in European private Law: see,

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‘facilitative’ law—that is, contracts (except those portions of contract law that are interventionist or redistributivist by nature, such as tenancy, employment and consumer protection), corporations and property. iii

Knowledge Transfer and Diffusion

Those in charge of law-making in a given jurisdiction (most notably, legislators, but also courts and even administrators in public agencies) may learn and acquire knowledge about how to properly design the legal rules for a certain area of the law. Legal rules express preferences of the law- makers, and indirectly, of the population of a given jurisdiction: ideological, cultural and religious views, and so on. Legal rules also satisfy preferences—again, of many kinds—and serve the interests of at least some portions of the population. However, there is more to the law than its political, cultural, expressive and preference-satisfying dimensions. Lawyers as members of a profession, and perhaps comparative lawyers in particular, have a point in emphasising that the law is also a craft, a technical and specialised field of human knowledge. Legal techniques may travel, they can be taught and learned and they can be appraised and verified in their performance and outcomes—at least roughly, given that human societies do not allow perfect natural experiments. Law-makers (or their technical staff) may learn new legal techniques, novel legal means to achieve a certain outcome; they may learn of an innovative legal solution or rule for an existing problem. They can also know about refinements, corrections and improvements made in received legal rules. And they can import (perhaps, not without some further manufacture or re-elaboration) the rules and solutions that others have introduced, refined and experimented. Comparative lawyers and comparative lawyer-economists use the term ‘legal transplant’ to refer to the import of legal rules, doctrines and ideas.9 But, even if we count as a ‘transplant’ the adoption of foreign-born or initially alien ‘diffuse’ legal views or approaches, not all legal knowledge transfer across borders can be characterised as legal transplants. Law-makers in one jurisdiction may use the experience or the knowledge produced in other countries to confirm the soundness of existing legal rules, or to learn how not to design a legal rule, given the knowledge about its failure in a different legal system. This ‘trade’ in legal

P Legrand, ‘European Legal Systems are Not Converging’ (1996) 45 International & Comparative Law Quarterly 52. It must be noted, however, that those proponents of the view of competitive convergence of facilitative law also emphasise the importance of some hurdles in the way a convergent outcome: see, Ogus, ibid, 411–12. 9 Legal transplants are very important, not only for the development of legal systems, but for social and economic development more generally: see D Berkowitz, K Pistor, and J-F Richard, ‘Economic Development, Legality, and the Transplant Effect’ (2003) 47 European Economic Review 165; and R La Porta, F Lopez-de-Silanes and A Shleifer, ‘The Economic Consequences of Legal Origins’ (2008) 46 Journal of Economic Literature 285. Among comparative lawyers, the controversy whether legal transplants are at all possible is rampant: see A Watson, Legal Transplants 2nd edn (Georgia, Georgia University Press, 1993) and ‘Legal Transplants and European Private Law’ (2000) 4 Electronic Journal of Comparative Law, showing how legal transplants are part and parcel of the legal history of many, if not most, nations. In turn, see P Legrand, ‘The Impossibility of Legal Transplants’ (1997) 4 Maastricht Journal of European and Comparative Law 111, for a fervent denial that legal transplants exist in a meaningful way.

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knowledge and experience, even if unguided and uncoordinated, may lead towards a certain degree of convergence of the legal rules, particularly in ‘technical’ areas of the law. One of the reinforcing mechanisms of these processes and particularly important in the European context is mutual recognition. This principle, which allows more intense regulatory competition among European jurisdictions, will accelerate the competitive process towards the efficient legal rules, thus giving additional force o the competitive mechanism. Mutual recognition, on the other hand, reduces the cost of knowledge transfer on rules and standards across European borders, and consequently also improves the effectiveness of the knowledge transfer and diffusion mechanism.10

B

Legal Harmonisation through Coordinated Action

The processes of convergence that we have examined in the previous sub-section are uncoordinated, in the sense that no visible hand is at the helm in the route towards increased harmonisation of legal rules. Sometimes, however, such a visible hand does exist and jurisdictions take part in a conscious coordinating process the end product of which may be approximation of legal rules. The important feature here is that the end result (similar or identical contents in substantive legal rules) is not the outcome of uncoordinated action by the players (the jurisdictions) as in spontaneous convergence, but the result of cooperative or coordination actions taken by the affected jurisdictions, with or without the assistance of an external player (such as, an international organisation, government at a higher level of political power, private institution, legal entrepreneur, or the like).11 There is coordinated harmonisation, for instance, when different jurisdictions agree to negotiate an international agreement containing a piece of legislation on a given matter of private law (say, intellectual property, or the international sale of goods, or legal formalities for contracts) and then implement the content of the agreement in their own legal systems, immediately through direct translation of the agreement, or in a more indirect way through derivative implementing national legislation. Also when a public international organization (such as UNCITRAL) or a semi-public entity (such as the US National Conference of Commissioners on Uniform State Laws or Uniform Law Commission), or a private organisation (such as the Commission on European Contract Law or the American Law Institute in the US) propose a model piece of legislation, typically taking into account—albeit not exclusively—existing rules in various jurisdictions among those to which the model laws will be applied. In all the former circumstances, a given jurisdiction is 10 See, D Neven, ‘Regulatory Reform in the European Community’ (1982) 82 American Economic Review 98 and Parisi and Fon, The Economics of Lawmaking, above (n 1) 69. 11 To illustrate the distinction: a substantially similar legal transplant may be the product of spontaneous convergence (country A decides to imitate the laws of country B in a given area) or the result of a coordination game of harmonisation (country A and country B enter a negotiation process to approximate their laws, and they use the laws of country B as a starting point for what would be the end result of the harmonisation).

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not—at any rate, not legally, though there may be reputational, commercial or other sanctions involved in case of non-cooperative behaviour, or there may be positive rewards in case of cooperative behaviour—forced or compelled to harmonise its existing rules with those of other jurisdictions, or those in the synthetic text of the international agreement or the model law. The larger or smaller—even zero if the processes entirely fail—degree of harmonisation, however, that may be achieved through these processes will be the outcome of a coordination game played by the different jurisdictions. It must be noted, however, that the end result may vary immensely in terms of the actual degree of harmonisation that occurs, ranging from a complete failure to harmonise, to full unification of the content of the law—at least on its face, and sometimes on its operation as well, if the harmonisation includes enforcement matters and a joint enforcement agency. It is the coordinating (cooperative) nature of the process that poses the distinctive feature, not the degree of similarity of legal rules as the outcome. It is also true that the actions of those external ‘instigators’ or ‘harmonisation entrepreneurs’ may facilitate convergence of legal rules through the mechanisms analysed in sub-section A, independently of the path and future success of the coordination exercise: the preparatory works for a model set of rules may foster knowledge transfer and diffusion; a model law may serve to clarify the set of issues on which legal competition among jurisdictions takes place in a relevant way; a private or public legal initiative by one of those legal entrepreneurs may also trigger an informational cascade of jurisdictions mimicking the rules adopted by earlier players.

C

Legal Harmonisation through Political Fiat

Harmonisation may also be the result of a political decision by a higher level of government. In a federal system, the federation may decide to impose a uniform set of rules where previously legal fragmentation in the form of diverse state or regional legislation was in force. Similarly, an international or supranational entity, within the scope of its constitutional mandate, may establish a single set of legal rules for all the participating states: for instance, the European Union, under the powers conferred by the treaties, may use regulations and directives to cover a given area of the law, or to approximate the existing rules in the different Member States. In both cases (the federal and the supranational) the process leading to a larger or smaller degree of harmonisation in the substantive legal rules to be applied in the lower units of government is neither spontaneous convergence, nor a coordination game—at least specifically addressed to the effect of harmonising a given area of the law—played by the interested jurisdictions. The mechanism is based on political fiat at higher levels of government with respect to those that will experience that their legal rules will be harmonised. Both in the comparative law and the comparative law and economics literatures it is not uncommon to speak of harmonisation and unification as different processes on the basis of the end result: whereas harmonisation does not entirely

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preclude peculiarities in adapting or implementing the harmonised legal solutions, it merely approximates the different legal orders, unification replaces in total the existing legal regimes in favour of the common set of rules, eliminating all differences between legal orders.12 In this view, what the European Union undertakes with the use of directives—at least those that establish minimum harmonisation13—would not be true unification, given that Member States would enjoy some degree of freedom in implementing the regulatory goals of the directive, and thus, some variation in the rules will be allowed, as long as the requirements in the directive are satisfied. It is true that if some (perhaps significant) degree of variation among the affected legal systems still remains after the harmonisation mechanism has been set in motion, it may not make meaningful sense to speak of unification. The point, however, is that the mechanism leading to harmonisation—whether small, large, or complete—has relevance on its own right. Indeed, in many respects it is the most relevant element. In our characterisation, the fact that the degree of harmonisation achieved in the process is less than complete does not eliminate the crucial element of political fiat governing the process. The actual degree of variation in the legal outcomes is, naturally, an important issue, but it does not affect the core of the harmonisation mechanism as such. Thus, one could find complete ‘unification’ in the sense of zero or virtually zero variation in the legal rules of the affected jurisdiction as a result of spontaneous convergence—although this may be a rare occurrence in an uncoordinated process—and, with higher likelihood, as a product of a cooperative coordinating process. As mentioned, a harmonisation process determined by a higher level of government may fall short of attempting or achieving absolute identity in the legal rules of the lower levels of government. But what we take as essential is the engine behind the harmonisation process, more than the end stage of harmonisation that is actually produced. As we will expand in the following sub-section, it is actually the specific features of the mechanism operating in a given harmonisation process that gives rise to the concern of those analysts who have expressed more critical views of harmonisation processes. The reason, on reflection, is not so hard to discern. At the level of generality that one typically (and probably inevitably) encounters in such analysis, it is difficult to criticise as such a given level of commonality or similarity in the content of legal rules, because a general optimality benchmark from which to assess the actual levels of achieved harmonisation is hardly feasible (how similar or dissimilar the rules of two or more given countries should be is very hard to determine at an abstract level of analysis).

12 See, Garoupa and Ogus, ‘A Strategic Interpretation of Legal Transplants’, above (n 1) and G Rühl, ‘International Transactions: Plurality of Law, and Constitutional Uncertainty: Conflicts of Laws Revisited (Berlin, Humbold University Working Paper, 2009). 13 See, on the recent case law of the ECJ on these matters, S Weatherill, ‘Measures of Consumer Protection as Impediments to Exports of Goods’ (2009) 5 European Review of Contract Law 149.

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The Main Wrongs of (some) Harmonisation Processes

Broadly speaking, spontaneous, uncoordinated convergence does not seem to raise serious concerns from either an economics or law and economics perspective. In fact, one of the mechanisms behind convergence (namely, competition of legal orders leading to general adoption of efficient rules) is the panacea of decentralised, preference-satisfying law-making that many lawyer-economists keep warmly close to their hearts as their ideal. True, as has already been mentioned, convergence need not lead to pareto-superior situations in the affected countries, as shown by the likelihood of inefficient equilibria in informational cascades types of setting. However, even if one is aware of these potential deficiencies, the spontaneous and uncoordinated nature of the process leaves little room for policy concerns to be plausibly converted into implementable recommendations to overcome such inefficiencies. Criticism is, consequently, mainly reserved for the other two kinds of harmonisation mechanisms. One would obviously expect criticism to be raised against political fiat, even if one assumes—and this is a big if—that this superior fiat is benevolent in inspiration and illustrated in spirit. It seems slightly more surprising that voluntary coordination by the various jurisdictions willing to overcome legal fragmentation is also perceived by many commentators, notably by many with an economic inclination, as an overall negative mechanism in legal development. We will not re-examine most of the objections to harmonisation by coordination and to harmonisation by higher level political dictate, since we have looked at several benefits and costs of the harmonisation process concerning European contract law elsewhere.14 What we intend to do in this section is merely to present in a different light what we take to be the two major critical positions on harmonisation of private law in Europe, namely that it is substantially unnecessary, on the one hand, and on the other, that it is essentially undesirable from an efficiency perspective. We will argue that these criticisms are not as forceful as one may imagine at first blush, both on theoretical and on empirical grounds. The former view, however, should not imply that the ongoing harmonisation exercise of private law in Europe is flawless, or that it is an admirable exercise that should by all means succeed. In reality, we remain highly sceptical about the ultimate soundness of the process, but we take it that it pays to clarify the real force of some of the objections raised against it. Actually, in the next section we will elaborate a little one of the most critical dimensions of the harmonisation process (namely, the mode of determining the rules) that has not received the same degree of attention as other elements, and which to us at least appears as very problematic in what one could label an epistemic sense. The main thrust of the argument to the effect that the harmonisation process is unnecessary has two components. The first one is that the transaction costs raised by legal diversity and fragmentation are not too significant or, at least, are not as significant as the pro-harmonisation rhetoric, and the mantras concerning the

14

Gomez, ‘The Harmonization of Contract Law’, above (n 1).

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obstacles to the European single market, may suggest. Some critics of the harmonisation process point out that there is little or no evidence of the costs of legal diversity for active cross-border trade,15 and even if they are, some economic agents can overcome the barriers at reasonable cost.16 This leads to the second component of the superfluity critique, namely that the rules of private international law and choice of law are able to carry the weight in removing or weakening the disruptions to international exchanges and interactions that may be caused by legal diversity.17 Goods, services, capital—and also persons—move across national borders, in Europe as elsewhere, typically through economic interactions that are not free from the reach of legal rules and regulations. Cross-border transactions involving the provision of goods and services, and the investment of capital, are governed by the laws and regulations contained in the different national legal orders involved. The fragmentation and disparity of legal systems can, to some extent, be alleviated through adequate choice of law rules that may determine the application to the transaction at hand of the rules of a single legal order, or at least determine which subsets of rules of different legal orders will govern the transaction. However, even the most intelligently designed rules on choice of law are unable to remove all the obstacles and transaction costs that legal fragmentation may erect in the way of cross-border trade and unified markets. Despite its relevance, it is clear that choice of legal order by the parties to the transaction is not always to be expected, and cannot provide in all circumstances the desired outcome. There are, undoubtedly (natural or man made) costs linked to the parties’ choice that may sometimes (even often) be high enough to prevent adequate choice and the positive consequences from it. One source of such costs may be that, in the production and distribution of goods and services, the relevant choice of action for firms frequently has to be taken before any anticipated choice of legal order by the parties to the transaction can effectively be made, let alone the outcome of such choice can be made known to the firm. This scenario is particularly likely with respect to goods and services produced for mass consumer markets, in which quality standards concerning many features of such goods and services cannot be reasonably tailored to the diverging requirements of the various legal orders that may be involved, when prospective buyers that can profitably be served by the firm are located in different jurisdictions and the outcome of the choice of law cannot be confidently anticipated by the producer. Sometimes, it is possible to defer to a later stage production decisions that are affected by legal rules and regulations, such as packaging (the contents, language, and information to be included) which can be undertaken locally in each national market, but usually at a cost. For other dimensions of goods and services, this possibility may simply be technologically unfeasible or economically prohibitive. Another source of such costs hindering effective choice of law is the lack of information by buyers, most typically consumers, who will be at best ill-informed about the content, let alone the likely advantages for them, of alternative legal or 15

Van den Bergh and Visscher, ‘The Principles of European Tort Law’, above (n 1) 514–15. Wagner, ‘The Economics of Harmonization’, above (n 1). 17 For the potential and effectiveness of choice of law rules see: Rühl, ‘International Transactions’ above (n 12); and O’Hara and Ribstein, The Law Market, above (n 7). 16

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regulatory standards in other foreign legal orders. The incentives to learn and become informed are commonly very weak, particularly in one-shot transactions, and often the reputation of the foreign producer of goods and services will not suffice to dispel the doubts that many consumers may reasonably hold in relation to the standards in a different legal system. Moreover, in the field of consumer markets, mistakenly or not, legal rules almost entirely eliminate the choice of governing law and subject the transaction to the law of the home country of the consumer. From the previous analysis, it seems highly unlikely that, given these costs and constraints for effective choice, efficient choice of law rules would be able to substantially eliminate the transaction costs arising from legal diversity, and thus parties intending to transact across national borders (firms willing to serve several national markets, consumers willing to be served by sellers in different countries, who may be hesitant to be subject to a foreign law) will face significant costs. Empirically, it is true that there is not an overwhelming body of evidence on the actual impact and magnitude of the costs of legal diversity for cross-border activities and trade. The study commissioned by the EU on the matter was indicative of the relevance, but not totally conclusive in the magnitude of costs at stake, and the same can be said of other surveys.18 But, there is some evidence that cannot be discarded as providing clear illustration, to say the least, of the importance of legal diversity as a source of transaction costs. Clermont and Eisenberg19 convincingly show how foreign plaintiffs need to present stronger cases to win in US courts—a dismal result that it is not unlikely could be replicated in other countries. And, more directly relevant to the European context, den Butter and Mosch20 find in an empirical study that similarity of legal systems may be able to produce roughly between 50–80 per cent more cross-border trade, using data of 25 OECD countries. Most recently, Turrini and van Ypersele21 estimate that legal similarity can increase trade among OECD countries up to 65 per cent, controlling for transportation costs, common culture and language and similar factors. In sum, transaction costs from legal fragmentation do not seem to be so negligible (in fact, probably they are likely to be not negligible at all, both for theoretical and for empirical reasons) and choice of law rules, however helpful, cannot carry the weight to reduce them significantly. Thus, the basis for the argument of harmonisation as being unnecessary seems relatively weak. The undesirability argument essentially emphasises the serious disadvantages of harmonisation— by superior political fiat and also by countries playing cooperative coordination games—as a stifling phenomenon. Harmonisation would stifle learning and experimentation by law-makers and legal system, thus reducing, and even

18 See, S Vogenauer and S Weatherill, The Harmonisation of European Contract Law: Implications for European Private Laws, Business and Legal Practice (Oxford, Hart Publishing, 2006). 19 See, K Clermont and T Eisenberg, ‘Xenophilia in American Courts’ (1996) 109 Harvard Law Review 1120. 20 See, F den Butter and R Mosch, ‘Trade, Trust, and Transaction Costs’ (Tinbergen Institute, Working Paper No 2003–082/3, 2003). 21 See, A Turrini and T van Ypersele, ‘Legal Costs as Barriers to Trade’ (Centre for Economic Policy Research Discussion Paper Series, No 5751, 2006) 20.

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suffocating, the sources of improving the efficiency of existing legal solutions.22 Harmonisation would also stifle competition among legal systems, thereby destroying the environment (namely, that of healthy competition by law-makers in order to better tailor rules to the preferences of the ‘clients’ of the rules) that is most conducive to efficient legal outcomes.23 Both theory and evidence would suggest, at least in our view, the opportunity to reassess the true weight of these two shortcomings of harmonisation—either by fiat or by coordination. The experimentation argument would emphasise that different jurisdiction with diverse substantive legal rules may reciprocally learn from the failures and weaknesses, but also from the successes of the diverse rules, so that the costs of designing more efficient rules will be reduced. By eliminating diversity, which would be a precondition for comparatively assessing the merits of diverse solutions to the same set of problems, harmonisation destroys legal experimentation. The interest of law-makers in different jurisdictions in learning from the experiences of others is an empirical matter, albeit one may reasonably anticipate that important variation across jurisdictions is very likely to be present in reality. One important weakness in the argument is that it assumes that harmonisation will be complete, both in terms of substance of the rules and in terms of geographical coverage of the harmonised outcomes. Both assumptions, and especially the second, are very likely not to hold. The fact that, say, EU countries harmonise their substantive legal rules in a given area, does not mean that all jurisdictions in the world will follow suit and will adopt that solution: Asian, North and South American and other jurisdictions will still offer diverse legal solutions to the same set of problems, and thus learning and experimentation may still be possible. In fact, the level of experimentation may increase, if the harmonisation process steers the interest towards the consequences in the real world of the harmonised legal outcomes, and thus draws attention to the importance of that matter. Moreover, even disregarding other solutions in different jurisdictions not affected by harmonisation, the assessment and evaluation of the effects of the adopted harmonised rules need not cease after harmonisation. Again it is an empirical question, but it may well be the case that the effort to continuously—or at least periodically—estimate the actual effects of the harmonised regime increase over the level that predated the harmonization process. A related but somewhat different point would be that even if the effects of the rules are assessed with the same intensity, to change the harmonised set of rules will be more costly, and thus the learning process will provide less tangible results after legal harmonisation. At the general level, there is nothing that should lead us to think that modifying the harmonised rule is typically more costly than modifying

22 See Ribstein and Kobayashi, ‘An Economic Analysis of Uniform State Laws’, above (n 4) 140–41; Ogus, ‘Competition between National Legal Systems’, above (n 8) 415; Wagner, ‘Economic Analysis of Cross-Border Legal Uncertainty’, above (n 1) 38; van den Bergh and Visscher, ‘The Principles of European Tort Law’, above (n 1) 517; Wagner, ‘Costs of Legal Uncertainty’, above (n 1) 5; and Rühl, ‘International Transactions’, above (n 12) 14. 23 See R van den Bergh, ‘Towards an Institutional Legal Framework for Regulatory Competition in Europe’ (2000) 53 Kyklos 435; Faure, ‘How Law and Economics may contribute to the Harmonization of Tort Law in Europe’, above (n 1) 47–49; van den Bergh and Visscher, ‘The Principles of European Tort Law’, above (n 1) 519–20.

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the set of heterogeneous legal solutions. It may be that that is the case, but it need not be. For instance, if harmonisation has taken place through a uniform rule adopted at a higher level of government, there are no reasons to think that it is more difficult or costly to change a law at the federal level than at state level. Which is more costly depends on many conditions and factors—constitutional and political variables playing a large role presumably. For instance, it is very hard to determine in a general way whether it is easier to alter a rule in a European directive or in a civil code of a given European country. It may go either way, depending on many circumstantial factors. Of course, the ability and the ease with which legal systems may adapt a rule to new sets of circumstances, and to technological, economic and social changes, is very important for law-making and its impact on social welfare. But this variable of adaptability, we would argue, is more connected to the mode of making law—rules versus standards, codified rule versus case law—than to the harmonised or heterogeneous content of the rule. As we will argue in section IV below, it may speak against harmonisation, but in its version of codification or recodification of more flexible modes of law-making. In sum, it does not seem that the learning and experimentation argument can be deemed decisive against harmonisation, either in its coordination or in its politically imposed versions. Concerning the argument that legal harmonisation represses healthy competition among law-makers—and thus interferes with a competitive process that would eventually lead to rules that would perfectly match the preferences of their addressees—we are also more sceptical than most who look at the matter from a law and economics perspective. We will not fully pursue the matter here, but we will try to outline how the theoretical conditions for efficient regulatory competition, and the empirical knowledge concerning the efficiency of regulatory ‘races’ across jurisdictions, may weaken the persuasive force of the arguments against harmonisation based on market competition among law-makers. First, the theoretical assumptions that underlie the result of efficient regulatory competition, both in the initial model of mobility of individuals24 and in the model of mobility of capital25 are numerous and very stringent concerning the goals of law-makers, the informational requirements, the policy instruments, the distribution of costs and benefits and more. It appears unlikely that they will all hold in most real world circumstances in which jurisdictions and law-makers adopt measures and rules.26

24 For the initial and pioneering contribution on competition in local public goods provision, see C Tiebout, ‘A Pure Theory of Local Expenditure’ (1956) 64 Journal of Political Economy 416. 25 See WE Oates, Fiscal Federalism (New York, Harcourt Brace Jovanovich, 1972). 26 For the Tiebout model of ‘voting with the feet’, whether physically or virtually, see Wagner, ‘The Economics of Harmonization’, above (n 1) 1007. For fiscal federalism models, see A Levinson, ‘Environmental Regulatory Competition: A Status Report and Some New Evidence’ (2003) 56 National Tax Journal 91, 94–95. In both cases, the contrast between the exacting set of assumptions for regulatory competition leading to optimality, and the likely characteristics of the settings in which law-makers (however well-intentioned they may be) have to operate, casts some doubt about the realisation of optimal results by way of competition among law-makers and regulators. For the specific case of Corporate Law, see Bar-Gill, Barzuza and Bebchuk, ‘The Market for Corporate Law’, above (n 7) and Gomez and Saez, ‘Competition, Inefficiencies and Dominance in Corporate Law’, above (n 7). Of course, the preceding argument does not imply that regulatory competition is non-existent, or doomed

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Secondly, although the empirical evidence concerning whether the presence of competitive sources of rules and regulations do actually benefit or harm the feasibility of efficient outcomes in the affected population is not overwhelmingly univocal, some of the most recent evidence, at least in the environmental sphere, should lead us to be even more cautious and less cavalier with respect to a denial of the possibility of finding actual cases of races to the bottom that, in the end, are harmful to social welfare. Whereas the earlier literature on regulatory competition in environmental standards did not find conclusive evidence of an erosion of standards due to regulatory competition,27 some of the recent evidence seems to point n the opposite direction.28 Again, none of this is decisive or entirely carries the day in the debate. Indeed, one should look out for further evidence to estimate the empirical relevance of the potentially efficient and inefficient consequences of regulatory competition, in the environmental area as well as in other sectors. Also, new theoretical work may uncover some dimensions that may reveal lower levels of costs or of benefits resulting from regulatory competition.29 The presence of this positive evidence of actual inefficiencies should make us less confident that the regulatory competition argument is a winning card against legal harmonisation processes.

III

HARMONISATION OF PRIVATE LAW IN EUROPE AS RECODIFICATION

In our view there is, however, an important feature of the process of harmonising European private law that should raise more doubts about its ultimate desirability from a law-making perspective. We refer to its likely recodification effect. Regardless of the specific content of the legal rules involved, let us take a set of model rules such as the ones in the ‘Draft Common Frame of Reference’ (‘DCFR’)—although one should not be too reductionist here: there are other expressions and potential outcomes of harmonised law-making in European private law—as the central image of what one would expect as the outcome of harmonisation. It seems clear that the to failure, simply that, in the real world, we should not expect it to function as a mechanism that will generate socially optimal outcomes. 27 See, eg, J List and S Gerking, ‘Regulatory Federalism and Environmental Protection in the United States’ (2000) 40 Journal of Regional Science 453. Most of this evidence is aptly reviewed, with an eye on the harmonisation debate, in Faure, ‘How Law and Economics may contribute to the Harmonization of Tort Law in Europe’, above (n 1) 47 et seq. 28 See: R Becker and V Henderson, ‘Effects of Air Quality Regulations on Polluting Industries’ (2000) 108 Journal of Political Economy 379; M Greenstone, ‘The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and Census of Manufacturers’ (2002) 110 Journal of Political Economy 1175; P Fredriksson and D Millimet, ‘Is there a “California Effect” in US Environmental Policymaking?’ (2002) 32 Regional Science and Urban Economics 737; Levinson, ‘Environmental Regulatory Competition’, above (n 26) 98. For a survey of the recent evidence, see A Levinson, ‘Pollution Haven Hypothesis’ in S Durlauf and L Blume (eds), The New Palgrave Dictionary of Economics (London, Macmillan, 2008). 29 See, J Ganuza and F Gomez, ‘The Superiority of Realistic Standards when the Assets of the Injurer are Endogenous’ (Universitat Pompeu Fabre, Department of Economics and Business Working Paper, 2009), showing how, when potential injurers (eg, firms that may cause environmental harm) may choose their level of assets and may become insolvent, if legal systems use standards of behaviour that adapt to the actual level of assets, they have less incentive to lower assets, and also cause lower levels of harm, which means that decentralised choice of standards will be less harmful.

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DCFR greatly resembles a code of broad legal rules governing central areas of private law such as contract and tort. This codification of contract law and tort law, or recodification, at least for most legal systems that already have civil codes that cover most of contract law and a part (although generally much less) of tort law, should be seen with a substantial degree of caution. This codification in such core areas of law, and not just private law, as contract and tort would negatively interfere, in our view, with the existing case law in the different European jurisdictions and its future evolution. The reason for this attitude does not lie in a belief in the general efficiency of the common law as such, or in a faith in the uniform superiority of judge-made law over legislation, nor even over codification as the quintessential systematic and abstract mode of law-making. We personally, as many others, even within law and economics, remain strongly unconvinced about the broad statement that the common law is overall efficient as a set of legal rules (as we would also be unwilling to accept a similar claim over any other legal order at so broad and general a level of stating the proposition). Moreover, this holds in any of the versions of the efficiency claim, be it the naive and largely self-delusory Posnerian view of common law judges as Benthamites who are efficiency oriented (bearing in mind that Posner himself has moved away from the initial versions of his own theory) or the evolutionary process version holding that inefficient rules are thrown out of the common law over time through increased challenges by dissatisfied litigants.30 Even the new and more sophisticated versions of the evolutionary characterisation of case law decision-making,31 which model judge-made rules as a continuous process of court decisions over time, in which the biases of the individual judges tend to be reciprocally washed out and which lead legal rules to approximate, at least probabilistically, more efficient and predictable outcomes, are subject to very stringent assumptions. Some of these assumptions are overtly implausible, taking legal orders and the entire evolution of rules over time in a global fashion.32 We are also equally unconvinced by the literature, of empirical bent, trying to show the superior economic performance of societies that possess a legal system of common law origin, with respect to those originating in the civil law tradition, and especially those founded on the French legal system as built after the legal

30 See, P Rubin, ‘Why is the Common Law Efficient?’ (1977) 6 Journal of Legal Studies 51, and ‘Why Was the Common Law Efficient?’ in F Parisi and C Rowley (eds), The Origins of Law and Economics: Essays by the Founding Fathers (Cheltenham, Edward Elgar, 2005) 383. For criticism of this ‘invisible hand’ purge of inefficient rules theory, see A Vermeule, Law and the Limits of Reason (Oxford University Press, 2009) 106 et seq. 31 Obviously, judge-made law is not synonymous with the common law, and statute law is not synonymous with the civil law, for there is a substantial component of statute law in common law legal orders and the reverse in civil law systems. With this in mind, however, we will loosely use common law and judge-made law interchangeably in the following discussion, given that we will not be determining the relative efficiency of real world legal systems belonging to one or the other tradition. On these discussions, see N Garoupa and C Gomez, ‘The Syndrome of the Efficiency of the Common Law’ (University of Illinois College of Law Working Paper, 2009). 32 See: N Gennaioli and A Shleifer, ‘The Evolution of Common Law’ (2007) 115 Journal of Political Economy 43, and ‘Overruling and the Instability of the Law’ (2007) 35 Journal of Comparative Economics 309; and G Ponzetto and P Fernandez, ‘Case Law versus Statute Law: An Evolutionary Comparison’ (2008) 37 Journal of Legal Studies 379. For the implausibility of an overall satisfaction of the conditions for efficient evolution, see Vermeule, Law and the Limits of Reason, above (n 30) 118.

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transformation produced by the codification in the early nineteenth century.33 A critical stance towards the current process of private law harmonisation in the form of codified statutory law covering the core of contract law and tort law, in our view, is not well-grounded on a general preference for judge-made law over statutes in all areas of the law—which is theoretically unfounded, as our current knowledge stands, nor derives from (again, not theoretically established in a convincing manner) general distrust of codes as modes of designing and formulating legal rules by legislatures.34 The criticism is substantially more modest in scope and reach. It is simply that contract law and tort law are legal fields in which the most important features with respect to law-making seem to better correspond to the comparative advantages of judge-made law over statute law, and particularly over abstract rules aspiring to universal, or quasi-universal, application. Contract and tort are highly contextdependent with respect to the desirability of the available legal solutions, and seem to require open-textured conditions of application in order to fit the legal consequence properly with the circumstances present in a given setting. Additionally, the adaptation to new contingencies and to modifications in the environment in which the rules have to determine the behavioural incentives, seem to be an important element in the picture. To be slightly more precise, let us take the example of contract law. The economic literature on contracts—and in particular the branch dealing with incomplete contracting—has identified several dimensions of contractual interactions in different environments (spot contracts, long-term contracting, and so on) that affect the desirability of the most basic rules of contract law, such as remedies for breach of contract. For instance, for long-term contracts (such as those in distribution chains: agency, distributorship, franchising) some of the factors that affect whether and how one party should pay compensation to the other, say for early termination, include: the timing of the parties’ interaction, the role of reputation to control opportunities for non-cooperative behaviour, the verifiability of instances of breach during the relationship and the variance between different kinds of breach, the incentives to make investments in the relationship, particularly relation-specific investments, the selfish, cooperative, or hybrid nature of the specific investments, are but the most relevant that have a bearing on the desirability of the existence, scope, and nature of a compensation scheme.

33 See, for a survey of this literature on economics of legal origins by the pioneers of this field, La Porta, Lopez-de-Silanes and Shleifer, ‘The Economic Consequences of Legal Origins’, above (n 9). The debate generated in different disciplines (finance, comparative economics, economic growth, legal history, comparative law) has been more than ample, and even a summary would be beyond the scope of this paper. For a summary, see Garoupa and Gomez, ‘The Syndrome of the Efficiency of the Common Law’, above (n 31) and the references therein. 34 For instance, it can be argued that early nineteenth century codification in continental Europe— and especially in France and other countries that followed her lead—was an adaptive response to the conditions of the judiciary and the political preferences of legislatures at that time: see, B Arrunˇ ada and V Andonova, ‘Judicial Cognition and Market Order’ (2008) 4 Review of Law and Economics 665 and ‘Common Law and Civil Law as Pro-Market Adaptations’ (2008) 26 Washington University Journal of Law and Policy 81.

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This illustration shows that rules in contract law should not be fact-invariant, or circumstance invariant. Continuous and adaptive rule-making that is jointly supplied with adjudication, responsive to the particular circumstances of the economic interaction at hand seems a more desirable rulemaking option than to set uniform binding abstract principles and rules requiring uniform outcomes across diverse economic circumstances and scenarios—or at least with an important element of circumstance invariance—that is linked to the idea of a contract law code. For tort and accident law, the reasoning would be substantially similar, and the relevance of adaptation to circumstances and the ability of gradual evolution seem again important properties of an efficient legal regime in this area. The latter properties appear to fit rather better the judge-made law model of producing legal rules. This mode of law making is, even for cognitive and psychological reasons, more contextual and circumstance-attentive than statutory law, it is able to better mirror the differences in factual content, it is more modest and less intrusive in the use of legal consequences, and it is parsimonious, but continuous, in adapting to the emergence and change of factual settings.35 All these seem attractive features for law-making in contract and tort. Even some of the usually identified shortcomings of judge-made law-making, such as the inability to cope with sudden and radical changes in circumstances requiring rapid modified legal response,36 are not so relevant when one thinks of contracting and torts. Even in the contingencies in which swift legal innovation is called for, reliance in judge-made law does not prevent legislatures from stepping in and introducing rapid and abrupt changes when the pace in the change of events so requires. But wait a minute. Are not the majority of European jurisdictions under regimes of contract law (and even of tort law, albeit to much lesser degree) contained precisely in civil codes? Would it then make such a difference to replace the old national codes with a new European one? Whatever its appearance, however, contract law and tort law in Europe are now de facto judge-made law, even in the countries possessing civil codes. One reason for this feature is that the many written rules in contract law in the codes and the few written rules in tort law in the codes,37 tend to be old rules, in the sense of rules that have been around for some time in that given legal system. In some countries, they are directly or indirectly from the codification period, and even their substantive content may be traced back to the eighteenth century, or to Roman Law. That gives them, regardless of their compact textual appearance, some degree of open-textured character, and invites

35 See: J Rachlinski, ‘Bottom-Up versus Top-Down Lawmaking’ (2006) 73 University of Chicago Law Review 933; and J Rachlinski and C Farina, ‘Cognitive Psychology and Optimal Government Design’ (2002) 87 Cornell Law Review 549. Even if courts enjoy cognitive and epistemic advantages in settings such as those associated with contracts and torts, and even if they may exploit better than other types of law-makers some well-known cognitive abilities of the human brain, such as categorisation and pattern-recognition, it does not mean that courts are cognitively optimal law-makers, or that they should always, and for all fields of law, be preferred to legislatures for epistemic reasons. See, F Schauer, ‘Do Cases make Bad Law?’ (2006) 73 University of Chicago Law Review 883; and Vermeule, Law and the Limits of Reason, above (n 30) 123 et seq. 36 See: Ponzetto and Fernandez, ‘Case Law versus Statute Law’, above (n 32) 403 et seq; and Vermeule, Law and the Limits of Reason, above (n 30) 109–10. 37 See, for this difference in profusion of legal provisions on Contract and Tort Law in Civil Codes, and the changes over time, Parisi and Fon, The Economics of Lawmaking, above (n 1) 25 et seq.

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typically more creative (or aggressive, if one prefers) and less formalistic interpretive strategies, at least in view of the need to take into account the passage of time and the necessary adjustment to new circumstances. New written laws, and particularly a new code, would, with high likelihood invite a more formalistic and automatic application of the new provisions in the code, with less reflection about the economic circumstances of application. The result would then be more formalistic—and less context-dependent legal solutions—which, as we have argued, fit less well the typical settings of contract and tort rules. In sum, for reasons linked to the epistemics of law-making in what would be the core of harmonisation of private law in Europe, a note of caution about the mode of law-making seems important from an economic viewpoint.

IV

HOW TO BUILD OPTIMAL HARMONISED STANDARDS

From a normative standpoint, the ‘whether’ question is not the only relevant one. The ‘how’ question is equally important. This is not just in the implementation phase, but as a crucial element to give an informed answer to the ‘whether’ puzzle: when one cannot find a way to build harmonised standards that seems promising or convincing enough, one should answer the ‘whether’ question in the negative. Given the setting in which the harmonisation of European private law takes place, which necessarily has to be built largely on the pre-existing and diverse national rules (already harmonised EU law would not be comprehensive enough) to properly determine the content of the harmonised standard becomes a crucial issue, if we want the exercise to improve social welfare in European societies, and not to be just a challenging intellectual subject for academic lawyers. For instance, should the new harmonised European standards and rules for the protection of one class of contracting parties—say consumers—simply reflect the current minimum level of protection contained in the directives already in force, when they exist, or should they correspond to the minimum, to the average, or to the maximum levels of consumer protection now observed in the different national legal systems?

A The Factors Underlying the Content of Standards in a Desirable Harmonisation Surprisingly, the question of what factors one should take into account when building harmonised standards has not received a lot of theoretical attention, neither in the legal nor in the economic literature. There is, certainly, a very large legal and economic literature concerned with building protective standards for consumers and, to a lesser extent, for other social groups.38 However, there is just 38 Among the body of economic literature on the design of optimal standards for protecting consumers against risks, one could cite H Leland, ‘Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards’ (1979) 87 Journal of Political Economy 1328; Y-S Chan and AM Marino, ‘Regulation of Product Safety Characteristics under Imperfect Observability’ (1994) 6(2) Journal of Regulatory Economics 177; C Crampes and A Hollander, ‘Duopoly and Quality Standards’ (1995) 39

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one working paper (by the authors) that tries to determine the relationship of a harmonised standard with respect to the pre-existing national standards.39 In the remainder of this chapter we will try to adapt the argument that we developed generally to the European setting. With social welfare in mind, it is very likely that the largest advantage of building and establishing harmonised legal standards of behaviour for economic agents (individuals and firms) in their interactions, is essentially to reduce the transaction costs in cross-border commercial activity, and thus to enlarge economic welfare arising from those increased— and, ex hypothesi, more attractive, or else they would not take place—economic interactions that cross the national European borders. Certainly, there are costs involved in this—both in the process of constructing the standards and as a consequence of imposing the harmonised standards.40 These costs may well outweigh the benefits, so that the adoption of harmonised standards may reduce welfare, and not increase it, over the pre-existing differentiated rules. But the positive effect, if any, of harmonised standards materialises through increased trade (which, of course, includes a reduction in the costs of all activities related to trade, and also the increase in the contract surplus from the interaction—by firms and consumers). The main idea is that constructing optimal harmonised standards to induce trade across national borders depends essentially on the technologies—the cost functions—of the firms that will produce the goods and services, on the one side, and on the preferences of the populations in the countries that build the unified standards, on the other. That is, the definition of the harmonised standards of behaviour in European private law should consider the distribution of the costs of providing the products and services—not just the material costs of production, but any cost necessary to ensure the effective delivery of the product or service to the consumer across the different European countries. It should also consider the distribution of the societal preferences of consumers in the various Member States over the relevant issue affected by the behaviour that would be subject to the standard, be it the physical safety of the product, the length of the contractual warranty, or the level of detail on the content of the contract boilerplate clauses to be communicated in advance of the conclusion of the contract. In short, optimal standards should be based on technological parameters and preference parameters. Without doubt, the collection and processing of the information on those parameters for the entire area governed by private law, and even for smaller portions of it, would involve immense costs, and probably is, in full rigour, virtually impossible, due to lack, imprecision and/or unreliability of data. Nevertheless, the

European Economic Review 71; Daughety and Reinganum, ‘Stampede to Judgement’, above (n 6); C Constantatos and S Perrakis, ‘Minimum Quality Standards, Entry and the Timing of the Quality Decision’ (1998) 13(1) Journal of Regulatory Economics 47; S Marette, J-C Bureau and E Gozlan, ‘Product Safety Provision and Consumers’ Information’ (2000) 39(4) Australian Economic Papers 426; P Garella, ‘“Innocuous” Minimum Quality Standards’ (2006) 92 Economics Letters 368; and S Marette, ‘The Minimum Safety Standard, Consumers’ Information, and Competition’ (Centre for Agricultural and Rural Development, Iowa State University Working Paper 07-wp 441, 2007). 39 See J Ganuza and F Gomes, ‘Optimal Harmonized Standards to Promote Cross-Border Trade’ (University of Pompeu Fabra, Department of Economics and Business Working Paper, 2008). 40 See, on these costs, Gomez, ‘The Harmonization of Contract Law’, above (n 1).

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basic idea does not become moot because it cannot be replicated ad pedem litteram in the real law-making process. The theoretical guidance remains valuable, because it clearly points at the factors that an exercise in harmonising behavioural standards in private law should consider essential, even if full information about the specifics of those factors is not available. Moreover, technology and costs for firms and consumer preferences are crucial, but so too is their mutual correlation, or lack thereof. If it can be established whether the technological parameters and the parameters reflecting societal preferences for consumer protection are independent or correlated, and depending on the nature and direction of the correlation, then we can determine whether the optimal standard is intermediate between the pre-existing national standards, equals the more exacting standard, or even, counter-intuitively, exceeds even the toughest standard among national laws.

B

An Economic Model of Optimal Harmonised Standards

In this sub-section—to be read in conjunction with Annex A—we act on the remarks of the previous sub-section by setting up the most simple economic model of building harmonised standards for an economic union (involving trade and economic interactions generally). We start from a situation of differentiated markets of two countries. For simplicity, we assume that the standards refer to safety/consumption, but the model is applicable to any general behavioural standards for firms affecting their interaction with consumers (production, marketing, contractual content, etc). It can be extended in a straightforward manner to a larger number of countries and to other economic agents. Again, for simplicity and to abstract from complexities arising from different market structures, it is assumed that there is one single firm in each country producing a product that may harm consumers acquiring it. As the analysis in Annex A demonstrates, the optimal harmonised standard will vary according to the economically relevant features of each scenario.

V

CONCLUSIONS

Harmonisation of private law in Europe is a multifaceted notion, evoking very different phenomena, and does not involve a single type of mechanism increasing the resemblance of legal outcomes across jurisdictions. This may happen by operation of diverse mechanisms, ranging from spontaneous (a neutral characterisation, however, in normative terms: not everything spontaneous necessarily leads to a desirable outcome) convergence, to conscious coordination exercises by legal orders, with or without the push from external harmonisation entrepreneurs, to imposed uniformity (or simply, approximation) by political fiat from a higher power or authority. These processes widely differ in operation and force, and their economic assessment should also vary, independently of the actual outcome in terms of equivalence in achieved legal outcomes.

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This more precise dissection of harmonisation mechanisms carries over to the evaluation of European harmonisation of private law, in ways that differ from current assessments. The recodification element of the current harmonisation exercise, on the other side, is more troublesome from a law and economics perspective than is usually acknowledged. Finally, the construction of harmonised rules and standards is, no doubt, a crucial dimension of law-making in private law in the midst of some kind of harmonisation process. It is, however, an under-theorised issue, despite its relevance. The essential factors to consider in building harmonised behavioural standards starting from a setting in which different national (and perhaps European) standards co-exist, are the cost functions for the affected economic agents (firms, essentially) and societal preferences for the relevant dimensions of the underlying behaviour. The correlation between these factors may lead to a wide range of standards compared to the existing ones, including, under some conditions, standards that are tougher than any pre-existing one.

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8 Of Islands and the Ocean: The Two Rationalities of European Private Law* RALF MICHAELS

I

INTRODUCTION

From the point of view of the harmonisation of civil law, the body of law formed by EU directives has now reached ‘critical mass’ and action must now be taken in one direction or another. The existing, unsystematic approach, consisting of a combination of directives and international private law, must be overhauled because it poses an increasing number of risks for users. What economic players find when they seek to engage in cross-border activities is the great ocean of international private law containing the 20 or 30 greater or smaller islands of European Community law. As soon as users leave these safe harbours they risk running aground on shallows consisting of either unresolved conflicts of individual private law regulations or the absence of coordination between European law and international private law. In some places there is risk of the ocean drying up altogether, because the law of EU directives which is purely geared to individual conflict situations is in the long term upsetting the inner equilibrium of the national civil codes.1

With these colourful words, in 2001, the reporter for the European Parliament emphasised the need to provide more coherence for European private law. The complaint about the fragmented and unprincipled character of European private law was, by then, already long familiar.2 Hein Kötz had formulated it as early as 1981; he was also the first one, apparently, who phrased the metaphor, picked up by the reporter and many others, of European private law directives as ‘islands in

* This chapter has benefited from discussions by participants of presentations given at the European University Institute in Florence and at the Centre for the Study of European Contract Law at the University of Amsterdam. Special thanks for additional comments are due to Jan Smits and especially Nils Jansen, who saved me, I hope, from overstating. While some of the chapter’s ideas go back to a talk given at Harvard Law School in 2000, the chapter itself was largely written during a fellowship at the Law and Public Affairs Programme at Princeton University. 1 Report on the approximation of the civil and commercial law of the Member States (COM (2001) 398—C5–0471/2001—2001/2187(COS)). 2 For two recent perspectives (both, ironically, Dutch national country reports to the World Congress on Comparative Law), see MW Hesselink, ‘The Structure of the New European Private Law’ available at: www.ejcl.org/64/art64–2.pdf; JM Smits, ‘The Complexity of Transnational Law: Coherence and Fragmentation of Private Law’ in JHM van Erp and LPW van Vliet (eds), Netherlands Reports to the Eighteenth International Congress of Comparative Law: Washington 2010 (Antwerp, Intersentia 2010) 113–30.

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an ocean of national private laws’.3 Kötz himself turned his criticism into a plea for a common European private law scholarship, and such a scholarship did indeed emerge soon. Some of this scholarship originated in comparative law and sought to revive a historical ius commune, or to create a European civil code on the basis of comparative law.4 Other scholars emphasised the need to address and perhaps systematise the existing private law of the European community.5 Differences among these bodies—plastically called, by Stefan Grundmann, ius commune and ius communitatis 6—seemed to pale before the common interest in a Europeanised private law that united such scholars in opposition to an overly nationalised private law scholarship that existed. These differences seem to play no role in the most recent Green Paper by the Commission, which suggests that, whatever private law instrument is finally adopted, ‘the instrument should be comprehensive and self-standing, in the sense that references to national laws or international instruments should be as much as possible reduced’,7 and then goes on to distinguish different possible solutions merely on the basis of their breadth, but not on their intellectual origins. And yet, the differences still exist and remain clearly visible. The academic ‘Draft Common Frame of Reference’ (‘DCFR’)8 still displays its origin in the comparative law tradition.9 The existing acquis of EU private law seems to play only a very subordinate role.10 This is so even though existing EU law was ostensibly integrated

3 H Kötz, ‘Gemeineuropäisches Zivilrecht’ in H Bernstein, U Drobnig and H Kötz (eds), Festschrift für Konrad Zweigert zum 70. Geburtstag (Tübingen, Mohr, 1981) 481, 485 (‘Inseln in einem Meer nationaler Rechtsordnungen’); republished in H Kötz, J Basedow, KJ Hopt and R Zimmermann (eds), Undogmatisches (Tübingen, Mohr Siebeck, 2005) 20, 23; H Kötz, ‘Rechtsvereinheitlichung—Nutzen, Kosten, Methoden, Ziele’ (1986) 50 Rabels Zeitschrift für ausländisches und internationales Privatrecht 1, 6. 4 Foundational texts for the former include R Zimmermann, The Law of Obligations. Roman Foundations of the Civilian Tradition (Oxford, Clarendon Press, 1990); H Kötz and A Flessner, European Contract Law vol 1 (Oxford, Oxford University Press, 1997); original German edn Mohr Siebeck, 1992); for the latter, see especially the Principles of European Contract Law (1992–2003). 5 Beginning with S Grundmann, Europäisches Schuldvertragsrecht (Berlin, de Gruyter 1999). 6 S Grundmann, ‘Ius Commune und Ius Communitatis—ein Spannungsverhältnis’ in S Grundmann, Festschrift für Fikentscher (Tübingen, Mohr, 1998) 671; Grundmann, Europäisches Schuldvertragsrecht, ibid, 1–9. 7 European Commission, ‘Green Paper on policy options for progress towards a European Contract Law for consumers and businesses’ COM (2010) 348 final 7 (1 July 2010). 8 Research Group on a European Civil Code/Research Group on EC Private Law (Acquis Group) (eds), Principles, Definitions and Model Rules of European Private Law—Draft Common Frame of Reference (DCFR) 6 vols (Munich, Sellier, 2009). 9 This is so even if the role of actual comparative law in the formulation of its rules may have been limited: N Jansen and R Zimmermann, ‘“A European Civil Code in all but Name”: Discussing the Nature and Purposes of the Draft Common Frame of Reference’ (2010) 69 Cambridge Law Journal 98, 106–07. 10 B Lurger, ‘Much Ado About (Almost) Nothing): The Integration of the So-Called “Consumer Acquis” in the Draft Common Frame of Reference’ in A Somma (ed), The Politics of the Draft Common Frame of Reference (Alphen, Kluwer, 2009) 131–50; R Schulze, ‘The Academic Draft of the CFR and the EC Contract Law’ in R Schulze (ed), Common Frame of Reference and Existing EC Contract Law 2nd edn (Munich, Sellier, 2009) 3–23. On the heterogeneity of sources in the DCFR, see also H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659.

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in the DCFR through the Acquis Principles. But the Acquis Principles themselves have been criticised as not being in full accordance with the existing Community private law,11 which is not surprising, given that they themselves originate at least in part in the ius commune project of the Principles of European Contract Law (‘PECL’) and on the UN Convention on Contracts for the International Sale of Goods (‘CISG’).12 Moreover, their integration into the DCFR has given them a rather supplemental role.13 In short, the problem exists on both sides: the ius commune seems to have difficulties integrating existing EU contract law; the existing ius communitatis seems to defy efforts at systematisation without losing its own character.14 If these were shortcomings only of the existing proposals, then it would suffice to improve these proposals. Indeed, the Commission appears hopeful it can be done; it has set up an expert group to evaluate the DCFR and give advice on the way forward15 (a group curiously comprising mostly members of the same group that already assembled the DCFR itself).16 If, by contrast, these shortcomings are structural, inherent to the respective private law projects, then a remedy will be much harder to find, and the efforts to move forward with the DCFR will not succeed. In this chapter I want to argue that the problems are indeed structural. The starting point is the thesis that the incompatibility between the DCFR and the existing acquis communautaire is a consequence of different private law rationalities.17 Rationalities

11 N Jansen and R Zimmermann, ‘Restating the Acquis Communautaire? A Critical Examination of the “Principles of the Existing EC Contract Law”’ (2008) 71 Modern Law Review 505–34. 12 See H Schulte-Nölke, ‘From the Acquis communautaire to the Common Frame of Reference—the Contribution of the Acquis Group to the DCFR’ (2008) 14 Juridica International 27–31; H SchulteNölke, ‘Die Acquis Principles (ACQP) und der Gemeinsame Referenzrahmen: Zu den Voraussetzungen einer ertragreichen Diskussion’ in R Schulze, C von Bar and H Schulte-Nölke (eds), Der akademische Entwurf für einen Gemeinsamen Referenzrahmen: Kontroversen und Perspektiven (Tübingen, Mohr, 2008) 47–71. 13 See C Castronovo, ‘Common Frame of Reference and Acquis: Conciliation or Clash?’ in K Boele-Woelki and W Grosheide (eds), The Future of European Contract Law (Alphen, Kluwer, 2007) 159–67. For a comprehensive critique of the DCFR, see H-W Micklitz and F Cafaggi, ‘Introduction’ in H-W Micklitz and F Cafaggi (eds), European Private Law after the Common Frame of Reference (Cheltenham, Elgar, 2010). 14 See already N Reich, ‘A European Contract Law: Ghost or Host for Integration?’ (2005) 24 Wisconsin International Law Journal 425, 449: European law is concerned with contract law on many ‘corners’ and had to develop its own concepts of contract; however, its main consideration always has been using contract law as a starting point for further objectives like competition, free movement, public procurement, consumer protection, non-discrimination, or definition of jurisdiction, not dealing with contract law as ‘such’ as taught in law schools or inserted in traditional codes or restatements of contract law. Community contract law is ‘special,’ not ‘general,’ contract law. It is functionally oriented, not systematically developed. It has been created ‘bottom-up’ to solve problems perceived by Community legislators as urgent or important, not ‘top down’ by legal science to create a body of generally applicable norms to contracts. Therefore, the Community concept of contract will differ substantially from the one used in member state contract law, whether in codified or common law countries. 15 Commission Decision of 26 April 2010 setting up the Expert Group on a Common Frame of Reference in the area of European Contract Law [2010] OJ L105/109 (27 April 2010). 16 For criticism, see J Basedow et al, ‘Ein europäisches Vertragsrecht kommt—aber zu welchem Preis?’ Frankfurter Allgemeine Zeitung (1 July 2010) 8. 17 See already, eg, H-W Micklitz, ‘Perspektiven des europäischen Privatrechts—Ius commune praeter legem?’ (1998) 6 Zeitschrift für europäisches Privatrecht 253–76; R Michaels, ‘Privatautonomie und

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concern questions asked and frameworks of discussion, not answers given and ideologies leading to such answers. This means that multiple ideologies, and multiple legal rules, are compatible with one and the same rationality.18 In the European context, one of these rationalities—the rationality of existing Community law—is what I call instrumentalist. 19 The term signifies that private law serves as a means to extra-legal ends, in particular those formulated in the EU Treaty and by the Court of Justice. For a long time, this end was exclusively the furthering of the internal market; now that the goals of the EU are broader, EU private law may also serve a broader array of goals. Nonetheless, the competence of the EU is defined by its goals, so as a consequence all laws it enacts must by necessity be instrumentalist in nature. The other rationality, the one originating in domestic private law as encapsulated especially in codifications on the Continent and in common law in Britain, is what I call juridical. The term is meant to capture a specific characteristic of this type of private law reasoning, namely that its expertise is a specifically law-based one, and the aim is to find answers to existing questions on the basis of the legal material itself—legal texts, legal precedents—rather than on the basis of some extra-legal goal. This dichotomy may seem, at least in essence, familiar; it seems to represent the well-known and oft-analysed dichotomy between ‘classical legal thought’ and a more modern conception of private law. This is not entirely false, but too simple. First, ‘classical legal thought’ is frequently equated with a laissez-faire conception of private law, whereas, by contrast, a juridical rationality can be used to justify far-reaching interventions in contractual autonomy, most importantly based on considerations of just price. Secondly, classical legal thought and modern law refer to different areas—one bygone, one current—whereas juridical and instrumentalist rationalities describe at least potentially timeless concepts; they are ideal types. The idea that the rationalities of ius commune and ius communitatis differ is not new of course, but many analysts believe it must, and can, be overcome in favour of one of the rationalities. For some scholars, the rationalities represent the paradigms of different periods, from which it might follow that the juridical rationality should simply give way to the more current instrumentalist understanding. If this were so, the only mistake with the DCFR would be its anachronistic juridical rationality: were it more openly instrumentalist, it would succeed. Others view the distinct rationalities as linked to the respective level of regulation: Community law automatically follows a specific (instrumental) rationality simply because it is

Privatkodifikation. Zu Anwendbarkeit und Geltung allgemeiner Vertragsrechtsprinzipien’ (1998) 62 Rabels Zeitschrift für ausländisches und internationals Privatrecht 580; CU Schmid, ‘The Instrumentalist Conception of the Acquis Communautaire in Consumer Law and its Implications on a European Contract Law Code’ (2005) 1 European Review of Contract Law 211–27. See now, much more comprehensively, CU Schmid, Die Instrumentalisierung des Privatrechts durch die Europäische Union. Privatrecht und Privatrechtskonzeptionen in der Entwicklung der Europäischen Integrationsverfassung (Baden-Baden, Nomos 2010). 18 Very clear on the compatibility of one rationality (or, in his word, consciousness) with various ideologies is Duncan Kennedy, ‘Three Globalizations of Law and Legal Thought: 1850–2000’ in D Trubek and A Santos (eds), The New Law and Economic Development. A Critical Appraisal (Cambridge, Cambridge University Press, 2006) 19, 22–23. A clear distinction between political and technical matters is made also by U Mattei and F Nicola, ‘A “Social Dimension” in European Private Law? The Call for Setting a Progressive Agenda’ (2006) 41 New England Law Review 1, 16–23. 19 See Schmid, Instrumentalist Conception, above (n 17).

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Community law. If this were true, then the DCFR would, once turned into a Community instrument, partake in this European rationality, and no problem would ensue. My first finding stands in contrast to this. Each of these rationalities is linked neither to a specific time period nor to a specific regulatory level. The narrow focus on relations between EU law and Member State laws closes our eyes to the fact that the relation has a long pedigree. In fact, both rationalities have always coexisted consistently over time and space—in different centuries and different countries of European comparative legal history. The fact that neither has ever won out over the other suggests that neither is dispensable and that instead both may be mutually supportive, perhaps even constitutive.20 My second finding is that these rationalities not only persist over space and time; moreover, each rationality tends to align with a certain legal form. In essence, the form of instrumental private law is the statute; the form of juridical private law is the system, whether codified or uncodified. (Islands and ocean, respectively.) Although the substance of both types of laws changes considerably as between different time periods, different countries and between national and European law, these formal alliances remain constant. If this is correct, then an instrumentalist codification—or even a mere instrumentalist coherent Community instrument—is quite inconceivable. Of course, this alignment of rationalities and forms is not universally true. Statutes can provide a juridical rationality; instrumentalist reasoning may occur in codifications or in the common law. The alignment is not necessary but only typical. Nonetheless, the typicality is quite high, because form and rationality are mutually supportive. On the one hand, an instrumentalist reasoning is often best implemented in a statute, because a statute, due to its relative isolation, ensures maximal force. Juridical reasoning, by contrast, is often best implemented in a system (whether a code or a common law) because of the emphasis in this reasoning on internal legal coherency. On the other hand, the form has an influence on the rationality with which legal rules are interpreted. Thus, a rule in a code will regularly be interpreted and applied in a juridical, systematic manner, even if it was included, originally, for instrumentalist reasons. My third finding is that, although the form of these rationalities remains relatively constant over time, their allocation between the domestic and the European level does not. Currently, juridical private law is largely allocated at the Member State level, whereas most instrumentalist private law rests at the European level. This creates a curious complete reversal. Prior to the nineteenth century, it was exactly the other way round: instrumentalist law (statutes) was local; juridical law was European. This switch of levels leads to unrecognised frictions; it is one important reason for current uncertainties about the future of European private law.

20 cf for the connected relation between private and public law, W Hoffmann-Riem and E Schmidt-Aßmann (eds), Öffentliches Recht und Privatrecht als wechselseitige Auffangordnungen (Baden-Baden, Nomos, 1997); M Moran, ‘The Mutually Constitutive Nature of Public and Private Law’ in A Robertson and Tang Hang Wu (eds), The Goals of Private Law (Oxford, Hart Publishing, 2009) 17.

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The chapter is structured as follows. I first distinguish, in a necessarily rough and overly general way, the two rationalities of private law (section II). I then sketch their parallel development in European private law history and their respective relation to the nationalisation and denationalisation of private law (section III.) I end with some potential implications for European private law (section IV).

II

THE TWO RATIONALITIES DISTINGUISHED

What is the difference between the two rationalities? At the risk—a certainty, actually—of caricature, here are a number of differences between instrumentalist and juridical rationality. One views private law as compensatory21 and coordinate;22 the other as competitive23 or socially responsible. One focuses on the bilateral relations between individuals in (relative) isolation from society; the other on the role of markets and transactions for society (and vice versa).24 One looks at private law as dealing with commutative justice between the parties; the other as an instrument of distributive justice.25 One views private law as separate from public law;26 the other views law as intrinsically linked with, or even as part of, public law.27 One views private law as a systematic whole;28 the other as an assembly of different instrumentalist acts with little or no necessary internal coherence29 (though such coherence may be considered desirable for other reasons, in particular

21 I borrow this term from S Meder, ‘Der Begriff des Privatrechts als Kriterium rechtsgeschichtlicher Forschung. Zur Bedeutung des Kompensationsmodells für die Neuere Privatrechtsgeschichte’ (1997) 19 Zeitschrift für Neuere Rechtsgeschichte 249. 22 G-P Calliess and P Zumbansen, Rough Consensus and Running Code. A Theory of Transnational Private Law (Oxford, Hart Publishing, 2010) 96–109. 23 H-W Micklitz, ‘The Concept of Competitive Contract law’ (2005) 23 Penn State International Law Review 549–86; cf also C Baldus and F Vogel, ‘“Kompetitives Vertragsrecht”: ein Harmonisierungsmodell?’ (2007) Zeitschrift für Gemeinschaftsprivatrecht 158–67. 24 See M Auer, Materialisierung, Flexibiliserung, Richterfreiheit. Generalklauseln im Spiegel der Antinomien des Privatrechtsdenkens (Tübingen, Mohr, 2005) 10–45. However, Auer (like Kennedy, whom she follows here) understands individualism and collectivism as different positions (yielding different responses) while I distinguish different rationalities (yielding different ways of reasoning). 25 Extended debates in CW Canaris, Die Bedeutung der iustitia distributive im Privatrecht (München, Verlag der Bayerischen Akademie der Wissenschaften, 1997); W Lucy, Philosophy of Private Law Part II (Oxford, Oxford University Press, 2007). 26 For a list of suggested criteria of distinction, see R Michaels and N Jansen, ‘Private Law Beyond the State? Europeanization, Globalization, Privatization’ (2006) 54 American Journal of Comparative Law 843. 27 D Kennedy, ‘The Stages of the Decline of the Public/Private Distinction’ (1982) 130 University of Pennsylvania Law Review 1349–57; Hesselink, ‘The Structure of the New European Private Law’, above (n 2) 8–10. 28 N Jansen, Binnenmarkt, Privatrecht und europäische Identität (Tübingen, Mohr Siebeck, 2004) 72ff; for the history of this idea, see R Michaels, ‘Systemfragen des Schuldrechts’ in R Zimmermann (ed), Historisch-Kritischer Kommentar zum BGB vol 2: Schuldrecht: Allgemeiner Teil 1. 29 D Kennedy, ‘Thoughts on Coherence, Social Values and National Traditions’ in MW Hesselink (ed), The Politics of a European Civil Code (The Hague, Kluwer, 2006) 9, 10–19; see also JM Smits, ‘The Future of European Contract Law: on Diversity and the Temptation of Elegance’ in M Faure et al, (eds) Towards a European Ius Commune in Legal Education and Research 239–56.

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the quality of the law overall,30 its effectiveness,31 or equal treatment).32 One believes that law develops in an evolutionary way;33 the other sees change in discrete steps of legislative or judicial interventions. One views the core of private law in non-mandatory rules that express the hypothetical will of individuals and from which parties can derogate if they want (at least with effect among themselves) and treats mandatory rules as supplementary; the other focuses largely on mandatory rules and views non-mandatory rules (if it considers these relevant at all)34 as instrumentalist35—either because they make it costly for parties to deviate from them,36 or because their inefficiency forces parties to reveal their true preferences.37 One views general contract and property rules as its centre38 and places specific legal instruments like consumer protection, the law of standard terms, unfair competition law, to the periphery or even outside private law; the other considers general contract law rules as relatively unimportant and defines private law ‘from the boundaries’:39 competition law, food safety law, labour law, consumer law etc.40 One is technical to the extent that openly non-legal arguments are excluded; the other is technocratic and views law as a means toward the furthering of extra-legal goals, be they derived from economics, ethics or politics.41

30 eg, S Grundmann, ‘European Contract Law(s) of What Colour?’ (2005) European Review of Contract Law 184; see also S Grundmann, ‘Systemdenken und Systembildung im europäischen Privatrecht’ in K Riesenhuber (ed), Europäische Methodenlehre (Berlin, de Gruyter, 2006) 159–86. 31 C Cuijpers and BJ Koops, ‘How Fragmentation in European Law Undermines Consumer Protection: The Case of Location-Based Services’ (2008) 33 European Law Review 880. 32 Hesselink, ‘The Structure of the New European Private Law’, above (n 2) 15. 33 R Zimmermann, ‘Savigny’s Legacy: Legal History, Comparative Law, and the Emergence of a European Legal Science’ (1996) 112 Law Quarterly Review 576. 34 For an opposition against default rules, see U Mattei, ‘Hard Code Now!’ (2002) 1 Global Jurist Frontiers article 1, available at: works.bepress.com/ugo_mattei/5/; see also A Somma, ‘Some Like it Soft: Soft Law and Hard Law in the Shaping of European Contract Law’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 51. 35 MW Hesselink, ‘Non-Mandatory Rules in European Contract Law’ (2005) 1 European Review of Contract Law 44, 81–83. 36 See H-W Micklitz, ‘Review of Academic Approaches on the European Contract Law Codification Project’ in M Andenas, S Diaz Alabart, B Markesinis, H-W Micklitz and N Pasquino (eds), Private Law Beyond the National Systems—Liber Amicorum Guido Alpa (London, British Institute of International and Comparative Law, 2007) 699, 719–20, with reference to Anthony Ogus. 37 I Ayres and R Gertner, ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’ (1989) 99 Yale Law Journal 87. 38 R Sohm, The Institutions: A Textbook of the History and System of Roman Private Law 3rd edn, trans JC Ledlie (Oxford, Clarendon, 1907); originally Institutionen 12th edn (Leipzig, Duncker & Humblot 1905) 29; J Gordley, Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment (Oxford, Oxford University Press, 2007). 39 H-W Micklitz, ‘The Visible Hand of European Regulatory Private Law. The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’ EUI Working Paper LAW 2008/14, 3–4. 40 C Joerges, ‘The Impact of European Integration on Private Law: Reductionist Perceptions, True Conflicts and a New Constitutionalist Perspective’ (1997) 3 European Law Journal 378. 41 For this distinction, see A Riles, ‘Taking on the Technicalities’ (2005) 53 Buffalo Law Review 973–1033.

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Character Focus Overall concept Legal form

Juridical private law

Instrumentalist private law

Compensatory/coordinative Relations between individuals System/seamless web Codification/common law

Competitive/socially responsible Regulation of markets/society

Commutative Separate

Insulated (‘sector-specific’) Statute (also as directive or regulation) Distributive Entwined

Horizontal

Vertical

Style Legal argument

Core fields of classical private law: contract, property, tort, restitution Technical Intrinsic rationality

Periphery of classical private law: competition, food safety, labour, consumer Technocratic Extra-legal goals

Interpretation

Systematic

Teleological

Non-mandatory rules

Core of private law, based on hypothetical will of the parties

Exceptional and of marginal importance, serve purposes of indirect regulation or reduction of transaction costs

Mandatory rules

Exceptional

Core of mandatory rules; non-mandatory rules as exception

The role of contract and property

Function of individual freedom

Means towards efficient/appropriate allocation of goods

Restrictions of freedom of contract

Personal shortcomings (lack of information or wealth)

Market failure or social justice

Justice ideal Relation with public law View of private law Important areas

It is important to point out some differences that the distinction between rationalities does not encompass. First, and perhaps most importantly, the difference is not one of substantive ideology—at least not in the simple form of a Left/Right ideological spectrum, where classical private law would be on the ideological right (or, more modern, neo-liberal) and instrumentalist private law would be on the left, or instrumentalist private law would be altruistic, classical private law would be individualistic. The dichotomy concerns structure, not substance; each side of the dichotomy is compatible, at least prima facie, with any substantive content.42 On the one hand, within instrumentalist private law, we can find both interventionist-progressive positions and market-liberal positions. The 42

Cf already text accompanying n 18.

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manifesto for social justice in European contract law43 is no more or less based on an instrumentalist understanding of private law than is Grundmann’s market-liberal conception of European private law as a market order. On the other hand, we find a variety of positions in juridical private law between the strong emphasis on private autonomy by some one the one hand and Gordley’s equality in exchange on the other.44 This does not mean that rationality and ideology are completely unrelated. Juridical private law is less open to radical thought, on the Left or on the Right—which is one important reason why scholars of both law and economics and critical legal studies have been highly critical of classical legal doctrine. The reason is not that radical thought could not be expressed, at least in theory, in the form of classical legal doctrine (arguably, law and economics often uses formulaic thought that is quite similar) but that juridical private law makes it hard to move away quickly from the status quo. For similar reasons, juridical private law is less open to experimentalism than is instrumentalist private law: evolutionary changes are harder to attribute to any one decision within the legal system than to individual decisions that are not systematically related with other issues. Secondly, juridical and instrumentalist private law do not necessarily deal with different subjects (even though, as a matter of fact, different rationalities often prevail in the actual legal approach to different subjects). Twentieth-century developments have taught us that private law cannot be split into one area that would be neutral from an ethical and political perspective while another one is political. Consumer protection law, for example, is not necessarily allocated to instrumentalist law; it can (and does) also exist within juridical private law.45 The difference is the type of rationality that is used to justify it, and here the old discussion about the foundations of consumer protection law is illustrative. Instrumentalist private law will protect consumers in order to achieve certain goals, be it the functioning of markets (by overcoming information asymmetries) or the enhancement of social justice (by overcoming structural imbalances of bargaining power). Juridical private law, by contrast, will justify the protection of consumers on the basis of justice in exchange. The conflict between the traditional notion of the passive consumer and the European notion of the informed consumer is best understood not as a conflict between different degrees of protection, but rather as a conflict between different rationalities. Similarly, the debates in several European countries about whether consumer protection laws should be integrated into the general private law system (for example the civil code) or remain separate is not, at least not only, a debate over the importance of consumer protection. (In any event, the implications of integration would not be clear: is consumer law more important if it is integrated, or if it has its own visible place?) Rather, it is a debate about

43 Study Group on Social Justice in European Private Law, ‘Social Justice in European Contract Law: A Manifesto’ (2004) 10 European Law Journal 653. 44 J Gordley, ‘Equality in Exchange’ (1981) 69 California Law Review 1587; Gordley, Foundations of Private Law, above (n 38) 361ff. 45 cf R Michaels, ‘Preamble I’ in S Vogenauer and J Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC-Commentary) (Oxford, Oxford University Press, 2009).

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whether consumer law is part of a general system based on juridical rationality or rather a separate area of legislative discretion informed by instrumentalist rationality. This implies the answer to another, third, misconception, suggested by proponents and opponents alike: that juridical private law is, or aspires to be, devoid of substantive values, neutral, or un-political. Private law has always been about values, and there have always been discussions as to what those values should properly be.46 In this sense, law—including classical private law—can never be neutral; it always takes a position, and it always plays a role in and for society. What is different from instrumentalist law is the structure of such discussions, sometimes also the criteria used. One may properly call this political in a general sense: private law concerns society at large and creates winners and losers.47 Take, for example, the debate in Germany in the 1990s about consumer protection in secured credit.48 Banks had frequently required close family members of borrowers—for example, spouses or children—to enter into security agreements, and the question was whether those family members could be held responsible once the borrower defaulted. In part, of course, this was a debate on the proper degree of protection of consumers. Insofar as we could distinguish just two camps (as well as compromise solutions in between), they would be those who favour party autonomy and those who favour the protection of weak individuals, or those who favour market efficiency (liberals) and those who favour social justice (progressives). But this dichotomy characterises only half of the dispute, because it maps on the difference between rationalities in a complex way. In part, there existed a dispute among those interested in protection of the family members between those who thought such protection required intervention by the Constitution (and the Constitutional Court) and those who thought private law could bring about this protection on its own. In the end, therefore, we must distinguish not two but four different positions. Among proponents of instrumentalist private law, some suggested that consumer protection would vitiate efficient contracts; others would suggest that consumer protection is necessary to create proper market conditions, or to achieve social justice. Among proponents of juridical private law, a similar debate existed among those who thought that the nature of the contract suggests its enforceability and those who would argue that such a contract violates the juridical category of good morals. By contrast, take for example the debate over the protection of personal guarantees under the doorstep directive. In Dietzinger, the European Court of Justice held that a personal guarantor can invoke protection of the directive only if 46 N Jansen and R Michaels, ‘Private Law and the State. Comparative Perceptions, Historical Observations, and Basic Problems’ (2007) 71 Rabels Zeitschrift für ausländisches und internationals Privatrecht 345. 47 Whether this means that private law requires democratic legitimacy is another matter. For sceptical positions, see Michaels and Jansen, ‘Private Law beyond the State?’, above (n 26) 879ff; JM Smits, ‘European Private Law and Democracy—A Misunderstood Relation’ in M Faure and F Stephen (eds), Essays in the Law and Economics of Regulation in Honour of Anthony Ogus (2008) 49–59; JM Smits, ‘Democracy and (European) Private Law: A Functional Approach’ (2009) 2/2 European Journal of Legal Studies 26, available at: www.ejls.eu/5/66UK.pdf. 48 See N Jansen, Seriositätskontrollen existentiell belastender Versprechen. Rechtsvergleichung, Rechtsgeschichte und Rechtsdogmatik, in: Störungen der willensbildung bei Vertragsschlu/3, hg. von Reinhard Zimmermann, Tübingen, Mohr (siebeck), s. 125−162.

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the guarantee is entered into for purposes of a consumer contract.49 For a juridical rationality, this is hard to understand: it appears that the personal guarantor needs, if anything, more protection than a normal consumer. From an instrumentalist perspective, by contrast, the decision is understandable: the directive is aimed specifically at the protection of consumers, not at a general control of contracts.50 Such general control is the domain of juridical private law, and indeed, that is where protection of the guarantor can be found.51

III

THE TWO RATIONALITIES IN EUROPEAN PRIVATE LAW HISTORY

The prima facie similarity between juridical private law and classical legal thought suggests a certain temporal relation between both rationalities: juridical private law characterised the nineteenth century, instrumentalist private law replaced it sometime in the twentieth century.52 This is probably correct insofar as disciplinary paradigms are concerned: scholarly debate in the nineteenth century took place mostly within a juridical paradigm; instrumentalist rationality was viewed as an exception. By contrast, many debates in the second half of the twentieth century led more and more to an instrumentalist paradigm, where juridical rationality was viewed as an exception (though this preference for instrumentalist reasoning was stronger in the United States than in Europe).53 It is incorrect, however, as a suggestion concerning the actual content of private law. Rather, both rationalities always coexisted. This in itself should not be a surprising insight—it is hard to conceive of a legal system that can completely ignore one of the two rationalities.54 However, the insight that a legal system always requires both rationalities does not imply in what form these two rationalities will actually occur in the legal system. A brief survey of European private law history suggests interesting insights for these questions. I pay special attention to two aspects: first, the form in which juridical and instrumentalist private law respectively are expressed; and, secondly, whether juridical and instrumentalist private law respectively are thought of as domestic/ national or as transnational/European.

49 Judgment of the Court (Fifth Chamber) of 17 March 1998, Bayerische Hypotheken- und Wechselbank, Case C-45/96 AG v Edgard Dietzinger [1998] ECR I-01199. 50 C Joerges, ‘Interactive Adjudication in the Europeanisation Process? A Demanding Perspective and a Modest Example’ (2000) 8 European Review of Private Law 1–16. 51 Bundesgerichtshof, Judgment of 14 May 1998, IX ZR 56–95, (1998) Neue Juristische Wochenschrift 2356, sub II. 52 Most recently JW Rutgers, ‘The DCFR, Public Policy, Mandatory Rules, and the Welfare State’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 115, 123–25 with references; more generally, Kennedy, ‘Three Globalizations of Law and Legal Thought’ in Trubek and Santos (eds), The New Law and Economic Development, above (n 18). 53 Kennedy, ibid. Michaels and Jansen, ‘Private Law beyond the State?’, above (n 26) 845. 54 D Kennedy, ‘Distributive and Paternalistic Motives in Contract and Tort Law, with Special Reference to Compulsory Terms and Unequal Bargaining Power’ (1982) 41 Maryland Law Review 4.

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Ralf Michaels A Starting Point—Universal Ius Commune/Common Law and Local Statutes

A good starting point55 lies in the continental ius commune and the English common law prior to the nineteenth century. The ius commune represented juridical private law in the sense of the criteria discussed above. Formally, its foundation lay not in legislative law-making, but in scholarship (though the ius commune also encompassed judicial opinions.) Moreover, it mostly represented juridical reasoning. Even where new rules were introduced for what might be called instrumentalist reasons—laesio enormis,56 adverse possession/acquisitive prescription,57 good faith acquisition58—the ‘official’ reasons given were specifically juridical, and the rules, once accepted, entered the general juridical discourse. However, the ius commune never represented the entirety of private law. Rather, this largely scholarly law was interspersed by statutes—Coing used exactly the same metaphor later to be used by Kötz—‘like isolated little islands in the sea’.59 These statutes (at least most of them) represented instrumentalist private law in the sense developed before: they implemented specific policy goals and were interpreted with these goals in mind.60 Again, the alignment was never perfect: some local statutes were always more like little codes; their goal was to provide certainty on rules of traditional private law with no additional instrumentalist goals. The relation between instrumentalist statutes and juridical ius commune was complex. On the one hand statutes trumped the common law. On the other hand, their interpretation was a matter of ius commune, and they were interpreted narrowly—not necessarily because of judicial desire to minimise legislative restriction to the common law, but more because they were thought to represent specific policy choices, not generalisable principles. English common law, before the nineteenth century, displayed many of the same characteristics.61 Like the ius commune, the English common law represents juridical private law (even though the term ‘private law’ was rarely used).62 Like the ius commune, this common law was interspersed by statutes, but the relation

55 The difference between juridical and instrumentalist private law can be observed earlier; see Jansen and Michaels, ‘Private Law and the State’, above (n 46). For Roman law, see, eg, N Jansen, ‘Staatliche Gesellschaftspolitik und juristische Argumentation im römischen Privatrecht?’ in H Altmeppen et al (eds) Festschrift für Rolf Knütel zum 70. Geburtstag (2010) 493–512. 56 J Gordley, ‘Just Price’ in P Newman (ed), The New Palgrave Dictionary of Economics and the Law vol II (London, Macmillan, 1998) 410. 57 See C Rose, ‘Possession as the Origin of Ownership’ (1985) University of Chicago Law Review 73−88. 58 R Michaels, ‘Acquisition from a Non-Owner’ in J Basedow, K Hopt and R Zimmermann et al (eds), Handbook of European Private Law (Oxford, Oxford University Press, forthcoming 2011). 59 For the ius commune, see H Coing, ‘Zur Auslegung von Rezeptionsgesetzen. Fichards Noten zur Frankfurter Rezeption von 1509’ (1936) 56 Zeitschrift für Rechtsgeschichte (Romanistische Abteilung) 269, 276; cited in R Zimmermann, ‘Statuta sunt stricte interpretanda? Statutes and the Common Law: A Continental Perspective’ (1997) 56 Cambridge Law Journal 315, 317; a similar expression is used (but with doubts as to its attraction for French lawyers) by MS Amos, ‘The Interpretation of Statutes’ (1934) 5 Cambridge Law Journal 163, 173. 60 eg, M Raeff, The Well-Ordered Police State: Social and Institutional Change through Law in the Germanies and Russia, 1600–1800 (New Haven, Yale University Press, 1983). 61 For comparison, see Zimmermann, ‘Statuta sunt stricte interpretanda?’, above (n 59); S Vogenauer, Die Auslegung von Gesetzen in England und auf dem Kontinent (Tübingen, Mohr, 2001). 62 cf HP Glenn, Common Laws (Oxford, Oxford University Press, 2005).

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between common law and statutes was a long and uneasy one. In fact, the image of statutes as islands in an ocean of common law originates with Bentham;63 it has since been adopted by others.64 Statutes have traditionally been viewed as instrumental in nature, which was reflected in their interpretation: few attempts were made to integrate statutes into a broader system of common law.65 Further, ideas on the relation resemble those in the ius commune. Thus, on the one hand, statutes trump the common law; the idea of judicial review of statutes against some non-legislative standard is very limited.66 On the other hand, however, statutes are to be interpreted narrowly, with a view to their instrumentalist character and the specific regulatory goal the legislator had in mind. One more remarkable characteristic can be found in both ius commune and Anglo-American common law: the difference between universality and particularity. The ius commune was thought of as universal in the sense that it transcended boundaries between different jurisdictions; it was ‘common’ to all, European in nature. The same is true for the common law, despite Pound’s suggestion that the protestant tradition in law that influenced the common law was nationalist, opposed to the universalism of papist canon law.67 For a long time, the idea of the common law applied to all peoples in England, later even to the Commonwealth. In Swift v Tyson, an opinion from 1842,68 Story J felt free to ignore local principles of common law as they had developed in individual states, and to replace them with trans-state (and potentially trans-national)69 principles of law, invoking lex mercatoria and the ius commune. As late as 1897, an American judge could pronounce that ‘[t]he tendency of the law of all the English race is, if unimpeded, toward uniformity … The strongest barriers against the action of this centripetal force are diversity of legislation with its obvious attendant ills’.70 Statutes were local; the common law was universal. B

The Nationalisation of Juridical Private Law

In continental Europe, juridical private law lost its non-legislative character with the rise of codification. The consequence was that the formal difference between traditional and instrumentalist private law became blurred; both kinds of law now consisted in legislative law. This has led many observers from common law jurisdictions to the erroneous conclusion that all private law in Europe is now 63 J Bentham, Of Laws in General HLA Hart edn (London, Athlone Press, 1970) 120: ‘the several efficient laws appear … like islands and continents projecting out of the ocean’. Bentham, remarkably, understood ‘laws’ to combine both statutes and precedent, both of which he thought could interfere with an assumed pre-legal or non-legal general liberty. His opposition to the common law, and support of codification, was directed in part against this character of judge-made law. 64 See, eg, K Zweigert and H Kötz, An Introduction to Comparative Law 3rd edn (Oxford, Clarendon Press, 1998) 70; J Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (The Hague, Kluwer, 1999) 22. 65 Vogenauer, Die Auslegung von Gesetzen in England und auf dem Kontinent, above (n 61). 66 Heydon’s Case (1584) 76 ER 637. 67 R Pound, The Spirit of the Common Law 54. 68 Swift v Tyson 41 US 1 (1842) 69 ibid,19. 70 In (1897) 5 The American Lawyer.

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thought to be instrumentalist, depending in its substance on the legislator’s discretion. Yet this is erroneous. Formally, codes are indeed passed by parliament, and this makes for an important element of democratic control and legitimacy. Substantively, however, their content is determined largely outside parliament, and parliament rarely takes notice of it. Portalis’ famous quote is still, more or less, apt: ‘The Codes of nations are the fruit of the passage of time; but properly speaking, we do not make them’.71 The French Code civil was largely a continuation of prior academic legal treatises.72 The German Civil Code was, in its drafting stage, vigorously debated among academics and practitioners; parliamentary debate, by contrast, was brief and concerned mainly details.73 An earlier draft of the New Dutch Civil Code was discussed extensively in Parliament in the first half of the last century; when the final code was passed in the 1990s, however, no similarly extensive discussion appears to have taken place.74 What mattered, in other words, was the form of private law as a systematic presentation of rules and principles with commentary, more than their formal origin with the legislator.75 Codified private law is often thought of as intrinsically conservative, but this view is problematic. The idea that codes conserve the state of the law at any given time, or, more specifically, express an intrinsically conservative (or bourgeois) idea of law, possibly one of the nineteenth century,76 has been shown to be exaggerated in two ways. First, codifications have proven adaptable to different political and societal circumstances, and they have evolved over time, if not in text then in how they have been interpreted. The German Civil Code, most famously, existed under five radically different regimes.77 A second point, however, may be even more important. The mistake of those criticising codes for being conservative is that they take codes, and thus classical private law, to represent private law at large. They thereby forget the huge corpus of private law outside the codes, much of which is instrumentalist and represents the necessary reactions to social demands. Statutes can bring about quick changes because a code can continue to provide a framework; codes can remain relatively constant because the necessary change takes place elsewhere, namely in statutes. In fact, for much of the nineteenth and twentieth centuries, the distinction between juridical and instrumentalist private law continued, at least in principle, as

71 JEM Portalis, Discours Préliminaire sur le projet du code civil (1801), here cited after JEM Portalis, Discours, rapports et travaux inédits sur le Code Civil (Paris, Joubert, 1844) 1, 15: ‘Les codes des peuples se font avec le temps; mais, à proprement parler, on ne les fait pas’. 72 J Gordley, ‘Myths of the French Civil Code’ (1994) 42 American Journal of Comparative Law 459. 73 One of those, however, was already the protection of the weaker party. See, more generally, MF John, Politics and the Law in Nineteenth Century Germany: The Origins of the Civil Code (Oxford, Clarendon Press, 1989) ch 7. 74 See MW Hesselink, ‘The Politics of a European Civil Code’ (2004) 10 European Law Journal 675, 689–91. 75 N Jansen, The Making of Legal Authority (Oxford, Oxford University Press, 2010) especially 99ff. 76 See, eg, F Wieacker, Das Sozialmodell der klassischen Privatrechtsgesetzbücher und die Entwicklung der modernen Gesellschaft (Karlsruhe, CF Müller, 1953); AJ Arnaud, Essai d’analyse structurale du code civil français—La règle du jeu dans la paix bourgeoise (Paris, LGDJ, 1974); N Irti, L’età della decodificazione (Milano, Giuffré, 1979); for counter-critique see, eg, J Rückert, ‘Das Bürgerliche Gesetzbuch—ein Gesetzbuch ohne Chance?’ (2003) Juristenzeitung 749–60. 77 Das BGB im Wandel der Epochen (U Diederichsen and Wolfgang Seller eds, Göttingen, Vandenhoeck & Ruprecht, 2002).

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a formal one, too: only general private law was codified; instrumentalist private law remained, more often than not, in the form of statutes. In Germany, the formal distinction is clearest: on the same day on which the German Civil Code was passed, a number of specific private law statutes were passed alongside it but deliberately left out of the code. In French law, there is a greater tendency to integrate instrumentalist statutes into the Code civil, but often these statutes still remain recognisable both by their numbering and their distinct regulatory style.78 This is sometimes forgotten when codes are said to be comprehensive and all-encompassing. In this sense, then, instrumentalist statutes still exist, and their relationship to general law in form of the code still resembles that of statutes to the common law: statutes typically trump the code as leges speciales; however, their interpretation is a matter of principles developed within general private law (though rarely codified). Codification did not immediately lead to a nationalisation of all European private law. The French Code civil provides a fascinating combination of close connection to the nation state on the one hand, universal aspiration on the other: although (or because?) quintessentially French, it has always been promoted as a model for the world.79 Codes became symbols of national identity and culture, yet not in demonstrating difference from other countries in substance, but instead rather through the demonstration that each country again can bring about what amounts to essentially the same. As a consequence, the use of comparative law arguments was, in the beginning of the codes, relatively frequent and seemed to pose few methodological or even political concerns. Only after some time, when domestic expertise became great enough, did this change: codes (like statutes) came to be viewed as quintessentially domestic.80 Interestingly, a similar development took place in common law systems, even though no explicit act of codification signalled the shift. A hundred years after Swift v Tyson, Brandeis J, in Erie Railroad, would have none of Story J’s transnational common law: now, common law was based on sovereign will, and where state law governed, the Supreme Court was bound to apply the common law as it had developed in the states. Holmes J had formulated the intellectual foundation earlier in a different case: ‘The common law is not a brooding omnipresence in the sky but the articulate voice of some sovereign or quasisovereign that can be identified … It always is the law of some state ’.81 Similar, though perhaps less pronounced, developments can be observed outside the United States, in the declining role of the Judicial Committee of the Privy Council as the highest court of appeal for various common law jurisdictions.82 In its heyday, the Privy Council’s greatest force lay not in imperial control over the colonies, but rather in its ability to symbolise how the common law can bind together vastly 78

cp only, eg, the rules in the French code civil on product liability with the rules on general law of

delict. 79 This tension can be observed, eg, in Y Lequette, ‘Quelques remarques à propos du projet de code civil européen de M von Bar’ 2002 Recueil Dalloz Doctrine 2202–14. 80 N Jansen, Binnenmarkt, above (n 28) 19ff with references. 81 Southern Pacific Co v Jensen 244 US 205, 222 (1917) (Holmes J, dissenting). 82 DB Swinfen, Imperial Appeal: The Debate on the Appeal to the Privy Council, 1833–1986 (Manchester, Manchester University Press, 1987).

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different cultures. After independence, the former colonies, one after another, abolished the appeal not so much, it appears, because of a lack in quality (though delays were an issue) or, worse, because they felt that the United Kingdom would still exert power. Rather, appeals to a court outside the country would have felt at odds with the newly-found sovereignty. C

The Denationalisation of Instrumentalist Private Law

For some time, then, all private law, juridical and instrumentalist, remained at the state level and the boundaries between them began to become blurred. It was before this background that the somewhat simplistic ideas about a complete sub-sumption of private law under public law were strongest: all law was public law because all law was state law.83 In the European context, this idea had important (though perhaps unintended) consequences: if all law was essentially public, then all law was at least potentially instrumentalist, and that meant that competences over instrumentalist law encompassed competences over all private law. In this sense, the two rationalities can explain, in a nutshell, both why the European Community entered the field of private law and why it entered it in the specific way and with the specific limitations that it did. Originally set up with exclusive competence over regulation to enable a common market, the Community developed, with some justification, an ever-broader definition both of regulation and of what might be necessary for a common market, which began to filter into private law, without ever capturing all of it.84 Since no explicit general EU competence for private law exists, any competence must be grounded in specific provisions and thus justified with specific regulatory goals. As a consequence, existing EU private law follows an instrumentalist rationality. This rationality does not determine outcomes: Article 114 TFEU, the main basis of EU private law legislation, is so vague as to allow for very different policies, notably both those that favour market liberalisation and those that increase and harmonise consumer protection.85 Not surprisingly, therefore, both market liberals and consumer protection proponents have long seen the best opportunities for their respective policy goals in the European Union, evidence that EU private law can accommodate a variety of different policies and ideologies, while remaining within one particular rationality.86 Formally, EU private law remains, in principle, in the traditional form of instrumentalist private law, namely statute. Most existing private law directives and regulations share the main characteristics of statutes: they regulate specific situations; they remedy perceived shortcomings in existing law, they are not comprehensive legislative instruments (though some directives, like those on product liability or consumer purchases cover quite wide ground). 83

See Michaels and Jansen, ‘Private Law beyond the State?’, above (n 26). cf N Reich, ‘The Public/Private Divide in European Law’ in Micklitz and Cafaggi (eds), European Private Law after the Common Frame of Reference, above (n 13) 56–89. 85 See V Mak, ‘Standards of Protection: In Search of the “Average Consumer” of EU Law in the Proposal for a Consumer Rights Directive’ (2011) 19 European Law Journal 25. 86 B Heiderhoff, Gemeinschaftsprivatrecht 2nd edn (München, Sellier, 2007) 132–33. 84

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The increased EU legislation, combined with the jurisprudence on the impact of the fundamental freedoms on national private law, has had the effect that a large part of instrumentalist private law has moved from the national to the supranational, European, level. At the same time, the need to justify EU private law legislation with the regulatory goals of the internal market have meant that EU legislation of juridical private law, in particular in the form of a comprehensive codification, has been much harder to justify. First, it is harder to explain why the juridical private law of the member states provides a barrier to trade.87 Moreover, the Court of Justice explicitly held (albeit in passing) that rules that parties can avoid through the exercise of party autonomy (which encompasses most rules of juridical private law) do not, in principle, provide such a barrier.88 The reasoning is not unproblematic: even though juridical private law is not aimed at regulatory goals, it can nonetheless have effects on the internal market.89 The correct reason may be a different one: rules of juridical private law are typically part of a whole system that cannot easily be separated from that system, which means that ruling them inapplicable would be both inadequate and ineffective. Statutes, even of European origin, can interact with (relative) ease. What would be needed would be a comprehensive codification on the European level, but that remains hard to justify from an instrumentalist perspective.90 IV

CONSEQUENCES

It is worth pausing to state two important findings from the historical overview. First, both juridical and instrumentalist rationalities have not only survived side by side over time; they have also, again and again, found the same formal expression, with one important exception: whereas instrumentalist private law has almost always taken the form of specific statutes, juridical private law has existed as either common law or as codification. Secondly, between the national and the European level, juridical and instrumentalist private law have switched places. Juridical private law, once considered transnational, has moved to the domestic sphere (and is now defended as an emergence of national culture). Instrumentalist private law, by contrast, has moved, in large parts, from the domestic sphere to the European sphere. These findings spur several consequences. The first consequence concerns the switch of juridical and instrumentalist law between domestic and European level. As concerns juridical private law, the virulent opposition towards Europeanisation, be it in form of a code or in form of a new ius commune, remains somewhat puzzling from a historical perspective. Juridical law was long transnational and, 87 See, eg, the brief analysis by JW Rutgers, ‘The European Economic Constitution, Freedom of Contract and the DCFR’ (2008) European Review of Contract Law 95, 104–05. 88 Case C-339/89 Alsthom Atlantique SA v Compagnie de construction mécanique Sulzer SA [1991] ECR I-107. 89 Comprehensively, A Tassikas, Dispositives Recht und Rechtswahlfreiheit als Ausnahmebereiche der EG-Grundfreiheiten (Tübingen, Mohr, 2004); see also Hesselink, ‘Non-Mandatory Rules in European Contract Law’, above (n 35) 44. 90 Doubts as to its justification under Alsthom Atlantique are expressed by Reich, ‘A European Contract Law’, above (n 14) 440.

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presumably, is less in need of democratic legitimacy and thus nationalisation than is instrumentalist law. Its place at the Member State level is therefore usually defended not on political but on cultural grounds: national codes, and the English common law, are viewed as national symbols.91 These cultural positions do not seem very important, but neither are the calls for a European codification, because moving the formulation of juridical private law to a European level may be relatively small. True, the historical experience suggests that the main function of juridical private law is to serve as a background law, and that background law should be transnational. In this sense, a European discourse over private law, as Zimmermann in particular has advocated for a long time, is most welcome. However, for this purpose it matters little at what level juridical private law is formulated; what matters is the extent to which the community of lawyers that develops private law engages in dialogue. Given the extent of discourse that already exists, and given the existence of several codified bodies of contract law that can already serve as background law, most importantly the UNIDROIT Principles 92 and PECL, one may well wonder whether a CFR actually has any additional role to play.93 The bigger problem of the switch lies with the partial move of instrumentalist private law to the supranational level. Historically, instrumentalist law worked well on the state level because the state had both the democratic legitimacy to enact it and the tools to implement it—even if, in reality, democratic legitimacy is a recent (and increasingly contested) achievement,94 and laws were enforced irregularly until quite recently.95 The new Europeanised instrumentalist private law still relies largely on states for both its democratic legitimacy and its effective implementation (under the supervision of the Court of Justice and the Commission). If the above analysis is correct, then the friction between EU private law and Member State law brings together two quite different conflicts: that between European and Member State instrumentalist rules and that between instrumentalist and juridical private law generally. As to the former conflict, the problem, noted most explicitly by the Social Justice Group, that the move from Member State level to EU level implies, clandestinely, a move from a focus on social justice in the Member States to a strong emphasis on free markets on the EU level, seems apt. The solution proposed by the Social Justice Group—EU law must develop more social justice—is, however, only one way to re-establish the balance; the other would be to leave social justice concerns in the Member States (where their democratic legitimacy can be achieved more easily) and instead fine tune the balance and conflict between EU and Member State rules in a multi-state system. This is a topic of the ongoing debate over multi-level regulation in European private law, and the only direct contribution this 91

See only N Jansen, Binnenmarkt (above n 28). R Michaels, ‘Umdenken für die UNIDROIT-Prinzipien: Vom Rechtswahlstatut zum Allgemeinen Teil des transnationalen Vertragsrechts’ (2009) 73 Rabels Zeitschrift für ausländisches und internationals Privatrecht 866–88. 93 S Vogenauer, ‘Common Frame of Reference and UNIDROIT Principles of International Commercial Contracts: Coexistence, Competition, or Overkill of Soft Law?’ (2010) 6 European Review of Contract Law 143–83. 94 The challenge to democratic legitimacy comes from the increasing number of laws enacted through administrative, not legislative processes. 95 J Schlumbohm, ‘Gesetze, die nicht durchgesetzt werden: ein Strukturmerkmal des frühneuzeitlichen Staates?’ (1997) Geschichte und Gesellschaft 647 (1997). 92

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chapter can make here is to suggest that the multi-level question is important for regulatory (ie, instrumentalist) private law but not so much for juridical private law. As to the latter conflict, a second consequence concerns the difficulties of creating a coherent and comprehensive body of European private law on the basis of either juridical or instrumentalist rationality. Broadly speaking, because the different projects represent different rationalities, the challenges they have to overcome are different ones. Returning to the metaphor of islands and the ocean, such proposals attempt to get rid of either the ocean or the islands. Along the lines of the first alternative, Schmid suggests that ‘with the plans for a European contract code, we may well be on the way towards a new European law continent surrounded by an ever smaller sea of national contract law’.96 This is the project that aims at harmonising existing instrumentalist EU law, as for example in the Consumer Rights Directive. However, it seems unlikely that the project will get rid of all water. Instrumentalist private law is already situated at the European level, but its own rationality is in conflict with the idea of systematisation. Part of the trouble has to do with the different levels of European instrumentalist law and national juridical law and is well known: such a huge project of artificial land building interferes strongly with the existing ocean of national laws, and the strong criticism of the directive suggests that this interference is not easily accepted. Part of the trouble has to do with the different rationalities, and this part, although discussed less frequently, may actually be more important. Linking the islands takes away the great advantage of individual statutes to regulate specific areas, without having to take into account the direct impact such regulation has on other areas of the law. If history is a good guide, then the regulatory character of the ius communitatis probably defies efforts at systematisation, let alone a comprehensive one. The alternative, to raise the water of juridical private law until the islands (at least those of European origin) are no longer visible, appears at least as fanciful. True systematisation of a European juridical law would not be a great problem. Juridical private law is already systematic (at least within each Member State’s law); its transposition to the European level would merely undo the nationalisation of private law that took place earlier and, in this way at least, re-establish the situation of the ius commune. (This step would be successful only if it left behind also the methodological nationalism that underlies the forms that juridical private law found in the nation state).97 The problem is that such Europeanised juridical private law would not lose its juridical character; it could therefore neither subsume nor integrate existing instrumentalist private law. It is not surprising that the integration of the Acquis Principles in the DCFR has so far been quite incomplete. This suggests a third consequence: it has been pointed out, critically, that DCFR and the Consumer Rights Directive still have almost no connection.98 The DCFR hardly 96 Schmid, The Instrumentalist Conception of the Acquis Communautaire in Consumer Law and its Implications on a European Contract Law Code, above (n 17) 212. 97 JM Smits, ‘The Draft-Common Frame of Reference, Methodological Nationalism and the Way Forward’ (2008) 4 European Review of Contract Law 270–80; JM Smits, ‘The Draft Common Frame of Reference: What is Wrong and How to do Better?’ ‘in Micklitz and Cafaggi (eds), European Private Law after the Common Frame of Reference, above (n 13) 90–100. 98 R Zimmermann, ‘The Present State of European Private Law’ (2009) 57 American Journal of Comparative Law 479, 487–89; R Zimmermann, ‘Textstufen in der modernen Entwicklung des

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accounts for existing EU private law. On the other hand, the Directive Proposal appears to have been developed with little attention to comparative domestic law. Only subsequently did the Commission publish an unofficial ‘comparative table’ measuring, in somewhat schematic fashion, the impact the directive would have on Member State laws.99 This continued separation may actually be neither surprising nor deplorable; it puts into form the continued existence of two private law rationalities on the European level. Instead of attempting to make both approaches and their respective emanations—DCFR and Consumer Rights Directive, respectively—more similar, we might be better served by leaving each to its own rationality. In other words, we should be glad that the acquis communautaire has not been properly integrated into the DCFR, because this non-integration makes it possible for both DCFR and acquis to maintain their respective rationalities. On the one hand, this would make it inadequate to direct instrumentalist criticism at the DCFR. Its perceived lack of social justice100 would not be a big problem as long as social justice was adequately reflected in instrumentalist private law (whether on the Member State or the European level). The underlying argument is simple: although social justice is undoubtedly a desideratum of private law writ large, it is not a necessary element of that part of private law that is juridical. On the other hand, if the Consumer Rights Directive should prove unable to overcome fragmentation,101 this would be in accordance with its instrumentalist character. It would not be a real problem as long as the necessary coherence of European private law could be brought about through a body of juridical private law. Finally, if it is true that several bodies of private law will continue to exist— European instrumentalist law, member state instrumentalist law, and juridical private law (perhaps even on different levels) then it follows that we must broaden our perspective. We cannot confine ourselves to the analysis of substantive rules within these respective bodies; we must also develop conflicts rules for the relations between these respective rationalities.102 But this would be a programme for a yet bigger project.

europäischen Privatrechts’ (2009) Europäische Zeitschrift für Wirtschaftsrecht 319, 320–21. Detailed comparison in P Rott and E Terryn, ‘The Proposal for a Directive on Consumer Rights: No Single set of Rules’ (2009) 17 Zeitschrift für Europäisches Privatrecht 456–88; TQ de Booys, MW Hesselink and C Mak, ‘How the CFR Can Improve the Consumer Rights Directive: A Comparison between the Model Rules in the Draft Common Frame of Reference and the European Commission’s Proposal for a Consumer Rights Directive’, Centre for the Study of European Contract Law Working Paper Series No 2009/09, available at: ssrn.com/abstract=1492660. More parallels are seen in R Schulze, Common Frame of Reference and Existing EC Contract Law, above (n 10). 99

Available at: ec.europa.eu/consumers/rights/docs/comparative_table_en.pdf. eg, MW Hesselink, ‘Common Frame of Reference and Social Justice’ (2008) 4 European Review of Contract Law 248; expanded as CFR and Social Justice: A Short Study for the European Parliament on the Values Underlying the Draft Common Frame of Reference for European Private Law: What Roles for Fairness and Social Justice? (Munich, Sellier, 2008); Rutgers, ‘The DCFR, Public Policy, Mandatory Rules and the Welfare State’ in Somma (ed), The Politics of the Draft Common Frame of Reference, above (n 10) 115. 101 V Mak, ‘Review of the Consumer Acquis: Towards Maximum Harmonization?’ (2009) 17 European Review of Private Law 59–60. 102 See, eg, C Joerges, ‘Sozialstaatlichkeit in Europe? A Conflict of Laws Approach to the Law of the EU and the Proceduralisation of Constitutionalisation’ (2009) 10 German Law Journal 336. 100

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9 The Theoretical Foundations of European Private Law: A Time to Stand and Stare ROGER BROWNSWORD

I

A

INTRODUCTION

WELL-KNOWN poem by William Henry Davies begins:

What is this life if, full of care, We have no time to stand and stare

When European contract lawyers have never been so busy, debating and drafting the Common Frame of Reference (‘CFR’), reviewing the consumer acquis and discussing the move from minimum to maximum harmonisation, we might take a leaf from Davies’ book. We might pause to ask what we take to be the theoretical foundations of private law in general and of contract law in particular. After all, when we are so busy with the doctrinal detail, these are questions that, understandably, might escape our attention. Evidently, Davies was something of a traveller, but not a businesslike traveller looking for the quickest way of getting from A to B. For Davies, a gentle meander from A to B was just fine. In the same wandering spirit, this chapter starts with some thoughts about the ordering elements of human societies (including the private legal ordering elements) and it ends with some remarks about effective ordering. However, along the way, there are reflections on questions of justification and purpose, as well as matters of principle and policy, that are, I think, critical to our getting to grips with the foundations of private law in general, as well as seeing more clearly what the current European contract law debates amount to. Davies’ view of the world was somewhat left-field and, appropriately enough, what emerges in this chapter is a view of contract law that is out of kilter with much common thinking.1 To say that the law of contract is quintessentially a law of private ordering is not obviously at odds with the conventional wisdom; however, if 1 For the seeds of this view, see R Brownsword, ‘Contract, Consent, and Civil Society: Private Governance and Public Imposition’ in P Odell and C Willett (eds), Civil Society (Oxford, Hart Publishing, 2008) 5.

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we take this idea seriously, we arrive at some counter-conventional views concerning what is and what is not part of the law of contract. For example, the view taken in this chapter is that the harmonisation of the law regulating consumer transactions in the European marketplace is an expression of public, rather than private, ordering—from which it follows that a number of directives, albeit targeted at consumer contracts, should not be characterised as an articulation of the law of contract. This is no idle exercise in classification; for, the justifying strategies that we use in relation to public ordering are quite different from those applied to private ordering. But, this is to rush ahead; and Davies would not approve. So, let us approach this in a more leisurely way and begin at the beginning.

II

PRIVATE ORDER, PUBLIC ORDER AND ORDRE PUBLIC

I start with a three-level ideal-typical model of the ordering (or governance) of human societies. First, because these societies are populated by humans, they need to be ordered in ways that are supportive of human life; without the bare essentials, there can be no purposeful interaction or transaction between humans. The physical environment needs to be nurtured and sustained; there needs to be provision for clean air, clean water and food. The conditions for public health need to be secured. And, there needs to be a regulatory environment that is conducive to purposeful human activity. In Anarchy, State and Utopia,2 Nozick famously posed the question of whether we would see a problem if the regulatory environment permitted assaults on others provided that a tariff-based compensatory payment was made (so much for a broken arm, so much for a broken leg and so on). If this were to be the regulatory arrangement, and assuming that most would prefer not to be assaulted (even with the compensatory payment), it would invite a defensive approach that would exert a chilling effect on both interactions and transactions. Although it might be seen as an impudence for a common lawyer to offer a view on ordre public, it seems to me that, at this level, it is precisely matters of ordre public that are involved. Assuming that the governance of ordre public is satisfactory, a society of humans is at least viable. However, the distinctive way in which such a society then collectively orders itself takes us to the second level of governance, this being the public ordering of that society. A glance at the coverage of any modern government, or at the Directorates in the Brussels Commission, will give some indication of the scope of what I am terming public order. Let me emphasise, public order, so understood, is not about quelling demonstrations or responding to unsocial behaviour in public places; rather, it is about health, education, the economy, transport and a myriad other matters. And, although its competence is limited, I suggest that the regulatory instrumentalism we see in the activities of the Commission is a paradigm of public ordering.

2

R Nozick, Anarchy, State, and Utopia (Oxford, Basil Blackwell, 1974).

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In modern high-technology societies, public ordering has both ex ante and expost elements.3 Ex ante, before drugs, chemicals, products and the like can be put into circulation, they need to be safety-checked; and failure to submit to such checking may attract criminal penalties. Ex post, once such items are in circulation, regimes of product liability and tort law will provide for the compensatory ground rules. Regulation is all around us—and what is all around us is a public ordering even if the community of lawyers prefers to classify some of the compensatory rules as a part of ‘private law’. This leaves the third level of governance, namely, private ordering. When we get to this level, societies are viable and have a distinctive public profile. However, regulators may leave it to individuals to self-regulate and generate their own tailored order. It is in this foreground that we find contract law. Paradigmatically, contract law is a licence for self-governance. It is not simply that parties may make their own trades; more significantly, it is that they may (within public policy limits, ie, within the limits set by ordre public and the regulated public order) set their own terms of trade. Contract law really is private law par excellence because contractors (both general and particular) have the opportunity to act as their own law-makers.4 No doubt, some will think that this picture of three-level ordering is far too tidy and suffers from the short-sightedeness of so-called ‘Westphalian dualism’.5 Surely, in a world of legal pluralism—and the multi-level and heterarchical ordering of European law is pluralism par excellence—ordering is more complex than this. Without question, regulatory environments are often very tricky to map; there is not always a clear demarcation between regulators and regulatees; and these are shifting scenes. In defence of the ideal-type, however, I can say that it gives us an indication of the range of regulatory tasks without foreclosing the question of who does what or how the tasks get done. There is, no doubt, more to be said; but it is time to move on.

III

JUSTIFICATION—JUSTIFIED ORDERS

At all levels, this regulatory assemblage needs to be justified. There are overwhelming prudential arguments that support the requirements of ordre public; such 3 Compare R Brownsword, ‘Nanoethics: Old Wine, New Bottles?’ (2009) 32 European Journal of Consumer Policy 355. 4 Compare DR Johnson and D Post, ‘Law and Borders—The Rise of Law in Cyberspace’ (1996) 48 Stanford Law Review 1367, 1389–90: Perhaps the most apt analogy to the rise of a separate law of Cyberspace is the origin of the Law Merchant—a distinct set of rules that developed with the new, rapid boundary-crossing trade of the Middle Ages. Merchants could not resolve their disputes by taking them to the local noble, whose established feudal law mainly concerned land claims. Nor could the local lord easily establish meaningful rules for a sphere of activity that he barely understood and that was executed in locations beyond his control. The result of this jurisdictional confusion was the development of a new legal system—Lex Mercatoria. The people who cared most about and best understood their new creation formed and championed this new law, which did not destroy or replace existing law regarding more territorially based transactions (eg, transferring land ownership). Arguably, exactly the same type of phenomenon is developing in Cyberspace right now. 5 W Twining, ‘Implications of “Globalisation” for Law as a Discipline’ in A Halpin and V Roeben (eds), Theorising the Global Legal Order (Oxford, Hart Publishing, 2009) 39, 46.

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requirements, regulating agency-threatening risks, are so much in the interest of each of us that we scarcely need to question their legitimacy. Nevertheless, if we ask whether we are doing the right thing in specifying particular requirements of ordre public, some might seek a justification in social contract theory. It is worth pausing over this latter point because it helps us to understand the difference between a justifying strategy that works for public order and one that works for private ordering. With just a touch of licence, we can treat social contract justifications as falling into two categories: they are either ‘Hobbesian’ in their nature or they are ‘Lockean’. The difference is as follows. According to a Hobbesian view, there are two options available: either a state of nature or submission to a sovereign authority that will establish a framework for organised civil society. The justification for enforcing the latter is that, on its merits, it is a better deal than the former.6 Hobbesians might gloss this by saying, quite plausibly, that rational or prudent persons would consensually submit to the latter in preference to the former; but such hypothetical (rational choice) consent should not mislead one into thinking that the justification for the sovereign state rests on any kind of originating consent. It does not. It rests on its merits; and this is not something for which an apology need be made. By contrast, a Lockean justification for civil society rests precisely on the originating consent of those who agree to enter such a politico-legally organised society with duly authorised government and courts. Lockeans might gloss this justification by suggesting that rational contractors would not consent unless they thought that joining in had more going for it than staying out;7 but we should not be misled into thinking that the Lockean justification rests on the merits. It does not. It rests on the parties’ originating consent; and, once again, this is not something for which an apology need be made. Putting licence to one side, the critical point is that there is a difference between a substantive kind of justification, appealing to prudential or moral interests, and a justification that is procedural, relying on the parties’ free and informed consent. Characteristically, the justification for private ordering rests on the consent of the parties. By contrast, the primary justification for public ordering will rest on the argument that the regulatory position is in line with collective prudential interests

6 Compare G Brüggemeir et al (the Study Group on Social Justice in European Private Law), ‘Social Justice in European Contract Law: A Manifesto’ (2004) 10 European Law Journal 653, where it is argued that the completion of the market is not a simple technocratic challenge. Rather, the nature of the market (including its mix of self-reliance and co-operation) together with larger questions of social justice and public values need to be debated. Ultimately, though, the justification for the democratically approved law of contract is ‘Hobbesian’. Thus, at 669, the Group says: In the course of this [broad] democratic dialogue about the content and reach of European private law, the attractiveness of the proposed harmonisation of the law to the citizens of Europe will turn ultimately on the issue of what values of social justice the proposed European laws embrace. The abandonment of national legal traditions with their familiar standards, processes, and discourses will only become an attractive possibility if it is believed that the harmonised European laws offer a progression towards better principles of social justice. For the range of welfarist conceptions of social justice already implicit in European contract law, see T Wilhelmsson, ‘Varieties of Welfarism in European Contract Law’ (2004) 10 European Law Journal 712. 7 Hence, in this context, the Lockean proviso becomes: rational contractors will consent provided that their position post-entry is at least as good as (or no worse than) their position pre-entry.

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or with moral requirements (whether, in the latter case, the criterion is utilitarian, rights-based, Kantian, or whatever). In pluralistic societies, where there is no consensus about either risk/benefit prudential judgments or about fundamental values, substantive justification can be problematic and regulators might have to fall back on a secondary justification, one that appeals to the fairness, transparency and inclusiveness of the decision-making process. Because of its centrality to contract theory, it is worth lingering over the distinctive features of a consent-based (private) justification. Broadly speaking, the justificatory function of consent is twofold. In one kind of case, let us call it the ‘volenti’ type of case, the consenting agent, A, is precluded from raising a complaint about the conduct of the recipient agent B (B’s ‘wrongdoing’ as it otherwise would be)—for example, this is the position in the standard case in which A consents to some surgical procedure to be carried out by B. In the other kind of case, let us call it the ‘contractual’ type of case, A is precluded from denying that he or she is bound by the rules or terms (the rights and obligations) to which he or she has consented—as might be the case, for example, where A consents to a particular choice of law clause. In the former case, A’s consent functions to release B from some part of his or her usual obligations to A; in the latter case, A’s consent functions to increase A’s own obligations to B (where A’s dealings with B are not standardly governed by the chosen law). In the former case, the recipient agent, B, appeals to A’s consent by way of a defence; in the latter case, B appeals to A’s consent in order to advance claims. In one case, consent functions as a shield, in the other as a sword. However, if the consent is not authentic, if it is not freely given and adequately informed, it will serve no justificatory purpose of any description. Consent, thus, functions as a justifying reason.8 However, precisely because B relies on A’s authorisation for the doing of x rather than on the rightness of the doing of x itself, it becomes clear that consent operates as a distinctive form of procedural justification. In particular, consent amounts to a limited ‘in personam’ (or ‘agent relative’) response. Consent does not comprehensively justify the action as such; rather, the consenting agent is precluded from asserting that he or she has been wronged (or that he or she is not bound by the agreed rule-set, or the like). Unlike a substantive justification, however, none of this offers a justification to third parties who challenge the legitimacy of the actions taken by A and B. Gathering this up, in the volenti type of case, consent functions as a procedural justification, giving the recipient of the consent (B) a complete answer to the consenting agent (A); no wrong is done to the consenting (authorising) agent (A) by the recipient agent (B); but it does not follow that the recipient agent (B) does no wrong to third-party agents (such as C). In the absence of consent, a wrong will be done to agents whose rights are violated even if, all things considered, the wrongdoing can be substantively justified as the lesser of two evils. In the contractual type of case, consent functions as a procedural justification, giving the recipient of the consent (B) a good reason for holding the consenting agent (A) to the agreed rules or terms; but it does not follow that the rules or terms agreed between A and B can be (or, indeed, need be) justified to a third-party agent C.

8

Compare, D Beyleveld and R Brownsword, Consent in the Law (Oxford, Hart Publishing, 2007).

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In the larger picture, the attraction of consent as a justifying reason is not hard to understand. Quite simply, not only does consent provide the recipient, B, with a complete answer to the consenting agent, A, but it does so without the former having to engage contestable substantive justifications—or, at any rate, such justifications do not have to be offered to the consenting party (even if such substantive justifications cannot be altogether avoided in relation to third parties).9 IV

EC CONSUMER LAW

As we pause to reflect on the foregoing, should we regard the EC regulation of consumer transactions as an exercise in public or private ordering? To switch from order to law, should we treat the various directives that regulate the consumer marketplace as an expression of public law or of private law? For many, the assumption is that the consumer protection directives are still within the domain of contract law. Undoubtedly, contract law has several branches but when we advise by reference to these directives, we are still dealing with a branch of the law of contract. This seems to me to be a mistake; rather, we should view this stream of regulation as an attempt to set the background rules for the consumer marketplace. This is not to say that the regulatory purposes—the extension of the market, the development of consumer confidence and the balance struck between the interests of suppliers and consumers—are justified; rather, it is to say that we need the kind of justification that is appropriate for public ordering. Moreover, the expectation is that regulatory positions of this kind will be adopted only after full and transparent public engagement. To state the obvious, if these were the products of private ordering, we would not normally expect there to be inclusive consultation of this kind. To set this in the larger context of public regulation, we can say that regulators are liable to be called to account in three fundamental ways.10 Stated shortly, regulators might be charged with failing to act in a sufficiently prudential or precautionary way; with acting illegitimately; or with acting ineffectively. As we have said, in modern high-technology risk-averse societies, there is considerable concern that dangerous products (for example, GM foods or products that contain nanoparticles) should not reach the market without regulatory oversight. However, for present purposes, we can set aside questions of prudential accounting. Prudence apart, the first question is whether the objective or purpose associated with a particular regulatory intervention is appropriate or justifiable—that is to say, the question is whether regulators are trying to do the right kind of thing. Secondly, even if it is conceded that regulators are trying to do the right kind of thing, we might question whether they are setting about securing their regulatory objectives in the right kind of way. When we ask whether regulators are proceeding in ‘the right kind of way’, our question might be whether the intervention is likely to 9 For this reason, it is all the more important that the conditions for a valid consent are carefully specified and stringently applied in practice. 10 In general, see R Brownsword, Rights, Regulation and the Technological Revolution (Oxford, Oxford University Press, 2008); and R Brownsword and K Yeung (eds), Regulating Technologies (Oxford, Hart Publishing, 2008).

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achieve its regulatory purposes—our question, in other words, is whether this particular intervention will work, whether it will be effective. Alternatively, our question might be more concerned with the legitimacy of the means adopted by the regulators: here, we do not doubt that the regulatory intervention will work, but we remain to be persuaded that it passes moral muster.11 It follows that, if regulators are to have a complete answer to their critics, they must show that their regulatory interventions are backed by legitimate regulatory purposes, that the regulatory means employed are legitimate and that the interventions are actually effective.12 It follows that our assessment of the directives, unlike the standard way in which we assess the (internal) doctrinal coherence of private law, should be focused on the legitimacy and effectiveness of the set of regulatory interventions. Observations of this kind, as Collins has remarked, are ‘not entirely novel’13 and it should not be thought that contract law is being singled out for some especially demanding regulatory treatment. It is rudimentary—as, for example, Bork has written with reference to competition law—that ‘policy cannot be made rational until we are able to give a firm answer to one question: What is the point of the law—what are its goals? Everything else follows from the answer we give … Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules’.14 With the regulatory purposes established, we can proceed to check the legitimacy of those purposes and then to investigate whether the doctrinal expression (and, concomitantly, the chosen institutional array) is effective in articulating and implementing those purposes. This implies a process of regulatory review and renewal. According to Collins (speaking, once again, about the implications for contract law): Once legal discourse reorients itself towards the instrumental reasoning of welfarist regulation, it must observe closely the consequences of regulation in order to ascertain whether the objectives are being achieved. The trajectory of legal evolution alters from the private law discourse of seeking the better coherence for its scheme of principles to one of learning about the need for fresh regulation by observations of the consequences of present regulation. Information about the world, especially market practices, has to be gathered and reconstituted in a form which enables the legal discourse to adjust its own internal operations and regulatory outcomes. Within this new form of legal reasoning, what the law actually does, its social and economic effects, becomes crucial to the dynamic operations of the legal system.15

11

See, in particular, K Yeung, Securing Compliance (Oxford, Hart Publishing, 2004). The reasons for regulatory failure or (relatively speaking) regulatory ineffectiveness are many and varied: see Brownsword, Rights, Regulation and the Technological Revolution, above (n 10) ch 5. Essentially, there are three loci for the problem, namely: (i) the regulators themselves and their regulatory instrument(s); (ii) the regulatees (particularly their knowledge, attitudes, interests, values, and responses); and (iii) externalities (factors outwith the relationship between regulators and regulatees but which act against the achievement of the regulatory purposes). 13 H Collins, Regulating Contracts (Oxford, Oxford University Press, 1999) 8. 14 R Bork, The Antitrust Paradox (New York, Free Press, 1993) 50. For a sustained commentary on the competing and evolving policies of EC competition law, see G Monti, EC Competition Law (Cambridge, Cambridge University Press, 2007). 15 Collins, Regulating Contracts, above (n 13) 8. I take it that, although Collins talks here about ‘welfarist’ regulation, his point is of general application. 12

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Indeed, in mainstream regulatory thinking, it is a commonplace that regulation is an ongoing process of standard-setting, monitoring (detection) and correction. Is the Commission’s programme of consumer protection justifiable and effective? Let us leave the question of effectiveness for a while and simply focus on the justifiability of the regulatory purposes in general and the directive detail in particular. Whereas, in purely domestic contexts, the principal purpose of regulating consumer transactions is to ensure that consumers are treated fairly by suppliers, in a regional European context, the regulatory purposes become more complex, involving the encouragement of cross-border consumption (especially by using e-commerce platforms) and improving the environment for small businesses who want to increase their cross-border markets. There is, of course, a potential tension in these dual-purpose objectives: the more that the bar is raised for consumer protection, the more difficult it is for small businesses to grow. Conversely, the lower the bar, the easier it is for small businesses to compete for cross-border consumers (although, if the bar is set too low, consumers will surely deal more defensively, which will tend to operate in favour of local suppliers who are known and trusted). While we might defend the Commission’s general purposes, commentators line up to criticise both the substantive detail and the process associated with the project of protecting consumers in a single European marketplace.16 For example, critics complain that the focus on the interests of European consumers does not do distributive justice to the legitimate interests (and human rights) of others, that the focus on consumer protection does not sufficiently protect the interests of weaker parties generally (that we need to reconfigure our sense of the zone of protection),17 that the focus on the informed average or representative European consumer fails to recognise the range of consumer capacities and that the adoption of maximum harmonisation measures does not allow for subtle adjustments in the consumer protection cultures of particular Member States. So, can we justify both the process and the product of the Commission’s initiative? Possibly, one can justify the former but not the latter, and vice versa. Even with Davies’ licence for leisurely reflection, I cannot answer these questions while we are on this particular journey.

V

CONTRACT LAW

If we take the regulation of consumer transactions out of contract law, how faithful is the law of contract to the spirit of self-governance? Where the parties signal their intentions very explicitly (through clearly agreed express terms), the classical common law response is to follow the lead given by the parties; and the general rules of contract law are treated merely as defaults. In the very recent English law of

16 See, eg, B Lurger, ‘Old and New Insights for the Protection of Consumers in European Private Law in the Wake of the Global Economic Crisis’ (ch 6 in this volume). 17 See, in particular, S Grundmann, ‘The Structure of the DCFR—Which Approach for Today’s Contract Law?’ (2008) 3 European Review of Contract Law 225.

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contract, the courts have been bolder, relying on signals that are contextual and implicit to guide them towards the parties’ intentions and expectations. This doctrinal turn raises some important issues about our understanding of the parties’ reasonable expectations, it being widely accepted that the mission of the modern law of contract is to protect the reasonable expectations of contracting parties.18 The central question is: what precisely is it that transforms a mere expectation into a reasonable (legally-to-be protected) expectation? We can identify four different reference points for the reasonableness of an expectation. These are: 1. The rules of contract law. 2. The signals, express and implicit, given by one’s co-contractor. 3. The norms that are recognised in the particular setting or sector in which one is contracting. 4. Those principles of fair dealing that, even if not registered in legislation or recognised in practice, nevertheless set the standard of reasonableness. In other words, a party might argue that its expectation (of performance, of cooperation, of limited liability, etc) is ‘reasonable’ because it is supported by the formal law of contract, by the signals given by the other party, by the norms of the local marketplace, or by some a priori (substantively rational) standard.19 What we can say about this is that contract law enters into uncertain territory once it allows that expectations can be reasonable for reasons other than that they are supported by law or by the express terms of the contract; for, not only is there room for argument about what is implicit or what is reasonable a priori, but it invites a tension between the various reference points. But again, as Davies might suggest, we should pause: before we go any further with our four reference points for reasonable expectations, we should remind ourselves that, if we are in truly contractual, privately ordered, territory, we are looking for consent-based procedural justification. With governing rules that are freely adopted, with signals that are indicative of consent (or waiver) and with norms that are assumed to be implicated in a particular trading sector, all is well. However, with principles of fair dealing that are not necessarily recognised, it is less clear how consent fits in; possibly, at this point, we are moving back into the sphere of substantive justification. And, if there are some non-negotiable benchmarks for reasonableness operating alongside consent-related reference points, we might find a pattern of co-regulation taking shape. At all events, this kind of analysis of reasonable expectation might be thought to be helpful in more than one way. For example, it cautions against the assumption 18 Compare eg, JN Adams and R Brownsword, ‘More in Expectation than Hope: The Blackpool Airport Case’ (1991) 54 Modern Law Review 301; JN Adams and R Brownsword, Key Issues in Contract (London, Butterworths, 1995) passim; and J Steyn, ‘Contract Law: Fulfilling the Reasonable Expectations of Honest Men’ (1997) 113 Law Quarterly Review 433. 19 Compare Lord Walker’s concluding remarks in The Office of Fair Trading v Abbey National plc [2009] UKSC 6, at para 52: ‘[The outcome of the appeal] may cause great disappointment and indeed dismay to a very large number of bank customers who feel that they have been subjected to unfairly high charges in respect of unauthorised overdrafts. But this decision is not the end of the matter’. That is to say, the customers might try some other way of pleading the reasonableness of their expectations (and, concomitantly, the unreasonableness of the banks’ terms) or press for legislative recognition of, and protection, for their expectations.

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that this mission is easily delivered; and it flags up particular moves in the courts as especially significant. So, for example, in a rush of valedictory decisions, and in particular in the Transfield Shipping case,20 Lord Hoffmann has prioritised the ‘context’ in which commercial contractors transact and this has set a new frame for the determination of reasonable expectations. It is worth taking a more careful look at what Lord Hoffmann said in Transfield Shipping v Mercator Shipping Inc, where the basic question was whether the traditional rule concerning remoteness of damage should apply to regulate a claim for consequential loss. According to his Lordship: The case therefore raises a fundamental point of principle in the law of contractual damages: is the rule that a party may recover losses which were foreseeable (‘not unlikely’) an external rule of law, imposed upon the parties to every contract in default of express provision to the contrary, or is it a prima facie assumption about what the parties may be taken to have intended, no doubt applicable in the great majority of cases but capable of rebuttal in cases in which the context, surrounding circumstances or general understanding in the relevant market shows that a party would not reasonably have been regarded as assuming responsibility for such losses?21

Favouring the latter view, Lord Hoffmann held that, relative to background market expectations in the shipping sector, ‘it is clear that [the parties] would have considered losses [of the type claimed, a matter] for which the charterer was not assuming responsibility’.22 We can link this doctrinal development to the shifting ideological patterns of the law of contract. Whereas the classical law aimed to establish the ground rules for trade, the modern law of commercial contracts aims to endorse the ground rules that are embedded in particular markets; in the classical law, the law led, but now it is practice that leads. With this shift in emphasis (a shift from static to dynamic market-individualist thinking)23 we find, correlatively, a changing approach to the benchmarks of reasonableness. Practice-based expectations are now in head-tohead competition with legal rule-based expectations.24 By contrast, in consumer contracting, the benchmark for reasonableness is largely set by the law—that is, by legal provisions that are markedly protective of consumer interests. Here, the reason for sticking with the law as the benchmark is not so much for the sake of calculability and predictability (as was the case with the classical law) but because these rules are thought to reflect a fair accommodation of the interests of suppliers and consumers. Whether or not the accommodation can

20 Transfield Shipping v Mercator Shipping Inc [2008] UKHL 48. Hard on the heels of Transfield Shipping, we should note Attorney General of Belize v Belize Telecom Limited [2009] UKPC 11, where Lord Hoffmann teases out the significance of a ‘contextual’ approach for the implication of terms. 21 ibid, para 9. 22 ibid, para 23. 23 See R Brownsword, ‘Static and Dynamic Market Individualism’ in R Halson (ed) Exploring the Boundaries of Contract (Aldershot, Dartmouth, 1996) 48; R Brownsword, ‘Contract Law, Co-operation, and Good Faith: the Movement from Static to Dynamic Market-Individualism’ in S Deakin and J Michie (eds), Contracts, Co-operation and Competition (Oxford, Oxford University Press, 1997) 255; and R Brownsword, Contract Law: Themes for the Twenty-First Century 2nd edn (Oxford, Oxford University Press, 2006) ch 7. 24 Compare S Hetcher, Norms in a Wired World (Cambridge, Cambridge University Press, 2004).

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be justified in this way takes us back to the question that we have already said must be left for another day.

VI

A EUROPEAN CODE OF CONTRACT LAW?

Let us pause again to take a sideways look at what is happening in European contract law. Specifically, how should we view the development of a European Code of Contract Law? How would it fit with the picture of private law in general and contract law in particular that is being painted in this chapter? Insofar as the provisions of the code are designed for non-consumer transactions, then to fit in they must be viewed either as an optional set available for the parties to adopt or as default rules that would support commercial contracting in the regional marketplace. While there has been no shortage of opposition to the idea of a binding code,25 there has been considerable support for a code as an optional instrument—but, we should not infer that this presupposes an understanding of contract law and private order of the kind depicted in this chapter. To the extent that support for an optional instrument is a pragmatic recognition of the difficulties facing securing acceptance of a binding measure, it might well be realistic; but it says nothing about a principled approach. By contrast, if we understand contract law as an exercise in private ordering, a code should never be more than an optional instrument. If the code were available as an optional instrument, the justification for enforcing it as between contracting parties who had freely elected to be bound by its provisions would be straightforwardly procedural; and the parties’ reasonable expectations that their disputes would be resolved by reference to the code would be in line with a consent-based approach. Equally, if instead of adopting the code, the parties had freely adopted another regime of governance, their reasonable expectation (backed by procedural justification) would be that the latter provisions should apply. In other words, where contractors freely consent to a particular scheme of governance, whether the code or otherwise, there is little justificatory work to be done. Certainly, we might want to ask whether such a code has been developed in the right kind of way, or whether it makes sense to devote such a considerable resource to the development of an optional set for the parties, but the procedural justification would be the answer to the most fundamental question of why the code or some other regime should be applied to the parties’ transactions. An optional code might also have a secondary role to play in settling disputes between commercial contractors who have not explicitly adopted a governing law for their dealings. In other words, the code might function as a set of default provisions for contractors who have not signalled the private order that they accept for their transactions. Here, the procedural justification would not work—the reason for applying the code would not be because the parties have consented to this scheme of governance. The problem is precisely that the parties have not 25 See, eg, HL European Union Committee, European Contract Law—the Way Forward? HL Paper 95 (London, TSO, 5 April 2005) in which there is much evidence of a concern that the CFR might serve as a Trojan horse for a binding European code.

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attempted to engage in private ordering; and, in the absence of steps towards self-governance, we are back to the need for a substantive justification. There is much that could be debated concerning the (substantive) justification of a particular regime of default rules. For example, to what extent is the setting of such defaults an arbitrary matter? Possibly, in some cases, it is simply a matter of establishing a default rule of the road (a postal or a receipt rule for acceptances); but, is it correct to assume that this is not invariably the case? Where there is something to argue about in relation to the particular default, what criteria are to be applied? Do we turn to economists (and the value of efficiency) or to ethicists (and the value of justice) at this point? Whichever we turn to, it is only because the parties have not taken advantage of the freedom that is theirs to exercise.26 Another question is whether it makes sense to try to establish a regional set of default rules. The recent contextualist tendency in the English commercial law of contract27 recognises that, even within national markets, there are material sectoral differences. The practice and understanding in shipping might not be identical to that in construction or finance: there are, so to speak, markets within markets and the law needs to be attuned to the features of the particular market. With the law moving in this direction, it might seem inconsistent to try to set common default rules, nationally or regionally. However, I am not sure that this is so. For where the parties have clearly consented to the application of a particular set of local market rules (simply by trading in that market), the default rules will not be engaged—or at any rate they will not apply unless there are gaps in the local rules that need to be supplemented by the default provisions. Having default rules that are of general application seems to me to be neither for nor against the possibility of fine-grained self-governance. To this extent, the establishment of a European Code of Contract Law, qua European Code of Default Rules for Non-Consumer Transactions, if not the most elegant or inspiring of projects, at least would be neutral.

VII

PURPOSES, PROJECTS, POLICIES, PRINCIPLES

So, when we stop and stare, what do we see? And, is what we see the same as what those who have been conducting these projects see? I suggest that what those who stop and stare will see is two rather different projects. One project is designed to regulate the regional consumer marketplace, the other to offer an optional set, coupled with a default regime, that will apply regionally to non-consumer transactions (principally, to business-to-business transactions). When we regulate the consumer marketplace, we might incorporate some optional settings but the basic purpose is to set the terms of trade. The precise nature of the policy for protecting and informing consumers that is enshrined in this regime is the central question. We need to articulate the deep justification for

26 On efficiency, justice and freedom, compare MW Hesselink, ‘If You Don’t Like Our Principles We Have Others’ (ch 4 in this volume). 27 Starting with Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98.

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that policy and we need to be assured that the making of the policy accords with the participatory and inclusive European ideals of democracy. By contrast, the main purpose of the other project is to enhance and facilitate private ordering in relation to non-consumer transactions (principally, in relation to business-to-business transactions). Here, we need to articulate the deep justification for self-governance, and the justification for the particular regime of defaults that is adopted. We also need to be assured that this project, even if it is more ‘technical’ than the former, comports with the European ideal of democratic decision-making. If this is the larger picture, then we might pause to reflect on the shift in the ‘Draft Common Frame of Reference’ (‘DCFR’) from 15 core aims and values to four underlying principles of freedom, security, justice and efficiency. What should we make of this? Perhaps, we might follow Hesselink in thinking that this is a somewhat impoverished expression of shared European values.28 Or, again, we might share Fauvarque-Cosson’s sense that this is a missed opportunity for creating a common European identity.29 However, so far as the regulation of transactions is concerned, it is not so much how many values we recognise but how we understand the relationship between and the application of these headline values. In the field of consumer transactions, regulators have given up on full-blown freedom of contract (qua private ordering) in favour of a pluralism that prioritises the interests of consumer security (coupled with the efficiency of a marketplace with one set of rules). Some, as we have seen, argue that the regulatory balance needs some adjustment; but the key point is that this is no longer a sphere of Freedom with a capital ‘F’. By contrast, the co-regulation of commercial transactions leaves the contractors with considerable freedom (to private order their affairs). Considerations of justice and possibly security might enter the picture in the form of public policy constraints on the parties’ freedom to self-govern—private ordering still takes place in the shadow of public ordering. And, there might be efficiency considerations that shape a fall-back set of default rules. However, the essential point is that the topography of these basic values is quite different once we move from consumer to commercial contracting, from public regulation to private ordering.

VIII

EFFECTIVE REGULATION

Just about everything that I have said thus far relates to the justification of the regulatory scheme. If, instead, we focus on the potential effectiveness of the scheme, then the contrast between the two projects becomes even more pronounced. For the first project, the regulatory intervention needs to move things in the desired direction. If suppliers are unaware of, or simply ignore, the regulatory requirements, or if consumers are uncertain of their rights, there is likely to be a degree of regulatory failure. Moreover, the effectiveness of the regulation needs to 28

ibid. B Fauvarque-Cosson, ‘The Need for Codified Guiding Principles and Model Rules in European Contract Law’ (ch 5 in this volume); also H Collins, The European Civil Code: The Way Forward (Cambridge, Cambridge University Press, 2008). 29

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be measured in the context of the larger regulatory environment that draws on informal norms—formal regional regulation can always be defaulted by local custom and practice. In this light, consider two of the objections to the proposed Directive on consumer rights.30 One objection—perhaps the most fundamental objection articulated by the community of consumer lawyers—is that the proposal is misguided in putting forward a measure of maximum harmonisation. Minimum harmonisation, it is conceded, is fine; if Member States wish to adopt a higher legal standard of consumer protection than that set by Brussels, they are free to do so. However, where measures of maximum harmonisation are adopted, Member States lose this freedom—which might be contrary to the public interest in protecting consumers as well as detrimental to democracy in taking away the power of local communities to make their own public interest judgements.31 There is no doubt that this is a serious objection. Nevertheless, viewed through a regulatory lens, a measure of maximum harmonisation will be seen as merely an adjustment to the legal part of the regulatory environment. In principle, in certain environments, the legal maximum might be treated as the regulatory minimum. While the objectors might well be correct in assuming that, in practice, the setting of such a legal maximum will be antithetical to what is taken to be the legitimate regulatory objective of increasing the level of protection for European consumers, without seeing how regulatees respond, we should not jump too mechanically to this conclusion; for the setting of a legal ceiling does not preclude the possibility that, within particular sectors or zones, there might be self-regulatory standards that aspire to a higher level of consumer protection, or more demanding requirements of good faith and fair dealing. This is all part of the regulatory environment, even if not underwritten by hard law—and, sometimes, soft law is more effective than hard law in achieving the regulatory objectives. Another objection to the proposal, an objection voiced by Howells and Schulze,32 is that the drafting of the directive is defective to the extent that it deviates from, or simply ignores, the guidance in the DCFR. Certainly, this deficit invites the charge of—at minimum—regulatory inefficiency. After all, why invest in the drafting of the CFR only to ignore it? In the larger picture though there is no particular reason why the regulation of consumer transactions should adopt the language and conventions of a background document that purports to be about the general law of contract. Indeed, in the larger picture it is not even obvious that the seemingly haphazard specification of different periods for consumers to have the right to withdraw from certain kinds of transaction is counterproductive. Undoubtedly, such untidiness offends our best instincts as lawyers; but whether such untidiness is counterproductive relative to the regulatory purposes is another question—it probably is, but we should not simply assume that this is so. In other words, when 30 Commission, ‘Proposal for a Directive on Consumer Rights’ COM (2008) 614/3 (9 October 2008). Here, I am drawing on R Brownsword, ‘Regulating Transactions: Good Faith and Fair Dealing’ in G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009) 87. 31 For this point about local democracy, I am indebted to Hans Micklitz. 32 G Howells and R Schulze, ‘Overview of the Proposed Consumer Rights Directive’ in Howells and Schulze (eds), Modernising and Harmonising Consumer Contract Law, above (n 30) 3.

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we evaluate the proposal we need to think about the regulatory environment (not merely the hard law segment of that environment) and we need to focus on the particular regulatory purposes that back the proposal. For the second project, applying only to commercial contracting, the burden on regulators is considerably lighter. If the European Code of Contract Law, correctly presented as an optional instrument, is rarely selected, this is the parties’ choice; this is freedom (private ordering) in action; and in no sense is this a case of regulatory failure. Equally, if there are few occasions when the defaults are brought into play, it matters not; the defaults facilitate self-governance and it is the latter rather than the former that constitutes the regulatory objective. IX

CONCLUSION

We can conclude by returning to Davies’ poem: in case the point eludes us, the poem ends in much the same way as it starts. Thus: A poor life this, if full of care, We have no time to stand and stare.

Even if the itinerant life of leisure advocated by Davies is not an option for busy European contract lawyers, we do well to take stock and to reflect on the foundations of contract law. In the future, there might well be one Europe; but the desultory reflections in this chapter point to a twin-track regulatory agenda for transactions. In one track, we have the regulation of consumer transactions; in the other, the regulation of commercial transactions. In one track, regulators and their constituencies need to establish, in a transparent and democratic fashion, the terms for fair and reasonable dealing (consumption); in the other, subject to the constraints of ordre public and public ordering, it is for the contracting parties to agree to their terms of trade. In one track, the justifying reasons are substantive; in the other, they are procedural. In one track, effective regulation is a real issue; in the other, it is far less problematic. In one track, we have a new deal for consumers (and their suppliers); in the other, we have contract proper. In the modern regulatory state, we might suppose that private law has both a diminished function (being largely relegated to matters of dispute settlement) and an uncertain future (as the state extends its public ordering competence and capacities). In this uncertain future, the footholds for autonomous action are likely to be increasingly challenged33—in which case our priority should not be the doctrinal detail so much as working to preserve those spheres of self-governing activity (such as those transactional activities governed by the law of contract) that we continue to value.

33 For some reflections, see R Brownsword, ‘Autonomy, Delegation, and Responsibility: Agents in Autonomic Computing Environments’ in M Hildebrandt and A Rouvroy (eds), Autonomic Computing and Transformations of Human Agency (London, Routledge, 2011) (forthcoming).

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Finally, what of the much-debated Draft Common Frame of Reference?34 Should we side with the sponsors or should we take the side of its many critics? Some of the best private law minds in Europe have been engaged in order to produce the draft; and yet, as Schulte-Nölke recognises, the draft has been criticised on all fronts.35 From the Davies perspective, however, it seems that neither side—neither the sponsors nor their critics—really ‘gets it’. The world is changing rapidly; we are being swept along on a tide of information and communication technologies; and we need to think, not only about the regulation of on-line transactions and interactions but more generally about the ways in which the law of contract can contribute to the possibility of private ordering and autonomous action.

34 C von Bar, E Clive and H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 35 H Schulte-Nölke, ‘“Restatements” in Europe and the US: Some Comparative Lessons’ (ch 2 in this volume).

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10 The Political Foundations of European Private Law: Editorial Introduction LEONE NIGLIA

T

HIS PART OF the book proposes reflection on a rather neglected dimension of private law ‘Europeanisation’, considering that scholars are typically concerned less with political finalities and more with designing texts. It is a walk in uncharted territory. But the compelling need to take this path cannot be denied. Doctrinal pursuits remain, at best, cryptic.1 Theoretical and governanceorientated perspectives beg truly political questions, due to the many uncertainties these perspectives unleash.2 And a look at aspects of enforcement and compliance3 cannot ‘answer’ our political questioning either, despite its high regard in regulatory studies. In the meantime, political material cascades on and around the ivory tower, while a controversial transformation of law towards marketisation is well under way, almost unstoppable in reach and intensity.4 This section maps ways in which to promote active reflection on the political dimension, towards setting the stage for an engagement with political arrangements and finalities before, or at least contemporaneously with, designing texts. It shows that there are politically relevant things that matter alongside European legal texts, namely, method, interpretation, geopolitics, axiology and constitutional material as unearthed in the following chapters. It indicates ways to look at such important materials while, at the same time, challenging us to think deeply about how private law scholars can actively configure a path of their own amid the complex intertwinements between the political and legal dimensions that underlie the European private law construction. In brief, a foundation question lies at the core of this book that cannot but be political, and to start tackling it we need to work on crafting a vocabulary that is still lacking. Each of the following chapters offers an insight on what that vocabulary might look like, contributing to designing a map

1 For analyses that highlight the many weaknesses of mainstream model-rules doctrinal works cf L Niglia, Taking Comparative Law Seriously—Europe’s Private Law and the Poverty of the Orthodoxy (2006) 54(3) American Journal of Comparative Law 401; H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann, ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659 et seq. 2 cf Pts I and III of this volume. 3 cf Pt IV of this volume 4 L Niglia, The Transformation of Contract in Europe (The Hague, Kluwer, 2003).

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on the basis of which to analyse our theme with a view to understanding what we may construe as ‘political dimension’. This part of the book starts with views on methodological aspects implicated in the political dimension from the perspective of an outsider-insider to the European private law story—Duncan Kennedy—followed by the comment-article by Norbert Reich. Guido Alpa’s contribution then invites us to reflect on methodological and constitutional aspects. The rest of the contributions (apart from my own that focuses again on ‘method’) engage with transnational-political (that is, supranational versus national) and geopolitical dimensions understood as East–West. I’d like to present them all, briefly, following a reverse order with a view to start from transnational-political and geopolitical perspectives towards contributions that focus on ‘methodological’ aspects. I hope to invite a double reading depending on which direction one finds more comfortable. The contribution of Reiner Schulze considers the interface between private law Europeanisation and the political dimension, understood as the broader integration process. The political integration process and its impact on private law lie at the core of this contribution. Schulze argues that to examine the political foundations of European private law one ‘must pay attention to the development of European integration, to its objectives as specified in the treaties and to its present status’. Specifically, he sees private law as located at either of two levels that, in his view, characterise the integration process—one being the supranational level of political authority, with scholarship having to face the task of identifying commonalities out of the acquis communautaire; the other being the national political level of authority qua the variety of legal systems and traditions, with scholarship having the distinct task of identifying ‘acquis commun’ principles or ‘best solutions’ in national laws. The ‘legitimacy’ of the operations of private law scholarship, in his view, lies in taking into account the boundaries that define each level of authority. This, inter alia, entails that private law methodology is to be attuned to the overarching, political dual structure. Analytical considerations follow that specify the terms in which the ‘dual authority’ political requirement should matter for an understanding of the scope of European private law ‘legal science’. For example, it is argued that ‘studies or sets of rules, which do not inquire into “Common Principles”, but “best solutions”, do not draw upon the legitimation based on existing consistencies in the national laws. They rather have to admit that they are solely based upon the assessment of the author in each given case’—in the sense that any such best solution needs be assessed in its capacity to fit the supranational law’s ‘specific requirements and task’. It is equally argued that ‘it would be problematic to assume that “common principles” … could be adopted as a model of regulation’. Schulze’s argument is ultimately about defending the autonomy of the “‘constitution” of the supranational union’ vis-à-vis any attempts at ignoring it, arguing that ‘the greatest weakness of the Principles of European Contract Law’ has consisted in disregarding the supranational dimension. Paul Varul addresses our theme from the perspective of an understanding of the political dimension qua East–West. Varul sets the harmonisation process against the backdrop of the interests of Member States in the East and in the West, identifying the key distinctive and diverse aspects of both on the basis of the underlying social and economic relations. He warns that ‘the fundamental issue is about how far

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social integration will essentially go, as conflicts between the national and international, and the different interests of the larger and smaller states may start to hamper integration’. It is interesting to note Varul’s reliance on a direct relationship between the underlying social and economic relations and the law: The harmonisation of private law in the European Union can therefore first and foremost be a method or means of integration of social and economic relations and depends on the development and the needs of the latter.

From this vantage point, the resolution of harmonisation problems appears to require their re-evaluation in light of the underlying interests and political will of the Member States. In his view, a key distinction between East and West lies in the fact that the model rules such as the Unidroit Principles and the Lando Commission’s Principles of European Contract Law (‘PECL’) have had little success in the West compared with the enormous success in the East, in terms of influence on actual practice. Varul notes that this is the result of Western legal systems being ‘established and well-functioning’ and therefore less suitable to change, even if needed or justified, in direct contrast to Eastern systems. Through analysing private law harmonisation through the exclusive lens of the East–West dimension, Varul, on noting the influence in practice of the model rules in the East, argues for serious consideration of the model rules in order not to disadvantage Eastern countries when negotiating common (that is, for the East and the West) rules. This indicates that, in Varul’s view, the issue of what political use to make of the model rules should be seen entirely in relation to the complex bargaining processes implicated in the East–West exchanges. The joint contribution of Marek Safjan and Aneta Wiewiórowska-Domagalska considers private law Europeanisation in its relationship with the political understood as private laws’ ‘common axiology’ throughout the East and the West. Theirs is a rejection of the East–West distinction as fundamentally flawed, in obvious contrast to Varul’s take. Theirs is an engagement with the political and methodological question at once, in that they argue that ‘only an approach subordinated to a common axiology and methodology will guarantee a successful process’ but also that giving predominant attention to political aspects is needed for ‘until we answer the question regarding the aims of private European law, it is not possible to conduct a serious and in-depth discussion about it’. On the basis of this approach, the two authors both challenge conventional understandings of the East/West division and propose a set of alternative, more ‘realistic’ division lines. As to the critical part of their chapter, Safjan and Wiewiórowska-Domagalska argue that ‘[c]ontrasting and contradicting the East and the West seems too simplistic and reflects schematic thinking or the political correctness of Western doctrine’. They offer illustrations, drawing on the Polish experience, of a ‘common axiology’ between East and West in private law. For example, they argue that one really cannot treat all former communist countries in the same way, given that Polish private law has kept its ‘legal integrity’ despite its changing ideological outlook. On this basis, they argue that to accept the opposition East/West is both ‘unjustified’ and ‘counterproductive’ given that ‘it merely harms the idea of a common European axiology’. Further, they stress that ‘underlying the differences between the East and the West leads to strengthening the sovereignty factor, no

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matter who puts this argument forward—the West or the East’. One should note how this notation provides an interesting comparison with Varul’s view that, one should decide about the political use of the model rules by bearing in mind the actual bargaining powers that underlie the positioning of Eastern and Western actors—in Varul’s view, not to use the model rules would disadvantage Eastern European actors. The constructive side of the chapter offers an insight into a range of ‘universal phenomena’ that really ‘create barriers’ to the development of a European private law, in contrast to the ‘simplistic evaluation of the current situation based on the political foundation East versus West’. Such phenomena, in the authors’ view, include the common and civil law divide. Guido Alpa’s ‘new paths’ invites us to rethink the political in its concrete dimension of engagement with recognition of the interpretive choices vis-à-vis the often conflicting requirements implicated in European private law and those of national private law. It is argued that the interpreter located at the national level must engage in three tasks, namely: understanding the Englishness or ‘nonautochthonous’ meaning of terms employed in ‘European texts’ such as the ‘Draft Common Frame of Reference’ (‘DCFR’), also with a view to understanding to what extent one is ‘obliged’ to follow them; translating the terms used in the European texts into the interpreter’s own terms as a precondition for promoting real understanding throughout Europe; and, last but not least, putting in place a ‘comparison with national experience’ with a view ‘to check whether the choices made by the authors’ of the DCFR ‘are better than those made by the legislators, judges and interpreters of a given system’. Alpa stresses how the degree to which one can hope to convince national legal actors of the credibility of any European texts is linked to their passage through such an interpretative operation. Of the three tasks, the last appears to Alpa to be the most demanding, in particular in relation to the national constitutional dimension. At this further level of analysis, we are once more invited to think of the concretedness of the interpretative act and related dilemmas. It is because of this specific approach, attentive to the complexities inherent in the interpretative act, that Alpa’s contribution takes us directly and elegantly towards a focus on the methodological dimension to private law Europeanisation as such. Alpa’s chapter leads us into the difficult terrain of how any understanding of the political dimension needs to face the hard realities of everydayness in interpretation—understood less as surrendering to the logic of contingent imperatives and more as engagement with the difficult, yet enriching, enterprise of actualizing the constitutional command in the private law sphere. It is to this methodological dimension that the rest of the contributions of this part of the book are dedicated, complementing all that the chapters by Safjan, WiewiórowskaDomagalska, Schulze and Varul teach in terms of attempting a comprehension of the political as a transnational dimension of engagement. Both Kennedy and Reich address private law Europeanisation from the vantage point of—to put it in Kennedy’s words—‘a politicisation of legal technique’ via the increasing employment of the technique of balancing in private law—a process that Reich critically discusses as developing via more principled and less ideological reasoning material. By investigating the choices being made through legal reasoning, through reliance on distinctive traditions of thought that reach back to the

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early nineteenth century and encompass the whole of the past century through reference to the works of Demogue and Esser, Kennedy—drawing on the French Demogue and Reich on the German Esser—invite us to understand the political foundations by looking directly into the development of private law in methodological terms. Specifically, they focus on French and Germanic (and their North American counterpart) studies on legal reasoning and offer distinctive readings. Both contributions make historical inroads in the methodological aspects underlying the political problematic. Let me consider each contribution in turn, with no pretence at all of doing justice to all that both chapters contain. The chapter by Kennedy focuses on ‘balancing’ in private law. Kennedy sees the (‘Outline Edition’ of the) DCFR as ‘marking an important moment’, that of ‘the open adoption by prestigious and authoritative European privatists of diverse ideological tendencies of balancing as the basic framework for analysis and evaluation of private law rules’, as opposed to the more classical employment of techniques such as positivistic formalism or teleology or the jurisprudence of values. He also sees all this as a ‘historic turning point’ consisting of the private law debate merging into the more general debate on proportionality in administrative, constitutional and EU law, in the context of a general tendency towards both ‘derationalisation and politicisation of legal technique’. Kennedy offers a definition of private law balancing by drawing on the work of the French scholar Demogue, whom he claims to recover from much neglect, as a Weberian ‘ideal-type of the dominant mode of legal reasoning in our period’, tracing a ‘transnational genealogy’ of balancing/proportionality in private law based on patterns of exchange between the United States and Europe. His analysis covers a broad time span, from the late nineteenth century to our days. It is a story of a gradual emergence of the ideal-type. Before the Second World War, he traces balancing material in Europe first by focusing on Bentham and then showing corresponding American developments in Theophilus Parson’s 1853 The Law of Contracts whom he equally sees as one of the precursors of balancing qua the compromising among conflicting considerations. The analysis then unfolds concentrating on Rudolph von Jhering’s 1852 Geist des römischen Rechts auf den verschiedenen Stufen seiner Entwicklung and Francois Geny’s 1899 Méthode d’interprétation et sources en droit privé positif: essai critique. Kennedy argues that their work of critique of abuse of deduction as developed in ‘Classical Legal Thought’ was based on resolving conflict not by ‘compromise’ but by ‘the choice of a dominant end’. It is only with the American-European works of Holmes, Heck and Demogue that balancing comes close to the ideal-typical structure based on ‘compromising’ that Kennedy claims dominates the contemporary legal scene. This is a complex story of how ‘Americans initially responded to European ideas about balancing that suited their circumstances’ but ‘eventually developed their own original version’. Kennedy then makes two key points. First, he recounts the ‘complete marginalisation of balancing ideas in Europe after the Second World War, at the same time that American legal theorists were developing the approach in a newly overt and elaborate way in the United States’. Secondly, he notes a reverse trend over the last twenty years, with balancing being brought once more to the fore in Europe whilst being undermined in the United States. He argues that one

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can see this new trend in as diverse European developments as the socialisation of private law; the internal fragmentation and pluralisation of competing projects for private law Europeanisation which requires ‘compromising’; the attractiveness of balancing as a method which offers a ‘chance of broad acceptance’ for any of the proposals for a Europeanised private law coming from institutions or academic groups. It is at this very point that Kennedy joins the current European debate from a highly sophisticated line of analyses. This takes me directly into briefly considering Reich’s chapter before returning to Kennedy’s contribution once more. Reich’s contribution is written in the form of a critical follow-up to Duncan Kennedy’s chapter. Reich offers a re-reading of contemporary European private law cases (and scholarship) in the context of the Europeanisation of private law in light of Joseph Esser’s concept of Vorverständniss which, as Reich reminds us, Esser developed out of a critique of Heck’s Interessenjurisprudenz view. Reich argues that Heck, with his book Begriffsbildung und Interessenjurisprudenz published in the early 1930s, ‘paved the way for an opening of the legal system towards balancing of different interests’, in critique of the dominant conceptual jurisprudence. However, his approach remained ‘positivistic’ insofar as his work ‘does not help with interpretation in areas where the legislator has not made clear which interests to protect’. It was then Esser, with his two path-breaking books Grundsatz und Norm (1956) and Vorverständniss und Methodenwahl (1970) who moved legal thought significantly away from Begriffsbildung towards engagement with ‘substantive justice’ through an active form of principled balancing. On the basis of the reasoning model as constructed by Esser (which Reich rightly considers to have been an insight into the structures of legal thinking such as those that Dworkin would have mapped at a later stage), Reich offers a sophisticated account of key private law cases relating to private consumer law directives and free movement rules, arguing that Esser’s Vorverständniss allows us to better understand the underlying principled choices being made in the courtrooms. Reich also recovers the historical dimension of private law Europeanisation through re-reading some of its key episodes. To refer to the example of unfair terms—Reich applies Esser’s Vorverständniss to historical shifts in contract law that I have recounted in The Transformation of Contract in Europe, an operation that, in my view, illustrates the explicatory power of his reading in unpacking key methodological aspects, as they are inevitably implicated in legal historical and comparative studies. In his conclusive remarks, Reich interestingly argues that, whatever method one chooses, one ends up with having to deal with a problematic basic indeterminacy of outcomes, which is a warning to whoever attempts to identify a (common or otherwise) methodology in European private law matters. In intersecting the study of Kennedy at a certain point in time—postwar Europe—with a focus on the German side, Reich offers an insight on developments that leads him to disagree with Kennedy on two accounts. First, he disagrees with regard to the argument that balancing (in private law) and proportionality (in ‘public law’) have anything really in common in Europe. Secondly, he disagrees on the issue of the role of methodological awareness. He sees Vorverständniss as a standpoint for ‘unearthing’ law on the ground ‘better’ (what judges actually do), rather than as an instrument for change—while interestingly Kennedy seems to me to offer a distinct understanding whereby methodological awareness should be

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valued as a forward-looking instrument towards possibilities for change implicated in a dimension of choice. One must note how the exchanges between Americans and Europeans on balancing remain as they always have been—somehow in-between reception and adaptation. My own contribution ends this part of the book with an attempt at developing further our reflection on the role of balancing in private law, and specifically in the context of the multi-level system in which private law operates towards Europeanisation. The chapter focuses on interjurisdictional aspects entailed in the balancing exercise at EU legislative level, specifically warning that the Commission should reflect on the prospects for effective enforcement of its proposed legislation, avoiding (partly or entirely) to intervene if the move sounds counter-intuitive—if it turns out to lead to less legal unity and more fragmentation, thus increasing rather than solving the problems that its action sets out to confront. The argument is explained in the more conventional terms of the general (EU constitutional law) category of proportionality. In the contribution, I indicate a number of reasons that point to the need for taking seriously ‘jurisdictional balancing’ as part and parcel of the broad European private law agenda. There are three aspects that I would like to emphasise as they are particularly relevant to the broad political debate about private law initiated in this book. First, balancing is a technique that currently lends itself to further a certain vision of the world that is in turn highly contested, as the ECJ cases Laval and Viking 5 have recently shown in the free movement arena, and as it emerges from a look at other ‘private law’ case-law including the English case First National.6 This is an understanding that Reich stresses in his chapter and should be taken seriously in the debate about whether and to what extent to adopt balancing in European private law, including issues of jurisdictional balancing. Secondly, the question arises as to whether methodological tools are really indeterminate or whether choosing a method leads to certain results and, therefore, any choice of method must be conducted with such Zweck (to say it à la Jhering) in mind. Methodology and political aspects are interrelated in this problematic way. ‘Jurisdictional balancing’ as I propose it, understood as ‘method’, must be evaluated and examined further in this very perspective as well. Thirdly, there is a critical interface between balancing and the discourse about integrity of and in ‘law’ that needs be reflected on carefully in the context of the private law debate, in relation to the extent to which (jurisdictional) balancing may conflict with basic understandings of the ‘rule of law’. Let me stress, once more, how the chapters that follow aim at offering a grounding of a new kind—a vocabulary about what we may construe as ‘political dimension’, towards a ‘new beginning’ in which the political dimension matters rather than being neglected. This is particularly important considering how analyses about other foundational aspects to private law Europeanisation, implicitly or explicitly, identify dilemmas that only a developed awareness about political aspects 5 Cf Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet [2007] ECR-I, 11767; Case C-438/05, The International Transport Workers’ Federation (ITF) & The Finnish Seamen’s Union (FSU) v Viking Line ABP & Oü Viking Line Eesti [2007] ECR I-10779. 6 Director General of Fair Trading v First National Bank [2001] UKHL 52.

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can answer. For example, in his summary introduction to the chapter contributions on multi-level European private law, Weatherill holds that: ‘[t]rying to understand the multi-level environment invites some deep questions about the nature of law, legitimacy and sources of authority, but also forces us to consider how to seek to manage difference and change (if at all!)’ And, commenting on rather different views as to adoption of stronger (qua unitarian) and softer (qua flexible) forms of governance, he adds that: ‘[t]hese are not competing narratives. They reflect the space in the shaping of European private law for embrace of different objectives, different priorities, different methods’.7 In brief, a first lesson that one learns from the chapters in this part is that, insofar as the Europeanisation of private law is a ‘project’,8 it needs be made as aware as possible of its very ‘objectives, priorities and methods’—it is less a project-in-the-making and more a project-to-be-made. Only by taking this step back, both in thought and action, can we enable ourselves to take the longer path towards a credible European private law.

7 8

Ch 18 in this volume. Ch 22 (Reimann and Halberstam) in this volume.

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11 A Transnational Genealogy of Proportionality in Private Law DUNCAN KENNEDY

I

INTRODUCTION—THE DRAFT CFR AS LEGAL THEORY

I

N JANUARY, 2008, the ‘Von Bar Group’ published the ‘Interim Draft Common Frame of Reference’ (‘DCFR’),1 in partial fulfilment of the mandate and grant of the European Commission. The DCFR is supposed to be the basis of the ‘harmonisation’ of the private law rules of the members of the EU, functioning not as a code, but in the mode of the American restatements. The question to what extent the treaties constituting the EU authorise the Commission to impose common private law rules is a vexed one, and the DCFR has intensified conflict on this point. But for our purposes the most striking thing about the document is its affirmation that the selection of the ‘solutions’ that are to compose the body of harmonised European private law must be done on the basis of ‘balancing.’ Here are the relevant parts of the document: 11. Underlying principles. The word ‘principles’ surfaces occasionally in the Commission communications mentioned already, but with the prefix ‘fundamental’ attached. That suggests that it may have been meant to denote essentially abstract basic values. The model rules of course build on such underlying principles in any event, whether they are stated or not. It would be possible to include in the DCFR a separate part which states these basic values and suggests factors that the legislator should bear in mind when seeking to strike a balance between them. … It must be conceded, however, that, taken in isolation, such fundamental principles do not advance matters much at a practical level because of their high level of abstraction. Abstract principles tend to contradict one another. They always have to be weighed up against one another more exactly because only then are optimal outcomes assured. … 18. Function and purpose of ‘fundamental principles’. Private law and in particular contract law is one of those fields of law which are, or at least should be, based on and guided by deep-rooted underlying principles. Any statement of them must, in our view, give some practical guidance on how to read and to interpret the definitions and model 1 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (Munich, Sellier, 2008).

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rules contained in the CFR, and to reflect its theoretical underpinnings, including its underlying political, economical and social aims and values. … 23. Balancing conflicting aims and values. It is characteristic for such fundamental aims that they conflict with each other. For example, on occasion, justice in a particular case may have to make way for legal certainty, as happens under the rules of prescription. Freedom, in particular freedom of contract, may be limited for the sake of human rights if, for instance, rules on non-discrimination apply. Therefore the aims can never be pursued in a pure and rigid way. The underlying values of a private law system can only be discerned and described by explaining how such fundamental aims are balanced in the individual model rules.

This interim formulation was sharply critiqued in a paper authored by Eidenmüller, Faust, Grigoleit, Jansen, Wagner and Zimmerman.2 To an American observer with some long-term familiarity with Western European private law theory, this paper seems easily recognisable as a conservative attack on the DCFR. Thus, it objects to the use of general clauses, reasonableness requirements and the augmentation of the role of business practice as an invitation to judicial law-making excoriated as undemocratic. At the same time, it objects to the generalisation of duties of good faith and cooperation, and the unstructured nature of the list of factors to be balanced, as inviting an unjustifiable erosion of private autonomy for the sake of an imprecise goal of social justice and solidarity. But what is most striking about the critique is that it accepts the general balancing framework, albeit with two demands: that the DCFR should provide ‘decision criteria’ for balancing in choosing particular rules and that private autonomy be recognised as the rule, with restrictions in the name of other values clearly relegated to the status of exceptions. A few months later, Hesselink published a short book, CFR and Social Justice,3 defending the DCFR against left critiques that it provided inadequate protection for weak parties and against the Eidenmüller et al critique that it was too left wing. Without going into detail, the most striking thing about this highly sophisticated defence from the centre-left was that it also accepted the balancing framework,4 in this respect building on a fascinating series of social justice oriented private law works that had gradually moved to conceptualising social justice as a congeries of policies needing to be balancing among themselves, at the same time that they were collectively balancing against the traditional autonomy and administrability policies favoured by the Right.5

2 H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659. 3 MW Hesselink, CFR and Social Justice: A Short Study for the European Parliament on the Values Underlying the Draft Common Frame of Reference for European Private Law: What Roles for Fairness and Social Justice? (Munich, Sellier, 2008). 4 eg, ibid, 22 and passim. 5 See text to n 105 below.

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A year later the von Bar group published the final draft of the DCFR, acknowledging various critiques.6 I would characterise the revision carried out on the list of principles to be balanced as a complex set of direct and indirect concessions to the conservative critique of Eidenmüller et al, to some extent marginalising the principles that might be regarded as having a progressive pedigree, and reasserting the primacy of what in America we would call neo-liberal understandings. Significantly, the principle of social justice and solidarity is demoted—along with linguistic and cultural diversity and protection of human rights—to a secondary role, on the excuse that public law rather than private law should be the main vehicle for its achievement.7 Nonetheless, there is no retreat at all from the basic balancing framework8 and, at least to my eye, nothing that could be said even to approach the development of ‘decision rules’ to guide balancing in the fashioning of particular rules. In this chapter, I will treat the DCFR and the critiques as marking an important moment: the open adoption by prestigious and authoritative European privatists of diverse ideological tendencies of balancing as the basic framework for analysis and evaluation of private law rules. Of course, it is possible that the approach of the DCFR will turn out to have been idiosyncratic, and that more traditional methods, whether classically ‘positivist’ (meaning ‘formalist’ or conceptual), or teleological or based vaguely on the ‘jurisprudence of values’ will regain their dominance. On the other hand, it seems possible that European private law theory has reached a kind of historic turning point and will now find itself merging into the more general debate in administrative, constitutional and European Union law, within which ‘proportionality’ is both omnipresent and highly controversial. In my view, this is the more likely outcome and would represent the continuation and intensification of a global trend in legal thought.9 In the general debate, it is often said, and I agree, that the move to proportionality represents the simultaneous de-rationalisation and politicisation of legal technique. This trend, if it exists in private as well as in public law, is open to radically different interpretations. We might understand it, in the mode of Wieacker in his History of Private Law in Europe, as devolution, as the tragic loss of the coherence and ethical power that the legal tradition attained in the late-nineteenth century.10 Or we might, and I think we should, on the contrary, interpret it in a Weberian way, as disenchantment, as the belated attainment of legal maturity.11

6 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 7 ibid, 10–17, 61–62. 8 eg, ibid, 61. 9 D Kennedy, ‘Three Globalizations of Law and Legal Thought: 1850–2000’ in D Trubek and A Santos (eds), The New Law and Economic Development. A Critical Appraisal (Cambridge, Cambridge University Press, 2006). 10 See text to nn 92–96 below. 11 M Weber, ‘Politics as a Vocation’ in HH Garth and CW Mills (eds and trans), From Max Weber: Essays in Sociology (New York, Macmillian Press, 1946); D Kennedy, ‘The Disenchantment of Logically Formal Legal Rationality, or Max Weber’s Sociology in the Genealogy of the Contemporary Mode of Western Legal Thought’ (2004) 55 Hastings Law Journal 1031.

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My goal in this chapter is to trace the transnational genealogy of balancing/ proportionality in private law, with the emphasis on the pattern of exchange between Europe and the United States, beginning with the late-nineteenth and early-twentieth century dominance of German and French private law theory and continuing up to the present. I will proceed as follows: The second part presents a brief summary of what I mean by balancing/ proportionality as an ideal type of the dominant mode of legal reasoning in our period. The third and fourth parts make up the bulk of the chapter. They present a narrative tracing ideas about balancing in European and American private law theory over the last 150 years. Part III traces the origins of private law balancing up to the Second World War. It begins with Bentham and Jhering and then takes up the little known American developments in the first part of the nineteenth century, before the ascendancy—in Europe and also in the US—of the highly conceptual private law approaches commonly called ‘Classical Legal Thought’ (‘CLT’). Around 1900, balancing ideas became an element in the ‘social’ critique of CLT for the ‘abuse of deduction’, but were radicalised by German, French and American thinkers (most notably Demogue, Heck and Holmes) who had little faith in the social project of reconstructing legal theory around teleological reasoning. This part emphasises the extent to which the Americans initially responded to European ideas about balancing that suited their circumstances, but eventually developed their own original version. Part IV describes the more or less complete marginalisation of balancing ideas in Europe after the Second World War, at the same time that American legal theorists were developing the approach in a newly overt and elaborate way in the United States. Over the last 20 years, a variety of circumstances have reversed this process, bringing balancing/proportionality to the fore in Europe, while a dramatic political shift to the Right along with the rise, first, of civil libertarian and then of neo-liberal neo-formalism have undermined it (without by any means eliminating it) in the United States. There follows a ‘coda’, brief and sketchy, more a set of hypotheses than a developed position. First, it argues, contrary to a quite widespread European opinion, that private and public law balancing/proportionality are the same in all important respects and that the European version is the same in all important respects as the American version. Secondly, in the US there has been a close historical relationship between private and public law balancing. This suggests two questions for future research. The first concerns the European genealogy of proportionality: should we continue to understand its emergence in public law after 1945 strictly as a product of the influence of some combination of Aristotle and nineteenth-century German administrative law on first the German and then the European public law courts? The second concerns the influence, if any, of the intense and highly publicised American postwar debate about balancing in constitutional law on the German Constitutional Court. I see this chapter as an essay in a relatively new comparative law genre that might be called ‘transnational genealogy of legal thought,’ or something like that. See

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Monateri, ‘Black Gaius’12 and Diego Lopez, Teoria impura del derecho.13 In this genre, we study not ‘transplants’ of particular legal rules or even of a whole body of law, but the dissemination of the discursive practices of actors who are producing law (lawyers, judges, legislators, academics) or, in the phrase of the Sacco school, the ‘circulation of models’. Graziadei’s very useful chapter on transplants14 mentions in passing the study of legal consciousness, but it is a measure of the newness of the approach that he has little to say about how it is done or what its results have been. A warning: this is not legal sociology, so in the case, for example, of balancing, I don’t discuss the degree to which changes in models at the very abstract academic level affect concrete rules or particular jurisdictions, nor the kinds of interests that are served or disserved by the transformations, nor, for that matter, the historical causes of change. I am interested in all these topics, but here focus on figuring out what exactly changed in ways needing contextualisation in all the above senses.

II

SUMMARY—THE IDEAL TYPE OF BALANCING IN PRIVATE LAW

This section will lay out in some detail, in the form of a Weberian ideal type, what I take to be the various characteristics of the technique of balancing/proportionality as it is currently practised by lawyers in both private and public law.15 1. The first point is that, according to the conventional understanding, balancing is a technique of ‘last resort’. We balance when there is a gap, or conflict or ambiguity in the legal materials, so that it is at least arguable that there is neither a definitive ‘conceptual’ nor a definitive teleological nor a definitive precedential answer to the interpretive question posed. This may be because these ‘logical’ methods have ‘run out’ or because in the existing understanding it is permissible to disregard the outcome they require on the ground that the legal decision maker has a responsibility to substantive values as well as to positive law. Of course, it is common to argue that judges and jurists should never balance. Conversely, it is common to argue that particular pieces of legal reasoning ‘abuse deduction’ or precedent or teleology, and that the only plausible explanation of the outcome is covert balancing. And it is not uncommon to argue that all legal reasoning, whatever its self-presentation, is ‘really’ balancing. In other words, the role of ideal-typical balancing in legal reasoning is controversial.

12 PG Monateri, ‘Black Gaius: A Quest for the Multicultural Origins of the “Western Legal Tradition”’ (2000) 51 Hastings Law Journal 479. 13 Diego Lopez, Teoría impura del derecho: La transformación de la cultura jurídica latinoamericana (Bogotá, Legis, 2004). 14 M Graziadei, ‘Comparative Law as the Study of Transplants and Receptions’ in M Reimann and R Zimmermann (eds), The Oxford Handbook of Comparative Law (Oxford, Oxford University Press, 2006). 15 This summary draws on D Kennedy, ‘Freedom and Constraint in Adjudication: A Critical Phenomenology’ (1986) 36 Journal of Legal Education 518; D Kennedy, A Critique of Adjudication (fin de siècle) (Cambridge, Mass, Harvard University Press, 1997); D Kennedy, ‘From the Will Theory to the Principle of Private Autonomy: Lon Fuller’s Consideration and Form’ (2000) 100 Columbia Law Review 94; Kennedy, ‘The Disenchantment of Logically Formal Legal Rationality’, above (n 11); Kennedy, ‘Three Globalizations’, above (n 9).

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2. In balancing, we understand ourselves to be choosing a norm (not choosing a winning party) among a number of permissible alternatives on the ground that it best balances or combines conflicting normative considerations. The considerations vary in strength across an imagined spectrum of fact situations. The norm has a defined scope of application—the set of fact situations for which it represents the ‘best balance’—and a limit, beyond which we enter the domain of an exception, or of another norm. 3. The chosen norm is not derivable from any of the considerations taken in isolation, so the norm is a ‘vector’ or a ‘resultant’ (to use Heck’s word), rather than a conclusion that was always implicit in a general principle or goal. The considerations may be loosely ranked but there are no ontological priorities among them, and in private law they include not only the moral considerations often called principles, but also ‘policies,’ goals, values, rights and even precedents conceived as having differential ‘weight.’ These are typically arrayed in formulaic pro/con ‘argument bites’ that are used over and over in legal argument. 4. It is a very important condition of legitimate balancing that the considerations must be derivable from the body of legal materials, as either enacted or as inferable (this is the survival of the classical ‘method of construction’ within the balancing enterprise). And they must also be ‘universalisable’, meaning that they must be at least formally in the interests of ‘everyone’, by contrast with interests understood to be ‘ideological’ or ‘religious’ or ‘partisan’ or ‘sectarian’. 5. An important moment in the history of balancing (to be discussed in more detail below) occurred when the procedure was reformulated to include considerations of administrability and, very significantly, considerations of institutional competence (judge versus legislator versus administrator; regional versus national versus transnational instances, etc). This means that, to the objection that balancing gives the judge too much power, or that it is too uncertain, the advocate responds that judicial usurpation is a danger to be considered, as is the choice, in formulating the new norm, between a rule and a vaguer standard. In short, balancers engulf their critics by incorporating their objections into the calculus. 6. A common (but by no means universal or logically necessary) way to organise the permissible norms among which the balancer chooses is according to the extent to which they are ‘social’—meaning that they internalise costs to actors—or ‘individualist’—permitting actors to externalise. This contrast translates, generally but by no means universally, into a political contrast: in the law of the market, externalising norms are conservative, while internalising norms are progressive. In the law of the family, education, religion and civil society generally, externalising norms are progressive (feminist, libertarian) whereas internalising norms are conservative. (This is a complicated point which I have developed elsewhere,16 but must leave in this cryptic form here.) 7. Balancing is an intensely controversial procedure, commonly regarded as, at least potentially, a Trojan horse for the invasion of law by ideology. There is no agreement as to whether it is always, or never, or often, or seldom necessary because there is no alternative. There is no agreement as to whether judges should

16

Kennedy, ‘Three Globalizations’, above (n 9) 64.

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use it, always, never, sometimes, etc. I think, on the other hand, that there is general agreement on the main features of the ideal type as I have just described them.

III

A

BALANCING BEFORE THE SECOND WORLD WAR IN EUROPE AND AMERICA

Balancing in the Emergence of Classical Legal Thought

In the genealogy of balancing before Classical Legal Thought (CLT),17 Bentham clearly has an important place, but it is not easy to define that place. As against the attitude of Kant, and then of Savigny and Hegel, Bentham demands that we see law as a ‘means to an end’.18 Jhering, who coined that phrase, recognised Bentham as his forefather, merely substituting social ends for the happiness of individuals.19 Bentham’s critique of Blackstone20 is the first canonical work of legal critique in English. It is important first because he mocked Blackstone precisely for claiming repeatedly that there was an immanent rationality to the common law of his time. He recognised and critiqued the law making role of judicial law interpreters and appliers and argued for reform by choosing and then codifying rules that would produce the most possible human happiness. All through the nineteenth century and into the twentieth, similar internal critiques of conventional doctrinal writers undermined faith in conceptual and teleological forms of legal reasoning, clearing the ground for the acknowledgment of legal indeterminacy and the consequent necessity of balancing as a last resort. (As, for example, Jhering’s ‘Heaven of Legal Concepts’.21) But when it came to choosing the rule, Bentham is better described as an advocate of an additive method than of a balancing method. He recognised that the interests of individuals conflict, and that law regulates the conflicts, with the goal of producing the largest sum of happiness. He argued that law should sanction in order to align the interests of the actor with those of others, but abstain from intervention where intervention would not increase the sum of individual happiness.22 This is quite different from the idea that the group has common goals that conflict among themselves, so that whatever rule we choose will be a compromise. In the United States, Bentham was influential and controversial, mainly because of his advocacy of codification. American judges and doctrinal writers developed a conventional way to explain legal rules, one that fell into none of the camps of 17 On the general category of classical legal thought, see D Kennedy, The Rise and Fall of Classical Legal Thought (Washington, Beard Books, 1975) ch 3; Kennedy, ‘Three Globalizations’, above (n 9). 18 ‘The general object which all laws have, or ought to have, in common, is to augment the total happiness of the community’: J Bentham, An Introduction to the Principles of Morals and Legislation (Oxford, The Clarendon Press, 1879) 170. 19 R von Jhering in I Husik (trans), Law as a Means to an End, The Modern Legal Philosophy Series 5 (New York, Macmillan, 1921). 20 J Bentham, A Fragment on Government (Dublin, J Sheppard et al, 1776). 21 R von Jhering, ‘In the Heaven of Legal Concepts’ in MR Cohen and FS Cohen (eds), Readings in Jurisprudence and Legal Philosophy (Boston, Little Brown, 1951). 22 Bentham, An Introduction to the Principles of Morals and Legislation, above (n 18) chs 13 and 17.

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European legal philosophy (natural rights, natural law, utilitarianism, positivism, the historical school). They were particularly conscious of the possibilities for choice in law making, perhaps because in their post-colonial situation they had constantly to decide how much of their colonial English law to retain and then how much of contemporary English legal development to import. Their formula was that legal choice involved tempering the demands of ‘morality’ (sometimes also called ‘God’s law’ or ‘justice’ or ‘natural right’ or ‘the law of nature’) in the interest of what they called ‘policy’, meaning the common, usually material interests of the community.23 The common law was less than fully moral, but for good reasons. A famous canonical statement of this point of view, worth extensive quotation, is Theophilus Parson’s explanation of the limitations of the law of fraud, distinguishing between, that kind and measure of craft and cunning which the law deems it impossible or inexpedient to detect and punish, and therefore leaves unrecognized, and that worse kind and higher degree of craft and cunning which the law prohibits, and of which it takes away all the advantage from him by whom it is practised. The law of morality, which is the law of God, acknowledges but one principle, and that is the duty of doing to others as we would that others should do to us, and this principle absolutely excludes and prohibits all cunning; if we mean by this word any astuteness practised by any one for his own exclusive benefit. But this would be perfection; and the law of God requires it because it requires perfection; that is, it sets up a perfect standard, and requires a constant and continual effort to approach it. But human law, or municipal law, is the rule which men require each other to obey; and it is of its essence that it should have an effectual sanction, by itself providing that a certain punishment should be administered by men, or certain adverse consequences take place, as the direct effect of a breach of this law. If therefore the municipal law were identical with the law of God, or adopted all its requirements, one of three consequences must flow therefrom; either the law would become confessedly, and by a common understanding, powerless and dead as to a part of it; or society would be constantly employed in visiting all its members with punishment; or, if the law annulled whatever violated its principles, a very great part of human transactions would be rendered void. Therefore the municipal law leaves a vast proportion of unquestionable duty to motives, sanctions, and requirements very different from those which it supplies. And no man has any right to say, that whatever human law does not prohibit, that he has a right to do; for that only is right which violates no law, and there is another law besides human law. Nor, on the other hand, can any one reasonably insist, that whatever one should do or should abstain from doing, this may properly be made a part of the municipal law, for this law must necessarily fail to do all the great good that it can do and therefore should, if it attempts to do that which, while society and human nature remain what they are it cannot possibly accomplish.24

Pre-classical American legal thinkers were able to assimilate a surprisingly large number of legal doctrines to this model, including, for example, the doctrines of caveat emptor, negotiability, limit shareholder liability, bankruptcy and consideration.25 As with Bentham, we are speaking of a precursor of balancing and in the United States it may be that this is the prototype of the idea of conflicting 23 24 25

For an extended discussion, see Kennedy, The Rise and Fall, above (n 17) ch 3. T Parsons, The Law of Contracts vol 2 (Boston, Little Brown, 1853–55) 265. Kennedy, The Rise and Fall, above (n 17) 111–13.

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considerations leading to the choice of a norm well understood as a compromise. But it is only a prototype, still missing most of the attributes that I listed above in describing the ideal type. A second American legal idea also plays a role in the pre-history of balancing. The systematisation of contract, tort and property law at the end of the nineteenth century around the will theory was a gradual affair. There were a number of doctrinal areas that were outliers in relation to the core areas of private law. Anna di Robilant has usefully gathered these together, and shown that in each one common law judges and doctrinal writers recognised a large conflict of interests between right holders, going beyond the narrow material interests of the particular litigants and the need to choose outcomes that took the conflict of interests into account.26 Some important examples include water rights, nuisance law, interference with contractual relations and the law governing labour union activities, such as strikes and boycotts. Beginning in the 1840s and continuing into the early twentieth century, one characteristic American solution was a ‘reasonableness’ test (the other was a ‘malice’ test). The courts took up on a case-by-case basis, guided by earlier precedents, the assessment of the quantity and legitimacy of the interests of the litigants. In deciding whether what the defendant had done was ‘reasonable’, the courts took into account the economic consequences for the community of facilitating or obstructing the activity in question. These decisions could have a great deal of precedential value, in spite of their formulation as applications of a standard and amounted to important judicial legislation. Reasonableness tests were characteristic of CLT in both public and private law, as for example in the emerging law of negligence and in antitrust law. They were not categorically inconsistent with the classical drive to rationalise and unify law around the will theory, since it was easy to conceptualise an actor’s unreasonableness as fault, a defect of the will. The methodology of balancing/proportionality that characterises modern law is quite different from deciding a particular case by applying a reasonableness standard balancing the costs and benefits of the defendant’s conduct against costs and benefits to the plaintiff, in light of larger community interests. In the former, the jurist chooses a norm by balancing; in the latter, it is the norm itself whose application requires balancing. American jurists, before and also during the Classical period, never, to my knowledge, justify the choice of a reasonableness test (requiring balancing in application) by balancing the conflicting principles, rights, welfare, administrability and institutional competence considerations that seem relevant to the choice. The choice of reasonableness was, at the rhetorical level, just the opposite of a compromise of conflicting considerations, since reason was a universal and also a legal value. Nonetheless, it is a relatively small step from deciding a case by a reasonableness test, thereby setting a precedent, to deciding on a norm by a similarly structured method of balancing. American jurists such as Oliver Wendell Holmes and Learned

26 A di Robilant, ‘Abuse of Rights: The Continental Drug and the Common Law’ (2010) 61 Hastings Law Journal 687.

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Hand seemed to clearly grasp this analogy, as they developed balancing methodology as an anti-Classical, critically informed practice in the early twentieth century.

B

Balancing and the Critique of Classical Legal Thought

The most important figure by far in the critique of CLT was Rudolph von Jhering, the founder of what I will call Social Legal Thought (SLT). The two dimensions of SLT were the insistence on ‘law as a means to an end’ and the internal critique of what Francois Geny famously called the ‘abuse of deduction’ in CLT.27 While it is common to treat Jhering’s ‘Spirit of Roman Law’28 as emblematic of his early ‘formalist’ phase, it is worth noting that the thesis of this masterpiece is that the spirit of Roman law was transformed (for the worse, according to him) by the rise of good faith, so that conflicting ideals are present at the heart of the work. But for our purposes, it is more important that a few pages out of the massive whole were preserved and referred to over and over again by all the critics of CLT. In the discussion of ‘formal realisability’ versus ‘material realisability’ Jhering asserts that the interest in administrability will often force departure from the norm formulation that would best suit the underlying substantive purpose of the law. His famous example was the choice of a rule of majority at 21, distorting the substantive goal of majority for those of mature judgment.29 It is striking that in ‘Law as a Means to an End’,30 the manifesto of legal teleology, there are few if any examples of Jhering presenting legal choice as compromise. There are many legal ends and it is clear that they may conflict. But the conflict is resolved not by compromise, but by the choice of a dominant end. For example, the law of property serves private autonomy only so long as private actors behave in a way that promotes the good of society. When there is a conflict, the good of society forces the landowner to grant as easement to the landlocked parcel, prohibits destruction of a valuable house built in a mistake of title and so forth.31 Over and over, the later critics of CLT working in Jhering’s shadow refer only to the necessity of compromising form and substance when looking for an example of the necessity of balancing in private law. (See, for example, Heck,32 and the DCFR as quoted in the introduction to this chapter.) In the critique of the abuse of deduction, both Jhering and Geny proceed by demonstrating flaws in dogmatic presentations. They then argue, vaguely, that in the presence of open texture the jurist should choose a rule according to the social ends or interests in presence. They are persistently blind to the obvious problem of the conflict of social ends. When they recognise it, they simply choose a dominant 27 F Gény, Méthode d’interprétation et sources en droit privé positif: essai critique 2nd edn (Paris, F Pichon et Durand-Auzias, 1919). 28 R von Jhering, in O de Meulenaere (trans), L’esprit du droit romain dans les diverses phases de son développement (Paris, A Marescq, 1877), originally published as R von Jhering, Geist des römischen Rechts auf den verschiedenen Stufen seiner Entwicklung (Leipzig, Breitkopf und Härtel, 1852). 29 ibid, 51–56. 30 von Jhering in Husik (trans), Law as a Means to an End, above (n 19). 31 ibid, 384–97. 32 See text at part III.C.2 and accompanying notes.

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end and then reason from it, without explaining how they chose, or applying their critique of the abuse of deduction to their own derivation of a rule from an end.33 C

Balancing as a New Kind of Legal Theory34

We have come, according to my genealogy, to a moment of rupture, occurring in the late 1890s and early 1900s, in parallel with modernist intellectual and artistic developments across Western culture. There are three important figures: Oliver Wendell Holmes, in the United States, an assiduous student of European legal thought, and on the other side of the Atlantic, slightly later, Phillip Heck and Rene Demogue, neither of whom had any knowledge of Holmes. (It is worth noting that the Free Law School played, in this development, the role of the rejected extreme position, rather than that of intellectual trendsetter.) I have written elsewhere, in perhaps excessive detail, about how each of these contributed to the modern form of balancing.35 I will restrict myself here to a bare bones summary, sometimes simply transposing earlier texts. It seems worthwhile to put some emphasis on Holmes, since my European readers may not be familiar with this aspect of his work and his followers have had more influence on private law theory and practice in the United States than either Demogue or Heck in their countries. i

René Demogue

Demogue’s all but forgotten masterpiece, Les notions fondamentales du droit privé: essai critique,36 published in 1911 and partially translated into English soon thereafter as ‘Analysis of Fundamental Notions’,37 initiated a particular type of legal theoretical project, which he describes in the first sentences of the preface: This book is not a study of positive law … I have adopted mainly a critical point of view, in order to show, without seeking to disguise anything, the conflicts and contradictions which will no doubt always agitate private law, and my object will be attained if I may suggest to students already through with elementary studies reflections which will help them to penetrate the basis of institutions.38

His title is in itself a claim: that there is a limited set of basic ideas that animate the design of private law rules. They are static and dynamic security, economy of time 33 K Llewellyn, ‘A Realistic Jurisprudence: The Next Step’ in Jurisprudence: Realism in Theory and Practice (Chicago, University of Chicago Press, 1962) 14–16. 34 The discussion of Demogue and Heck in this section reproduces paragraphs from Kennedy, ‘From the Will Theory’, above (n 15) and from D Kennedy and MC Belleau, ‘La place de René Demogue dans la généalogie de la pensée juridique contemporaine’ (2006) 56 Revue interdisciplinaire d’etudes juridiques 163, 180–89. 35 Kennedy, A Critique of Adjudication, above (n 15); Kennedy, ‘From the Will Theory’, above (n 15); Kennedy and Belleau, ‘La place de Rene Demogue’, ibid, 180–89; Kennedy, ‘The Disenchantment of Logically Formal Legal Rationality’, above (n 11). 36 R Demogue, Les notions fundamentales du droit privé: essai critique pour servir d’introduction à l’étude des obligations (Paris, Rosseau, 1911). 37 R Demogue, ‘Analysis of Fundamental Notions’ in FW Scott and JP Chamberlain (trans), Modern French Legal Philosophy, The Modern Legal Philosophy Series vol 7 (Boston, Boston Book Company, 1916). 38 ibid, 349.

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and activity, justice, equality, liberty, solidarity and the principle of the spreading of losses, the notion of the general welfare or public interest, protection of future as opposed to present interests and protection of emotional as opposed to material interests. Along with these ‘bases’, Demogue presents a catalogue of what he calls technical applications, meaning basic legal concepts such as freedom of contract. His book has some of the qualities of a Borges list. It includes what we would call policies, which we can see as goals that legal decision makers have or ought to have. But it also includes in a relatively unstructured list what we might call legal concepts, institutional descriptions, abstract ‘values’, concepts like evolution and what we might call images or stereotypes about social life. But in the conclusion of the first part of the book—the only part that was translated—he clearly states his position about what it all means. I will let him speak for himself: The Tendency to Oversimplification: Fictions of Unity and Opposition This rapid examination of the principal ideas that come into play in the theory of private law makes it now possible to express conclusions with greater force. The simplicity which our minds require does not appear to be the law of the exterior world … The simplist [sic] theories—such as those of a world steadily advancing, of a world of infinite perfectibility, of solidarity and fraternity unfolding themselves ever more and more—seem just as exaggerated as the duelistic [sic] theories, if I may be permitted to coin a word, which see everywhere in life a struggle between two opposite principles— individualism and socialism, authority and liberty, progress and reaction, State and individual. Correct as approximations, as methods of instruction, these duels, if closely examined, are really battles between masses, certain parts of which support or oppose just as well one as the other of the two combatants.39

The striking accomplishment of Demogue is to present the ‘notions’ simply as ‘there’ in the legal consciousness of his time, as what people actually think is important, without forcing them into his own meta-theory. After summarily critiquing the various modes of reconstruction of his time—particularly the various metrics and evolutionisms—and pointing out that practice is contradictory when looked at in terms of any one value, Demogue makes a characteristic conflicting considerations observation: Compromise, Not Logical Synthesis, the Goal of Juridical Effort May we hope that the human brain will one day be strong enough to unite in one harmonious synthesis the elements on which law depends? I do not believe that it is possible. We can make fortunate reconciliations—an effort which is even facilitated by the shut-in character of every society; but we must be conscious of their imperfection … … … [L]aw can perfect its technic, that is to say its methods of perfectly attaining an end, or even several ends simultaneously. This is the only side on which it is certain that progress is possible.40

39 40

ibid, 564–65 (fns omitted). ibid, 569–72 (fns omitted).

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Demogue’s contribution to the genealogy of conflicting considerations was the distinction between ‘static and dynamic security’. His position is that ‘security’ is one of the most important of all the animating ideas of private law. He distinguishes between two types: ‘static security’ means that when you have rights, you know what they are and expect to be able to defend them; ‘dynamic security’, or ‘security of transaction’, means that you know when you and your transactional partner will be bound, and to what.41 What makes Demogue a founder of balancing analysis is that he, like Jhering, identified a trade-off that is built into the law-making process: when one thing goes up (security of transaction), something else must go down (static security). This means that it never makes sense, when justifying a rule, to say that it is good because it promotes security of transaction. To make sense, one must add: at an acceptable cost to static security. Likewise for Jhering, it never makes sense to justify a rule by appeal to its administrability—one must always add: and its acceptable cost in over or under-inclusiveness. This is the basic difference between the conflicting considerations model and the rival approach to policy analysis that identifies one policy per rule. There are two elements of modern policy analysis that are quite clearly missing from his presentation, and these are the two elements, interestingly, that it is easiest to trace in the legal theoretical developments of the ‘Unitedstatesean’ post Second World War period. The first of these was the firm incorporation of the considerations as strictly legal, in spite of the fact that they are not rules but only general notions (this was the contribution of Dworkin and his school, against English legal positivism).42 For Demogue, the notions are all rooted in social life, rather than in any notion of enactment or legal as opposed to social positivity. For Demogue, evolution is a crucial aspect of the reality of social life. The reality of social evolution generates social needs, or demands, to which law responds. In all these respects, he is a typical representative of Social Legal Thought. Where he departs, decisively, is with respect to the possibility of a truly ‘scientific’ translation, by the jurist, whether judge, legislator or professor, of these needs, demands, interests or whatever, into positive law. He believes in the transformation of ‘is’ into ‘ought’, but he does not believe that a coherent socialised law can be derived from the undoubted evolutionary process of the socialisation of life in modern society. The second striking absence was of any development of what we now call ‘institutional competence arguments’, that is of the ‘policy’ or ‘notion’ or ‘consideration’ that Demogue occasionally designated simply ‘the separation of powers’ (this was the contribution of the Hart and Sacks Legal Process materials).43 ii

Demogue contrasted with Philipp Heck

Heck seems, on the one hand, to be recognised in Germany not just as the founder of what we are calling conflicting considerations rationality, but as an important influence on juristic method (both judicial and professorial) today. He made his first 41 42 43

ibid, 427–29. See text at part IV.A.1 below. See text at part IV.A.2 below.

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major contributions between 1905 and 1912 (Der Problem der Rechtsgewinnung),44 and continued writing through the 1930s. Some initial contrasts with Demogue are in order. Of course, the first is that Demogue was virtually forgotten in France, while Heck is remembered in Germany. A second is that Demogue was translated in 1916, a mere five years after the publication of Notions in France and was recognised as an important contributor for years thereafter. Heck was not translated until 194845 and exercised no discernible influence in the United States. (Heck was never translated into French, unlike Jhering, Gierke and Ehrlich, the German progenitors of the social—at least as far as one can tell from the holdings of the Harvard Law School Library, which, though astonishingly complete, could still have lacunae.) a Heck as a Founder of Conflicting Considerations Heck makes a very sharp distinction between the notion of the purpose of a law and the interests for whose conflict the law is a solution (he refers to laws frequently simply as ‘conflict solutions’): The fundamental truth from which we must proceed is that each command of the law determines a conflict of interests; it originates from a struggle between opposing interests, and represents as it were the resultant [vector] of these opposing forces. Protection of interests through law never occurs in a vacuum. It operates in a world full of competing interests, and, therefore, always works at the expense of some interests. This holds true without exception. If we confine ourselves to an examination of the purpose of a law we see only the interest which has prevailed. But the concrete content of the legal rule, the degree in which its purpose is achieved, depends upon the weight of those interests which were vanquished … Therefore the teleological jurisprudence of Jhering is not sufficient.46

Der Problem der Rechtsgewinnung (1912) seems to be the main basis of this 1932 work. It seems to contain his basic ideas (but query does it contain the notion that the norm is a ‘resultant’ or ‘vector’?) Heck’s formulation of the contrast between conceptualising a norm as the product of a single purpose and conceptualising it as the ‘resultant’ [vector] of a conflict of interests (including ‘ideal interests’) is clearer than anything in Demogue. Since he was developing this sharp distinction at just the same time Demogue was writing Notions, Heck has a clear claim to be one of the most important progenitors of the contemporary mode of conflicting considerations. b Limitations of Heck’s Approach Heck (as translated) was, however, even in his culminating work of 1932, a less sophisticated practitioner of the method he helped to invent. In the whole book (as translated), there are very few actual enumerations of interests and indeed precious few examples. Nothing could be further from the amazing doctrinal density of Demogue’s treatment. On the one occasion when Heck enumerates types of interest conflicts, in a footnote no less, he 44

P Heck, Das Problem der Rechtsgewinnung (Tübingen, JCB Mohr, 1912). M Schoch (ed and trans), The Jurisprudence of Interests: Selected Writings of Max Rümelin, Phillipp Heck, Paul Oertmann, Heinrich Stoll, Julius Binder, Hermann Isay (Cambridge, Mass, Harvard University Press, 1948). 46 P Heck, ‘The Formation of Concepts and the Jurisprudence of Interests’ in Schoch (ed and trans), The Jurisprudence of Interests, ibid, 35–36. 45

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simply categorises them into: private versus private, public versus public and public versus private. At a more concrete level, he refers quite frequently when he needs an example to Jhering’s conflict between the substantive desirability and the legal administrability of a solution as conflicting influences in legislation. At least as received in translation in the United States, there is nothing at all like Demogue’s static/dynamic analysis—that is, no contribution to conceptualising just how it could be true that a norm is inevitably a vector. A second flaw is that although interest jurisprudence uses the word ‘interest’ to cover everything that legislators and judges balance (or perhaps ought to balance, a serious ambiguity) the term is, in English, French and German, tied to some notion of subjective wants or needs. This is so much the case that Heck had repeatedly to point out that ‘ideal interests’ were just as important as ‘material interests’ in law making and interpretation (probably following Weber’s elaboration of this distinction). Modern conflicting considerations is sharply different from Heck’s version of interest jurisprudence because of the lack of even this limited commitment to grounding law making in any conception of wants or needs. Conflicting considerations include conflicting moral axioms: pacta sunt servanda, sed rebus sic stantibus. They include, perhaps most prominently, subjective rights in conflict, without any suggestion that the rights are reducible to interests. Moreover, in contemporary conflicting considerations, all the considerations have to be universalisable, so that all utilitarian considerations have to be ‘social interests’. Whereas Heck prides himself on adding ideal to material interests, the modern approach considers only the ideal.47 Even more striking is that Heck operates firmly within the framework of interpretation on the basis of a hierarchy of sources: — Gaps and conflicts are necessary before there is a problem. — When there is a gap or conflict, the task of the judge is simply to replicate the balance of ‘interests’ represented by the legislation to be interpreted. — The role of the jurist is (at least nominally) to assist the judge in this task. To the extent this formulation is plausible, the ‘jurisprudence of interests’ becomes less threatening, to say the least, than Demogue’s critique of ‘contradictions that will no doubt always agitate private law’. The reason for this is that Heck’s proposal purports simultaneously to radically reduce the problem of judicial subjectivism and to subordinate the judge to the legislator and the jurist to the judge, eliminating separation of powers problems.

47 A striking defect of Heck’s treatment (as translated) is that he fails to distinguish clearly between interests thought of as firmly attached to particular social actors (say debtors and creditors), and interests plausibly attributed, though with different degrees of force, to everyone (eg, security of transaction). Hermann Isay, a late representative of the Free Law School, or perhaps an intuitionist in the mold of the American Hutcheson, effectively critiques Heck as follows: It is completely obscure what Heck means by the ‘standards of evaluation’ which the Jurisprudence of Interests is expected to attain. Are they meant to be standards for measuring the importance of the ‘values’ or the importance of the concrete interests, ie, the ‘value holders?’ Schoch, The Jurisprudence of Interests, above (n 45) 321.

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However, to a modern ‘Unitedstatesean’ immersed in conventional ‘Unitedstatesean’ conflicting considerations analysis, this proposal, which is central to everything Heck says in the translated pieces, seems close to incoherent. According to Heck, a given statute is a ‘conflict-solution’ understood as a ‘vector’ or ‘resultant’ of the opposed considerations and the solution is the solution to a particular imagined real life situation of conflict. Then the problem is that if there is a gap or doctrinal conflict in applying the norm to a new situation not contemplated by the drafters of the original solution, it would seem that there would have to be a new evaluation of the interests as they play out in the new circumstances. Since the interests are perennial, appearing again and again, as in Demogue’s metaphor of ‘living to fight another day’, it would seem possible that an interest that was weak in the underlying conflict situation would be strong in the gap situation. We can ask ‘how would the legislator have resolved the conflict in this situation?’ but this is hardly the same thing as simply ‘applying’ the balance that determined the outcome in the first case. In short, we can apply the same policies, but we can’t apply their ‘weights’ because the weights depended on the particular typical fact situation for which the previous law maker was seeking an appropriate balance.48 Far from seeing this as a problem, Heck thinks the application will generally be easy. For example, he objects to the proposed term ‘evaluating jurisprudence’ to describe his method on the ground that ‘it is only in exceptional cases that the jurist who follows the teleological method is called upon to make an evaluation. As a rule, all he has to do is to ascertain the value judgments of the legislator’. He manages to maintain the plausibility of this view only by periodically blurring the distinction between the purpose of a norm and the interests for which it is a ‘conflict-solution’. This passage, for example, is striking in light of Heck’s equally frequent rejection of an interest-purpose equation: Of course some cases will be difficult. But such hard cases are counterbalanced by very simple ones. After all, it must not be forgotten that the question as to what interests are involved in a statute is none other than the old inquiry into the ratio legis, the practical motive, the purpose of a statute. … certainly no one has contended that our modern statutes are as a rule enigmatic and incomprehensible are regards their practical purpose. … The purpose which a statute is meant to serve as a whole is a known fact, so obvious that normally the question simply does not arise.49

iii

Oliver Wendell Holmes and his Followers

The American counterpart to Demogue and Heck was Oliver Wendell Holmes. Holmes was, to begin with, immersed in the American development of multi-factor reasonableness tests I described in the last section and he was also a student of European legal theory. He published his most important contribution to the theory

48 Max Rheinstein’s review of The Jurisprudence of Interests sees that there is a problem but I think misses the specific point in the text above. See M Rheinstein, ‘Review: The Jurisprudence of Interests’ (1948–49) 1 Journal of Legal Education 470. 49 Heck, ‘The Formation of Concepts’, above (n 46) 170.

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of balancing in 1894, well before the 1899 publication of Geny’s Methode,50 which generalised for Europeans the critique of the abuse of deduction in Classical Legal Thought (CLT). It is important that Holmes was a harsh critic of Geny, much to the apparent distress of Roscoe Pound, on the grounds that Social Legal Thought (SLT) was merely a modern variant of natural law.51 (Compare Weber’s52 and Kelsen’s53 similar critiques of sociological jurisprudence.) In his article ‘Privilege, Malice and Intent’ in the Harvard Law Review, Holmes claimed that ‘[t]he law of tort as now administered has worked itself into substantial agreement with a general theory’.54 The general theory was that actors are liable for actions that a reasonable man would foresee are likely to cause material damage, unless they are ‘privileged’. Holmes’s innovation was to argue that, [W]hether, and how far, a privilege shall be allowed is a question of policy. Questions of policy are legislative questions, and judges are shy of reasoning from such grounds. Therefore decisions for or against the privilege, which really can stand only upon such grounds, often are presented as hollow deductions from empty general propositions.55 Perhaps one of the reasons why judges do not like to discuss questions of policy, or to put a decision in terms upon their views as law-makers, is that the moment you leave the path of merely logical deduction, you lose the illusion of certainty which makes legal reasoning seem like mathematics. Views of policy are taught by experience of the interests of life. Those interests are fields of battle. Whatever decisions are made must be against the wishes and opinion of one party, and the distinctions on which they go will be matters of degree. Even the economic postulate of the benefit of free competition is denied by an important school.56

Holmes insisted that the judge had to ‘measure’ somehow ‘the very serious legislative considerations that have to be weighed’ and should do this ‘work’ ‘with express recognition of its nature’ rather than through ‘unconscious prejudice or half-conscious inclination’. Holmes’s writing in this period has, to my ear, a quite astonishingly modern ring (but no more so than the slightly later writing of Demogue, who for example cites Nietzsche with approval). But even when he ascended to the US Supreme Court, he was capable of writing (in 1909) that: All rights tend to declare themselves absolute to their logical extreme. Yet all in fact are limited by the neighborhood of principles of policy, which are other than those on which

50

Gény, Methode d’interpretation, above (n 27). OW Holmes, ‘Natural Law’ (1918) 32 Harvard Law Review 40; see also D Kennedy and MC Belleau, ‘François Gény aux États-Unis’ in C Thomasset, J Vanderlinden and P Jestaz (eds), François Gény, mythe et réalites 1899–1999, Centenaire de Méthode d’interpretation et sources en droit privé positif—essai critique (Montreal, Les Éditions Yvon Blais, 2000) 306. 52 M Rheinstein (ed), Max Weber on Law in Economy and Society 2nd edn 20th Century Legal Philosophy Series vol 6 (Cambridge, Mass, Harvard University Press, 1954) 308–09. 53 H Kelsen in BL Paulson and SL Paulson (trans), Introduction to the Problems of Legal Theory (Oxford, Clarendon Press, 1992), s. 22. 54 OW Holmes, ‘Privilege, Malice, and Intent’ in Collected Legal Papers (New York, Harcourt, Brace and Company, 1921). 55 ibid, 120. 56 ibid, 126–27. 51

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the particular right is founded, and which become strong enough to hold on their own when a certain point is reached. The limits set to property by other public interests present themselves as a branch of what is called the police power of the state.57

It is notable that this case, and the famous passage just quoted, concerned the circumstances in which the state had to compensate for interfering with the exercise of a private right. Holmes from the beginning deployed his balancing test in both the private law and the public law context.58 Learned Hand,59 who saw himself as Holmes’s devoted follower, proposed balancing tests in a series of contexts, including the law of antitrust, the definition of negligence and the definition of free speech rights threatening to national security.60 For Hand, as for Holmes, the move to balancing was initially part of the progressive critical project, because he saw overt judicial balancing as formal acknowledgment that judges decide questions of policy without any methodology that distinguishes them from legislators. If that is what judges do, then there is less basis than there would otherwise be for judges to overrule legislatures. Indeed, if judges can’t decide constitutional questions without balancing, one can ask why their balance, their views of policy, should prevail over those of the elected representatives of the people. If balancing means looking in detail at the consequences of drawing the line in one place rather than another, then it would seem that judges are less ‘institutionally competent’ to the task than legislators.61 In his ‘Introduction to the Philosophy of Law’ (lectures delivered at Yale Law School in 1921–22),62 Roscoe Pound,63 also a follower of Holmes, although far more sympathetic than he to SLT, made a striking move beyond his earlier treatment of the question of the ideal element in law (Demogue appears in his references along with the European canonical authors) and formulates what he clearly sees as a new position. He begins his discussion of the contemporary philosophy of law by noting that: [a]t the end of the last and the beginning of the present century, a new way of thinking grew up. Jurists began to think in terms of human wants or desires rather than of human wills. … They began to think of the end of law not as a maximum of self-assertion, but as a maximum satisfaction of wants. … Having inventoried the wants or claims or interests which are asserted and for which legal security is sought, we were to value them, select

57

Hudson County Water v McCarter 209 US 349 (1909) 355. For an extended discussion of Holmes’s position and its current status in the American constitutional law of regulatory takings, see W Treanor, ‘Jam for Justice Holmes’ (1998) 86 Georgetown Law Journal 813. 59 The paragraphs on Hand are taken from Kennedy, A Critique of Adjudication, above (n 15) 322–23. 60 US v Aluminum Co of America 148 F 2d 416 (2d Cir 1945); US v Carroll Towing Co 159 F 2d 169 (2d Cir 1947); Dennis v US 182 F 2d 201 (2d Cir 1950). 61 L Hand, The Bill of Rights (Cambridge, Mass, Harvard University Press, 1958). 62 R Pound, ‘The Scope and Purpose of Sociological Jurisprudence’ (1911) 24 Harvard Law Review 592 and (1912) 25 Harvard Law Review 140, 162. 63 These paragraphs on Pound are taken from Kennedy and Belleau, ‘La place de Rene Demogue’, above (n 34) 192–94. 58

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those to be recognized, determine the limits within which they were to be given effect in view of other recognized interests.64

Pound goes on to criticise the first generation of ‘social utilitarians’ for underestimating the difficulty of the task, but points out that one of their major virtues was that they ‘made clear how much the task of the lawmaker is one of compromise’.65 He takes the compromise position in a direction that is very close to Demogue’s: Philosophers have devoted much ingenuity to the discovery of some method of getting at the intrinsic importance of various interests, so that an absolute formula may be reached in accordance wherewith it may be assumed that the weightier interests intrinsically may prevail. But I am skeptical as to the possibility of an absolute judgment.66

He goes on to argue for the possibility of ‘improved tools’, echoing Demogue on la technique. He reviews the various approaches and concludes, ‘In these formulas do we really get away from the problem of a balance compatible with maintaining all the interests, with responding to all the wants and claims, which are involved in civilized social existence?’.67 Pound’s version of interest jurisprudence was merely a step along the road to modern conflicting considerations, for several reasons. He was no better than Heck in dealing with the ambiguities of material versus ideal interests and with the problem of the heterogeneity of notions. And like Heck, he fluctuated between insisting on interest conflict and affirming single purposes or functions for rules (with marginal exceptions) in the mode sometimes called ‘social conceptualism’. Nonetheless, the Pound version of sociological jurisprudence was open to development into conflicting considerations analysis simply because of its self-conscious renunciation of the hope for a meta-criterion or ‘formula’ that would make purely situational compromise unnecessary. In other words, Pound renounced the aspiration to ‘scientificity’ in the strong sense that, according to him, had characterised the European philosophy of law since Plato.68 In Lon Fuller’s casebook, published in 1947, he includes many excerpts from European sources on form and on the substantive bases of liability. His most striking American excerpt is called simply ‘Observations on the Course in Contracts, 1934’, an unpublished fragment by George Gardner. It is the first pure example of a balancing model of substantive conflicting considerations that I know of, although not without ambiguity or even mystery: The ethical problems involved in the law of contracts result as I see them from four elementary ideas: (1) The Tort Idea, ie, that one ought to pay for the injuries he does to another. As applied to promises this means that one ought to pay for losses which others suffer in reliance on his promises.

64 R Pound, An Introduction to the Philosophy of Law (New Haven, Yale University Press, 1922) 75–76. 65 ibid, 81–82. 66 ibid, 75–76. 67 ibid, 84. 68 ibid, 1–6.

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(2) The Bargain Idea, ie, that one who gets anything of value by promising to pay an agreed price for it ought to pay the seller the price he agreed. (3) The Promissory Idea, ie, that promises are binding in their own nature and ought to be kept in all cases. (4) The Quasi-Contractual Idea, ie, that one who receives anything of value from another ought to pay for it unless it came to him as a voluntary gift. These ideas, which at first seem trite and wholly harmonious, are in fact profoundly in conflict. The first and fourth proceed from the premise that justice is to be known after the event, and that it is the business of the court to correct whatever consequences of voluntary intercourse between men may be found to have turned out unjustly. The second and third proceed from the premise that justice is to be known before the event in transactions voluntarily entered into, and that it is the parties’ business to settle the justice and injustice of their voluntary transactions at the start. The conflict between these two standpoints is perennial; it can be traced throughout the history of the law of contracts and noted in nearly every debatable contracts question; there is no reason to think that it can ever be gotten rid of or to suppose that the present compromises of the issue will be any more permanent than the other compromises that have gone before.69

The particular balancing model that emerges in Fuller’s own work, most notably in ‘Consideration and Form’,70 holds that even within the domains of social life where private contract, rather than state ownership or administrative regulation, is the appropriate ordering idea, the principle of private autonomy must concur and possibly contend in every case of rule definition with tort and restitution principles; also with the Jhering-derived purposes of formality (the evidentiary, cautionary and channelling functions). What is striking about his thesis, in spite of the various ways in which he ignores or minimises conflict among considerations, and ignores altogether the ‘socialisation’ of contract going on while he was writing, is that private autonomy is merely the first among equals. The specific rules of contract law implement six distinct policies, rather than flowing analytically or conceptually from the will theory. This internal pluralisation of the bases of contract paved the way for balancing, by directly assaulting the notion of univocal coherence in private law. iv

Hohfeld versus Josserand

There are many reasons for the peculiarly extensive development of balancing methodology in the United States over the twentieth century, including the nineteenth century precursors (the problem of ‘reception’, morality versus policy and reasonableness tests in torts cases) and in retrospect there seems to be a kind of continuity to the sequence that lead eventually to the public law balancing debate of the 1950s. I would suggest that an important difference between the US and the Continent was the divergence discussed by di Robilant between the civilian abuse of right concept and the

69 GK Gardner, ‘Observations on the Course in Contracts’ (1934), unpublished fragment quoted in LL Fuller, Basic Contract Law (St Paul, West Publishing Company, 1947) 297–98. 70 LL Fuller, ‘Consideration and Form’ (1941) 41 Columbia Law Review 799; D Kennedy, ‘From the Will Theory’, above (n 15).

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American refusal to generate an abstract concept, combined with overt balancing. This difference is clearest if we contrast Hohfeld and Josserand.71 Hohfeld published his famous article, ‘Some Fundamental Legal Conceptions as Applied in Judicial Reasoning’ in 1913.72 What counts for us is his assertion that the word ‘right’ was used in legal reasoning equivocally, sometimes meaning legal protection for a victim against harm from another and sometimes meaning the freedom of action correlative to the absence of legal protection for the victim of harm from another. Both legal protection and the absence of legal protection were commonly rationalised as implied in a particular right, as when a property owner asserted his property ‘right’ simultaneously as the basis of a trespass action for a physical invasion and as a defence to a nuisance action based on the idea that the defendant owner is free to do whatever he wants on his own land. The effect of Hohfeld’s move was to undermine the rights rationales for a large number of private law rules, requiring that they be reconceptualised as products of particular calculuses of ‘justice and policy’ (in his phraseology) rather than as conceptual derivations. The notion that property is a ‘bundle’ of distinct entitlements without a common conceptual core flowed from the Hohfeldian analysis (although it was not logically entailed) and achieved mainstream acceptance in the restatements of property and restitution. It lead to a radical ‘materialisation’ of doctrinal discussion, so that, as in the ‘reasonableness’ tests we have already discussed, a relatively small number of arguments were deployed to justify an infinite variety of normative lines drawn across objective and subjective factors in an indefinite number of legal situations. It is interesting that the formulation of a general doctrine of abuse of right was a response to the same set of problems addressed by the American reasonableness test in its late nineteenth century stage. Like its American counterpart, abuse of right was closely related to the critique of the abuse of deduction alleged against CLT; but the differences are equally striking. First, as di Robilant points out in the article referenced above: In France and in Italy, I suggest, the shaping of an overarching concept of ‘abuse of rights’ was part of the jurists’ struggle to preserve the conceptual coherence of private law at a moment when, under the pressure of social and economic change, new fields of law were being carved out of ‘droit prive’. These new legal disciplines, zoning law, labor law, welfare law, were deemed to be more apt to govern social and economic change. Private lawyers stood up as the staunch defenders of the systematic unity of private law as well as of their own professional power as the ‘legal architects of modern society.’ Conversely, in the United States, where pretensions to law’s conceptual coherence were increasingly coming under attack, rationalization of these non-integrated reasonableness tests and malice rules was achieved by means of a unitary style of reasoning rather than by means of conceptual integration. This instrumentalist style of reasoning, featuring ‘balancing,’ cost-benefit analysis and policy arguments, differed significantly from orthodox late nineteenth century American legal reasoning.73 71 L Josserand, De l’espirit des droits et de leur relativé: theorie dite de l’abus des droits 2nd edn (Paris, Dalloz, 1939). 72 WN Hohfeld, ‘Some Fundamental Legal Conceptions as Applied in Judicial Reasoning’ (1913) 23 Yale Law Journal 16. 73 A di Robilant, ‘Abuse of Rights: the Continental Drug and the Common Law’, (unpublished) Expresso O available at bepress.com/annadirobilant/1.

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Another way to put the difference would be to say that abuse of right in Europe remained conceptually squarely within the rubric of Social Legal Thought. In this approach, the basic idea was that classical private law had been coherently individualist. It was to be displaced by an equally coherent social law, whose premise was that individualist law, although generally desirable, must give way whenever its consequences were inconsistent with social purposes. This was an extension of Jhering’s idea, mentioned above, about the subordination of absolute property rights when they conflicted with social goals, as in the example of the easement of access to an isolated parcel. As Josserand put it: In any case, individual prerogatives, even the most egotistic, are social products in form and in substance; it would be inconceivable that they could be exercised at the rights holder’s convenience, diverted from their original purpose and employed for any goal; it would be contrary to their origin as well as to the most urgent need of the social community which confers them’.74

The opposition to this approach, as di Robilant points out, came from traditionalists. Demogue, with his critique of ‘duellisms’ and his insistence on compromise of multiple factors, was an exception and soon marginalised. By contrast, in the United States, the pretensions to anti-individualist coherence of the social approach found critics on the political and methodological left and these developed from sociological jurisprudence in the radicalising direction of legal realism. As already noted, the critique of coherence in law was associated with the progressive demand for judicial deference, in constitutional law, to legislative reform of tort and contract rules in the interest of weak parties. Hohfeld’s famous article is part of the critique of conservative anti-union interpretations in the British common law, interpretations that at the time were being turned into constitutional dogma by the US Supreme Court. The de-rationalising and politicising element in balancing suited the agenda of progressives, rather than contradicting it in the mode suggested, for Western Europe, by di Robilant.

IV

BALANCING AFTER THE SECOND WORLD WAR—THE UNITED STATES AND WESTERN EUROPE CONVERGE AND DIVERGE

In this section, I discuss the completion of the ideal type of balancing in private law in the United States after the Second World War, the postwar effacement of the concept in European private law, the subsequent rise of balancing in Europe and its effacement in the United States.

A

The Completion of the Ideal Type in the United States

As already mentioned, the main postwar development of balancing methodology occurred in the United States and involved, first, the critique of classical positivism

74

L Josserand, De l’esprit des droits, above (n 71).

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for failing to understand the legal character of principles and secondly, the generalisation and systematisation of arguments concerning the respective competences of legal institutional actors. By the end of the 1970s, the most prestigious, progressively-oriented state courts had adopted the methodology and reduced it to a virtual set of formulae, as I will illustrate through a close reading of a famous case in the California Supreme Court. i

The Legal Pedigree of Policy Considerations—Fuller and Dworkin

Kelsen and Hart often appear in the popular jurisprudential imagination as ‘positivists’ both in the sense of defining law as an officially generated ‘fact’ within a sharp fact/value distinction and in a second sense as believers that there are right and wrong answers to legal questions, a usage of the word positivist that is close to what Americans often call ‘formalism’. Kelsen puts forward the idea of the interpretive ‘frame’, outside which a legal interpretation is wrong as a matter of ‘cognition’. Hart’s image is of ‘core and penumbra’, with judgements in the core being a determinate matter of application of norm to fact. But for the genealogy of balancing, their importance derives from the flip side of their positivism. Each was insistent on the significance of the domain of discretion or indeterminacy in the system of legal rules, each was a critic of the idea that social purposes or any other teleological conception could settle interpretation within that area and each described what judges must do, ‘willy nilly’, in that area, as ‘balancing’.75 The jurisprudential reaction against the Hart/Kelsen formulation was American. Both Fuller and Dworkin argued, against that version of positivism, that the sharp contrast between rule and discretion was inaccurate.76 For Fuller against Hart, the point was simultaneously that interpretation in the core required judgement and that in the penumbra there were implicit or immanent principles of legality that made judgement more than arbitrary.77 For Dworkin, sharply critical of Fuller in some respects, a principal vice of positivism was its failure to recognise that principles as well as rules are legitimately part of the legal materials that ground interpretation. This is true, although the principles are not ‘enacted’ in any usual sense and they differ from rules in that they can be decisive in one case, and then rejected in another, without losing their legal status. Principles have ‘weight’ and relative weight is an appropriate determinant of

75 See D Kennedy, ‘A Left/Phenomenological Alternative to the Hart/Kelsen Theory of Legal Interpretation’ in Legal Reasoning: Collected Essays (Aurora Colorado, Davies Group, 2008) 155–56. This essay was also published in English at (2007) 40 Kritische Justiz 296. 76 For the contribution of Josef Esser, see the chapter by Norbert Reich in this volume, and the review of Esser for an American audience by M Rheinstein, ‘Esser: Grundsatz und Norm’ (1956) 24 University of Chicago Law Review 597. 77 LL Fuller, ‘Positivism and Fidelity to Law—A Reply to Professor Hart’ (1957) 71 Harvard Law Review 630.

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correct interpretation.78 Jurists produce legal ‘right answers’ not by ‘mechanical’ rule application, but through an open-ended interpretive process that engages a wide variety of sources, while eschewing the collective goals he calls ‘policies’, whose pursuit is reserved to the legislature.79 Dworkin denounced the ‘hole in the doughnut’ theory of discretion, meaning the Kelsenian ‘frame’ notion and the Hartain ‘penumbra’ on the ground that judgement was never discretionary, but always to be in some sense controlled by principles. For American jurisprudes, I think the upshot of these encounters has been a new background picture of how a legal order works. First, there are many situations with high stakes where the correct legal interpretation is open to debate. Secondly, when that is the case, a wide range of legal materials is available for the generation of pro and con arguments, a range going well beyond the notion of enactment or formal adoption. It may be useful to see this as the American version of the classical continental ‘method of construction’, within which the jurist looks beyond the code to principles that must have been immanent in it if we are to understand it as coherent. Thirdly, there is no jurisprudential consensus either about how judges actually decide, or should decide, when interpretation is controversial. For our purposes, an important aspect of this situation is that balancing is one option, with a quite distinguished jurisprudential basis, although there are numerous others. A second is that the requirement that the considerations to be balanced have a legal pedigree is not a tight constraint linked, for example, to enactment, or even to explicit mention in case law. A third is that principles can be balanced along with (or in the case of Dworkin, instead of) interests. ii The Argument from Institutional Competence—The Hart and Sacks Legal Process Materials The final element in the ideal type as I have been presenting it is the incorporation into the balancing calculus of the dimension of institutional competence. As we saw in the introduction to this chapter, writers like Eidenmüller et al argue their interpretations of balancing strongly committed to the opposition between judicial and legislative method, even though judicial balancing seems on the surface to be a serious threat to that distinction. The Hart and Sacks ‘Legal Process’ materials, distributed without formal publication through the 1950s and 1960s and widely used in law school classes all over the United States, treated considerations of institutional competence as determinative of many questions of private and public law.80 The materials presented formulaic arguments about the judicial role, but also the choice between judge and jury, federal and state courts, national and international instances. The message was that the choice of an appropriate decision maker,

78 R Dworkin, ‘The Model of Rules’ in Taking Rights Seriously (Cambridge, Mass, Harvard University Press, 1977). 79 R Dworkin, Law’s Empire (Cambridge, Mass, Harvard University Press, 1986). On Dworkin’s theory of legal reasoning, see Kennedy, A Critique of Adjudication, above (n 15) 119–30. 80 H Hart and A Sacks, ‘An Introduction to the Nature and Function of Law’ in WN Eskridge and PP Frickey (eds), The Legal Process: Basic Problems in the Making and Application of Law (Westbury, Foundation Press, 1994).

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rather than of a correct solution, was often the correct way for a judge to decide a legal question. (Similar to Wietholter’s conception of ‘proceduralisation’ from the 1980s.)81 It is somewhat paradoxical that Hart and Sacks were committed to the idea that what made a question appropriate for judicial as opposed to legislative resolution was that it permitted ‘reasoned elaboration’ (as opposed to political discretion) which was for them the hallmark of the judicial role. The addition of considerations of institutional competence to the substantive considerations (policies, principles, interests, powers, rights) and considerations of administrability—rules versus standards—permitted the ‘closure’ so to speak of the balancing procedure. The objections that balancing was uncertain and undemocratic were answered, albeit by confession and avoidance. The procedure was a last resort, to be used as a general matter only when the law (viewed conceptually or teleologically or as precedent) ‘ran out’. When that was the case, there was no escape from judicial creativity. In choosing a norm (not a winning party, but a new norm to answer an interpretive indeterminacy) there was no alternative to balancing. But, the balance should include consideration of the dangers of judicial usurpation, particularly in fashioning the norm as more like a rule or like a standard. To my mind, the writer who came closest to fully stating this type was Stewart Macaulay, in a series of articles on contract law published in the 1960s. His typology of goals, strongly influenced by Weber’s sociology of law, was cast in a somewhat obscure lingo, which I won’t reproduce here, limiting myself to saying that his article on the regulation of credit cards, written in 1967, contains all the elements whose emergence we have laboriously traced. It begins the discussion of what to do about issuer disclaimers of liability for lost cards as follows: ‘[w]hen, then, should there be a duty to read? The problem is one of balancing the capabilities of and the values we hold about the legal system against our substantive goals’.82 iii An Example of Fully Developed Private Law Balancing—Tarasoff v Regents of the University of California (1976) In order to illustrate the American development during the postwar decades, I present a discussion of the case of Tarasoff v Regents of the University of California,83 decided by the California Supreme Court in 1976. In this period, the California court was perhaps the leading actor in the development of progressive doctrine in property, contracts, torts and family law, and also, under the leadership of Justice Roger Traynor, the leader in the development of private law theory. (The courts of New Jersey, Massachusetts and New Hampshire and the federal court of appeals for the District of Columbia, were also leaders.) This case instantiates most, if not all of the traits of balancing analysis that I outlined in part II, above. It was

81 See D Kennedy, ‘Comment on Rudolf Wietholter’s “Materialization and Proceduralization in Modern Law,” and “Proceduralization of the Category of Law”’ in C Joerges and D Trubek (eds) Critical Legal Thought: An American-German Debate (Baden-Baden, Nomos Verlagsgesellschaft, 1988). 82 S Macaulay, ‘Private Legislation and the Duty to Read—Business by IBM Machine, the Law of Contracts and Credit Cards’ (1966) 19 Vanderbilt Law Review 1051. 83 Tarasoff v Regents of the University of California 551 P 2d 334 (1976).

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decided at the very end of a period of aggressive doctrinal and theoretical development (a trend reversed through a direct political attack by the governor of California, Ronald Reagan). For this reason, the court can cite ample precedent for its innovations. The question in the case was whether the parents of Tatiana Tarasoff, who had been murdered by Prosenjit Poddar, a mentally disturbed acquaintance, could recover damages from the University of California to compensate for the failure of the university psychiatrists who were treating him to warn her that in their opinion there was a very serious risk that he would kill her. The legal question was whether there was a duty to warn in the absence of any kind of direct relationship between the therapists and the victim. There was no California precedent closely on point. Justice Tobriner began the doctrinal discussion in a fashion characteristic of the period: ‘In analyzing this issue, we bear in mind that legal duties are not discoverable facts of nature, but merely conclusory expressions that, in cases of a particular type, liability should be imposed for damage done’.84 He then quotes a leading case on the theory of legal duty, decided in 1968, in a passage that ends with an interior quote from William Prosser, author of the leading torts treatise of the time and the Reporter for the Second Restatement of Torts: The assertion that liability must … be denied because defendant bears no ‘duty’ to plaintiff ‘begs the essential question—whether the plaintiff’s interests are entitled to legal protection against the defendant’s conduct. … [D]uty is not sacrosanct in itself, but only an expression of the sum total of those considerations of policy which lead the law to say that the particular plaintiff is entitled to protection. Prosser, Law of Torts 3rd edn (1964) 332–33).85

He then quotes another famous California case to the effect that the court departs from the general principle of ‘no duty act to absent relationship’ only upon ‘the balancing of a number of considerations’ with the major ones being the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved.86

The Court thus framed all the relevant considerations as universalisable common values or goals and rooted them in its prior case law, as well as in academic authority (Prosser). The substantive discussion engages most of the considerations listed. For example: We recognize the public interest in supporting effective treatment of mental illness and in protecting the rights of patients to privacy, and the consequent public importance of safeguarding the confidential character of psychotherapeutic communication. Against this interest, however, we must weigh the public interest in safety from assault.87

84 85 86 87

ibid, 342. ibid. ibid. ibid, 346.

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… We conclude that the public policy of favoring protection of the confidential character of patient-physician communications must yield to the extent to which disclosure is essential to avert danger to others.88

There follows one of the characteristic tropes of social legal thought with regard to internalisation of costs: Our current crowded and computerized society compels the interdependence of its members. In this risk-infested society, we can hardly tolerate the further exposure to danger that would result from a concealed knowledge of the therapist that his patient was lethal.89

The dissenting opinion is in the same rhetorical mode, but deploys the well known set of matching argumentative tropes (very much in the mode described by Perelman and the Ecole de Bruxelles): The issue whether effective treatment for the mentally ill should be sacrificed to a system of warnings is, in my opinion, one for the Legislature, and we are bound by its judgment [as expressed in a regulatory statute that does not include a duty to warn]. Moreover, even in the absence of clear legislative direction, we must reach the same conclusion because imposing the majority’s new duty is certain to result in a net increase in violence [by reducing the effectiveness of treatment].90

This case marks, I think it fair to say, the high water mark of balancing theory in private law in the United States. Before we examine the causes of the retreat of the waters, it seems appropriate to cast a glance across the Atlantic.

B

Disappearance and Re-emergence of Balancing/Proportionality in Europe

For several generations, it has been a matter of curiosity, with variable animus, why legal theoretical developments in Europe after the Second World War were so different from those in the United States. My generalisations would be the following: legal theory in Northern Europe, Britain, France and Italy was preoccupied with trying to draw appropriate contrasts between legality in liberal democratic societies and ‘legality’ under Nazism and Stalinism. Both legal indeterminacy and positivism were a threat to this self-understanding. The so-called ‘revival of natural law’ symbolised by the difference between Radbruch as a prewar social jurist and as the postwar author of a ‘proviso’ on judicial disobedience to unjust laws,91 the ‘jurisprudence of values’, the notion of a kind of common liberal 88

ibid, 347. ibid. 90 ibid, 355. 91 The text of the proviso: The conflict between justice and legal certainty may well be resolved in this way: The positive law, secured by legislation and power, takes precedence even when its content is unjust and fails to benefit the people, unless the conflict between statute and justice reaches such an intolerable degree that the statute, as ‘flawed law’, must yield to justice. It is impossible to draw a sharper line between cases of statutory lawlessness and statutes that are valid despite their flaws. One line of distinction, 89

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horizon orienting all the Western systems, ‘ordo-liberalism’, all were incompatible with the Demoguian strand, which as we’ve seen already was notably weak from the beginning. European scepticism took a quite different form, well represented by Franz Wieacker’s History of Private Law in Europe with Special Reference to Germany.92 The reader may be interested to contrast Wieacker’s disillusioned version of social legal thought with Gardner’s ‘Fragment on the Course in Contracts’ quoted above, or Fuller’s list of six policies animating contract law rules. During the nineteenth century, according to the post-Second World War European version, the principle of ordering according to the will theory in general, and freedom of contract in particular, had governed labour law, landlord/tenant, urban land use, environmental law, insurance, transport etc. The new ‘social’ principle of regulation, in the interest of weak parties or third parties or the public interest, made ‘incursions into the classical territory of private law’93 in one of two ways: wholesale, displacing free contract altogether, or ad hoc. In either case, the incursions led to the ‘disintegration of private law’94 and ‘not only destroyed the internal coherence of private law but also undermined the distinction between private and public law, which our legal system still took for granted at the end of last century’.95 To make things even more problematic, the reformers failed (perhaps tragically, or miserably, or heroically) to state the social principle in a way that had ‘proper system and conceptual clarity’ as a guide to adjudication or even to legislation. The result was that where the social fully displaced contract, we either returned to status or to some half-baked version of collectivism. In the areas where contract survived as remnants of its once coherent self, it was displaced by a hotchpotch rather than by something that could guide elaboration and development: ‘[T]he disintegration of the coherent private law of the nineteenth century remains the crucial problem in the relationship between legal scholarship and the outside world’.96 I think it fair to say that although this attitude is still present in some circles of private law scholarship in Europe, it is no longer even close to dominant. Indeed, as I argued at the beginning of this chapter, it seems more plausible to say that private law theory in Europe has entered a phase of balancing/proportionality and has transcended the earlier version that confronted the coherent but outdated classical

however, can be drawn with utmost clarity: Where there is not even an attempt at justice, where equality, the core of justice, is deliberately betrayed in the issuance of positive law, then the statute is not merely ‘flawed law’, it lacks completely the very nature of law. G Radbruch in B Paulson and SL Paulson (trans), ‘Statutory Lawlessness and Supra-Statutory Law (1946)’ (2006) 26 Oxford Journal of Legal Studies 1, 7. 92 F Wieacker in T Weir (trans), A History of Private Law in Europe (with Particular Reference to Germany) (Oxford, Clarendon Press, 1995). These paragraphs about Wieacker are taken from Kennedy, ‘From the Will Theory’, above (n 15) 162–63. 93 Wieacker, A History of Private Law, ibid, 434. 94 ibid, 438. 95 ibid, 438–39. 96 ibid, 441.

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tradition with the ethically attractive but incoherent and unworkable aspiration of ‘solidarity’ put into effect by subtracting one domain after another from private law. The first element in this evolution is undoubtedly the ‘socialisation of private law’, well described in this extended quotation from Hesselink’s CFR and Social Justice: 3.1 The Socialisation of Private Law in the Member States In the course of the 20th Century social justice concerns have profoundly transformed private law. In all Member States private law underwent a gradual transformation from classical to modern private law where a formal notion of freedom of contract and party autonomy gave way to the recognition that in reality many individuals in many situations are not so free and autonomous (Materialisierung). In contract law this meant that, on the one hand, the freedom of contract and its binding force were limited whereas, on the other, duties to inform, duties to co-operate and duties of care were introduced, in order to avoid unfairness and to protect weaker parties. In property law the absolute character of property rights was limited and its social function was recognised, often with the help of the concept of abuse of right. In tort law fault liability was replaced in many instances (such as product, traffic and environmental liability) by strict liability for creating risks to others. This socialisation took place by legislation (especially for the protection of weaker parties: workers, tenants, consumers, patients), be it in or outside the civil code, but often also by the courts based on general clauses such as good faith or (in the common law) through so-called implied terms. In several Member States the process of socialisation had a constitutional dimension as well. The Sozialstaatsklausel in the German constitution (Art 14) and the obligation of solidarieta sociale in the Italian Constitution have been instrumental in the socialisation of private law, while the constitutions of Ireland, Germany, Italy, Greece, Spain and Portugal recognise the social character of property. Moreover, the socialisation of private law has gone hand and hand with a gradual blurring of the dividing line between private law and public law and private law and ‘regulation’: By the end of the twentieth century in Europe, private law had begun to construct a new synthesis between the distributive instrumental concerns of regulatory measures and its traditional corrective justice orientation based on systematised general principles.97

But what is the connection between the ‘socialisation’ of private law and the rise of balancing? An important factor seems to have been the emergence of the doctrine of horizontal effect in the context of a new German constitution that simultaneously guaranteed private property rights and subjected them to a requirement of ‘social justice’. The first horizontal effect case, paradoxically, involved a free speech challenge to the codified private right to protection from private economic boycotts, a right that at least formally involved the internalisation of social costs. In horizontal effect cases, constitutional courts sometimes confront this kind of challenge, in which a constitutionalised Hohfeldian privilege, such as free speech, influences a more ‘social’ private right and sometimes the opposite, when a constitutional ‘social function of property’ argument for protection of a weak party confronts a classical liberal Hohfeldian privilege in the civil code. Balancing seems the only workable solution, even if it is a solution of last resort.98

97 98

Hesselink, CFR and Social Justice, above (n 3) 13–14. R Alexy, ‘On Balancing and Subsumption: A Structural Comparison’ (2003) 16 Ratio Juris 433.

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It might appear that this is a public law problem, without relevance to the ‘internal’ evolution of private law. But as Matthias Kumm points out in a strong article on horizontal effect, it is a commonplace, after the socialisation of private law described above, that private law itself contains all the values the social people once thought had to be imposed from above through constitutionalisation.99 The notion of interpreting a code through constitutional values leads eventually to the open acknowledgment of the potentially contradictory structure of private law. I think a second, equally speculative factor may well have been the slowly growing realisation of the diversity of solutions to elementary questions of civil law within the continental tradition. This is an accomplishment of the discipline of comparative law, and particularly of the school of Rodolfo Sacco. Sacco’s version of comparative law cruelly and persistently points to cases where identical code provisions produce contradictory case law, and where divergent code provisions produce identical case law.100 The strong impression left by the studies of this school is of the under-rationalised character of many private law rules in the civilian tradition. The impression has been reinforced by the impressive studies of the Common Core project, which might also be called the ‘Contradiction within the Core’ project.101 To my mind what is most striking about these studies is that the divergences between national systems, especially those where Britain and Germany are polar cases, seem to reflect sharply divergent balancings of a common list of policies. This might be a matter of merely academic interest were it not for the existence of the European Union and of a Commission with imperial impulses towards ‘harmonisation’ of private law. Confronted with the Commission’s initiatives, privatists initially found themselves divided along national lines, each defending familiar code solutions as aspects of national identity.102 But quite abruptly, the field reconfigured itself, dividing into what we might loosely call ‘neo-liberal’ and ‘social justice’ camps that cross national lines.103 Politicised debate in private law occurs in the context of legalism: both sides on a given issue argue that they are correct in their interpretation of the acknowledged sources, which will now include the wide variety of contradictory solutions in the different European legal systems. Balancing is an obviously attractive method for any institution or, for that matter,

99 M Kumm, ‘Who is Afraid of the Total Constitution? Constitutional Rights as Principles and the Constitutionalization of Private Law’ (2006) 7 German Law Journal 341. 100 R Sacco, ‘Legal Formants: A Dynamic Approach to Comparative Law’ (1991) 39 American Journal of Comparative Law 1 and 343. 101 See, eg, R Sefton-Green (ed), Mistake, Fraud and Duties to Inform in European Contract Law, The Common Core of European Private Law (Cambridge, Cambridge University Press, 2005); M Bussani (ed), Pure Economic Loss in Europe, The Common Core of European Private Law (Cambridge, Cambridge University Press, 2003); R Zimmerman and S Whittaker (eds), Good Faith in European Contract Law, The Common Core of European Private Law (Cambridge, Cambridge University Press, 2000). 102 D Caruso, ‘The Missing View of the Cathedral: The Private Law Paradigm of European Legal Integration’ (1997) 3 European Law Journal 3. 103 Study Group on Social Justice in European Private Law, ‘Social Justice in European Contract Law: A Manifesto’ (2004) 10 European Law Journal 653; see also H Collins, The European Civil Code: The Way Forward (Cambridge, Cambridge University Press, 2008).

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any academic research team that is responsible for making proposals that have a chance of broad acceptance.104 The final impulsion toward balancing comes from the internal fragmentation of both the neo-liberal and social justice camps, a development reminiscent of Fuller’s pluralisation of the policy bases of contract rules. I hope the reader will permit me to quote again a 1911 passage from Demogue that is highly relevant to today’s debate over harmonisation: The simplist [sic] theories—such as those of a world steadily advancing, of a world of infinite perfectibility, of solidarity and fraternity unfolding themselves ever more and more—seem just as exaggerated as the duelistic [sic] theories, if I may be permitted to coin a word, which see everywhere in life a struggle between two opposite principles— individualism and socialism, authority and liberty, progress and reaction, State and individual. Correct as approximations, as methods of instruction, these duels, if closely examined, are really battles between masses, certain parts of which support or oppose just as well one as the other of the two combatants.

In our context, the neo-liberals, as in Eidenmüller et al, have to find a way to maintain coherence in the face of division between classical doctrinalists and proponents of efficiency analysis, who share preferences for conservative solutions, in spite of sharply antagonistic normative premises. Within the social justice camp, Thomas Wilhelmsson’s article, ‘Varieties of Welfarism’105 begins a similar process of internal disintegration. So long as there seems to be a confrontation of two arguably internally coherent views—neo-liberalism versus social justice, for example—it is at least conceivable that one is right, or that one will win out, so that balancing will, at least ultimately, prove to be unnecessary. But once the process of internal disintegration is underway, this comes to seem an impossibility. It is no longer clear what it would mean for one camp or the other to triumph, given that each is subject to myriad inconsistent interpretations, each representing a compromise of the potentially conflicting elements that compose it. A final factor in the re-emergence of balancing in Europe must certainly be the rise of proportionality tests in European public law, including both the European Court of Justice (ECJ) and the European Court of Human Rights (ECHR). On the other hand, I suppose it is conceivable that privatist disdain for public law proportionality actually delayed the acceptance of the inevitable represented by the DCFR.

104 For two ‘outsider’ observations of this discussion, see D Kennedy, ‘The Political Stakes in “Merely Technical” Issues of Contract Law’ (2001) 1 European Review of Private Law 7; D Kennedy, ‘Thoughts on Coherence, Social Values and National Tradition in Private Law’ in MW Hesselink (ed), The Politics of a European Civil Code (The Hague, Kluwer, 2006). 105 T Wilhelmsson, ‘Varieties of Welfarism in European Contract Law’ (2004) 10 European Law Journal 712.

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216 C

Duncan Kennedy Balancing in Retreat in the United States after 1980

The American developers of balancing in private and public law began as very careful and earnest students of German and French legal ideas. Some time around 1945, they seem to have concluded that they had little left to learn. For them, it was now the American century in law as in so many other areas of endeavour. They stopped reading, and they stopped being preoccupied with their European origins. As teachers, they no longer tried to interest their students in the work that had defined their own youth. Insomuch as there was a history of how American legal theory had reached this stage, it became a purely American history. No more translations. It was assumed not just that American legal theory was American, but that it had always been American. Paradoxically, just as they turned inwards, they began to influence legal thought in other parts of the world, for many reasons, some creditable and some discreditable and to influence it both for good and for ill. It was during this period of isolation that the Americans completed the balancing model, taking it to a point far beyond what their European predecessors had achieved.106 Then the period of creativity came quite abruptly to an end. Beginning around 1980, judges and doctrinal writers pulled back from the various theoretical controversies about how to conceptualise private law. There were many reasons for this, but I will mention only one, which may or may not have been the most important. Starting soon after the Second World War, American contract, tort and property law went through a protracted period of substantive change closely corresponding to the ‘socialisation’ described by Hesselink in the long quotation above. The judges and doctrinal writers who brought about these changes used variants of the social methodology and balancing, as illustrated by the case of Tarasoff v Regents of the University of California, discussed above. These developments, always presented as a matter of mere social rationality, came little by little to be understood as an aspect of the general progressive dominance of the courts, the dominance of the left, most visible in the public law work of the Warren Court, but also strongly present in the development of a law of gender that was both more protective of women’s interests in conflict with male interests and radically individualist in its attitude toward women’s freedom of choice. The programme of the American right wing, beginning in the 1960s with Richard Nixon but culminating with the election of Reagan in 1980, included as an important element an attack on ‘judicial activism’. Although in public law balancing had initially seemed a conservative technique, by the 1980s it was associated with activism, and the very sharp shift in the political affiliations of American judges brought about by Republican electoral dominance after 1968 led also to stalemate and then to some rollback of the mass of ‘socialising’ reforms of the post-Second World War period.107 It led also to the adoption, by both Left and

106

The preceding paragraphs are taken from Kennedy, ‘From the Will Theory’, above (n 15). On this development, see D Caruso, ‘Contract Law and Distribution in the Age of Welfare Reform’ (2007) 49 Arizona Law Review 665; J Feinman, ‘Unmaking Law: The Classical Revival in the Common Law’ (2004) 28 Seattle University Law Review 1; C Knapp, ‘Rescuing Reliance: The Perils of Promissory Estoppel’ (1998) 49 Hastings Law Journal 1191. 107

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Right, of modes of legal reasoning that disguised to the extent possible the element of judicial creativity. In legal academia—after the blaze of theoretical controversy brought about by the simultaneous rise of law and economics and critical legal studies—the mainstream more or less abandoned theory. For those who persisted, on the Right, there was a conservative, highly conceptual version of law and economics and neo-formalist versions of libertarianism and commutative justice; on the Left, an often equally conceptual or neo-formalist version of progressive civil liberties and rights talk, often ‘identity’ based. Balancing has not disappeared from American discursive practice, nor has it been superseded by a convincing alternative for dealing with gaps, conflicts and ambiguities. But it has passed from being a highly theorised, controversial practice to a persistent unacknowledged, often only half-conscious, underground activity. I think it not an exaggeration to say that for the last 15 years or so the European harmonisation discussion has been more interesting, from the point of view of private law theory, than anything happening among American privatists.

V CODA QUESTIONS ABOUT THE RELATIONSHIP BETWEEN PRIVATE LAW BALANCING AND PUBLIC LAW PROPORTIONALITY

In this chapter, I have treated private law balancing more or less in isolation from the issue of proportionality in public law. The relationship between the two is a subject of great interest, and one that I intend to pursue in the future. For the moment, it seems worthwhile to try to present the four quite broad questions that concern me, and then to suggest in a tentative way my initial hypotheses, very much subject to confirmation or disconfirmation through further study. The questions are: (1) Are the private and public law procedures analogous, identical, or quite distinct? (2) Did the developments in public and private law influence one another? (3) Is the American version of balancing in constitutional law analogous to, identical to, or quite distinct from European proportionality analysis? (4) Did the American development of balancing in constitutional law influence the development of proportionality in Germany after the Second World War?

A

Are the Private and Public Law Procedures Analogous or Identical?

It is an interesting and important question in what respects the balancing approach that characterises American and European sophisticated private law theory is the same as or different from the proportionality approach that characterises a very large part of European Union law, whether in the ECJ or in the ECHR, as well as the constitutional law of several Member States and particularly of Germany. The most limited definition of public law proportionality is tied closely to administrative law and has several parts. The situation is conceived as one in which the holder of a public power proposes an action that is formally within the scope of the power and that will impinge significantly on a private right. The prefect wants to build a road. After establishing the conflict between legitimate power and

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substantial legally protected interest, we first ask whether the action was both necessary and then chosen in such a way as to minimise gratuitous injury to the right. This is the first proportionality question. If the state action is proportional in this limited sense of means-ends rationality, then we move to the final stage of ‘true balancing’, in which the adjudicator has to decide whether the power trumps the right or vice versa, on the basis of a calculation whether the injury to the right was ‘proportional’ to the gain from the exercise of the power. Disproportion means illegitimacy.108 The basic private law balancing situation is one in which the plaintiff argues for the adoption of or interpretation of a rule of contract, property or tort law that restricts the defendant’s legal authorisation to injure him. The conflict may be cast in terms of interests or rights, or both, with the plaintiff typically alleging a Hohfeldian ‘claim right’ to protection and the defendant a Hohfeldian ‘privilege’, or ‘right to freedom of action’. The idea is that the adjudicator should assess the effects of adopting a more or less restricted view of the defendant’s authorisation to harm the plaintiff in terms of the relative weight of principles involved, of rights in conflict and of social (not individual) interests in the outcome, while keeping in mind the conflict between rules and standards and between judicial activism and judicial passivism. In a manner analogous to what Teubner argues has happened in the emergence of ‘societal constitutionalism’ as a general characteristic of global legal normativity,109 jurists have abstracted and then re-specified public law proportionality so that it now reaches far beyond the administrative law formulation. The term describes the procedure used in: — Judicial review of national legislation under national constitutions that both guarantee rights and distribute powers. — Judicial review of provisions of national civil codes whose application arguably infringes constitutionally guaranteed individual rights. — European judicial review of national legislation under the European conventions guaranteeing human rights. — Judicial review of norms adopted by the European legislative institutions or national legislatures under the provisions of the treaties allocating powers between the centre and the Member States. Once abstracted and re-specified in these ways, my hypothesis is that there is a single evolving template, organised around conflict between rights and powers, between powers, or between rights, involving in each case the same three questions: (a) Have the parties acted within, or been injured with respect to, their legally recognised powers or rights? (b) Has the injuror acted in a way that avoids unnecessary injury to the victims legally protected interest? (c) If so, is the injury acceptable given the relative importance of the rights or powers asserted by the injuror and the victim? While there are, of course, dramatic practical institutional 108

J Schwarze, European Administrative Law, rev 1st edn (London, Sweet & Maxwell, 2006). G Teubner, ‘Societal Constitutionalism: Alternatives to State-Centred Constitutional Theory?’ in C Joerges, IJ Sand and G Teubner (eds), Constitutionalism and Transnational Governance (Oxford, Hart Publishing, 2004). 109

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differences between balancing in private and public law, it is not clear to me that there are any differences at this more abstract analytic level. B

Did the Developments in Public and Private Law Influence One Another?

In the American case, there is no question that there is a very close connection between the development of balancing in the two contexts. As the discussion has already indicated, the American private law balancing theorists of the period from 1900 to 1937 were intensely concerned with the implications of their private law theory for US constitutional law. They argued that, because private law rules were intelligible only as the product of the balancing of conflicting policies, the choice of rules was inherently ‘legislative’. Consequently, vigorous judicial review of legislative choices to reform the rules in a progressive direction would constitute anti-democratic judicial usurpation. It seems to me that the connection in Europe is completely obscure, but a matter of considerable interest. C Is the American Version of Balancing in Constitutional Law Analogous to, Identical to, or quite Distinct from European Proportionality Analysis? My impression is that the European view on this question is that American public law balancing is quite different from European public law proportionality. My hypothesis, again subject to disconfirmation, is that contrary to the typical European view, American constitutional law balancing has all the elements of European proportionality. These include the preliminary tests of whether the legislation is within the general powers of the state and whether it adopts the ‘least restrictive means’ to achieve its objective. Given the abstraction and re-specification of proportionality just described, it is hard for me to see that the original restricted administrative law definition is of any use in describing the European practice. The abstracted and re-specified practice seems to be identical to American constitutional law balancing, although there will obviously be many differences of style, presentation and detail between the systems.110 D Did American Private and Public Law Balancing Discussions Influence European Public Law Proportionality? My impression is that the typical European view is that the European practice of proportionality in public law has its origins in some combination of Aristotle’s definition of commutative justice and German, or rather Prussian, nineteenthcentury administrative law, under the definition that I gave above. My tentative hypothesis on this question is again contrary to this European view. The reason for my scepticism is simple: during the period immediately preceding 110 A useful preliminary treatment is J Bomhoff, ‘Balancing, the Global and the Local: Judicial Balancing as a Problematic Topic in Comparative (Constitutional) Law’ (2008) 31 Hastings International & Comparative Law Review 555.

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the German constitutional cases establishing proportionality via the doctrine of indirect horizontal effect, the US Supreme Court, beginning with the Dennis case on the criminalisation of the American Communist Party, decided a series of First Amendment cases on the basis of balancing.111 These were the most politically salient decisions of the whole Cold War period and they stimulated an intense academic debate, including dozens of articles and books by well known and prestigious constitutional scholars and political scientists about the meaning and legitimacy of balancing, as opposed to the alternatives. The positions later associated with Alexy and Habermas in their German debate were quite thoroughly previewed in the American controversy. It is inconceivable to me that the new judges of the German Constitutional Court, working under American occupation with a brand new constitution that departed in many respects from earlier German constitutional models, were ignorant of the American balancing debate. Because the balancing debate is now largely forgotten in the United States, and proportionality is understood in Europe as a particular product of European circumstances, there seems to have been no attention paid at all to the question of the influence vel non of the Americans on the Germans at the crucial moment of judicial innovation. My initial hypothesis, again subject to disconfirmation, is that the American development influenced the German one.

111 For the standard reference on the history of public law balancing in the US, including a discussion of its origins in the late 1930s and early 1940s and its roots in the private law discussions that are summarised in the first parts of this chapter, see A Aleinikoff, ‘Constitutional Law in the Age of Balancing’ (1987) 96 Yale Law Journal 943.

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12 Balancing in Private Law and the Imperatives of the Public Interest: National Experiences and (Missed?) European Opportunities NORBERT REICH

I

STARTING POINT—A TRANSNATIONAL DIALOGUE ON BALANCING IN PRIVATE LAW

M

Y CHAPTER TAKES up some ideas presented by Duncan Kennedy1 in his contribution to this book, in which he reflects on interesting, conflicting parallel developments in private law methodology in a transnational perspective. In his words, ‘(i)n balancing we understand ourselves to be choosing a norm (not choosing a winning party) among a number of permissible alternatives on the ground that it best balances or combines conflicting normative considerations’. Such methodology is well known in constitutional law. Its reception in private law has allowed a rather conflicting and incoherent ‘opening’ of legal thought to extra-legal considerations, which, for many adherents to a more abstract legal reasoning (which Duncan Kennedy calls ‘Classical Legal Thought’ (CLT)) comes close to policy-making. It is feared that private law, particularly in countries with the tradition of codified law, loses its ‘innocence’, namely the guaranteeing of the enforcement of the ‘free will’ of parties to a contract in the interest of an efficient market economy. Instead of the prevalence of default rules, which to some extent put into legal norms what reasonable parties minimising transaction costs would have included in their contract themselves had they known the potential conflict2, private law becomes ‘corrupted’ by mandatory rules protecting weaker parties, imposing constitutional values like non-discrimination on free transactions and limiting the use of acquired rights. Even the ‘Draft Common Frame of Reference’ (‘DCFR’)3 to which Kennedy refers—and which is

1

D Kennedy, ‘A Transnational Genealogy of Proportionality in Private Law’ (ch 11 in this volume). For an economic approach to harmonisation see F Gomez and J Januza, ‘The Economics of Private Law Harmonised Law-making: Mechanisms, Modes and Standards’ (ch 7 in this volume). 3 C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). 2

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critically analysed in the chapter of Brigitta Lurger4—is ‘contaminated’ by this trend towards a more substantive justice in private law, based on balancing.5 ‘Balancing’ in this context becomes a highly complex and at the same time controversial issue going beyond the traditional two-party scheme of private law. As we will show later, it can be found in a multi-level system of European jurisdictions—always in confrontation with CLT based on abstract, formal, ‘principled’ legal reasoning defending private autonomy against intrusions of extra-legal principles and values.

II

REVISITING HECK—‘INTERESSENJURISPRUDENZ’ AND THE STONY ROAD TO A BALANCING APPROACH

In his mapping of legal thought on balancing, Kennedy refers critically to Philip Heck, the head of the so-called ‘Tübinger Privatrechtschule’. As a follower of Jhering, he promoted the influential German ‘Interessenjurisprudenz’ (teleological interpretation) after codification of civil law through the German Civil Code (BGB) which came into force on 1 January 1900. His article, ‘Das Problem der Rechtsgewinnung’ published in 1912, and reprinted in 1968,6 became well known, and contains a polemic both against ‘Freirechtsschule’ (free legal thought school—a sort of German ‘legal realism’)7 and ‘Begriffsjurisprudenz’ (conceptual jurisprudence—CLT in the words of Kennedy). Interessenjurisprudenz, according to him, relies on a subjective, historical interpretation of private law according to the ‘will of the legislator’. Law contains and regulates ‘legislative interests’ as ‘Begehrungsdispositionen’. Heck insists on a sharp distinction between ‘politische Gesetzgebungsprobleme’ and ‘unpolitische Probleme’: the ‘political problems of legislation’ are the prerogative of the parliament, while the ‘non-political legal problems’ of ‘juristische Filigranarbeit’ (legal fine tuning) are left to the judge or the bureaucracy. Interessenjurisprudenz becomes surprisingly depoliticised; Heck seems to be afraid that his concept of Interessenjurisprudenz can be misunderstood as an opening of law to non-legal imperatives. This cautious and positivistic approach to law, which seems to turn more against the Freirechtsschulethan against Begriffsjurisprudenz, is repeated in his later article ‘Gesetzesauslegung und Interessenjurisprudenz’, published in 1914 and again in

4 B Lurger, ‘Old and New Insights for the Protection of Consumers in European Private Law in the Wake of the Global Economic Crisis’ (ch 6 in this volume); I think, however, she is somewhat exaggerating in her critique of the DCFR. 5 See the joint paper by H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘Der Gemeinsame Referenzrahmen für das Europäische Privatrecht— Wertungsfragen and Kodifikationsprobleme’ (2008) 63 Juristenzeitung (JZ) 529; contributions to R Schulze (ed), Common Frame of Reference and Existing EC Contract Law (Munich, Sellier, 2008). 6 Published again in P Heck, Das Problem der Rechtsgewinnung (Bad Homburg, Gehlen Verlag, 1968) 9–45 edited by Roland Dubischar, with concluding remarks by Josef Esser. 7 See N Reich, ‘Sociological Jurisprudence’ und ‘Legal Realism’ im Rechtsdenken Amerikas (Heidelberg, Winter, 1966); for a recent account of the importance of legal realism in American legal thought, see K Grechenig and M Gelter, ‘Divergente Evolution des Rechtsdenkens—Von amerikanischer Rechtsökonomie und deutscher Dogmatik’ (2008) Rabels Zeitschrift für ausländisches und internationales Privatrecht (RabelsZ) 513, 522 et seq.

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1968.8 He insists on a strict subordination of the judge under the law (Heck uses the example of ‘lord’ as Herr and ‘servant’ as Diener)—the judge must adjudicate on the basis of ‘interessengemäßer, denkender Gehorsam’, that is a reflexive obeying the interests enshrined in the law. The formula of ‘denkender Gehorsam’ (reflexive obeying) as a starting point of legal methodology became very popular in Germany. It allows the judge to supplement and eventually modify the historically given complex of norms; he may fill lacunae in the law by respecting the value judgements of the law itself; any modification must conform to the intention of the legislator; there is a necessity to balance interests—a rather vague and open category in the methodology of Heck—with the help of value judgements. Heck on the one hand attacks the conception of a ‘closed’ body of law, vested in codification—a concept still very popular at his time and thereby openly engaging with the classical legal problems of closing so-called gaps in the law (‘Lücken im Recht’). However, at the same time he insists that, in closing these gaps, the judge or law scholar only implements the original will and intention of the legislator. This methodological ‘trick’ makes it possible for Heck to insist that in filling these gaps the judge acts within the law and does not transgress its borders. Heck tried to exemplify his Interessenjurisprudenz in his ‘Grundriss des Schuldrechts’ (basics of the law of obligations) published in 1929. Here he insists on the role of the judge as ‘assistant to the legislator in ordering life’ (‘Gehilfe des Gesetzgebers in der Ordnung des Lebens’).9 This is based on so-called delegating norms (‘Delegationsnormen’) which are found in the general clauses of the (BGB) like good faith (‘Treu und Glauben’) and unconscionability (‘Sittenwidrigkeit’). In closing gaps and in finding the right norm, the judge must act like a legislator: (D)ie Gesetzesnormen beruhen auf der Anschauung der verschiedenen Interessenkonflikte, die das Leben bringt, und der Wertung der beteiligten Interessen. Der Richter braucht die gleiche Anschauung und hat gleiches zu tun. (The legal norms are based on the understanding of the different conflicts of interests, which originate in life, and the evaluation of the different interests. The judge has to have the same understanding and do the same).10

Heck tries to demonstrate briefly his method in relation to problems which were prevalent in Germany between the two wars—due to the rapid devaluation of money—such as whether the creditor had a right to demand an adjustment (‘Aufwertung’) of his claim which had become devaluated during inflation. Heck discusses several ‘theories’ under the (then) existing legal doctrines, closing his argument with a purely result oriented approach—since all theories come to identical results, therefore a similar balancing of interests exists which in the end result in different yet equivalent norms.11 In an earlier article, he had severely criticised the judgment of the Reichsgericht (at the time the highest court in civil matters) of 28 November 1923 concerning the adjustment of mortgage credits

8 9 10 11

P Heck, above (n 6) at pp 46–141. Grundriss des Schuldrechts (Tübingen, Mohr) 1929) 11. Above (n 9) 14. Above (n 9) 95.

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during the inflation12 as violating the ‘continuity interests’ of the state (despite severe inflation) and privileging certain groups of creditors to the detriment of others. In his best known work, Begriffsbildung und Interessenjurispudenz, published in 1932, just before the Nazi take over, he wrote somewhat pathetically: ‘Die Interessenjurisprudenz will dem Leben dienen’,13 that is, it wants to serve life. He points to a differentiation between ‘interests’ and auxiliary concepts (‘Hilfsbegriffe’) and against ‘Scheinbegründungen der Begriffsjurisprudenz’ (false reasoning). In continuing his earlier methodological work he pleads for a ‘sinngemäße, abhängige Gesetzesergänzung’, that is, a reasonable gap-filling of the law. He does not want to refer his methodology to a binding philosophical system. In re-reading Heck today, one is surprised by the great influence that his Interessenjurisprudenz had (and still has) on German private law. This explains to some extent the critique and rejection of the Interessenjurisprudenz by Nazi legal methodology to which Heck tried to answer by referring to the ‘non-arian (ie, Jewish) origin of many representatives of the free law school’ (‘nichtariche Abstammung verschiedener Vertreter der freirechtlichen und soziologischen Schule’).14 According to this ideology, in particular in the view of its most prominent advocate Karl Larenz, the approach of Heck was too individualistic and contradicted the values of the so-called ‘racial order of the German Volk’ (‘konkretes Ordnungsdenken’ with reference to Hegel).15 After the Second World War, a reference to Heck would allow a return to the more traditional values of private law. But the critique remains that, as Kennedy remarks, he hardly defines and specifies what is meant by ‘legally protected interests’ existing in ‘life’. His approach is strictly positivistic, hierarchical and legalistic. The judge is merely re-rationalising the law respectively. the intention of the legislator, but not helping him in cases where the law remains ‘empty’ and does not give any direction. His narrow methodology does not help with interpretation in areas where the legislator has not made clear which interests should be protected, as is the case of general clauses such as ‘good faith’ or ‘bonos mores’. He opens legal methodology to the input of different interests into the law, beyond mere rules and to the value judgements attached to their ranking by the legislator, but this does not help with the ‘second step’ of having to resolve cases with regard to which exactly such balancing by the legislator is absent.16 Heck is important for insisting on an overt balancing of conflicting interests, but he does not tell us how to do it! However, Heck paved the way for an ‘opening’ of the legal system towards balancing of different interests. He helped to overcome the conceptual approach towards interpretation by Begriffsjurisprudenz, which was still the dominant thought of legal reasoning at his time—and still persists today. The slogan of 12 P Heck, ‘Das Urteil des Reichgerichts v 28.11.1923 über die Aufwertung von Hypotheken und die Grenzen der Richtermacht’ (1924) 122 Archiv für die civilistische Praxis 203. 13 Reprinted in Heck,, above (n 6) 142–204 (excerpts). 14 Grechenig and Gelter, ‘Divergente Evolution des Rechtsdenkens’, above (n 7) 552. 15 For details see the excellent work by B Rüthers, Die unbegrenzte Auslegung (Unlimited Interpretation’), (Frankfurt, Athenäum, 1973) 270–277. 16 See the critique of Grechenig and Gelter, ‘Divergente Evolution des Rechtsdenkens’, above (n 7) 554–55.

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Interessenjurisprudenz legitimised German judges and scholars to look for a more open reasoning in solving legal problems, especially in areas where the legislator had left gaps, despite the fact that his idea of denkendem Gehorsam amounted to mere fiction. This was particularly important—and at the same time unsatisfactory—in the understanding of general clauses where the method of ‘balancing interests’ remains vague and incomplete. Heck laid the foundations of the later methodological work of Josef Esser, an influential law professor in Tübingen and to some extent his follower and critic at the same time.17

III

JOSEF ESSER—HERMENEUTIC REALISM

Josef Esser continued the methodological reorientation of Heck in his great—but unfortunately little known abroad—work Grundsatz und Norm (‘principle and norm’), published first in 1956.18 It was followed by the smaller and even more influential book, Vorverständnis und Methodenwahl (Pre-understanding and Choice of Method) published in 1970.19 A collection of his essays with the title ‘Wege der Rechtsgewinnung’ (‘Paths to Finding the Law’) appeared in 1990.20 His works are, as their titles show, very much concerned with judicial finding and developing the law. The starting point of his work is the classical problem of ‘gaps in law’. The reference to dogmatic constructions as advocated more or less implicitly by Begriffsjurisprudenz, or by reference to the imaginary denkenden Gehorsam of the judge in the sense of Heck, does not give an answer of the complex processes in legal gap filling that allow legitimacy and predictability at the same time. The problem becomes even more difficult by the frequent use of the modern legislator of general clauses which must be prevented from becoming the ‘opening gates’ for arbitrary, politicised law-making under totalitarian regimes like Nazi fascism21 and Soviet socialism.22 Esser tackles this problem openly as one of a reference to a more 17 See his afterword in the collection of essays by Heck, Das Problem der Rechtsgewinnung, published in 1968, above (n 6) 222, referring in particular to the famous formula of ‘denkendem Gehorsam’ and its limits with regard to ‘gap filling’. 18 J Esser, Grundsatz und Norm in der richterlichen Fortbildung des Privatrechts (Principles and Norms in Judicial Law Making) 4th edn (Tübingen, Mohr, 1968). 19 J Esser, Vorverständnis und Methodenwahl in der Rechtsfindung (Pre-understanding and Choice of Method in Legal Interpretation: Principles of Rationality in the Judicial Decision) (Frankfurt, Athenäum, 1970); a popular pocket edition was published in 1972. For a brief comment, see JE Herget, Contemporary German Legal Philosophy (Philadelphia, University of Pennsylvania Press, 1996) 22; K Röhl and H Chr Röhl, Allgemeine Rechtslehre—Ein Lehrbuch 3 A (Köln, Heymann, 2008) 121. 20 J Esser, Wege der Rechtsgewinnung (Ways to Find the Law) (eds) P Häberle and H Leser (Mohr, Tübingen, 1990). 21 See Rüthers, Die unbegrenzte Auslegung, above (n 15) 270 where he writes in the preface: ‘Das Buch zeigt, welche Rechtsmethoden und welche Rechtsquellenlehren geeignet sind, nach einem Wechsel des politischen Systems nahezu ohne Zutun der Gesetzgebung in das überkommene Normensystem neue Wert- und Orientierungsprinzipien einzuführen, die dann eine Umwertung der gesamten Rechtsordnung ermöglichen’. (‘The book shows what legal methods and theories on legal sources are capable to introduce new value and orientation principles after a change of the political system without action of the legislator, which allow a modification of the entire legal system’). 22 N Reich, Sozialismus und Zivilrecht (Frankfurt, Athenäum, 1972) 175 et seq.

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complex set of values and principles which are meant to guide the judge in applying the law. He talks of the necessity (and possibility) to win consensus on concepts of justice in the legal community. ‘Reasonableness’ and ‘justice’ must be understood as socially efficient formulae of normative thinking. He insists on ‘piercing the veil’ (‘Durchgriff’—a term frequently used by Esser)23 of dogmatic legal thinking towards legal-political argumentation on ‘Sachgerechtigkeit’ (substantive justice). Long before Dworkin,24 he refers to the importance of legal principles which must be integrated into the finding and assessment of ‘rules’. A Durchgriff of general clauses should be allowed only in the limits of the objectives of the regulatory programme; they are the ‘starting points’ for the judicial creation of norms. Esser rejects the theory of ‘Wertfreiheit’ (absence of value judgements) in legal thinking as ‘ideology’. Instead he talks of a ‘Vorverständnis’ in legal thinking and interpretation, namely as ‘conceptualising’ the understanding of legal texts whereby a just result is—or should be—the final objective. His polemic is directed against a politically uniform understanding of the law like in socialism and fascism: this leads to the dominance of one truth (‘Wahrheitsmonopol’) which is against the very idea of pluralist legal principles. He pleads for the importance of consensus on values which are not based on social or political ideologies, but on dominant value judgements (principles) in legal decision making. For him, the autonomy of the judiciary is a political task. He therefore in the end rejects the reductionist, state-oriented methodology as put forward by Heck. The importance of the work of Esser can be seen today even more than at the time of his writing, where he was not followed by the majoritarian view of legal thinking which in Germany oscillated between the still dogmatic Begriffsjurisprudenz based on a hierarchy of legal constructs and a revised Interessenjurisprudenz trying to balance conflicting interests as they appear ‘in life’ without really disclosing their underlying Vorverständnisse on which a rational and transparent balancing can be based. Only now is the importance of his methodology felt in the widening of legal methodology to inherent principles, constitutional norms and EU internal market imperatives. This openness of the law can be easily transposed to a multi-level system like the EU. The role of the judge in the sense of Esser can be understood as mediator between ‘norms’ and ‘principles’. Esser wrote his books at a time when the impact of constitutional law—especially fundamental rights on private law thinking—was not yet felt. At that time, the mainstream doctrine, both in constitutional and in private law rejected any so-called ‘horizontal effect’ of fundamental rights (‘Drittwirkung’) which were said to be directed only against the state—a theory well understood after the experience of Nazi legal nihilism. Therefore, a constitutional ‘balancing’ of private law conflicts was not seen to be necessary; this emerged only later under the impact of the jurisprudence of the Bundesverfassungsgericht (BVerfG—Federal Constitutional

23

See Vorverständnis above (n 19) 118, 167. R Dworkin, Taking Rights Seriously (Cambridge, Mass, Harvard University Press, 1977) distinguishing between rules and principles; Röhl and Röhl, Allgemeine Rechtslehre, above (n 19) 282 correctly refer to the similarity between Esser and later Dworkin, regretting that Esser—though highly regarded in Germany—was internationally hardly taken seriously at all and did not provoke an in-depth discussion which was only achieved by the ‘Prinzipientheorie’ of Dworkin. 24

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Court: see below at part IV). Esser, on the other hand, in opening legal reasoning to generally accepted principles of justice, fairness and reasonableness—in a surprising reference to concepts well known in common law countries which he frequently uses to present his argument in a truly comparative spirit—clearly allows a transformation and an ‘influx’ of constitutional values and fundamental rights into the seemingly neutral private law. The vague concept of ‘interests’ as somewhat naively developed by Heck receives a much more manageable methodological input. These ‘interests’ serve as ‘transfer norms’ for values which reside seemingly outside the law but must be respected to make legal reasoning acceptable and legitimate. The discovery of an ever present Vorverständnis in legal thinking and law application is not meant as justifying ideologies in law application, but as a necessary and at the same time unavoidable consequence for and of legal reasoning. The concept of Vorverständnis helps to make legal reasoning transparent and thereby accountable.

IV

CONFLICTS IN CIVIL LITIGATION IN GERMANY—THE CASE OF PERSONAL SURETIES OF CLOSE RELATIVES

In order to understand the importance of the methodology of Heck on the one hand and Esser on the other, let us start with a conflict which shook German private law litigation and scholarship in the early 1990s and which was finally resolved by a famous yet controversial judgment of the BVerfG which has also attracted the attention of non-German observers.25 The story is very complex, and we have to simplify rather drastically. Are there limits on how far family members who do not have any substantial income or assets can underwrite sureties (‘Bürgschaft’) for their partners or relatives who had been granted credit from a bank and who need a surety to obtain credit at all? The German Civil Code takes a very formal approach in its provisions on sureties: according to § 766 BGB, non-business third party sureties must be in writing and signed by the guarantor (‘Bürge’). German banks in their commercial practice did not hand out credit without such a surety, used as a means of last resort in case the main debtor could not pay the capital and/or the interest as contracted. If the guarantor did not have any financial means either, the bank could get a judgment for payment which would, upon determination of the local court responsible for supervising the execution order into his assets, at least be enforceable in instalments and would protect the creditor—this was the usual justification of such sureties—in case of fraudulent transfer of assets from the debtor to the guarantor. Many of these guarantees caused considerable hardship to guarantors 25 O Cherednychenko, Fundamental Rights, Contract Law and the Protection of the Weaker Party: A Comparative Analysis of the Constitutionalisation of Contract Law, with Emphasis on Risky Financial Transactions (Munich, Sellier, 2007) 234–46, 306–30; A Colombi-Ciacchi (ed), Protection of Non-Professional Sureties in Europe: Formal and Substantive Disparity (Baden-Baden, Nomos, 2007) with a detailed report on Germany by P Rott at 51; C Mak, Fundamental Rights in European Contract Law. A Comparison of the Impact of Fundamental Rights on Contractual Relationships in Germany, the Netherlands, Italy and England (The Hague, Kluwer, 2008) 75 et seq; 242 et seq (with reference to comparative law).

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who had agreed to the surety for altruistic reasons to help a close relative or partner. Should the surety contract be enforced with Shylock-like rigidity? In one of the famous cases, the bank official who had asked for the guarantee had told the guarantor that the surety is only for the record (‘ich brauche das nur für die Akten’)—a statement which later was not held to be binding on the bank. When the litigation came to the German Federal Court (Bundesgerichtshof— BGH) the highest instance in civil law matters, a controversy arose between the ninth and the eleventh senate. The leading ninth senate started its legal reasoning from a radical and formal theory of private autonomy, also allowing the underwriting of altruistic yet risky transactions.26 The very one-sidedness of the transaction in favour of the bank and to the detriment (or risk) of the guarantor, precluded any substantive protection of the latter. The German Civil Code (BGB) took—in the opinion of the ninth senate of the BGH—a more formal approach to the protection of the non-commercial guarantor; there existed no duty of care of the bank with regard to the financial situation of the guarantor. If these formal requirements, specifying the extent of liability in writing, were fulfilled—whatever the sum, motives and risk in giving the surety—the guarantor could be condemned to payment in case of default of the debtor; an eventual protection of his or her assets (if they existed at all) could only be done at a later stage in the proceedings of forced execution. The eleventh senate—competent for banking contracts—took a more substantive approach, which however remained controversial in legal practice and legal writing.27 The controversy finally reached the BVerfG on individual constitutional complaints against the existing legal practice as determined by the case law of the ninth senate of the BGH. In a very ingenious procedural move, the BVerfG selected two cases, one which presented a situation with ‘normal risk’ for the guarantor, the other seemingly exceeding the tolerable risk margin.28 In the judgment of 10 October 1993 it made the famous statement that under the constitutional protection of the fundamental right to civil liberty of Article 2 of the German ‘Grundgesetz’ (Constitution) private autonomy takes not only a formal, but a substantive content encompassing two aspects: one guaranteeing freedom of contract (including risky transactions), the other the freedom of weaker parties from excessively burdensome contractual obligations. In the latter case, the state (or rather the judge) has to step in and use the general clauses of the BGB to protect the weaker party. The basic constitutional principle was formulated as follows:

26 BGHZ (Entscheidungen des Bundesgerichtshofs in Zivilsachen) 106, 269 (272); BGH NJW (Neue Juristische Wochenschrift) 1991, 2015 (2017); Cherednychenko, Fundamental Rights, ibid, 307. 27 BGH NJW 1991, 923 (925); for an account, see Rott (above n 25) 54; Cherednychenko, Fundamental Rights, above (n 25) 309. 28 BVerfGE 89, 214 (232); for a critique see O Cherednychenko, ‘Fundamental Rights, Policy Issues, and the Draft Common Frame of Reference for European Private Law’ (2010) 6 European Review of Contract Law 39, 57 criticising that the BVerfG ‘did not give an answer as to which of the two alternatives (private autonomy or protection of the weaker party, NR) should be followed or why’. This statement is incorrect, because the BVerfG tries to balance the two opposing principles and in the end leaves this to ordinary courts under the general clauses of the German civil law (‘good faith’ of § 242 or ‘unconscionability’ under § 138 BGB).

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Hat einer der Vertragsteile ein so starkes Übergewicht, dass er den Vertragsinhalt faktisch einseitig bestimmen kann, bewirkt dies für den anderen Vertragsteil Fremdbestimmung. (If one party has such a strong position that he can de facto determine unilaterally the conditions of the contract, this implies heteronomous determination of the other party to the contract).

The judgment of the BVerfG tried to narrow down its scope of application to situations of a ‘structural imbalance between the parties and to situations where the consequences of the contract are excessively onerous to the weaker party’. It left it to civil law courts, in particular the BGH, to find the appropriate remedies in German contract law, especially by using the general clauses on unconscionability and good faith which in this perspective took up a constitutional dimension in relations usually characterised by the principle of private autonomy. The judgment of the highest German court, however, aroused a storm of protest among German private law scholars29 and a considerable follow-up litigation.30 I am tempted to comment on it but will not do so. It should be kept in mind that the BVerfG wanted to protect close relatives and partners of the main debtor against excessively onerous transactions in situations of structural imbalance in contracting, which is typically the case of contracts between banks and guarantors where the latter find themselves in a ‘take-it-or-leave-it’ situation. At the same time, the BVerfG did not want to forbid completely the frequent use of third-party guarantees in credit transactions with small businesses or start-ups; otherwise credit would not be available to debtors with few assets for granting a security like a mortgage to the creditor. Rather, I want to use this litigation to make my point concerning our subject of balancing by referring to the Interessenjurisprudenz of Heck and the ‘hermeneutic realism’ of Esser referring to more fundamental values and principles of law. Heck, as I mentioned above, takes a historic approach to positive law and he would probably have supported the original logic of the BGH: the legislator had allowed third-party sureties under a mere formal approach, and even under the imperatives of a denkendem Gehorsam, the judge could not find any gap in legislation. The reference to general clauses to correct a seemingly unjust result by this formal approach was not really envisaged by Heck. Heck never referred to the substantive interests inherent in a legal norm and therefore his ‘balancing’ would have remained without result. Esser’s hermeneutic realism on the other hand indeed helps to explain both the approach of the BGH and the BVerfG. Both courts start from specific, yet different Vorverständnisse of the conflict which shapes the result: the ninth senate of the 29 D Medicus, Abschied von der Privatautonomie im Schuldrecht? (Köln, O Schmidt, 1994); W Zöllner, ‘Regelungsspielräume im Schuldvertragsrecht’ (1996) 196 Archiv für die civilistische Praxis 1, 6; U Diederichsen, ‘Das BVerfG als oberstes Zivilgericht—ein Lehrstück der juristischen Methodenlehre’ (1998) 198 Archiv für die civilistische Praxis 171, 247; G Spieß, ‚Inhaltskontrolle von Verträgen— das Ende privatautonomer Vertragsgestaltung?’ (1994) Deutsches Verwaltungsblatt 1222. 30 Later case law was concerned with defining the concept of close relatives or partners, including same-sex partners. For a recent case, see BGH NJW 2009, 2671, as well as the criteria of an ‘excessively onerous obligation’ or ‘gross disproportionality’, BGH NJW 2005, 971. We cannot go into the details of the sometimes very complex and intransparent case law. For an overview to the English speaking reader, see Cherednychenko, Fundamental Rights, above (n 25) 309–31.

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BGH from a purely formal one, putting the bank and the third party guarantor at same level of ‘private autonomy’; while the BVerfG used the fundamental right of personal freedom and liberty—even if it does not take direct but only an ‘indirect effect’ in private law relations— to correct the outcome of a seemingly autonomous and legally flawless transaction. The ‘influx’ of general principles of law—including obviously fundamental rights as already envisaged by Esser31— into private law relations, via the general clauses of the BGB, allows a certain ‘flexibilisation’ of results in transactions characterised by a disparity in the power structure between the guarantor and the bank, exceeding the ‘normal’ risk of one-sided transactions like a third-party surety. But obviously the problem remains that the criteria used are extremely vague and unspecific, and hard to determine by banks in their lending and by courts in their judicial practice.

V

THE ‘HEININGER SAGA’—COMMUNICATION GAPS BETWEEN EUROPEAN AND GERMAN COURTS

A somewhat more complex litigation which saw the BGH and European Court of Justice (ECJ) not in co-operation,32 but rather in a ‘communication gap’,33 concerned the so-called ‘Heininger saga’, based on a well-known judgment of the ECJ.34 Again, for the sake of our mostly methodological approach we have to be very simplistic without paying attention to the many fascinating and at the same time confusing details of the litigation.35 After German unification, the government had promised substantial tax breaks to purchasers of real estate mostly in the east, but also in other parts of Germany. So-called ‘project developers’ started aggressive marketing campaigns to sell real property to private investors, frequently inexperienced consumers, by promising them high returns from renting out these properties 31 See Esser, Grundsatz und Norm, above (n 18) 69 where he refers to the principle of ‘equality’ and its importance for private law—a legal concept very controversial at his time under conflicting theories of ‘mittelbare’ or ‘unmittelbare’ Dritttwirkung (direct or indirect horizontal effect). Similar debates are now found in EU law concerning the impact of the general non-discrimination principle. For opposing views, see N Reich, ‘The Public/Private Divide in European Law’ in F Cafaggi and H-W Micklitz (eds), European Private Law after the Common Frame of Reference (Cheltenham, Elgar, 2010) 56 against J Basedow, ‘Der Grundsatz der Nichtdiskriminierung im europäischen. Privatrecht’ (2008) Zeitschrift für europäisches Privatrecht (ZeuP) 230. 32 See H-W Micklitz, The Politics of Judicial Co-operation (Cambridge, Cambridge University Press, 2005) where he analyses the relationship between the ECJ and UK (English) courts in the reference procedure; unfortunately such a profoundly researched work is missing for Germany. 33 H-W Micklitz, ‘The Relationship between National and European Consumer Policy—Challenges and Perspectives’ in C Twigg-Flesner, D Parry, G Howells and A Nordhausen (eds), Yearbook of Consumer Law 2008 (Farnham, Ashgate, 2009) 36. 34 Case C-481/99 Georg Heininger u. Helga Heininger v Bayrische Hypo- und Vereinsbank [2001] ECR I-9945. 35 The German literature to his debate is vast and cannot be adequately referred to in this context which is more concerned with methodological questions. I refer to my contribution N Reich, ‘Heininger und das Europäische Privatrecht’, Liber amicorum P Derleder (Baden-Baden, Nomos, 2005) 127; see also, Micklitz, The Politics of Judicial Co-operation, above (n 33); H Unberath and A Johnston, ‘The Double Headed Approach of the ECJ Concerning Consumer Protection’ (2007) 44 Common Market Law Review 1237, 1261; T Möllers and P Grassi, ‘Die Europarechtswidrigkeit der Schrottimmobilienrechtsprechung zur Haustürwiderrufs-RiLi 85/577/EWG durch deutsche Gerichte’ (2010) Verbraucher und Recht (VuR) 3.

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and gaining tax breaks to be set off against the costs of the credit. Financing of these contracts was done by banks. Intermediaries of these developers usually approached consumers at the doorstep with credit forms to prepare the transaction with the financing banks. A whole package of different contracts resulted from this type of marketing (which may have differed from case-to-case but still showed similar patterns): — A real-estate purchase which, under German law, is only valid if documented before a public notary, which was usually the case. — A mortgage credit to finance the purchase of the property as prepared ‘at the doorstep’ by the developer, but finally approved by the bank, which transferred the money directly to the account of the developer. — A separate contract between the consumer/purchaser-investor and the developer, whose legal character remained unclear; frequently the developer became insolvent after the transaction and therefore could not be held responsible for false statements or fraud of his intermediaries vis-à-vis the consumer. Usually, after several years of the transaction, the consumer/investor/debtor realised that the promised profits from the investment turned into debts, but still the credit contract with the bank had to be observed. Was the consumer able to raise any defences against the bank? In its initial case law, the German BGH took a similar formal approach to the matter as in the surety cases: private autonomy allowed parties to split up a seemingly uniform transaction into several parts; the banks did not want to get involved in the risks of the purchase transaction but only handed out money; the intermediary of the developer was not regarded as agent of the bank. According to the majority opinion of German courts and scholars (‘herrschende Meinung’) on the law existing at the time the case came to the ECJ, the consumer could not withdraw from the credit transaction, even if it was negotiated at the doorstep; the Doorstep Directive 85/577/EEC36 was said to be not applicable to mortgage credit entered into, or prepared, at the doorstep. Therefore, the consumer did not need to be informed of an eventual right of withdrawal. This restrictive interpretation was challenged by lower German courts and finally the BGH was forced to make a reference in the Heininger case concerning the applicability of the Doorstep Directive 85/577 to consumer credit secured by a mortgage on the property. In its Heininger judgment of 13 December 2001, the ECJ made three important pronouncements: — Directive 85/577 is also applicable to real estate credit secured by a mortgage if concluded at the doorstep. Therefore, the consumer may withdraw from the transaction within one week. — If the consumer has not been informed about his right to withdrawal, this right does not lapse and can be activated any time later before final performance of the contract.37

36 Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negoti-ated away from business premises [1985] OJ L372/31. 37 This clarification was inserted by the ECJ in Case C-412/06 A Hamilton v Volksbank Filder [2008] ECJ I-2383.

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— Banks could not rely on their ignorance of the law; they could have avoided this by simply informing the consumer of his right of withdrawal. They do not enjoy any protection for their (incorrect) expectations in the state-of-the-art of German interpretation of EU law. The ECJ came to its surprising result by a very formal application of Directive 85/577, even though, from a historical point of view as would probably have been advanced by applying the Interessenjurisprudenz of Heck, it should have been clear that the case of real estate credit was not really covered by it; it mostly concerned the classical doorstep situation known from ‘vacuum-cleaner’ and ‘Encyclopedia Brittanica’ cases.38 There was no ‘gap’ which had to be closed by the denkenden Gehorsam of the judge; quite the opposite. When the case came back to the BGH, which alone has power to apply EU law (in light of the interpretation given by the ECJ) to the case before it, it took some trouble to ‘interpret’ German law in such a way as to conform to EU law in its judgment of 9 April 2002.39 It used the methodology of ‘conforming interpretation’ to allow the consumer a withdrawal even after this right had already lapsed under German law and provided that, in actual fact, the contract was negotiated at the doorstep, which frequently proved to be a complex situation of fact not decided by the ECJ. So far, so good. But what were the consequences of the Heininger judgment to the complex set of contracts of which the credit transaction was only part? The BGH was very quick at giving its answer in the above-mentioned judgment: the property and the credit transaction are legally separated from each other.40 The withdrawal of one (the mortgage credit) does not affect the other (purchase of real estate). The only consequence of withdrawal from the credit contract is to avoid it. What are the consequences of avoidance? Does the consumer have to pay back the credit in full and without the privilege of instalments, as the case law of the BGH seemed to suggest? Does he have to pay the contracted interests, including those which will accrue over time? Does it make any difference that he has not been informed about an eventual right of withdrawal? Could he raise a claim of compensation against the bank for not having been adequately informed—a proposal which I made in the follow-up of the Heininger litigation under the German theory of ‘culpa in contrahendo’?41 Or could one even argue, as the Commission did, that the credit and the purchase contract form an economic unity which must be judged together, even if formally separated? These were the questions which came to the ECJ via references of lower courts which were quite opposed to the restrictive case law of the BGH in the follow-up cases of Schulte 42 and Crailsheimer Volksbank.43 The contractual situation in Schulte was described by the ECJ as follows:

38 For a reasoning, see G Howells and T Wilhelmsson, EC Consumer Law (Aldershot, Ashgate, 1997) 167. 39 BGHZ 150, 248(256) = NJW 2002, 1881 (1883). 40 At 1884. 41 Reich, ‘Heininger und das Europäische Privatrecht’, above (n 35) 137. 42 Case C-350/03 [2005] ECJ I-9215. 43 Case C-229/04 [2005] ECJ I-9293.

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The investment which Mr and Mrs Schulte made has the following characteristics in particular. An intermediary put forward a proposal that the couple purchase an apartment which was offered for sale by a company which had purchased and renovated a large number of apartments in order to resell them. For tax reasons, the purchase of that apartment was to be fully financed by a loan. The intermediary’s proposal was that the purchase price and the transaction costs would be financed by a loan from the bank secured by means of a charge (mortgage, NR), and Mr and Mrs Schulte were to be personally liable for the debt. Mr and Mrs Schulte undertook to join a pool for rental receipts from the apartments in the residential complex which was intended to ensure an even distribution of the rental receipts. The investment in the apartment, financed entirely by the loan, was supposed not to require any expenditure by Mr and Mrs Schulte, as the loan was supposed to be repaid by means of the rental receipts in conjunction with certain tax advantages. It was not disputed before the Court that such investments entail not only the risk of an over valuation of the apartment at the time of purchase, but also the risks that the anticipated rental receipts fail to materialize and that expectations concerning the development of property prices prove mistaken. It appears that, in the case of Mr and Mrs Schulte, those two risks materialized.

In its reasoning, the Court put forward the following legal doctrines: — Starting from a formal approach in following the opinion of Advocate General Léger,44 it held that the withdrawal by the consumer avoided the credit transaction and that therefore the parties had to re-install the original state of affairs, namely, that the consumer had received the credit without justification and therefore had to pay back the money immediately and in full (paragraph 93). — It was of no relevance for the purpose for which the credit was used; the ECJ indirectly rejected the idea of ‘linked contracts’ as a principle of EU law, which would however not be precluded under national law (paragraph 76). — The consumer had to pay market interest for the credit money used without justification, thus restoring the status quo ante (paragraph 92). In the end this means that the consumer is worse off after withdrawal than before. Implicitly the ECJ confirmed the theory of a formal separation of transactions, as confirmed in the Opinion of Advocate General Léger of 29 October 2004 in Schulte: I think a purposive interpretation of the Directive, just like its practical effect, do not permit a requirement that the cancellation of the secured credit agreement should produce an effect, in one way or another, on the validity of the property purchase contract (para 95).

Heck would probably not have opposed this result: the ‘will’ of the (EU)-legislator (if it included credit transactions at the doorstep at all) was certainly not concerned with ‘linked transactions’ (this was left to Art. 11 (2) Directive 87/102/EEC on consumer credit45 which, however, expressly excluded real estate credit). The

44

Opinion of AG Léger in Crailsheimer Volskbank (2 June 2005) paras 54,72 Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit [1987] OJ L42/48, now supplemented by Directive 2008/48/EC of 23 April 2008 on credit agreements for 45

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denkende Gehorsam of the (European or German) judge did not allow to set aside the ‘will of the legislator’—which had not regulated ‘linked transactions’ financed by mortgage credit and hence left no ‘gap’ to be filled. The approach of Esser would have been somewhat more promising in referring to basic principles of the law, if they had been used by the ECJ. His insistence on a Durchgriff to general clauses should have allowed a way to a solution by going beyond the formal programme of the law (whether based on EU directives or on German implementing law) referring it back to general principles of justice, including effective protection of consumers as demanded by EU law.46 This broader ‘value oriented’ approach would not simply state that after withdrawal the consumer has to pay back the credit in full and with interest, but that at least from the consumer protection purpose of Directive 85/577 he should be allowed to pay back the credit in instalments, as originally agreed, and be charged only low market and not contract interest rates, without any penalty, as I have suggested in another context.47 But the ECJ, in seemingly protecting consumers, stuck to a very narrow interpretation of Directive 85/577, without keeping its protective scope in mind. Provisions on consumer protection (right of withdrawal) may in the end make the consumer worse off than before (withdrawal), as one of the judges of the BGH who sat on the Heininger litigation implicitly argued:48 ‘Consumer, beware of consumer protection!’49 As a small equitable remedy to consumers treated so harshly, the Court made a limited attempt to correct this unsatisfactory result in Schulte: in the Court’s opinion the Doorstep Directive 85/577 requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks (loss of rental income and property value incurred because of not knowing of their right of cancellation under the Directive, NR), by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks (para 101).

Later litigation before the BGH concerned these suitable measures without giving an appropriate answer.50 The BGH certainly took pains to implement the unclear pronouncements of the ECJ. It insisted on its theory of a formal concept of private autonomy, excluding a legal link of the different transactions. Specifically: even though the bank played a key role in making possible the real-estate transaction, and even though only with the support of the bank could the developer offer to the consumer a package deal including a promise to obtain credit—which, if approved consumers [2008] OJ L122/66 which also excluded real estate (mortgage) credit. See, H-W Micklitz, N Reich and P Rott, Understanding EU Consumer Law (Antwerp, Intersentia, 2009) para 5.7. 46 See, Micklitz, Reich and Rott, Understanding EU Consumer Law, ibid, para 8.8; V Trstenjak/E Beysen, ‘European Consumer Protection Law: Curia Semper Dabit Remedium’? 48 (2011) CMLRev 95. 47 See, ‘Heininger und das Europäische Privatrecht’, above (n 35) 131. 48 This is the essence of the article by W Bungeroth, ‘Die Rückabwicklung nach dem HWiG widerrufener Immobililarkredite’, Wertpapiermitteilungen (WM) 2004, 1505 (1509), himself a member of the eleventh senate of the BGH which decided the Heininger and follow-up cases—a good example for a Supreme Court judge disclosing (but not changing) his Vorverständnisse. 49 See Reich, ‘Heininger und das Europäische Privatrecht’, above (n 35) 142. 50 Scepticism had already been voiced by Micklitz, The Politics of Judicial Co-operation, above (n 32) 40; see now the detailed overview by Möllers and Grassi, ‘The Europarechtswidrigkeit’, above (n 35).

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by the bank, was finally paid out not to the consumer but to the developer—the bank took a ‘hands-off’ position in later litigation. It argued that it had only provided ‘credit’ and that as such it cannot be made responsible for problems regarding the use of that ‘credit’. Its most recent case law allows a claim in compensation by the consumer if he can prove that he has been deceived about his rights by the developer, and that the bank should have known of this behaviour; the bank may also be held liable under a theory of ‘culpa in contrahendo’ for not having informed the consumer of his right of withdrawal.51 This looks positive on the surface, but since many years have passed after the original transaction, the consumer will usually not be able to prove an eventual claim based on the negligent behaviour of the bank, arguing that this negligence caused the alleged harm. It would have been more convincing to base the negligence claim of the consumer on a theory which had been developed in another context by the BGH itself, namely the one according to which a rational investor would have behaved so as to pay respect to the risk information provided to him (‘aufklärungsrichtiges Verhalten’)52—a theory which the BGH expressly rejected as being ‘absolutely unacceptable’ (‘schlechthin unvereinbar’) due to its incompatibility with the fundamental principle of national law on compensation requiring causation.53 Methodologically, we can again refer to Esser’s theory of a Durchgriff, that is, looking beyond the formal veil of the contractual arrangements to the interests behind them with a view of finding a solution to the complex three-party problem which goes beyond the normal two-party arrangements of private law transactions, which had not been envisaged in Directive 85/577. The BGH, on the other hand, obstructed a ‘just’ solution in the sense of Esser, based on a balancing of interests, by putting forward a complex array of legal argument which seems to avoid rather than solve the problem, and which even raises the question of whether the BGH has not deliberately obstructed the post-Heininger case law of the ECJ,54 thus provoking a potential claim for state liability.55 VI

THE LIMITS OF PRIVATE AUTONOMY—‘CORE TERMS’ AND THE UNFAIRNESS TEST

One of the most difficult and most discussed problems of private law has been to define the limits of private autonomy. The cases mentioned above all more or less centre around this problem, and it is here where the balancing approach has been 51 BGHZ 169, 109; a recent judgment of the BGH—XI ZR 104/08 of 29 June 2010, VuR 2010, 382 with comment by Maier makes the bank responsible for misrepresentations of the intermediary concerning the amount of commission (15% instead of 5.86%). 52 BGH WM 2009, 1274 referring to earlier case law; LG Hamburg, WM 2009, 1363 with regard to the false advice of securities to inexperienced consumers/investors; an analogy to cases of false advice or information in mortgage credit marketed at the doorstep has been advocated by Reich, ‘Heininger und das Europäische’, above (n 36) 140; the state of law has yet to be clarified with regard to negligence and causation, see Möllers and Grassi, ‘The Europarechtswidrigkeit’, above (n 36) 11; we cannot go into details. 53 See above, (n 51) 121. 54 See, Möllers and Grassi, ‘The Europarechtswidrigkeit’, above (n 35) 15. 55 See ECJ Cases C-224/01 G Köbler v Austria [2003] ECR I-10239; C-173/03 Traghetti del Mediterrano v Italian Rep [2006] ECR I-5177.

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most important and influential—albeit not in the version of Heck, due to the fact that the formula of denkender Gehorsam does not help in defining the limits of private autonomy. More useful has been a reference to the Vorverständnisse of judges in the sense of Esser, when deciding cases involving the foundations and limits of private autonomy at the same time. Recent litigation concerning the application and interpretation of the EC unfair terms Directive 93/13/EEC56 can be useful in this context. The problem concerns the understanding of Article 4(2) of the Directive which posits that: Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, in so far as these terms are in plain intelligible language.

The legislative history of this last minute amendment is somewhat confusing and difficult to be used for interpretation purposes.57 The EU legislator seems to combine two important principles which are said to govern any market economy based on effective competition: — The principle of transparency in pre-formulated terms in consumer contracts. — The exclusion of so-called ‘core-terms’ from the unfairness test of Article 3(2) once the requirement of transparency is fulfilled. Recent litigation in three jurisdictions—UK, Germany and the EU—allows an analysis of the Vorverständnisse with which judges tackle the problem put before them by the EU legislator. Again, it is necessary to cut a long story short.

A

A Commercial Law Approach to Balancing by the UK Supreme Court

The interpretation of Article 4(2) was an issue addressed by the UK Supreme Court (former House of Lords) in the judgment of 25 November 2009 in the case of Office of Fair Trading v Abbey National et al.58 This concerned the highly 56 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993] OJ L95/29. 57 L Niglia, The Transformation of Contract in Europe (The Hague, Kluwer, 2003) 139; Micklitz, Reich and Rott, Understanding EU Consumer Law, above (n 46) para 3.11; its ‘origin’ is frequently seen in the paper by H Brander and P Ulmer, ‘The Community Directive on Unfair Terms in Consumer Contracts—some critical remarks on the proposal submitted by the EC Commission’ (1991) 28 Common Market Law Review 647, 656 insisting that any control by the courts of the reasonableness or equivalence of the relationship between price and the goods or services provided was an ‘anathema to the fundamental tenets of a free market economy’. 58 Office of Fair Trading v Abbey National et al [2009] UKSC 6 (on appeal from [2009] EWCA Civ 116), critical commenrts by S Whittacker, ‘Unfair Contract Terms, Unfair Prices and Bank Charges’ (2011) 74 MLR 106; M Kenny, ‘Orchestrating Consumer Protection in Retail Banking: Abbey National in the Context of Europeanized Private Law’ (2011) EurRevPrL 43. The Supreme Court was referring to its earlier case Director General of Fair Trading v First National Bank [2001] UKHL 52; [2002] 1 AC 481; for a critical analysis see H-W Micklitz, ‘Case note: House of Lords—Fair Trading v National Bank’ (2006) 2 European Review of Contract Law 471; H-W Micklitz, ‘Zum englischen Verständnis von Treu und Glauben in der Richtlinie 93/13/EWG’, (2003) Zeitschrift für europäisches Privatrecht (ZeuP) 865; Micklitz, The Politics of Judicial Co-operation, above (n 32) 418.

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controversial practice of UK banks debiting the following charges for consumers ‘not in credit’, namely: — ‘Overdraft excess charges’, to some extent similar to ‘overrunning’ in the sense of Directive 2008/48.59 — ‘Guaranteed paid item charges’. — ‘Unpaid item charges’. — ‘Paid item charges’. These charges made up about 30 per cent of the revenue of banks from payment services; to some extent, those clients ‘not in credit’—and therefore the more needy ones—heavily subsidised those ‘in credit’—that is those better off who did not have to pay these charges—as Lord Mance recognised in his speech (para 105). Starting from the premise that the clauses on the different charges fulfilled as such the requirement of transparency, the question arose as to whether they could be challenged as unfair, or whether they should come under the exclusion of Article 4(2) as ‘core terms’? Both the High Court and the Court of Appeal, in very detailed judgments, rejected the application of Article 4(2) (or the UK equivalent in implementing Directive 93/13) to these charges, thus using a well-known principle of EU law to interpret exceptions narrowly and to take account of the consumer protection objective of Directive 93/13, which had been reiterated by the ECJ several times.60 They argued, more or less similarly, that some of these clauses concerned additional charges either for services not rendered, or that they did not relate to the ‘core terms’ of the transaction, that is for services based on the contractual ‘quid pro quo’. The approach of the Supreme Court turns the matter upside down. The speeches of the Law Lords show a purely market oriented, commercial Vorverständnis of consumer protection. Directive 93/13 is more or less concerned with consumer choice, not with protecting him or her from unfair terms. As Lord Walker said in his speech, ‘(t)he services that banks offer to their current account customers are a comparable package of services’ (paragraph 40). This view was shared by Lord Phillips (paragraph 89). Lord Mance, in a detailed analysis of the legislative history of the clause, rejected the distinction between ‘essential’ and ‘non-essential terms’ (paragraph 112). The consumer ‘buys’ this package including all mentioned charges if not in ‘credit’, and therefore ‘any monetary price or remuneration payable under the contract’ is exempted from the unfairness test. Only ancillary provisions come under this test. The judgment can be criticised from a number of points: one is certainly the failed reference to the ECJ under Article 234(3) EC (now Article 267(3) TFEU); another is the dramatic narrowing down of the unfairness test, which is excluded for any term even if only indirectly relating to the ‘price of the package’. What is more important is the Vorverständnis of the Law Lords concerning the function of consumer law, which is not about balancing an unequal distribution of power 59 For an overview see, Micklitz, Reich and Rott, Understanding EU Consumer Law, above (n 46) para 5.8 60 For a recent example, see Case C-243/08 Pannon [2009] ECR I-4713, para 22.

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between banks and consumers, but about understanding consumers as rational market agents choosing on a take-it-or leave-it basis a package of services into whose overall ‘value for money’ the judge does not want to interfere.

B

Balancing by ‘Interessenjurisprudenz’ as applied by the BGH

The German BGH had to decide similar cases, but came first to different results in using the method of denkende Gehorsam as postulated by the Interessenjurisprudenz of Heck mentioned above. The starting point is a neat distinction between ‘price clauses’, as such containing the ‘core terms’ which cannot be controlled under the unfairness test under German law (which is drafted somewhat differently from the EC directive, but has a similar legislative purpose) and ancillary clauses (Preisnebenabreden).61 With regard to bank charges similar to the case cited by the UK Supreme Court, the BGH did not refer to Article 4(2) of Directive 93/13, but rather to a provision in German—and to some extent EU law—controlling lump–sum clauses for damages. This conceptual trick, based on the denkenden Gehorsam of the legislator, allowed the BGH to control the bank charges by redefining them as clauses on penalties and damages, not as price clauses. But this reconceptualising of conflicting ‘Interessen’ did not go very far. It is interesting to note that the BGH, in its later judgment of 14 October 199762 concerning the control of pre-formulated clauses by banks and credit card providers for a special charge on the use of credit cards abroad (‘Entgelt für Auslandseinsatz’) used a somewhat modified conceptual argument in denying such control. Without any reference to EU law and in particular to Article 4(2) of Directive 93/13,63 it stated that not only clauses concerning the consideration for a service as such, but such clauses for a special service (‘Sonderleistung’) for which there is not legal regulation, are excluded from unfairness control. The Federal Court insisted on the principle of private autonomy which allows banks to shape their price clauses as they wish. Since all providers ask for a special charge in an almost cartel-like fashion, the consumer will usually take it for granted to pay such charges for the use of his card abroad. A more recent judgment of the BGH of 24 March 201064 which was widely publicised concerned clauses in gas supply contracts with final consumers, linking the price of gas to the price of light oil on the market. The BGH did not discuss the problem of price clauses in general, that is in relation to Article4(2) of Directive 93/13, but simply held that the clause is void because of unduly disadvantaging the consumer (‘unangemessene Benachteiligung der Kunden des Versorgungsunternehmens’) which is prohibited by § 307 (I)(1) BGB. 61 BGHZ 124, 254— judgment (30 November 1993); the negative effects of this case law from an efficiency argument based on risk-distribution have justly been criticised by Kenny, above (n 58) 58. 62 BGHZ 137, 27 at 30. 63 Critique J Basedow, ‘Die Klauselrichtlinie und der EuGH—eine Geschichte der verpassten Gelegenheiten’ in H Schulte-Nölke and R Schulze (eds), Europäische Rechtsangleichung und nationales Vertragsrecht (Baden-Baden Nomos, 1999) 277, 284. 64 Case VIII ZR 178/08, NJW (Neue Juristische Wochenschrift) 2010, 2789.

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These different judgments of the BGH show that seemingly the Vorverständnis of judges on the adequacy and fairness of the relevant clauses is more important in deciding a case than the conceptual framework under which they are put. Such method may not help legal clarity, but at least allows an open deliberation of approaches aimed at finding a just result in a specific case before the judge.

C

The EU Option for ‘Decentralised Balancing’

In this understanding, not the ‘fairness test’ of Article 3(2) of Directive 93/13, but the transparency test of Article 4(2) becomes the decisive control instrument of unfair terms relating to price clauses. In his earlier analysis, Niglia pointed out the changes which Directive 93/13 brought to European contract law: That the vocabulary of a market-oriented contract law has been replacing the traditional rule-based one whenever judges decode the Directive’s set of market factors to be taken into account, is increasingly evident in various respects.65

The recent Ausbanc case66 before the ECJ may show whether this Vorverständnis of consumer protection in the EU is correct or not. The opinion of Advocate General Trstenjak of 29 October 2009 helps in understanding the scope and importance of the litigation. The Advocate General had already made significant contributions to an EU-specific theory of balancing with regard to both the extent and limits of private autonomy in using the methodological approaches of the denkenden Gehorsam of the Interessenjurisprudenz of Heck, and the Durchgriff to value judgements in the hermeneutic realism of Esser in several areas of private law such as in the recent case law of the ECJ concerning doorstep contracts,67 consumer sales68 and unfair commercial practices,69 which were all adhered to in the final judgments of the ECJ. The Ausbanc case concerns the question implicitly decided by the Law Lords, namely the place of Article 4(2) of Directive 93/13 in the mechanism of the unfairness control of pre-formulated terms. Spanish law had not implemented Article 4(2) under the principle of minimum harmonisation hitherto part of EC law—which will change once the Commission Proposal of 8 October 2008 is adopted.70 The Spanish Tribunal supremo wanted to know whether this exclusion prevented a control of the unfairness of ‘core terms’ on the price. Advocate General 65

See The Transformation of Contract in Europe, above (n 58) 190. Case C-484/08 Caja de Ahorros y Monte de Piedad de Madrid v Asocación de Usuarios de servicios bancarios (Ausbanc) [2010] ECR I-(not yet published) ; see the case note by J Stuyck, (2010) ERCL 449. 67 Case C-227/08 Martin, Opinion of AG Trstenjak, paras 79–83 concerning a balancing approach to the consequences of the ex officio protection of the withdrawal right of the consumer under Dir 85/577. 68 Case C-404/06 Quelle v Bundesverband der Verbraucherzentralen [2008] ECR I-2685, Opinion of AG Trstenjak, para 51. 69 Case 207/07 Gysbrechts [2008] ECR I-9949,Opinion of AG Trstenjak (17 July 2008); critique H-W Micklitz and N Reich, ‘Zur Kritk der Schlussanträge der Generalanwältin Trestenjak in der Rs. Gysbrechts, C-205/07, v 17.07.2008’ (2008) Verbraucher und Recht (VuR) 349. 70 For a critique see, H-W Micklitz and N Reich, ‘Cronica de una muerte anunciada’ (2009) 46 Common Market Law Review 471; N Jansen, ‘Klauselkontrolle im europäischen Privatrecht’ (2010) 66

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Trstenjak clearly put Article 4(2) at the centre of the conflict between private autonomy on the one hand, and the protection of the weaker party—the consumer—on the other (paragraph 39). Are Member States prevented from extending control of unfair terms also to the core elements of the transaction, or is the consumer sufficiently protected by competition and transparency, as the UK Supreme Court seemed to suggest? The argument of the Advocate General is to a great extent a legal discussion of the principle of minimum harmonisation. The role of minimum harmonisation allows Member States a broad scope of discretion in protecting consumers and, at the same time, forbids a lowering of protection (paragraph 86). Even more important are her remarks concerning the balancing of ‘interests’ undertaken by Directive 93/13 and the specific role of EU law in this context. As a result, the general principles of EU law, such as open market economy, competition and the fundamental freedoms, do not make Article 4(2) mandatory. She pleads for a restrictive and not—as the UK Supreme Court—for an extensive interpretation of Article 4(2) which does not cover all aspects of price clauses (paragraph 41). The ECJ followed suit, insisting on the consumer protective objective of Directive 93/13: (A)ccording to settled case-law, the system of protection introduced by the Directive is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge. This leads to the consumer agreeing to terms drawn up in advance by the seller or supplier without being able to influence the content of those terms.71

Its existing case law follows the line of Advocate General Trstenjak and clearly had made the point of importance for consumer protection rules. Some authors have even argued for an interpretation of EU law as ‘in dubio pro consumatore’.72 However, it is uncertain whether this line of argument can be continued in future; there are signs that the ECJ favours full harmonisation to the detriment of Member State consumer protection73. The Commission Proposal clearly points in this direction and would make Article 4(2) mandatory. If one follows the interpretation given by the UK Supreme Court, this would dramatically narrow down the unfairness control and reduce consumer protection to consumer choice.

Zeitschrift für europäisches Privatrecht (ZeuP) 69; see also the remarks of AG Trstenjak in para 83 as to the Commission Proposal of 8 October 2008 not being relevant in the litigation. 71

Para 27 of the judgment of 3 June 2010. H Rösler, ‘Auslegunsgrundsätze des Europäischen Verbrauchervertragsrechts in Theorie und Praxis’ (2007) Rabels Zeitschrift für ausländisches und internationales Privatrecht (RabelsZ) 495; K Tonner and M Tamm, ‘Zur Auslegung des europäischen Verbrauchervertragsrechts—insbesondere zur Auslegungsregel “in dubio pro consumatore”’ in L Thévenoz and N Reich (eds), Liber amicorum B. Stauder (Baden-Baden Nomos, 2006) 527; critique K Riesenhuber, ‘Kein Zweifel für den Verbraucher’ (2005) Juristenzeitung 831; K Riesenhuber, Europäische Methodenlehre (Tübingen Mohr, 2006) 264 pleads for a differentiated approach to the consumer ‘leitbild’ as a basis for interpretation. See also the recent paper by V Trstenjak and E Beysen, ‘European Consumer Protection Law: Curia Semper Dabit Remedium?’, (2011) 48 CMLRev 95,. 73 For an overview, see N Reich, ‘Von der Minimal- zur Voll- zur “Halbharmonisierung”’ (2010) Zeitschrift für europäisches Privatrecht (ZEuP) 7, 10. 72

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VII THE ROLE OF ‘BALANCING’ AND ‘PROPORTIONALITY’ IN SOCIAL CONFLICTS ACCORDING TO VIKING—FUNDAMENTAL RIGHTS VERSUS FUNDAMENTAL FREEDOMS

A

The ECJ as Final Arbiter in Social Conflicts?

In his chapter, Duncan Kennedy wonders how the ‘European proportionality analysis’ relates to the American version of balancing in constitutional law. Some of the different cases mentioned above tried to show that there is really no such thing as a ‘European’ concept of proportionality, but that its use depends very much of the Vorverständnisse of judges in the litigation before them. This can be demonstrated by a short analysis of the Laval 74/Viking 75 litigation which in nuce concerns the applicability of EU free movement rules to social action undertaken or supported by trade unions and their head associations against the posting of workers from one EU country (Latvia) to another (Sweden), or against the re-flagging of a ferry from a country with higher wages (Finland) to one with lower ones (Estonia). The outcome of this litigation has provoked violent reactions in scholarship.76 I will not go into the many aspects of this litigation, which I have

74 Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet [2007] ECR-I, 11767; the order for reference was published in the Official Journal of the European Union C series—OJ C281/10 (12 November 2005); the author could make use of a provisional English translation of 18 October 2005. The order is based on a prior judgment 49/05 case A 268/04 of 29 April 2005. For earlier discussions of the litigation, see N Reich, Diskriminierungsverbote im Gemeinschaftsprivatrecht, Jahrbuch Junger Zivlrechtswissenschaftler (Stutgart, Borberg, 2005) 9; C Barnard, EC Employment Law 3rd edition (Oxford, Oxford University Press, 2006) 283; N Wahl and P Cramér (eds), Swedish Studies in European Law (Oxford, Hart Publishing, 2006) 129; C Woolfson and JW Summer, ‘Labour Mobility in Construction: European Implications of the Laval Dispute with Swedish Labour’ (2006) 12 European Journal of Industrial Relation 49; V Hatzopoulos and Th Uyen Do, ‘The Case Law of the ECJ concerning the Free Provision of Services’ (2006) 43 Common Market Law Review 978. 75 Case C-438/05, The International Transport Workers’ Federation (ITF) & The Finnish Seamen’s Union (FSU) v Viking Line ABP & Oü Viking Line Eesti [2007] ECR I-10779 OJ C60/16 (11 March 2006). The High Court established jurisdiction because the headquarters of ITF were in London and therefore jurisdiction was conferred to the English Court under Art 2 Reg 44/2001, without being able to raise the ‘forum non conveniens’ objections. See ECJ Case C-281/02 Andrew Owusu v NB Jackson et al [2005] ECR I-1383. The High Court granted an injunction against ITF and FSU which was quashed by the Court of Appeal in its judgment to refer the case to the ECJ; [2005] EWCA Civ 1299 (Waller LJ). The litigation is explained by B Bercusson, ‘The Trade Union Movement and the EU: Judgment Day’ (2007) 13 European Law Journal 279. 76 See C Joerges and F Rödl, ‘Von der Entformalisierung europäischer Politik und dem Formalismus europäischer Rechtsprechung im Umgang mit dem “sozialen Defizit” des Integrationsprojekts—Ein Beitrag aus Anlass der Urteile des EuGH in den rs. Viking und Laval’ (Bremen, ZERP-Diskussionspapier, 2/2008); C Joerges and F Rödl, ‘Informal Politics, Formalised Law, and the “Social Deficit” of European Integration: Reflections after the Judgments of the ECJ in Viking and Laval’ (2009) 15 European Law Journal 1; P Rodière, ‘Les arrêts Viking et Laval, le droit de grève et le droit de négociation collective’ (2008) Revue trimistrielle de droit européén (RTD eur) 47; ACL. Davies, One Step Forward, Two Steps back? The Viking and Laval Cases in the ECJ (2008) Industrial Law Journal 126; J Malmberg and T Sigman, ‘Industrial Actions and EU Economic Freedoms: The Autonomous Collective Bargaining Model Curtailed by the ECJ (2008) 45 Common Market Law Review 1115; L Azoulai, ‘The Court of Justice and the Social Market Economy: The Emergence of an Ideal and the Conditions for its Realization (2008) 45 Common Market Law Review 1335; M Höpner, Usurpation statt Delegation— Wie der EuGH die Binnenmarktintegration radikalisiert und warum er politischer Kontrolle bedarf (Köln, MPI f. Gesellschaftsforschung, DP 08/12, 2008); S Deakin, ‘Regulatory Competition after Laval’ in (2008) Cambridge Yearbook of European Legal Studies 581.

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done elsewhere77. I will also limit myself to the Viking litigation which confronted the owner of the ferry ‘Rosella’ in Finland, Viking line, against the Finnish Seafarers Union (FSU) which took social action against the re-flagging, with support and solidarity action by the International Transport Workers Federation (ITF). The following discussion will take as settled case law that the EU fundamental freedoms, in particular the freedom of establishment in Viking of Article 43 EC (now Article 49 TFEU) [and the freedoms to provide services in Laval of Article 49 EC (now Article 56 TFEU)] were applicable also ‘horizontally’ against social action by trade unions which was regarded as a ‘restriction of these freedoms’ and that the decisive question therefore was whether these actions (restrictions) could be justified under the general ‘public interest’ test as developed in the consistent case law of the ECJ. B

Opinion of Advocate General Poiares Maduro

Advocate General Poiares Maduro gave his opinion in the Viking litigation on 23 May 2007 and insisted that, in the absence of secondary law, the case must be resolved according to a balancing test, which he set out with great clarity and brilliance.78 The question was how far trade unions can take social action against acts of relocation by undertakings protected by the free movement rules. On the one hand, workers (and their unions) must accept the recurring negative consequences that are inherent to the common respectively internal market’s creation of increasing prosperity, in exchange for which society must commit itself to the general improvement of their living and working conditions and to the provision of economic support to those workers who, as a consequence of market forces, come into difficulties (paragraph 59). This balancing is performed not by applying a proportionality test, but via the classical argument of market segregation. A coordinated policy of collective action among unions normally constitutes a legitimate means to protect the wages and working conditions of seafarers. Yet, collective action that has the effect of partitioning the labour market and that impedes the hiring of seafarers from certain Member States in order to protect the jobs of seafarers in other Member States would strike at the heart of the principle of non-discrimination on which the common market is founded.79 In my opinion, this simple test has a number of drawbacks, as the Viking case clearly shows. The collective actions of the ITF and FSU seemingly partition the labour market in attacking the re-flagging and thereby preventing the hiring of (cheaper) Estonian seafarers. But, on the other hand this is in the eyes of labour unions acting in solidarity, justified by a general policy against flags of convenience, not against Estonian workers in particular. Who is to judge the legitimacy of this 77 N Reich, ‘Fundamental freedoms versus Fundamental Rights—Did Viking get it Wrong’? (2008) Europarättslig Tijdskrift 851; earlier contributions were published in Juridica International (Tartu University, 2007) 100–15, ‘Free Movement versus Social Rights in an Enlarged Union—the Laval and Viking Cases before the ECJ’ (2008) 9 German Law Journal 125. 78 At paras 57–72. 79 At para 62.

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social policy, even if it may have a detrimental effect on free movement? These effects may also be purely accidental and an unavoidable consequence of social action, if there is desire for it to be effective. The Advocate General also seems to exaggerate the parallels between social actions in Commission v France 80 and Viking: while the first made free movement impossible by wildcat actions blocking roads in France against Spanish fruit exporters, Viking can always run its ‘Rosella’ (as it indeed has done for more than four years following protracted negotiations with the FSU, though perhaps without making the expected profit—not that making a profit is as such protected under the free movement rules); these economic disadvantages of social action may also materialise in any other conflict concerning relocation of business within the EU. In my opinion, Viking cannot expect special protection against social actions established to impede re-flagging, unless this action is in itself disproportionate (as in Commission v France) which, in my opinion, it was not.

C

The Approach by the ECJ in Viking

The ECJ based its argument on the premise that, under EC law, the most important limitation of the right to social actions—as now guaranteed in Article 28 of the EU Charter of Fundamental Rights referred to in Viking (paragraph 44)—is provided by the rules on free movement, as spelled out in the Schmidberger 81 and Omega 82 judgments.83 The exercise of the right to collective actions must be ‘reconciled with the requirements relating to rights protected under the Treaty and in accordance with the principle of proportionality’.84 The Court expressly recognises the right of labour unions to take collective action ‘for the protection of workers as a legitimate interest’ which is also justified by the fact the Community has ‘thus not only an economic but also a social purpose’, expressly provided for in Article 136 EC85 (now Article 3(3) EU Lisbon insisting on a ‘social market economy aiming at full employment and social progress’). These general principles must be applied to the different circumstances. In Viking the Court found it necessary to distinguish between the social action of FSU on the one hand, and the call for solidarity action by ITF on the other. i

The Situation of FSU

The collective action of FSU would be justified if it ‘could reasonably be considered to fall, at first sight, within the objective of protection the workers’ (paragraph 81). This is a matter of the national court (English or Finnish?) to determine. But the 80

Case C-381/93 Commission v France [1994] ECR I-5145. Case C-112/00 Eugen Schmidberger v Austria [2003] ECR I-5659. 82 Case C-36/02 Omega Spielhallen- und Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn [2004] ECR I-9609. 83 At para 45. 84 Viking para 46, also Laval para 94. 85 Viking, paras 77, 79; Laval, paras 103, 105. 81

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ECJ makes a number of qualifications which are to some extent new and put additional restrictions on the right to strike. The social actions must truly service the protection of workers which would not be the case ‘if it were established that the jobs or conditions of employment at issue were not jeopardised or under serious threat’ (paragraph 81), for example, if the undertaking which takes over the re-flagged vessel would be bound by the prior collective agreement or statutory provisions protecting workers. The mere reference to the policy of avoiding flags of convenience would not be enough. A similar argument could be invoked against strikes to avoid the outsourcing of an undertaking. The action taken by FSU, which is as such a legal means for defending rights of workers, must meet the requirements of proportionality. This, again, must be established by the national court; the ECJ can (only?) give guidance. In particular, the ECJ stressed the ultima ratio principle to justify social actions against re-flagging as an infringement of the freedom of establishment (paragraph 87). ii

The Special Case of ITF

The case of ITF is somewhat different because it is a head organisation of labour unions of seamen with a special objective, namely that of combating flags of convenience. Indirectly, the ECJ was asked whether this policy was justified under free movement aspects. The judgment is ambiguous on this point since the Court, on the one hand, insists on the restrictive character of this policy, but on the other refers to the opinion of the national court that ‘the objective of that policy is also to protect and improve seafarer’s terms and conditions of employment’ (paragraph 88). The Court resolves this conflict in the following words: However, as is apparent from the file submitted to the Court, in the context of its policy of combating the use of flags of convenience, ITF is required, when asked by one of its members, to initiate solidarity action against the beneficial owner of a vessel which is registered in a State other than that of which that owner is a national, irrespective of whether or not that owner’s exercise of its right of freedom of establishment is liable to have a harmful effect on the work or conditions of employment of its employees. Therefore, as Viking argued during the hearing without being contradicted by ITF in that regard, the policy of reserving the right of collective negotiations to trade unions of the State of which the beneficial owner of a vessel is a national is also applicable where the vessel is registered in a State which guarantees workers a higher level of social protection than they would enjoy in the first State (paragraph 89).

What exactly does the Court mean with this sentence, where it does not entrust the task of judging the legitimacy of solidarity action to the national court? There seems to be an overall critical overtone of the ECJ against social action to defend and support the policy against flags of convenience, because there is no proof that it is automatically pursuing the objective of protecting the interests of workers. The national court will have to establish that the solidarity action indeed pursued this objective, which is a matter of ITF to prove. In the end, this seems to severely curtail the right of solidarity action in an area before a concrete social conflict arises. This interpretation seems highly problematic because it implies that labour unions and their head associations can take social action only for the concrete

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purpose of protecting workers, not to support policies which in the long run may improve the social wellbeing of their members, or avoid a ‘social dumping’ by indirect means of action by undertakings, in particular via outsourcing. This limitation of the right of strike even goes beyond what Advocate General Poiares Maduro had argued, namely to prevent a segregation of markets via social action, but not put a general limit on social action to avoid outsourcing. What is even more regrettable is that the Court does not really explain its opinion despite its insistence on the social purpose of the EU and the broad guarantee to social action under fundamental rights aspects. iii

Proportionality versus Autonomy—How to Balance the Balancing?

The Viking [and Laval] judgments have aroused a lively debate among lawyers and politicians on the ‘spill-over effect’ of the EU free movement rules on traditional social policy objectives and collective action by labour unions of Member States.86 Both judgments certainly tend to a more ‘liberal’ and less ‘social’ approach, by invoking a certain precedence of free movement rights over the fundamental right to strike, despite the ‘social rhetoric’ of the ECJ. This is however really nothing new to observers of the recent development of the case law of the ECJ. The Viking judgment seems to be particularly problematic. This stems first from its unclear reasoning, both with regard to the strike by FSU which seems to be limited to specific ‘protection of workers’ if threatened in the concrete case, while it can be refuted if there is no real danger to the loss of workplaces and/or income, and furthermore as far as the solidarity action of ITF is concerned. Secondly, there is concern that action in support of a policy which may only in the long run improve the situation of workers, but which does not directly relate to collective bargaining and merely has an indirect negative effect on mobility of companies by making re-flagging more difficult and costly, will fall foul of the overarching EU principles of free movement. Such a narrow reading of the right to strike and solidarity action has not really been explained by the Court in interpreting the fundamental freedoms or the fundamental right to collective action, even if the Court seemingly wants to protect both by a balancing test. This balancing is clearly on the side of free movement and against social rights—an unacceptable consequence. It is obvious that the Viking judgment may be used against other types of social action directly or merely indirectly infringing free movement, if it cannot be established that it serves to improve the (concrete) protection of workers. Furthermore, the use of the concept of ‘proportionality’ gives rise to uncertainty, which in the end will prevent, or at least make more difficult, collective action and make the judge (whether national or European) the final arbiter in social disputes.87 The basic problem of the reasoning of the ECJ is not so much the question of a hierarchical relation between fundamental freedoms and fundamental rights— 86 See the articles cited above (n 76); a more nuanced position has been taken by the German judge at the ECJ; T von Danwitz, ‘Grundfreiheiten und Kollektivautonomie‘ (2010) Europäische Zeitschrift für Arbeitsrecht (EuZA) 6, 11. 87 See the article by R Rebhahn, ‘Europäisches Gericht bringt Bewegung in das Arbeitskampfrecht’ Frankfurter Allgemeine Zeitung (19 December 2007) 23 which seems to take a positive approach to this approach of the ECJ; he is contradicted by this author cited above (n 77).

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which must be put on a equal level—but the non-reflected reference of the ECJ to the proportionality argument, which it had developed with regard to state action and is now seemingly transferred to action by private associations. The ECJ seems to forget that the latter derive their legitimacy from the freedom of association as protected under Article 11 of the European Convention on Human Rights (ECHR) read in conjunction with Article 6 of the EU Lisbon Treaty and Article 28 of the EU Charter of Fundamental Rights, and that therefore their margin of discretion in determining the course of action in following their legitimate social objectives must necessarily be greater than that of Member States. They are not bound by a similar loyalty obligation as Member States under Article 10 EC (now Article 3(4) EU Lisbon). The strict proportionality test under which the ECJ monitors any state action having negative effects on free movement—with some nuances allowing Member States in delicate areas like the protection of children a considerable ‘margin of appreciation’88— cannot simply be taken over to private associations without in effect curtailing their autonomy of action. European Union law can only set the outer limits of action; it must leave to social partners a wide margin of discretion as to how they realise them. Negative side effects on free movement therefore have to be accepted in the interests of a democratic society, as spelled out in Article 11(2) ECHR. European Union law, as implemented by the ECJ, can therefore set only the outer limits of action. If collective action by labour unions (or by business associations) tends to negate this very freedom, for example, by a policy of ‘closed shops’ or by grossly violating the ‘negative freedom of association’,89 it cannot be justified, because it goes beyond the principle of proportionality. The same would be true with social action aiming at defending discriminatory conditions of work, for example, with regard to nationality, gender, race or similar objectives expressly condemned by human rights and EU law. On the other hand, it must remain a matter for social partners themselves whether and how their actions ‘truly serve the protection of workers’, whether the ‘flag of convenience’ (FOC) policy of the ITF is legitimate or not (provided there are no elements of discrimination, as Advocate General Poiares Maduro correctly pointed out), how far solidarity action is legitimate, what concrete steps regarding strikes, boycott, picketing, lock-out they want to take, including a moment of surprise. The reference to Schmidberger and Commission v France is misleading with regard to the proportionality criteria: both cases concern state (non-)action, not social action by private associations as such. And it is obvious that the differences in Member State laws and social relations must be taken particularly serious in this respect, as the ECJ recognised in Omega

88 See case C-244/06 Dynamik Medien Vertriebs GmbH v Avides Media AG [2008] ECR I-505 where the ECJ refers to Art 24(1) providing that children have a right to protection of their wellbeing and, similar to the opinion of AG Mengozzi (see my comment in (2007) Europaische Zeitschrift fur Wirtschaftsrecht (EuZW) 715); it is a matter of states to define the level of protection. 89 F Sudre et al, Les grands arrêts de la Cour Européenne des droits de l’homme (Paris, Presses Universitaires de France, 2003) 482, referring to the case law of the European Court of Human Rights in Strasbourg.

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with regard to fundamental rights.90 The EU fundamental freedoms—as fundamental as they may be—cannot take unlimited supremacy over fundamental rights.91 Balancing has two sides: it must exclude an unrestricted priority of fundamental freedoms as well as of fundamental rights. Both are ‘too fundamental’ to be forced into a hierarchical relation with each other in whatever direction.92 This can neither be done directly, as arguedabove, by a ‘reserved area’ for social action beyond the reach of the fundamental freedoms, nor indirectly by a presumption against social action going beyond a narrowly defined area of ‘protection of workers’ as set ex post in court litigation. Indeed, judicial restraint93 is necessary in this area. VIII

CONCLUSION

What is the result of this discussion? From a methodological point of view, courts seem to use different methods of finding results which they regard as just and fair. They will refer to ‘Classical Legal Thought’ (CLT) in the sense of Begriffsjurisprudenz to find seemingly coherent solutions to legal problems within the conceptual limits of their thinking, or use the more open reasoning of Interessenjurisprudenz in the sense of Heck allowing a balancing of different norms and societal interests to fill ‘gaps in law’. Neither method can avoid the ‘indeterminacy’-paradox which was so dear to legal realists and critical legal studies.94 The hermeneutic realism of Esser insists on a broadening of legal reasoning by Durchgriff to ‘principles’. This approach was later taken up by Dworkin who pointed to the difference between ‘rules’ having an imperative character allowing only ‘yes’ and ‘no’ answers and applicable in an ‘all-or-nothing fashion’,95 while ‘principles’ (or standards) are to be observed ‘because it is a requirement of justice or fairness or some other element of morality’.96 Dworkin goes on to posit that (p)rinciples have a dimension that rules do not—the dimension of weight or importance. When principles intersect … , one who must resolve the conflict has to take into account the relative weight of each … (I)t is an integral part of the concept of a principle that it has this dimension, that it makes sense to ask how important or how weighty it is. Rules do not have this dimension.97

But even such methodological fine-tuning may not always be satisfactory, as the analysis of the case law of different EU courts based on different Vorverständnisse has shown. The case law of the ECJ, in particular concerning social action, can be explained only from a liberal Vorverständnis, even if it uses some ‘social rhetoric’, as we have shown in the Viking litigation (see above at part VII). In consumer 90

See above (n 83) para 37. Similar: see Joerges and Rödl, above (n 76) 17, fearing a ‘loss of power’ (Entmachtung) of Finnish labour unions. 92 Similar: Rodière, ‘Les arrêts Viking et Laval, le droit de grève et le droit de négociation collective’, above (n 76) 57; Azoulai, ‘The Court of Justice and the Social Market Economy’, above (n 76). 93 See Joerges and Rödl, above (n 76) 21. 94 See Grechenig and Gelter, ‘Divergente Evolution des Rechtsdenkens’, above (n 7) 525; D Kennedy, A Critique of Adjudication (fin de siècle) (Cambridge, Mass, Harvard University Press, 1997) 169 et seq. 95 Dworkin, Taking Rights Seriously, above (n 25) 24. 96 ibid, 22. 97 ibid, 26. 91

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protection matters, a similar observation was possible with regard to the UK Supreme Court (see above at part VI.A). The ECJ has been somewhat hesitant and unclear, not using the full scale which balancing would have allowed it (see above at part V). In Germany, a notable difference could be found in approaches between the BVerfG insisting on the impact of the fundamental freedoms on private law relations by using a broad balancing test (above at part IV) and a more conceptual ambiguous ‘hidden balancing’ by the BGH with some reference to Interessenjurispruden (see above at part VI, C). It is important that such Vorverständnisse are made transparent in the process of legislation and adjudication. This is perhaps still the most important contribution of the work of Esser to private law methodology on balancing, even if one may differ as to the results of such balancing.

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13 New Paths of Private Law GUIDO ALPA

F

OR SEVERAL YEARS I have participated in the meetings of the Study Group for a European civil code, coordinated by Christian von Bar. This work has been a real training ground, not only to understand the importance and the influence of comparative law in the evolution of legal forms of economic and social relationships, but to deal with the problems of harmonisation of principles and the standardisation of law. I have promoted this initiative to Italian and European lawyers. Now that I see the end of this work, for now a text only in outline, I am satisfied with it; and within the limits of the time I have been allocated, I would like to go over my reasons for this assessment. The work is the result of the researches done by three different groups: besides the Study Group, the aspects concerning consumer law were examined by the Acquis Group (Research Group on the Existing EC Private Law) lead by Hans Schulte Nolke and Gianmaria Ajani; and the core of contract law is based on the Principles of European Contract Law, drafted by the commission lead by Ole Lando and Hugh Beale. The text of the ‘Draft Common Frame of Reference’ (‘DCFR’) has been edited by Christian von Bar, Eric Clive and Hans Schulte-Nolke. The DCFR pursues the aim of guaranteeing uniform principles on the subject of obligations and contracts, specific contracts, civil liability, unjustified enrichment, negotiorum gestio (benevolent intervention in another’s affairs) and trusts, and it comprises the principles pertaining to the acquis communautaire on consumer law as well as terminological and notional definitions. It is the result of the process taking place in which the national legal systems are coming closer together, not only with regard to the Community directives passed, but in the sector of general rules concerning the ‘common core’ of civil law. Similar efforts are also being made in the fields of family law, insurance law and procedural remedies. It is not a simple restatement of the law in force, rather it proposes introducing innovative rules to meet the needs of a modern and complex society like the one in which we operate. It does not sacrifice national models; rather it subsumes their shared principles, employing a terminology which is adaptable to different local contexts.

I

THE FRAME OF THE DRAFT COMMON FRAME OF REFERENCE

The text of the DCFR cannot be considered in a reductive way as a simple ‘toolbox’ which jurists, lawyers, judges and legislators can make use of to perform their tasks

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and achieve their aims. In the first place, it is a precious casket in which the cultures, trends and policies belonging to the European countries’ national experience and to Community experience converge. It is not without reason that I use the expression ‘experience’ rather than ‘legal rules’ or ‘legal systems’: it is necessary to take account not only of the text but its cultural origins and then of its practical application since, as we know, legal texts have an actual life which feeds on cases which see them ‘in action’, on the additions of the interpreter and on the environmental conditions, so to speak, in which they are applied. Seen from this perspective then, the DCFR is a document which, for now, can only be examined superficially: we know how it originated; we know the aims it proposes; we know what its literal meaning is. Following the publication of the six volumes of commentary—with a total of over six thousand pages—in the autumn of 2009, we have only started to find out what its cultural roots are and to investigate the meaning that its authors had in mind. But we will only be able to understand it fully when it begins to be used in academic studies, in decision models and in legislation models. The other side of the coin has yet to be sculpted; and it will be sculpted by time, which is a great sculptor as Marguerite Yourcenar said, observing how the text is used. In other words, for now it is only possible for us to see one side of the coin; a side which we can appreciate partly through the advance information collected in the studies which the authors of the DCFR have begun to publish. External observers have not, however, been idle. There has been an increase in seminars and opportunities for reflection, on the function of the ‘codes’ in contemporary society, on ‘contractual justice’ and on the economic aspects of the proposals for European contract law codification. Two important conferences followed one another over a few weeks, the one in Rome in September (23–24, 2008 ),1 under the patronage of the Italian Bar Council and the other in October (23–24, 2008-),2 at the Sorbonne, under the aegis of the French European Commission presidency. On those two occasions many jurists expressed their opinions on the DCFR’s choices and on the contents of the rules which it contains. In order to discuss the DCFR, jurists must carry out three complex operations. The original text was written in English, and this will also be the case for the commentary prepared by the authors. The use of this language is not neutral, it presents positive and negative aspects; in other words it comes at a price. It is a known fact that legal texts are never translated literally, because the translation of a text from one language to another implies a conceptual translation, in which the nuances, the authentic meaning, the ‘flavour’ of the words, the concepts, the figures of speech that are typical of every national culture are lost. Law by its nature is a product of national cultures, as the experts on legal realism, sociologists and anthropologists of law have taught us.

1 Il ‘Draft Common Frame of Reference’del diritto privato europeo. Scelte di metodo, analisi testuale, risvolti pratici nella prospettiva della professione forense, Rome, 23—24 September 2008 2 ‘Quel droit européen des contrats pour l’Union européenne?’, Université de la Sorbonne, Paris, 23−24 October 2008

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Community law is no exception to this rule, because the regulations, the directives and the other sources of law are translated into the national languages and therefore imply the ‘conversion’ of English and French terms (the languages in which the texts are initially written) in a context which is normally different from the original one; and comparative law is no exception either, because the jurist, however cosmopolitan he may be, has a ‘stamp’, a kind of original sin, a mindset which he carries with him wherever he goes and whichever text he examines. Maybe, if we had all studied Roman Law alone, we could speak a lingua franca, Latin, and understand each other immediately in our use of terms and concepts, as occurred throughout the Middle Ages and the Renaissance; moving further along in time, a similar phenomenon occurred for the French language and law, from the end of the eighteenth century and for the first half of the nineteenth century in association with the Code Napoléon, or for the study of the pandects and for the German language, from the second half of the nineteenth century to the 1940s. However, today we live in a very different world, we have crossed national borders, even the Nòmos has been separated from the Earth; a universally known language is required, precisely the one I am using. The English language necessarily brings with it the ideas of common law and an extraordinary experience of a pragmatic nature and of case law. But precisely for this reason further mediation is needed which goes beyond a simple literal translation. All these problems were discussed in a book—Fondamenti di diritto privato europeo 3 comparing the different models of legal system of the European continent: just writing the book we became aware that a ‘European private law’ needs a European set of terms, notions and principles. We could perceive also that it was true what Basil Markesinis had been predicting for many years: a great silent phenomenon of gradual convergence was going on; and that it was a choice left to the European legislator to let it develop gradually or to improve it through legal instruments. In any case, the interpreter’s task is very hard. The first operation, therefore, consists in understanding to what extent the English terms either correspond to their English meanings or allude to a nonautochthonous meaning, as the authors claim. This is why the definitions are useful: agreed or ‘stipulative’ definitions, like those offered by the authors in their comments, or binding definitions, if they are offered by the DCFR text itself. Indeed, in the appendix to the text one finds a long list of definitions of the terms used in the formulation of the rules. Are these ‘suggestions’ which the interpreter can take into account, but without being obliged to agree with them? Or are they binding meanings for the interpreter? The issue of the binding nature of the definitions contained in a legal text is an ancient problem: the answer depends not only on the ‘legal strength’ of the text, in other words on its position on the scale of sources of law—to think in Kelsenian terms—but of its authoritativeness. Legal hermeneutics teaches us that the freedom of the interpreter is not unlimited, but we also know that the interpreter does not tolerate excessive limitations and that, despite the definitions, interpretation overflows, it goes beyond, it adapts, it conforms, it shapes, in other words it

3

G Alpa and M Andenas, Fondamenti di diritto privato europeo (Milan, Giuffrè, 2005).

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‘manipulates’ the text. And this is how it should be, because the text has a life of its own, it is not conditioned by the intentions of its author, its meaning does not remain unchanged over time. The second operation consists of translating the terms into the interpreter’s own language: it is a necessary operation if one wants to share the text with jurists from each country of the Continent; it is an operation which on the one hand is psychologically spontaneous, and on the other complex, because the term, the notion, even the principle may not find its equivalent in the language and in the panorama of notions and concepts belonging to national experience. Therefore, it is necessary either to create ‘new’ terms, concepts and principles, or to proceed with similitude, absorption and fiction. The third operation consists of a comparison with national experience, to check whether the choices made by the authors are better than those made by the legislators, judges or interpreters of a given system. Otherwise how would it be possible to persuade legal practitioners to abandon their system in order to substitute it with another? And would it be possible to impose a new system with a binding instrument? By posing some of these questions, I am already performing a manipulation: I am treating the DCFR as if it were a civil code—which it is not—because the idea of a ‘code’ belongs to bygone times; but it is true that—for those like me who come from a background of over two centuries of codified law—it is entirely natural to see the image of a new code in the DCFR: a modern, flexible, tendentiallysystematic code, open to changes.

II

OBJECTIONS TO A ‘EUROPEANISATION’ OF PRIVATE LAW

Whether or not it is a code, the DCFR does, nonetheless, constitute the most significant result of the ‘Europeanisation’ process of private law. Rather than waiting for national systems to spontaneously converge towards a ‘common law’ built on practice and case law, with the circulation of ideas and models which contribute to maturing a shared concept of choices and concrete solutions, the authors of the DCFR proposed to set down in a text ‘negotiated’ among academic experts from all European countries, principles also deemed acceptable and shareable by legal practitioners. Thanks to the method used by the European Commission which supported this decision, the text was discussed with the stakeholders, representatives of businesses, consumers and professionals. The competence of the European Union to deal with this material was contested, the purely academic origin of the work was contested; the feasibility of a decision which would impose a new model on all legal practitioners, on all economic practitioners, on all its users, was contested. Reasons of economic and social usefulness, of uniform treatment of EU citizens and of appropriateness and modernity of the text support this undertaking. They are arguments which can be used to face other, more substantial objections to the ‘Europeanisation’ process of private law. The first is a direct objection, and concerns the general intention of the processes underway. This aversion also emerged during the discussion held in some seminars

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I organised on behalf of the Italian Bar Council: it stems from the fear that national identities will be suppressed for the benefit of an insipid model, a kind of Harlequin costume, which would end up marginalising the aspects which characterise the models on which the distinguishing features of the various systems are built. It is easy, however, to answer this objection, not only with arguments of an economical nature, which favour the harmonisation of the rules in order to facilitate market integration, but with arguments of a political nature, given that a uniform model would guarantee an equal status to all the legal systems, to all the citizens and to all the jurists in the European Union. And if the harmonisation models were welcomed in non-EU countries too, a uniform system for the whole continent would be created, and so, crossing the borders, it would not be necessary to change stagecoach horses, to use Voltaire’s metaphor on particularistic law. From the point of view of Italian law, I can assure you that the benefit would outweigh the cost, given that Italian law, like the Italian language, are these days little known abroad, and Italian law is rarely chosen by the contracting parties as the law of the contract, hence both the law and the language are recessive. Professionals, consumers, lawyers and judges would therefore be greatly helped if they could use a common regulatory text rather than having to apply foreign texts. The second objection attacks this process from the viewpoint of ‘social’ policy: consumer law is considered as a law belonging to ‘ordoliberal’ systems, seemingly aimed at protecting the weakest sectors of society but actually concerned with guaranteeing the protection of strong interests; the convergence of fundamental rights and consumer rights in a European contract law would end up giving priority to strong interests to the detriment of weak interests. One could, however, answer that the balance between economic and social interests at stake will never affect fundamental rights, which constitute the inflexible core of relationships between individuals. Moreover, it is these instruments of standardisation that guarantee the protection of fundamental rights, as provided by the DCFR in its introductory provisions. And from the viewpoint of Italian law, I can confirm that the initiatives to benefit the consumer have increased protection of the right to health, have strengthened the bargaining position of the individual and have allowed judges to check economic operations with greater powers compared with those that the civil code allowed. The third objection involves the fear that the harmonisation process is too timid and sacrifices the protection standards already reached at national level. This seems to me to be the most convincing objection: yet considering some national models, like the French, the English and the German, I do not think that this will be a risk. However, I would like to add that these objections—like others which have emerged during 30 years of discussions—tend to only take account of the editorial component of regulatory processes. But we know very well—as the exponents of legal realism have taught us—that legal phenomena, cultural trends and the practice of applying the rules, are complex phenomena, of which the textual component is just one of the many aspects to be considered. Equally important, perhaps more so, is the creation of the rule, which reflects the mentality, the culture, the social environment, even the mood, of the interpreter. Therefore, with respect to one text, jurists who have different training do not react univocally; the DCFR may have a

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propulsive function, and where its rules could seem less advanced than the national ones, it can be interpreted and adapted in order not to produce negative effects. One should not, then, go too far in assigning a text a sacred value. One example says it all. The Italian Constitution is one of the first and most modern constitutions in the postwar period. Despite coming into force in 1948, it is highly protective of civil rights, given the catalogue of individual and collective rights it contains. In some ways it is even more progressive than the Nice Charter, where it distinguishes between fundamental rights and economic rights, or where it awards the collectivity—as well as individuals—the protection of rights relating to ‘social groups’. Therefore one could think that it offers Italian citizens greater—and better—protection than that which is provided by constitutions which do not contain a ‘bill of rights’. And yet, this is not the case if one thinks of the present situation in which the legislature has prohibited the use of stem cells, it has introduced a status for embryos, it has limited access to artificial procreation, it chose not to grant legal status to de facto couples and it has suppressed the use of living wills. These are all issues which could be dealt with in a secular and positive way on the basis of the constitutional text in force, and instead they have been resolved by the Italian legislature in a completely negative way.

III

THE DRAFT COMMON FRAME OF REFERENCE, THE NICE CHARTER AND CONSUMER LAW

To fully understand the importance of the DCFR, it needs to be placed in the context of the evolution of private law. The DCFR came to attention by coming into existence with other important documents: on 12 December 2007 the Charter of Fundamental Rights, signed in Nice in 2000, was solemnly proclaimed, awarding the Charter legal status and no longer only political status4; on 8 October 2008 a Proposal for a Community Directive on consumer contracts was published.5 According to traditional interpretation, the Nice Charter, as a document of constitutional importance, should not involve civil law and relationships between individuals, because constitutions primarily concern relationships between the citizen and the state. Therefore, the document should not regard the field of interest of civil law and the civil law scholar. This interpretative model has been abandoned for half a century now in Germany and in Italy, for 35 years in Spain and for a few years in Great Britain and in France. In the first place the discussion concerned fundamental rights as recognised and guaranteed by national constitutions; it then spread to constitutional principles shared by Member Countries of the European Union; then to subjective legal positions protected by the European Charter of Human Rights signed in Rome in 1950 and applied by the court based in Strasbourg; and then to the application of that Charter by the European Community Court of Justice based in Luxembourg; further still it spread to the application of the Nice Charter by that Court; and finally to the importance of fundamental

4 5

Charter of Fundamental Rights of the European Union [2007] OJ C303/01. Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614/3 (8 October 2008).

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rights in the context of relationships between individuals in Community rules and in national rules of Community origin. Even where written constitutions do not exist, but there are laws which recognise fundamental rights, or where the European Charter of Human Rights signed in Rome in 1950 has been absorbed, the problem of applying fundamental rights to relationships between individuals has been resolved in a positive way. For its part, the European Court of Justice has, for many years, applied fundamental rights as belonging to the entirety of universally recognised general principles of law; recently it has applied the Nice Charter as if it were a document which already has legal status. Even where the written constitutions contain a Bill of Rights, fundamental rights have been strengthened by recognising the binding nature of the European Charter of Human Rights. Recently this hermeneutic operation was carried out by the Italian Constitutional Court, with decisions 348 and 349 of 2007. From this it can be hoped that the Court can be invested with the issue of the constitutionality of the recent laws which I mentioned above. We are therefore dealing with a complex cultural, political and practical process, as an outcome of which—in the law in books and in the law in action— fundamental rights have taken on a vital role which pervades all relationships, of all types. Alongside this process is the process of legally protecting the rights and interests of consumers. Here too we find different regulatory models in the national legal systems, which have introduced actual ‘consumer rights codes’, as occurred in France, in Italy and as they are planning to introduce in Luxembourg; or there are general laws, like in Spain; or ad hoc rules have been added to existing civil codes, as occurred in Germany. On a Community level the acquis concerning relationships between individuals has particularly developed in the sector of relationships with consumers. In order to avoid overlapping and grey areas, at Community level there has been a proposal for a general content directive to regulate, in a systematic way and at the highest level of harmonisation, contracts which have a professional as one party, and the consumer as the other. In this way the issue discussed at national level of relationships between general contract law and consumer law has been raised to a Community level. That is, whether the latter constitutes a specification of the former or a derogation of the former, or whether the latter tends to spread over the former, partially replacing it, or whether ‘radiating’ over it, it constitutes an evolutionary factor. The application of fundamental rights in relationships between individuals, the formation of a consumer rights code in the field of contracts and the drafting of a common frame of private law rules, are processes which for now are moving in parallel, they intersect in several places, but they seem destined to merge.

IV

FUNDAMENTAL RIGHTS AND THE DRAFT COMMON FRAME OF REFERENCE

And so we come to one of the crucial aspects of private law, also reflected by the DCFR, the issue of applying fundamental rights to relationships between individuals. In actual fact, the DCFR is not only aimed at the Member States of the

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European Union, but it is only natural to consider it in the light of Community law, also considering the interest that it has aroused in the Community bodies. Among the European Union’s objectives, the European Charter of Fundamental Rights establishes human dignity (Article 1–2) as a basic value and specifies that sustainable development in Europe is based on a ‘a balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress’ (Article 1–3). The Charter recognises and guarantees the rights of the individual to physical and mental integrity (Article II-63), reaffirmed in the form of health protection (Article II-95), respect for family life (Article II-67) and personal data (Article II-68) and it specifically provides for ‘a high level of protection’ for the consumer (Article II-98). Therefore, it is necessary to distinguish between the demands of citizens which concern fundamental rights recognised in the Member Countries’ constitutions and reaffirmed, in an even more extensive way, in the European Charter, and the so-called ‘economic rights’, which are found on the same level as the rights of the ‘professional’. The Resolution on consumer rights and interests of 1975 dealt, even then, with both categories of rights, but today the perspective has changed: even in Community law (which constitutes a legal system in itself, not assimilable into the national legal systems) it is now possible to use the formal categories which distinguish the sources of law and order them according to a priority, as occurs in the national legal systems. And since it is inconceivable that EU policies conflict with the fundamental rights recognised by the European Charter, the fundamental rights become a limit to Community action in this sector. Therefore Article 153 (ex 129) of the EC Treaty—which imposes on the Community the task of ‘contributing’ to the protection of the health, safety and economic interests of consumers, and of considering their needs, must be reread in the light of the European Constitution provisions. Like national constitutions for which an interpretative process of ‘direct application to relationships between individuals’ was created, the European Charter of Fundamental Rights also implies the direct application of the provisions contained within in to relationships between individuals. What are the remedies for the violation of fundamental rights in an economic operation with a contractual legal guise? Normally the regime of remedies is entrusted by Community law to the national systems and their application to national judges. However, in the case of violation of the principle of non-discrimination (which, naturally, does not exhaust the list of fundamental rights) the principles in which the acquis on consumer law has been consolidated (Acquis Principles) provide for compensation of economic and non economic loss (Article 3:201(2)); on the other hand the DCFR provides for the application of remedies for ‘non performance’ (Article III.-2:104); if the nonperformance cannot be excused it is also possible to request ‘specific performance’ (Article III.-3:101), or compensation, including non economic loss: Article III.3:701). The DCFR is therefore more advanced, from the perspective of protection of the individual, than the Acquis Principles. But this is, however, a sector which can only partially coincide with that of consumer protection in general, because from a contractual perspective it should not be possible (in my opinion) to take into

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account previous behaviour, which takes place in the pre-contractual phase, or in the case of a simple social contact which did not result in a contractual relationship. In other words, if the violation occurred before the contract was concluded, there is only room for compensation, but not for ‘specific performance’ which would entail obligatory conclusion of the contract. V

CONSUMER RIGHTS

In considering the responses to the Green Paper on the acquis concerning consumers as a whole,6 the Directorate General on the health and protection of consumers revealed that most of the interlocutors showed a propensity for adopting a general instrument aimed at the horizontal harmonisation of the rules on both cross-border and national contracts, an instrument which could entail greater legal consistency in the specific sectors considered. The majority (with 62 per cent) is in favour of an instrument which introduces full harmonisation, this is a position shared by the European Parliament, by the organisation representing businesses (at least for some essential aspects, like the definition of consumer and professional) while most of the consumer associations favour minimum harmonisation. The notion of consumer should be maintained within the most circumscribed limits, concerning the natural person. Disagreements persist over the application of the good faith clause, which bodies representing business are opposed to. The negotiation of individual terms should, according to most people, exclude unfairness tests; the combination of the black list and the grey list of unfair terms is welcomed, while most interlocutors are against extending the unfairness test to terms which define the contract content and price. More articulated were the responses to questions on remedies for nonperformance of information obligations; in most cases withdrawal is considered appropriate, this is accompanied by other remedies for individual types of breach. Instead, there are no univocal positions either on general remedies to contractual non-performance or on compensation. Following the consultation the European Commission drafted a Proposal for a European Parliament and Council Directive on ‘consumer rights’.7 The text provides 50 articles and several annexes comprising comparative forms and tables. The exposé des motifs includes 66 recitals and covers over 20 pages: the directive is aimed at revising the acquis communautaire on consumption, at simplifying the legal framework in force, at improving the functioning of the internal market and at resolving problems posed by the conclusion of transnational contracts. In this regard provisions were introduced on the choice of the applicable law with regard to contractual obligations (the so-called ‘Rome I Regulation’)8. However, the Commission acknowledged that the application of the Regulation, which allows the consumer to invoke national rules (Article 6), does not rule out the possibility of interpretational conflicts which could hinder the circulation of goods and services. 6 Commission, ‘Green Paper on the Review of the Consumer Acquis’ COM (2006) 744 final (8 February 2007). 7 COM (2008) 614/3 (8 October 2008), above (n 5). 8 Council Regulation (EC) 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6.

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This led to a very important decision, consisting in getting around the problem of the applicable law by providing uniform contractual rules concerning the relationships between professionals and consumers so that in every national legal system of the European Union the same rules can apply. This result is obtained—in accordance with the Commission’s intentions—by carrying out two operations: the drafting of a single text which coordinates the Community directives on the relationships between professionals and consumers, and choosing the level of harmonisation, described as ‘complete’ or ‘total’ and ‘targeted’ (ciblé). This is a very important decision because, until now, Community consumer law was entrusted to ‘minimum’ directives, which, having established a ‘minimum common denominator’ consisting of mandatory principles to be implemented in all the national legal systems, allowed individual legislatures to raise the level of protection. This system had the advantage of not lowering the protection of rights in the legal systems in which it was stronger compared with the legal systems offering less protection of civil rights, and at the same time of allowing the latter to gradually adapt to the stronger models, in the sectors considered on different occasions. However, two negative aspects were found: the legal treatment of relationships with consumers ended up being different, and the level of protection they were guaranteed varied from country to country. Complete harmonisation, proposed by the Commission, is pressed for by professionals, who currently have to face significant transactional costs due to the variety of applicable rules, and by consumer associations, who on each occasion should advise their members on which law, of the two in consideration, is the best to apply to the contract. This, however, implies a kind of restriction of the sector, whose evolution will exclusively depend—if the proposal is approved—on Community legislature, which will therefore limit domestic decisions. The proposal does not concern all of the sector’s directives, but just those covering some types of methods of concluding contracts (contracts concluded away from business premises, distance contracts) and some areas concerning content (unfair terms and sales guarantees). The outcome is a ‘mini consumer code’ which regulates, according to the definitions and scope (Articles 1–4), information (Articles 5–7), withdrawal rights (Articles 8–20), some aspects of sales (Articles 21–29), contract terms (Articles 30–39) and aspects regarding application of the directive (Articles 40–50). Article 43 establishes that if the ‘applicable law’ is that of a Member State’s legal system, consumers cannot waive the rights conferred on them by the directive. This implies that the rules are imperative and that the fundamental difference between a directive like this, leaning towards complete harmonisation and an actual regulation is scant, mainly consisting in legislative technique (implementation of principles, for the one, immediate enforcement, for the other) and in implementation times. Another important choice involves the definitions of ‘consumer’ and ‘professional’, in which the sector of ‘liberal’ work has been included. To be truthful, this is simply a clarification, given that the notion of ‘professional’ already included the businessman and the professional who carries out intellectual work, as defined in the civil code.

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Some of the notable new elements are the obligations imposed on intermediaries acting on behalf of consumers, the uniform time limits for withdrawal rights, the imposition of risk of loss or damage of goods during delivery on the trader, the provision of a list of contract terms described as unfair and a list of contract terms that are presumed to be unfair in the absence of proof to the contrary, to be provided by the professional. Rules which have remained outside the scope of the directive, despite being included in the acquis communautaire, regard unfair commercial practices, labelling, product safety, liability of the manufacturer, tourism services, consumer credit and remedies. Nothing is said about the directive concerning services, with a deadline for implementation by the Member States of December 2009, even though a partial overlapping of the rules is possible, especially as far as information and contract terms are concerned. The directive will certainly also have an impact on the drafting of uniform principles regarding contracts, sources of non-contractual obligations and the discipline of sales. At the same time, two important works have been published: a compendium of the directives concerning consumer contracts and the progress of their implementation in the Member Countries, and a systematic reconstruction of the acquis communautaire on the matter. We are therefore moving towards a ‘codification’ of Community consumer law. The DCFR does not have a section dedicated to consumer law as part of its structure. Rather, it has followed the model of the BGB and has included special rules within the general structure concerning all private law relationships, thus relationships between consumers, relationships between professionals and consumers and relationships between stronger and weaker parties: indeed, there are rules which try to rebalance the asymmetry of contracts when one of the parties is a ‘weaker’ consumer, or a ‘weaker’ professional. The DCFR marks, then, the expansion of consumer law into the field of general contract law, thus legitimising the idea that today it is no longer relevant to talk about ‘consumer contracts’ but it is necessary to talk about ‘asymmetrical’ contracts, that is to say, about contracts that are regulated by taking into consideration the situation in which one party finds himself in a minority position compared with the counterpart, even if this does not involve a party ascribable to the category of consumers, minors, the naturally incompetent and so forth. I will return to this point shortly.

VI

THE DRAFTERS’ CHOICES

In order to appreciate, on the one hand, the enormous effort made by the authors, and on the other, the basic choices which they made in writing the DCFR, it is necessary at this point to go into some details. Naturally, this is a brief analysis, given that the DCFR is composed of ten books and an appendix containing definitions; each book is composed of dozens of rules, the definitions go on for dozens of pages; really, each rule, each definition deserves further reflection.

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Even though, as I mentioned at the outset, the aims are different, comparison between the DCFR and the codes in force is inevitable: for my part, the comparison will involve the Italian civil code, introduced in 1942, amended for the section on family law and succession in 1975, and updated on many other occasions. Unlike that which happened in Germany, or that which is happening in France and in Spain, there are no official projects in Italy to reform the law of obligations and of contracts; however in 2005 a ‘consumer code’ was introduced, a sector-specific code in which the provisions on almost all relationships with consumers, including of course the implementation rules for the Directives on contracts and consumers, were brought together. Initially, the implementation rules for the Directive on unfair terms and those for the Directive on sales guarantees were added to the civil code, but in 2005 those rules converged in the sector-specific code. I will not dwell on the structure of the DCFR, even though it would be interesting to understand the reasoning behind the positioning of the rules on obligations, which are placed after (Book III) rather than before contract rules (Book II) while, since the contract is one of the sources of obligations, we would expect a different choice. Also of interest are the rules on the ‘Acquisition and loss of ownership of goods’ (Book VIII), which in the Italian Civil Code are spread out in the book on property and in the other books, with regard to the discipline of individual contracts or the protection of rights; in the same way one can understand the emphasis placed on the ‘Proprietary security rights in movable assets’ (Book IX), which in the Italian civil code are just hinted at, given that one of the aims of the DCFR consists in providing rules to encourage the integration of the internal market and the circulation of goods and services by giving certainty to relationships, confidence to businesses and protection to users. Instead, what is completely new for the Italian jurist are the rules on ‘trusts’ (Book X), which in Italian law are either replaced with legal rules concerning trust agreements (negozio fiducario) or derive from the international convention on this matter, as it is claimed that it also contains substantive law provisions. There are many new elements on the subject of contracts. I will only mention a few of them, choosing those which may appear more important in the eyes of an Italian jurist. The rules on contractual freedom, found at the beginning of Book II, were the subject of extensive analysis during the seminar organised by the Italian Bar Council, mentioned above, but also in a seminar held at the Law Faculty of the University of Rome, La Sapienza.9 In these two seminars the limits of contractual freedom were examined, understood as those involved in the relationship between mandatory and non mandatory rules, in the relationship between the legitimization of bargaining power and the abuse of bargaining power, and in applying the principle of transparency and the principle of good faith and fairness. However, there are two aspects which are the most striking—I would say in a positive sense—to the Italian jurist, who in the DCFR finds many rules which are

9 Consiglio Nazionale Forense, La libertà contrattuale, Rome, 20–21 November 2008. The reports are collected in Seminari del Consiglio Nazionale Forense (2008–2009), Rome, 2010.

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congenial because they are already provided for by the civil code, on contract interpretation, on simulation etc. I am referring to ‘pre-contractual duties’ and to ‘unfair terms’. As was pointed out above, Book II of the DCFR contains rules on contracts in general, but within each institution it distinguishes between (i) rules aimed at regulating contracts concluded by contracting parties who are not qualified; (ii) rules aimed at regulating contracts concluded by consumers; (iii) rules aimed at regulating contracts concluded between ‘weak’ professionals; and (iv) rules aimed at regulating contracts concluded by ‘weak’ consumers. The first group of rules is not however neutral, as one may think at first sight. Because despite being aimed at all contracting parties, these rules contain correctives based on transparency of the contract, on good faith and fair behaviour and on the prohibition of contractual abuse, which meet both the demand to ‘moralise’ the market and the demand to accommodate social needs which would not be fully met by the free play of the forces concerned. Chapter 3 of Book II concerns the subject of ‘marketing and pre-contractual duties’ (II.-3:101–3:501). This subject is completely new with respect to the civil code which (the first of the modern codes) contains specific rules on the subject of negotiations and pre-contractual liability (Articles 1337–38). In connection with the general principles relating to the application of the general ‘good faith’ provision in the phase prior to contract conclusion and the obligation to inform the other party of the causes of the invalidity of the contract, Italian jurisprudence has completed the statutory provision by establishing the extra-contractual nature of the liability for violation of these provisions and the extent of the reimbursable loss contained in the so-called pre-contractual liability (reimbursement of the costs sustained during the negotiations and payment of the profits lost through not concluding other contracts. Obligations in the pre-contractual phase are therefore limited and not standardised: they particularly concern the suspension of negotiations without justification, but do not concern the obligation to disclose facts and circumstances, except for the causes of invalidity of the contract. The fulfilment of precise pre-contractual information obligations concerning the list of data and the provision of explanatory notes and documents is only provided for by specials laws on contracts with the consumer and contracts concluded by banks, by insurance companies and by financial brokerage companies with their clients. On the other hand, the DCFR raises the information obligations of businesses to a general rule (to be complied with vis-à-vis anyone, as the text says ‘another person’) in the case of the sale of goods, assets and services: it does not specify in detail the information which must be given, but it employs a general clause, based on the reasonable expectation (‘reasonably expect’) of the counterpart and takes account of the standards of quality and performance, described as ‘normal’ under the ‘circumstances’ (Article II.-3:101). In the case of the counterpart also being a business, the violation of this duty corresponds to the failure to provide information which would be expected taking account of ‘good commercial practice’. Certainly, this is absolutely new in our experience, where negotiations between professionals are normally entrusted to the free market, except, precisely, for special rules.

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The DCFR also regulates pre-contractual information obligations with respect to the consumer whom we may describe as ‘average’ (Article II.-3:102) and the particularly disadvantaged consumer (Article II.-3:103); it provides rules on information provided in real time and by electronic means (Article II.-3:104, 3:105). It also provides that the price, the name and address of the business are provided (Article II.-3:107, 3:108). On a general level, it provides that the information is clear and precise and expressed in a plain and intelligible language (Article II.-3:106). This too is very new: in our legal system such a principle has not been codified; similar rules only apply to consumer contracts by virtue of the Community Directive on unfair terms. A similar principle is provided by the DCFR regarding terms which have been prepared by one party and submitted to the other (Article II.-9:402). In this case too, with a provision which is mandatory for the parties (Article II.-9:401) the terms must be drafted and communicated in a clear, simple and intelligible way. In the case of breach of the pre-contractual obligations, the penalty is the right to damages for loss (‘loss’) (Article II.-3:501), which goes beyond the simple precontractual liability. There is need for further reflection as to whether the authors ascribe this case to the area of extra-contractual liability, rather than to that of contractual liability, with all the consequences that arise from this on the subject of the burden of proof and the limitation period of the legal action for damages. What is clear, however, is that a contract concluded in breach of the pre-contractual obligations is in itself valid, and not rescindable; on the other hand, in the case of ‘unfair’ terms the term is not binding (Article II.-9:408). Recent jurisprudence from the Italian Court of Cassation, on the other hand, provides for termination of the contract, if the information obligation is provided for by law, with the resulting compensation for contractual damage; but there are decisions which apply the remedy of nullity, with the resulting restitutions. The DCFR also provides special rules when the contract is concluded with the consumer (Article II.-3:102). Another example of raising consumer rights to the level of general legislation is provided by the application of the principle of invalidity of the terms prepared by one party and submitted to the counterpart. First time among modern codes, the Italian Civil Code provides rules on the standard terms drafted by one party and imposed on the other, without making distinctions of status; the terms are not invalid if they are approved by being specifically signed (Article 1341, paragraph 2). In the DCFR instead, the terms are submitted to the scrutiny of ‘unfairness’, that is ‘significant disadvantages’ imposed on the contracting party through conduct contrary to good faith and fair dealing (Article II.-9:404); it does not make a difference whether the counterpart is a consumer or otherwise. However, if the counterpart is a business, the DCFR extends protection to it also and this goes beyond Community law itself which reserves this protection to the consumer only. The DCFR, then, does not reflect, at least from this point of view, the tendency of the national legal systems nor the tendency of Community law; here it neither works as a restatement nor as a reflection of Community law, but accommodates the demands of certain academic opinion and certain bodies (such

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as the English Law Commission) which had expressed their wish for the ‘moralisation’ of the market in the drafting of terms and in their imposition through controlling the abuse of bargaining power. In the case of contracts between businesses, reference is not made to disadvantages but rather to serious breach of good commercial practice, good faith and fairness (‘grossly deviates from good commercial practice, contrary to good faith and fair dealing’: Article II.-9:405). It is not exactly a test of abuse, since commercial practice is legitimised, in so far as it is ‘good’, but the use of good faith and fairness in drafting the contract, in the appraisal of the individual clauses and in the comparison of them with clauses applied in normal practice is, however, an important step forward. The text has a number of implications, and it would be possible to continue this analysis for pages and pages. As we can see, the DCFR is truly playing a driving role in the academic world and in the legal culture of every country, and it involves those whose who practise the legal professions: it is therefore a training ground in which jurists today test themselves in order to prepare the law of tomorrow.

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14 Political Foundations of European Private Law: Rethinking the East–West Division Lines MAREK SAFJAN AND ANETA WIEWIÓROWSKA-DOMAGALSKA I

INTRODUCTORY REMARKS

T

HE AIM OF this chapter is to discuss the East–West division in the context of the political foundations of private European law. This chapter consists of two parts: the first part focuses on the most important questions that private European law faces at the moment: its aim(s), concepts, tools and methodology; the second part analyses the East–West division with regard to private law. In particular, it discusses the meaning of the East–West division for the process of developing private European law; it briefly presents some very interesting features of the Polish legal system, which makes it a difficult one to classify unambiguously, and it tries to introduce to the current codification trend in post-communist Member States. Additionally, the question is asked regarding what kinds of lines of division a united Europe needs to deal with in order to facilitate the development of a private European law. A

Political Disclaimer

In our view, political discussions on the East–West dividing lines within the EU will only be fruitful if conducted in a proper context—ie, as part of a discussion on private law in the EU in general, and in particular a discussion on its target, concept and method. Only accepting such an approach will guarantee that all the important and decisive aspects currently influencing the scene of legal Europe are taken into account. This perspective sets the discussion in the realm of the present problems and future solutions, instead of focusing on the historical background, which is gradually losing its relevance as the approximation of laws in the EU progresses and the common problems that the legal systems of the Member States have to face overshadow the differences originating in the political heritage. Historical and political roots are certainly very important, but 20 years after the collapse of communism the discussion should not concentrate on the historical dimension. A more sophisticated and subtle methodology is needed in the approach to EU private law.

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The Context of the Discussion

Turning our attention to private European law, it is possible to discuss it from two different perspectives. The first, giving a simplistic and incomplete perception,1 is the law in a strict sense, which covers the rules of European origin. The other perspective is much wider and somewhat more ambiguous—it refers to creating a European legal sphere—a much more difficult to grasp or define sphere of a common European thinking.2 Of course, the law in the strict sense constitutes one of the most important building bricks of the common European sphere, but we would like to stress that our considerations exceed the limits of the narrowly perceived law.

II

A i

AIMS, CONCEPTS, TOOLS AND METHOD

Why Do It?—The Aim Targets

The first step towards setting the proper context for this discussion is to try to define—even if only hypothetically—the targets that can be set for private European law on the political and social arenas of Europe. The quest for defining the possible targets of EU private law should not be understood, however, as striving for defining workable and practical short-term action plan. To believe that it is possible to achieve such targets at the present stage would be utterly naïve. At the same time, it is very important and useful to take into account the wider perspective and vision of private law in Europe. One of the largest problems of the present European discussion is the lack of a greater idea allowing the direction of actions to be defined. Therefore, setting the targets is important, even if at present it only serves the purpose of ordering the discussion. a Market-orientated Targets Perhaps the most popular—and definitely the most often voiced—target of European private law is a further market integration. Harmonised law is commonly seen as the most effective instrument of eliminating barriers to the free exchange of goods and services. Generally speaking, private law in Europe takes the view of the market as its starting point, and only later mingles it with other targets—the best example is consumer law with its Janus face,3 or the recently introduced aim of improving the quality of European legislation.4 Strengthening and integrating the market is the leitmotif of the European Commission’s 1 C Joerges, ‘The Challenges of Europeanization in the Realm of Private Law: A Plea for a New Discipline’ EUI Working Paper LAW No 2004/12, 12. 2 See, H Schepel, ‘The European Brotherhood of Lawyers: The Reinvention of Legal Science in the Making of European Private Law’ (2007) 32 Law and Social Inquiry 3. 3 N Reich, Europäisches Verbraucherrecht (Nomos, Baden-Baden, 1996) 56. 4 See, eg, Commission, ‘Communication from the Commission to the European Parliament and the Council. A More Coherent European Contract Law. An Action Plan’ COM (2003) 68 final (12 February 2003).

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actions the area of consumer law. The directives explicitly refer in their preambles to the impact they might have on the functioning of the market. The most recent venture, the Proposal for a Directive on consumer rights,5 declares: ‘The harmonisation of certain aspects of consumer contract law is necessary for the promotion of a real consumer internal market’. The new Consumer Credit Directive6 is even more explicit: The de facto and de jure situation resulting from those national differences in some cases leads to distortions of competition among creditors in the Community and creates obstacles to the internal market where Member States have adopted different mandatory provisions more stringent than those provided for in Directive 87/102/EEC. It restricts consumers’ ability to make direct use of the gradually increasing availability of crossborder credit. Those distortions and restrictions may in turn have consequences in terms of the demand for goods and services.

Also, the Directive on the distance marketing of consumer financial services7 makes its point: ‘It is important, in the context of achieving the aims of the single market, to adopt measures designed to consolidate progressively this market’. This trend is backed by the increase of significance of the law and economics approach,8 which causes a heightened awareness of high transaction costs created by excessively complicated law, uncertain effects of law application and differences that exist in the approach of the jurisprudence. European private law, if constructed and adopted efficiently, could allow a significant decrease of the transaction costs from a legal and economic perspective. b Political Targets Apart from pursuing economic targets, private law in Europe could also have an impact on the political sphere. In this respect private law could prove its value in many areas. For example, it could play the role of a factor that brings stability to the regulation of private law of the Member States. Creating such stability could significantly increase the level of trust that the actors of the economic scene have for the law as an institution, as well as certainty and reliability on law in general, also on the European Union level. In a slightly different sphere, private law could constitute a factor that strongly underlines the common European axiology shared by the Member States. Paradoxically, private, and not only public law mechanisms, express the fundamental ideas, values, aspirations and expectations of the European community. One of the fundamental features of private law is that it reflects the social reality of a given community. Nowadays, the process of saturating private law with social values of various nature is quite remarkable. As a 5 Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614 final 2008/0196 (COD). 6 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC [2008] OJ L133/66. 7 Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC [2002] OJ L271/16. 8 See, eg, KJ Cseres, Competition law and Consumer Protection (The Hague, Kluwer, 2005); GK Hadfield, R Howse and MJ Trebilcock, ‘Information-Based Principles for Rethinking Consumer Protection Policy’ (1998) 21 Journal of Consumer Policy 131–69, F Gómez. ‘The Harmonization of Contract Law through European Rules: A Law and Economics Perspective’ (2008) 2 Revista para el anàlisis del derecho.

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result, a fundamental conflict exists today in the area of private law, opposing autonomy and freedom of contract as the basic values of the national legal systems, striving towards protecting the weaker party, equalising the lack of balance between the parties and the horizontal application of principles and fundamental rights.9 Those are problems that must be solved on a European level, if a fundamental axiological conflict among legal systems is to be avoided. Therefore, private European law might also provide a platform, on which discussion among the various legal systems may be conducted and common solutions developed. ii

Problem Solving

At the level of eliminating specific problems, private European law could severely reduce or even eliminate the need to resolve conflicts of laws by applying the conflict rules. At the moment, the European conflict rules present an extremely complicated picture.10 To take the example of regulation referring to consumer relations: first it is necessary to establish which rules are to be applied taking into account the temporal application and their contents11—the choice between the Rome Convention and the Rome I Regulation. Since 17 December 2009, Article 5 of the Rome Convention has been applicable only to contracts concluded before 17 December 2009 and by Danish bodies. To contracts concluded after that date, Article 6 of the Rome I Regulation applies. Compared with Article 5 of the Rome Convention, it widens the circumstances under which protection through conflict of law rules is granted to consumers. Secondly, consumer directives add their share to this complicated puzzle. The conflict of law rules are to be found in six consumer directives (93/13, 97/7, 99/44, 2002/65, 2008/48, 2008/122 and still 94/47). Five of them grant protection only in the case of choice of law made by the parties, and the Timeshare Directive grants protection only in the case of an objective reattachment. The directives do not regulate the institutions they deal with comprehensively—they touch only certain aspects, whereas the rest remains in the domain of the national laws. For the conflict of law rules contained in these directives, it means that they

9 See, C Mak, Fundamental Rights in European Contract Law. A Comparison of the Impact of Fundamental Rights on Contractual Relationships in Germany, the Netherlands, Italy and England (The Hague, Kluwer, 2008); OO Cherednychenko, Fundamental Rights, Contract Law and the Protection of the Weaker Party: a Comparative Analysis of the Constitutionalisation of Contract Law, with Emphasis on Risky Financial Transactions (Munich, Sellier, 2007). 10 H d’Oliveira, ‘The EU and a Metamorphosis of Private International Law’ in J Fawcett (ed), Reform and Development of Private International Law. Essays in Honour of Sir Peter North (Oxford, Oxford University Press, 2002) 135–36; A Dickinson, ‘European Private International Law: Embracing New Horizons or Mourning the Past?’ (2005) 1 Journal of Private International Law 231; J Basedow, ‘Conflict of Laws and the Harmonization of Substantive Private Law in the European Union’ in M Andenas, S Diaz Alabart, B Markesinis, H-W Micklitz and N Pasquino (eds), Private Law Beyond the National Systems—Liber Amicorum Guido Alpa (London, British Institute of International and Comparative Law, 2007) 184. 11 M Jagielska, Ewolucja ochrony konsumenta w prawie kolizyjnym Unii Europejskiej w zakresie zobowiTzan´ umownych (Warszawa, CH Beck, 2010).

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apply only within the scope of application of the directives, and to issues outside their scope the Rome I Regulation applies.12 The list of the presented targets only offers examples—other targets can also be identified. It is extremely important that these targets (or such targets) could be seen as strategic—targets that would determine the direction of the actions to be undertaken. B Europeanisation (EU-isation) of Private Law or European Private Law?— A Question of Tools The next crucial question regarding the future of private European law concerns the form in which the private European law should be implemented. This question is equally relevant for both spheres—the law in a strict sense and European legal thinking. At this level, one of the most difficult problems is how to regulate the relationship between national laws and European instruments, which anyway form a part of national laws. The crux is to find an equilibrium that would satisfy on the one hand the pursuit of further harmonisation and to create a common European legal sphere, and on the other the need to cherish national private law as an imprint of the nation’s social and historical development and tradition. The question is how to combine these two spheres effectively and with widespread consent. So far, many different approaches have been proposed. The most extreme is, of course, the idea of a European private law codification, ie, a European civil code. This concept appeared in 1989, when the European Parliament accepted to work on a common European Code of Private Law.13 It reappeared later in a series of parliamentary resolutions14 and pervaded, although in a changed form into the Commission’s way of thinking.15 After a period of decline, when work at a European level took a different route, the idea of codification seemed to resurface once again, even if only as an indicator for some basic directions in this field.16 The idea of a European civil code is not universally accepted. The greatest problem with European codification relates not to the question whether it should be created, but rather how to create it and how to use it. Should it be an instrument of primarily scientific importance that could potentially inspire the scientific world as well as the legal practitioners to apply common terminology? Or should it be, for example, an optional instrument? Maybe even a more far reaching solution is possible, ie, adoption of a binding act? There are also other concepts present in the European dispute, less intrusive from the national point of view. One of them is creating a model European law, possibly in the form of an optional instrument—an idea that surfaced recently in the form of 12 See, eg, N Leible, ‘Kollisionsrechtlicher Verbraucherschutz im EVU″ und in EG-Richtlinien’ in H Schulte-Nölke and R Schulze (eds), Europäische Rechtsangleichung und nationale Privatrechte (BadenBaden, Nomos, 1999) 379. 13 European Parliament Resolution on action to bring into line the private law of the Member States [1989] OJ C158/400. 14 See, eg, European Parliament, ‘Resolution on the harmonization of certain sectors of the private law of the Member States’ [1994] OJ C205/518. 15 Communication from the Commission on European contract law COM (2001) 398. 16 See: www.europarl.europa.eu/hearings/static/commissioners/answers/reding_replies_en.pdf.

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a ‘blue-button’ for electronic trade in the EU.17 It was picked up by the European Parliament,18 and is now considered as one of the options for the future development of private law in the EU.19 This concept allows the national laws to be maintained relatively intact, definitely safe from major structural and systematic turmoil that could be caused by adopting a legally binding instrument, or indeed fully harmonising directives. Moreover, such an approach could truly facilitate cross-border consumer trade, as it would be designed precisely for this type of transactions and would address problems arising specifically from the cross-border character of contracts. This concept bridges the classical concepts with the new approach. However, its scope would be rather limited, and it is difficult to say what impact such an instrument could have in practice, as it is difficult to say how it would approach the problems arising from conflict of laws, and relation with national laws. The process that we are witnessing at the moment—creating the acquis communautaire—might also be seen as a self-standing target of private European law. Although severely criticised, so far the approximation process of national laws through directives and jurisprudence has proved to be fairly successful. The EU has managed to create bridges among legal systems—sometimes putting bricks together by force, sometimes forgetting to put them at all, but the process of opening of the legal systems for each other and creating a common legal sphere cannot be denied. Nevertheless, it seems that the formula of this approach is running low at the moment. The process of creating the acquis is spontaneous, sometimes even chaotic and it lacks clearly established aim, which would have, not only economic, but also legal character. This process raises a lot of controversies regarding its final aims, the tools employed as well as the theoretical and dogmatic foundations. The harmonisation of only certain selected fields of law cannot lead to harmonised solutions. If, however, the selected fields are fully harmonised, the danger arises that, due to the shortcomings of the approach, the entire system might be endangered. The controversies raised by the draft Directive on consumer rights clearly illustrate this. The process is also directly or indirectly contested by some of the Member States for being too intrusive from the national law point of view. The work of the European Commission aimed at assuring coherent and correct implementation of the directives throughout the EU concentrates on the first phase of the process, ie, the harmonisation, which does not reflect the implementation reality. As Zimmermann put it, ‘having common rules does not amount to creating a common legal sphere’.20 The development of European law through jurisprudence is beyond the scope of scrutiny by the EU. Here the impact is probably much lower and the Europeanisation of legal thinking is much less advanced.

17 See, H Schulte-Nölke, ‘EC Law on the Formation of Contract—from the Common Frame of Reference to the “Blue Button”’ (2007) 3 European Review of Contract Law. 18 European Parliament resolution on European contract law and the revision of the acquis: the way forward of 23 March 2006 [2006] OJC 292 E; European Parliament resolution of 12 December 2007 on European contract law, text adopted P6_TA[2007]0615; European Parliament resolution of 3 September 2008 on the common frame of reference for European contract law, text adopted P6_TA(2008)0397. 19 See: www.europarl.europa.eu/hearings/static/commissioners/answers/reding_replies_en.pdf. 20 R Zimmermann, ‘The “Europeanization” of Private Law within the European Community and the Re-emergence of a European Legal Science’ (1995) Columbia Journal of European Law.

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With regard to the tools relevant for furthering a European private law, even establishing the methods of creating private European law may be recognised as a self-standing task for the future. The problems that appear at the conceptual level of law making in the EU at the moment are enormous. The law in Europe is becoming more and more complex, for various reasons of which two seem to be especially important. First, the challenges set for law by the economic and social developments are becoming more complicated and imbalanced. The second reason relates to a very complex legislative process, which is conducted on a supranational level. The law-making process in the EU has to face all these challenges, and quite often decisions not to deal with certain issues are dictated by the inability to find solutions. This inability is caused not only by the fact that these matters are sometimes highly controversial from a political point of view, but simply because these matters are new, extremely complex and have never been dealt with even at the national level. The European market can produce challenges that are unknown to the national markets. Hence, the European law-making process, highly political in its character, requires improvement to be able to overcome problems arising from the complexity of the matters it deals with and the process itself. All these concepts and methods have to be perceived through both of the established perspectives, as none of them can be fully and properly implemented without involving both spheres—the law in the strict sense and common legal thinking. C

The European Method

The methodology of creation private law in Europe is probably one of the most neglected subjects in the European discussion. It is a very organic problem and discussing it does not produce immediate results, which probably explains lack of its popularity. Moreover, in-depth discussion on the European legal sphere is a relatively young concept, which means that it needs to mature a bit before the relevance of its methodology will be recognised. Another reason for that situation might be that the method is only seemingly apolitical. However, when discussed thoroughly, the European methodology reveals its demons, requiring the secure, politically and socially acceptable shores of nationalism to be left behind in order to become truly European in nature—a step that is not only very difficult, but politically endangering. As long as discussion on European law is conducted from a national perspective, it creates an impression that the national level is at least as important as the European. This is not a proper place to discuss the method in great depth, though the most important questions that remain unanswered are worth mentioning; how to overcome the methodological nationalisms that are—as Joerges puts it in his highly illuminating paper—not well-prepared to understand the de-nationalisation process?21 How far are the national or comparative methods useful and effective in the current European discourse? Are they to be abolished completely or are there certain elements that could be applied also at a European level? What is the 21

Joerges, ‘The Challenges of Europeanization’, above (n 1) 13.

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ultimate result of the Europeanisation process likely to be, and how far can the method facilitate it? How should a new paradigm be constructed, and how should it be tested? And how can it be made acceptable in the post-national constellation, while at the same time respecting the social relevance of law for a nation? D i

Politics and Academic Research The Issue of Involvement

At the end of this part we would like to devote some attention to the question of what challenges and possibilities arise for the academic world in the context of the discussion on the future of private European law. Decisions on the direction of private law development are political in their nature and are made not by the academic community; they result from a compromise reached by the EU institutions and the Member States. Reaching a compromise does not always lead to reaching an optimum, since every compromise requires reconciliation with many contradicting forces. For example, in order to regulate product liability, a compromise had to be reached between protecting the producers, protecting and stimulating innovation and protecting consumers.22 Approaching this process from a political perspective does not leave much space for scientific intervention. Nevertheless, scholarly discussion may have impact on political actions. This influence might amount to introducing certain subjects to the European official agenda, or using scholarly proposals by the European bodies as the basis of their work. The ‘Draft Common Frame of Reference’ (‘DCFR’) is a great example of how successful this influence can be. The possibility of influencing the course of political action by the academic world will continue to exist, since academic research is a very valuable source of knowledge and inspiration for EU officials— probably the most important source outside the strictly political sphere. The increasing complexity of the European legal environment, as well as the increasing complexity of legal challenges to be met by the EU, guarantee that this situation is not temporary. The ongoing discussion on the character of academic research is very interesting from this perspective. The work of the major scholarly groups is compared with the debate that took place before the enactment of the BGB which shaped the way of thinking about the harmonisation of law in general. The originally progressive natural science is declared to be well-founded in Europe at the moment—Savigny resurrected, one may even claim.23 However, the academic world is much more politically engaged, and follows the path of Windscheid,24 as Basedow claims: ‘legal scholars transcended the traditional limits of the analysis of legal development and tried to shape the future European law themselves’.25 This path, however, carries with it certain dangers if the work created in the uncertain sphere of political 22

See, eg, G Howells, Comparative Product Liability (Aldershot, Dartmouth, 1993). See, eg, Zimmermann, ‘The “Europeanization” of Private Law’, above (n 20) 23. 24 Joerges, ‘The Challenges of Europeanization’, above (n 1) 10. 25 J Basedow, ‘The Renascance of Uniform Law: European Contract Law and Its Components’ (1998) 18 Legal Studies 125. 23

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influence becomes too politically engaged. The scholarly work should remain independent and impartial, and the scope and effects of its later use should not be decisive in the process of forming solutions. An in-depth discussion on European private law is therefore extremely useful as it allows us to reach beyond the limits of specific solutions proposed by the EU legislation and to consider instead the general and underlying questions of private law in Europe. Without doubt, this direction is correct. It should, however, be strongly emphasised that the method of discussing private European law and solution proposals should be organised so as to allow the targets set for private European law to be reached. Only an approach subordinated to a common axiology and methodology will guarantee a successful process. Taking that into consideration, one thing is certain: until we can answer the question regarding the aims of private European law, it is not possible to conduct a serious and in-depth discussion on it. Until then, we do not know what we are actually talking about. II

A

WHAT IS THE EAST AND WHAT IS THE WEST?

What is East and what is West?

The main question of this chapter is the East–West division of the EU Member States in the context of the political foundation of private European law. The very first problem that emerges in this respect is obviously what is actually meant by the ‘East’ and the ‘West’? What criteria are used to distinguish these two— presumably—antagonistic blocks? Is it the communist past, the historical development, the geographical location, the accession date, the impact on European policy, or maybe simply conservatism in legal and political thinking (whatever that would mean)? Does the West really mean all old Member States (old meaning that they joined the EU before 2004)? If so, then apart from being the old members of the club, what is the common denominator that distinguishes them from all the states that joined in 2004 and after? Likewise, is there one common denominator, apart from the accession date, that binds the new countries together? If there are common features distinguishable among the Member States, which of them belong to each of the groups, and are they sufficient to justify the established border? These questions are not simply theoretical or relevant only for academic debate; the correct answer to them can only be given by taking into consideration all the consequences for the future development of the European legal order, including of course the topic at hand, namely the European private law. B

The Evolution of the Discussion

A pan-European discussion on private law has a very long tradition, inscribed in the trend of discussing law in general. It is worth stressing, however, that the context of this discussion has evolved over time and it has (or should have) an enormous impact on the established divisions. In the most general terms, based on

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the ius commune concept, private law in Europe did not know national borders at first. The idea of the universalism of civil law has been inscribed into the very nature of this branch of law, since the Roman period. With the rise of the modern nation state, the era of codifications began,26 bringing with it the quest for finding similarities and differences between legal systems, and establishing an external order among them. Different classifications of legal systems in Europe emerged over time: French, German, English, Russian,27 Western (Romano-Germanic and AngloSaxon) and Soviet groups,28 or Roman family, German family, Anglo-American family and Scandinavian family.29 With the emergence of the European Communities, and later the European Union, the importance of the comparative method increased, and at the same time the aim of the comparative research conducted in Europe began to change. Groups of scholars commenced work that was supposed to lead not to defining the differences and similarities, but to coming up with ideas that would or could be common to all legal systems. Professor Lando and his group formed the avantgarde of this trend, later followed by the Study Group on a European Civil Code. A number of projects were established in order to pursue the research, based on various methods: The Study Group for a European Civil Code, the Common Core of European Private Law or the European Research Group on Existing EC Private Law (Aquis Group). This trend reflected the needs emerging at the political level of law-making in the European Communities and later in the EU—clearly a new approach in the organisation of private law mechanism at a European level. A deep political rationale could be found in dividing the Member States into ‘West’ and ‘East’ from the historical perspective. The same criteria of division are still applied and the established division more or less reflects the ‘old versus new one’. In order to verify the rationality of this division, however, different questions ought to be asked. Do all the old Member States contribute equally to the discussion on the future of European law and the European legal sphere? Do they share their legal problems and stand together in clear opposition to the new Member States, which likewise share legal problems of a different sort and do not participate in the European discussion? Or maybe by ‘West’ is meant only the most developed legal systems? Maybe, if this is the case, we should discuss the reasons for the supremacy of three legal systems over the remaining 24, instead of the East–West division line?

26

Zimmermann, ‘The “Europeanization” of Private Law’, above (n 20) 4. See, P Arminjon, B Nolde and M Wolff, Traité de droit comparé vol 3 (Paris, LGDJ, 1950–52). 28 See, R David and C Jauffret-Spinosi, Les grands systèmes de droit contemporains 10th edn (Paris, Dalloz, 1992). 29 K Zweigert and H Kötz, An Introduction to Comparative Law 3rd edn (Oxford, Clarendon Press, 1998). 27

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C The Value that the East–West Division Carries Today and the Consequences of (Ab)using it i

The Value of the Division

There are certain reasons to begin this part by asking questions related to the value of the East–West division based on formal, historical and political criteria, for they constitute the main motif for maintaining the East–West opposition in the current debate on private law in Europe. Looking into the future, what conclusions can be drawn from underlining the differences that exist between the two former political blocks that can contribute to a discussion on the prospects of European law? Contrasting East and West seems too simplistic and reflects schematic thinking or the political correctness of Western doctrine. This is especially true when considering how complicated the current legal problems of Europe are, and how little is really known about our (common) past. Ironically, one could say that it is definitely easier to grasp differences based on clearly distinguishable political divisions than on more complicated criteria relating to the functioning of legal culture, legal traditions, jurisprudence, etc. In reality it can be argued that the dramatic transformations that have taken place over the last 20 years have been so far-reaching that they have made the previously distinct legal constructions in various parts of Europe very much alike. Therefore, relying on the past rather than on the present is not only dogmatically wrong, but it may bring about dangerous political effects. At the same time, when looking into the past a question ought to be asked whether the politically driven divisions (East versus West, new versus old) were correct in the area of private law. Example of the Polish private law system strongly suggests that this was not always the case. Political divisions prove to be too superficial and insufficient to deal with subtle particularities of the officially post-communist system, which is in fact based on Roman tradition, and was, even during the communist period, largely reflecting ‘Western’ values especially in the area of private law. For the sake of our considerations, the future is of course the point of reference. Investigating the past is relevant as far as it can serve the future, and certainly a misperception of the past can exert a negative pressure on the debate. The discussion on the common future of legal Europe should therefore reach beyond the political sphere and refer to the construction and operation of legal systems in order to facilitate the estimation how deep are the gaps between various legal systems, and what are the prospects for a common future.

D i

What are the Consequences of Opposing the West and the East? The Consequences

The European Union was created as an economic community, though naturally with a strong political foundation. After the collapse of communism, the Eastern European countries were even more interested than the Western countries in creating a political union based on a common system of values (a common

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axiology). It could be argued that, from the perspective of these states, it was a community more of a political than an economic nature. At the same time, the way of thinking and acting of these young democracies was (and still is) inspired by two antagonistic forces: on the one hand a desire for integration (entering the circle of democratic countries), and on the other a determination to consolidate their recently regained sovereignty. Underlining the differences between the East and the West leads to strengthening the sovereignty factor, no matter who puts this argument forward—the West or the East. Paradoxically, the common European axiology seems to be denied by the division opposing East and West. ii

The Political Union

Accepting the opposition of ‘East versus West’ as an operational instrument at the present stage of the European development is not only unjustified but also counterproductive, because it merely harms the idea of a common European axiology. It remains in straightforward opposition to the attitude prevailing in Eastern part of Europe. It is a very banal and seemingly evident thesis—even a stereotype—that the European Union, for the countries of this part of Europe, represents essential values as a political union based on fundamental rights and freedoms, as well as the common idea of democratic state of law. At the same time, it should be strongly underlined that that is not the reason why using this criterion is wrong, it is the consequence of referring to it.

E i

Where do the Real Division Lines Lie? The Real Division Lines

The simplistic evaluation of the current situation, based on the political foundation ‘East versus West’, manifests itself in the fact that all the new Member States are treated according to the same scheme, while it seems that differences between Member States, established on criteria different than the communist past, are often more significant for the future of private law in Europe. Therefore, the main issue in the discussion on the political foundation of private law in Europe should focus rather on the question: what are the universal phenomena that create barriers or accelerate the development of European law? One can suppose that the stereotypical differences between the East and the West are not the most important factors amongst such barriers. ii

A Look into the Past

To explain this hypothesis we would like to begin the discussion with a quick reference to the evolution of Polish private law. It must be borne in mind that observations concerning one legal system are not representative for all the new Member States and, what is more, it is rather difficult to estimate without a very deep analysis the extent to which they apply to other legal systems of the post-communist bloc. The Polish example, however, is very significant because it

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shows that the division lines are not as obvious as the political or geographical approach suggests. After the Second World War, the Polish legal system was automatically classified as belonging to the Soviet or Russian family. After the collapse of communism, it was promoted to the post-communist legal system, and after the accession it gained the name of a new Member State—representative of the East. Using political or temporal criteria—these divisions are indisputably correct. However, it is highly questionable whether they are equally correct when applied to the Polish private law system, and when ‘tested’ against criteria relating to, for example, legal constructions and their origins, or dogmatic discussions. Due to historical and political considerations (Poland did not exist as an independent state during the great codification era) Polish private law does not have a very long tradition. However, its achievements are nevertheless quite remarkable. This chapter makes no attempt to analyse it in the depth it deserves, and our aim is only to highlight some very striking features of the system that make it impossible to fit into the oversimplified East–West political criterion. Work on codifying private law began after the First World War, when Poland was reinstituted as an independent country. In principle, five legal systems operated on the territory of Poland after 1918: the German, the Austrian, the Russian, the French and the Hungarian, though in fact the situation was even more complicated (the content of one legislation binding in different parts of Poland could differ).30 At that time, Poland had to face a challenge comparable to the challenges that the European Union is confronted with at the moment—a need to create one legal system from many differing legal traditions, make it comprehensible and operational. The difficulty of the task was proven by the fact that, before the Second World War, the unification of private law was only partially completed, although the Codification Commission—the body responsible for codification—had made significant progress in the preparatory works. The major achievements of this period were the Code of Obligations of 1933, the Commercial Code of 1934, the Copyrights Act of 1926, the Act on Combating Unfair Competition of 1926 and the Act on Bills of Exchange and Cheques of 1924. The Code of Obligations was heavily influenced by the ZGB, the ‘Code Napoléon’, the ABGB and the BGB. The work on a full-scale codification was interrupted by the war, due to the dramatic change in the political and economic environment. However, work on the unification of private law was recommenced after the war and by 1947 a number of acts had been adopted on the basis of the preparatory works of the former Codification Commission,31 although the Commission itself had not been re-established. The idea of codification was quite vivid and already in 1947 work on the Civil Code continued. With the Codification Commission formally in place again in 1956, the 30 S Grzybowski in W Czachórski and S Grzybowski (eds), System prawa cywilnego. CzVs´c´ ogólna (Warszawa, Zakład Narodowy im. Ossolin´ skich, 1974) 35. 31 Among others: General rules of contract law, decree of 12 December 1946, Dz. U. No 67, item 369, Personal matrimonial law, decree of 25 September 1945, Dz. U. No 48, item 270, Proprietary matrimonial law, decree of 29 May 1946, Dz. U. No 3, item 196, Family law, decree of 22 January 1946, Dz.U. No 6, item 52, Guardianship law, decree of 14 May 1946, Dz.U. No 20, item 135, Real property law, decree of 11 October 1946, Dz. U. No 57, item 320, Inheritance law, decree of 8 October 1946, Dz.U. No 60, item 328.

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work gathered speed and in 1963 a full private law codification took place, with the adoption of the Civil Code, and the Family and Guardianship Code. The Code of Obligations remained in force until the codification of private law was completed (1965). Even after 1965, the most important part of the Commercial Code, including its part regarding the regulation of commercial companies, was binding, and it was replaced by the Code of Commercial Companies only in 2000. Obviously, the new codification was saturated with ideology, but the core of civil law, established in the Code of Obligations, remained relatively intact. And this is perhaps the most striking quality of the Polish private law system—it survived the communist times buried under the cover of ideology. The classical (or ‘Western’) elements of the system were so strong that the Civil Code is still in force (although amended almost 60 times, including very serious amendments at the beginning of the 1990s, to remove the purely ideologically inspired parts). Despite the fact that work on preparing a new civil code began, the present one has a very good reputation among Polish lawyers. In 1939, Szymon Rundstein, a brilliant Polish scholar living at the turn of the previous century, published a very inspirational book, In the Search of Civil Law,32 in which he claimed that the construction of civil law simply reflects the way human kind organises its activity. Therefore, attempts made by various totalitarian regimes to disregard civil law and its role as a crucial instrument in the organisation of society were condemned to fail, and it was inevitable that civil law would ultimately resurface. The strong comparative foundation given to Polish private law by the Code of Obligations, as well as the sterling work of the Codification Commission, resulted in the fact that the codified law incorporated many features of the ‘Western’ doctrine. The system of Polish private law only acquired new ideological elements (which of course had had an impact on the legal constructions) however the classic civil law basic construction remained, sometimes hidden under the surface of the ideological ornament. This situation was reflected in the legal literature published in this period. Apart from books (and authors) concentrated on the ideological part, there were quite a large number of authors who (after having ‘paid their tribute’ to the censorship) published legal analyses comparable to ‘Western’ doctrine of that time. When the ideological implant is removed, these books serve as a source of great inspiration even today. The best example is perhaps the greatest monument to Polish legal thinking in the field of private law—The System of Civil Law,33 which was used as a reference also in other Eastern European countries. This is how Polish law is described by one of the famous personalities of Polish private law—Stefan Grzybowski: The long-term application of a foreign law on the Polish territories and the inherent influence of the foreign legal doctrine has led to the creation of very strong bonds between 32

S Rundstein, W poszukiwaniu prawa cywilnego (Warszawa, KsiVgarnia Powszechna, 1939). Czachórski and Grzybowski, System prawa cywilnego, above (n 30); J Ignatowicz (ed), System prawa cywilnego, Prawo własnos´ci i inne prawa rzeczowe (Warszawa, Zakład Narodowy im. Ossolin´ skich, 1977); Z Radwan´ ski (ed), System prawa cywilnego. Prawo zobowiTzan´ —czVs´c´ ogólna (Warszawa, Zakład Narodowy im. Ossolin´ skich, 1981); S Grzybowski (ed), System prawa cywilnego. Prawo zobowiTzan´ —czVs´c´ szczegółowa (Warszawa, Zakład Narodowy im. Ossolin´ skich, 1976); JS PiTtowski (ed), System prawa cywilnego. Prawo spadkowe (Warszawa, Zakład Narodowy im. Ossolin´ skich, 1986). 33

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the civil law in force in Poland and modern civil law doctrine [science] and certain foreign codifications and foreign legal science. Despite the fact that Polish civil law is the law of a socialist society, and as such is of a different quality than the legal systems in force until 1945, the unification and codification works conducted between 1945 and 1964 also was mostly inspired by previously binding legal systems and constructions originating from French, German and Austrian legal science. Therefore many terms and constructions in the Civil Code can only be understood when taking into consideration that they relate to a socialist society and accepting certain analogies with perspectives and constructions of the formerly binding law.34

Another example is a series of doctrinal achievements, related to the protection of the personality rights, including privacy rights. They are: Stefan Grzybowski’s Protection of Personal Rights (Ochrona dóbr osobistych) published in 1957,35 and Zbigniew Radwan´ ski’s Pecuniary Compensation for a Non-material Damage . (Zados´c´ uczynienie pieniVzne za szkodV niemajTtkowT) of 1957.36 One of the characteristics of the Polish legal system before 1989 was a visible discrepancy between the law in books and in practice. However, it is possible to find judgments that confirm the strong connection of the Polish legal system to its roots. Take, for example, a judgment of the Supreme Court of 1959, according to which any ambiguities in general terms and conditions applying to insurance contracts should be interpreted contra proferentem,37 or of 1978 which associates individual interest with the public interest.38 In another decision,39 the Supreme Court declared void a contract term obliging the buyer to pay an amount related to depreciation where defective goods have been exchanged on the basis of a warranty against physical defects. The last example of this trend, which remains absolutely in line with the EU legislation on unfair contract terms, was given in 1953.40 The Supreme Court stated that the liability of a dry cleaner losing a coat cannot be limited to an insignificant part of the value of the entrusted good, since the negative consequences of the defendant’s negligence should not be borne by the client. iii

The Present Division Lines

Turning to present day, what differences could be decisive for establishing divisions that would reflect reality? Below we try to point out certain possibilities. As there are no comprehensive studies conducted in this area, it is very difficult to say how complete the presented list is. However, it definitely indicates certain characteristic trends. 34

Grzybowski in System prawa cywilnego, above (n 30) 33. S Grzybowski, Ochrona dóbr osobistych według przepisów ogólnych prawa cywilnego (Wydawnictwo Prawnicze, Warszawa, 1957). 36 Z Radwan´ ski, Zados´c´ uczynienie pieniVz.ne za szkodV niemajTtkowT. Rozwój i funkcja społeczna. (Pan´ stwowe Wydawnictwo Naukowe, Poznan´ , 1956). 37 Judgment of the Supreme Court of 24 July 1959—4 CR 1027/58, (1961) 2 OSPiKA Item 32. For the facts of the case see, M Safjan, Ł Gorywoda and A Jan´ czuk, ‘Taking Collective Interest of Consumers Seriously: A View from Poland’ EUI Working Paper No 2008/26, 17. 38 Resolution of the Civil Chamber of the Supreme Court of 20 May 1978—III CZP 39/77, 1979 (3) OSNCP Item 40. For the facts of the case see, Safjan, Gorywoda and Jan´ czuk, ‘Taking Collective Interest of Consumers Seriously’, ibid, 17. 39 Decision of the Supreme Court of 30 December 1988, III CZP 48/88. 40 Decision of the Supreme Court of 6 October 1953, II C 1141/53. 35

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The first, most obvious division line is certainly the one established by the Channel: common law versus continental law, though for Zimmermann, for example, the common law as an entirely autochthonous achievement is only a myth.41 Although these systems go hand in hand occasionally, in the context of the widely understood European discussion (be it legislative activity of the European Union or academic dispute) the differences that exist between them still overshadow the similarities. This does not mean, of course, that a successful dialogue cannot be conducted. The very creative jurisprudence of the European Court of Justice strongly stimulates the process of approximation of these different systems. Perhaps the best example of the interaction between the two families are the Principles of European Contract Law (‘PECL’), which constitute the very first attempt to search an inspiration for common model solutions and legal ideology (axiology) through both systems. Adopting the concept of good faith in the common law system on the one hand, and accepting case law as a source of law by the continental systems on the other, confirms the ongoing trend. However, the different approaches represented by the two families certainly make the panEuropean dialogue more complicated. The next factor that can be noted is the strength of the legal tradition in a given country. Is the law in general—and the private law rules in particular—commonly perceived as part of the nation’s heritage? Is there a ‘well ageing’ civil code, recognised as a part of the cultural achievement of the nation? Of course, no one would like to deny the meaning of the legendary achievements of private law like the ‘Code Napoléon’ or the BGB for the European legal culture and their impact on the contemporary way of legal thinking. At the same time, we cannot avoid the question what is the very essence of the private law heritage: the codification as such or, on the contrary, the common values and concepts contained in the national systems, such as the importance of the statute of an individual, subjective rights, the concept of the private property or contractual autonomy? There is also a level of legal consciousness and culture presented by a given nation. It definitely has an impact, though it is difficult to say what kind of impact it is. It may manifest itself in either enthusiastic support for the idea of European harmonisation, or in a fierce defence of the national legal system. The source of differences in the level of legal consciousness regarding European law, which amounts to creating barriers that block the application of European law, are the educational systems of the Member States. In many of the Member States, studying European law is not a compulsory element of the legal curriculum and it is limited in principle to the European institutional law. Modern law curricula and examination requirements are oriented almost exclusively towards national law.42 It would be unreasonable, therefore, to expect a sufficient number of academics with appropriate background to understand and promote the values and ideas of European law. There are of course possible solutions: either increasing the European element in the national curriculum (civil law in its European context) or

41 42

Zimmermann, ‘The “Europeanization” of Private Law’, above (n 20) 14. Zimmermann, ibid, 4.

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simply ‘Europeanise’ the education process (the Erasmus programme proves how successful such a process can be). Another element that should be considered is the function and position of the judiciary in the legal system. The creativity and flexibility of the courts, their abilities to adapt new concepts and ideas to social and economic environment as well as their openness towards fascinating judicial dialogue with the European courts may definitely support the Europeanisation process and create a positive environment for a smooth absorption of European law in the national legal system. If the courts are not open to EU-driven ideas or do not react quickly and effectively to the ongoing changes, they are actually hindering the process of constructing the common legal space in Europe. A short commentary on these factors in the ‘eastern’ context seems necessary. The underdeveloped environment of legal culture in Eastern and Central European countries is very often mentioned as an additional barrier for the harmonisation of European law. However, the phenomena relating to imperfections in the legal systems, such as the low efficiency of the judicial system (including enforcement) is not limited to this part of Europe. As a result, one can observe a dogmatic and formal approach to law that creates obstacles to the development of European law in general in numerous Member States across Europe. It is sometimes argued that the reason causing such a situation in Eastern and Central Europe is the deeply underdeveloped legal culture. Even if we recognise this statement as true, it would be very difficult to identify what it actually means in the context of contemporary Europe. First of all, it would be very difficult to assess whether and to what extent such statements are relevant for all countries of the East. It is, for example, very characteristic for the Polish judicial system that preliminary references to the ECJ almost only concern the area of tax law.43 From such a perspective, for example, a low rate of preliminary reference in the area of private law, clearly differs Poland from some of the old Member States. However, it would be too simplistic to say that this factor alone is decisive, taking into consideration that a hesitation in seeking preliminary rulings could also be observed in many others states including old Member States. Economic factor is very important for differentiating legal systems is the scale of the market. One cannot exclude the hypothesis that the smaller markets will be more inclined to unify the legal environment of the European Union, because the barriers created by differences of the legal solutions are not sufficiently balanced by the scale of the internal market. In other words, the costs of entering the market for the external business would more likely exceed the potential gains that the market offers. For these Member States, therefore, it seems profitable to unify the legal regime in order to limit the number of barriers that restrain the entry to their market. The last issue that we may note is the involvement of national scholars into the European debate. Of course it would be very banal to say that the impact exerted 43 Out of 15 questions referred so far: 7 concerned tax law issues, see: Polskie Sprawy przed Trybunałem Sprawiedliwos´ ci i STdem Pierwszej Instancji Wspólnot Europejskich (zestawienie spraw zakon´ czonych i spraw w toku—stan na 15 maja 2009 r.) (Warszawa, Krajowa Szkoła Administracji Publicznej, 2009).

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by the private law doctrine of the new Member States is incomparably less intensive than that of the old Members States. There are two main possible explanations. Firstly, this results from the existence for nearly 50 years of the Iron Curtain. It was no doubt during this period that the European dialogue between two academic milieu was interrupted, and rebuilding this co-operation is one of the challenges for Europe. Secondly, there are linguistic barriers that make the major part of private law doctrine of the new Member States inaccessible to Western countries. The only possible solution for the future would be a greater participation of representatives of the academic milieu from new Member States in modern dialogue on the future of the European private law especially through international publications accessible in foreign languages. The idea to publish all the best achievements of private law doctrine, including the best doctorate theses, in the main European languages could help change this situation. Initiatives to create networks of academic legal cooperation at the European level are also supporting the movement in that direction.44

F

Recodifications of East and Central Europe

i

The Recodification Trend

The debate on the differences between the two former blocks also requires analysis of another aspect meriting further considerations—namely the strong recodification trend that can clearly be observed in the post-communist countries. So far new civil codes have been enacted in Latvia (1992–93), Estonia (1993–2001), Lithuania (2000) and Slovenia (2001—new Law of Obligations). Preparatory works are being conducted in Hungary (draft published in 2008), the Czech Republic (draft published January 2009), and Poland (draft of Book I was published early 2009). Further information concerning this trend is contained in Paul Varul’s chapter (chapter 15 in this volume) but we would like to point out certain interesting questions emerging as a result. ii

The Impact of Recodification

Taking into account the intensity and extent of the recodification work, a very interesting question appears: what will be the impact of the recodification of private law in these countries on the Europeanisation process? Is it going to enhance the European approach within the national legal systems, or on the contrary will it create a new barrier for the flow of Europeanisation? Will the system be more resilient to European influences, or will the structure of the new regulation allow a smooth absorption? Both can be argued, and the answer definitely requires an in-depth study. Right now it is the proper time to evaluate the possible impact of this important factor, which cannot be avoided in the debate on the future of private law in Europe. Some inspiration can be drawn from the, ie, the Dutch experience in this matter, related to a new code introduced in 1992. It represents a 44 For these reasons the idea of European Law Institute recently established is expected to fulfil this objective.

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prime example of the openness and friendly approach of a legal system towards the European influence. Also Germany could be taken into account in investigating this matter, with its recent deep reform of private law inspired by European tendencies.

G

The Common Problems Overriding the Differences

At the same time, it should not be forgotten that very similar processes are taking place throughout Europe, all of them influencing the harmonisation of European law and the future evolution of private law. It should be emphasised that the existing legal designs based on private law mechanisms in Europe are largely similar or identical. These similarities constitute the perfect departure point for the further evolution of European private law, and at the same time one of the most important factors determining the present debate on strategy in this field. The common challenges that Member States (be it new or old) are facing at the moment are twofold. At a very general level, Member States need to define above all the aim for private law in Europe and agree on the method and the tools that would be most appropriate to achieve it. Yet soon, another challenge will emerge; as the Member States will have to answer the question how effectively combine EU law with the internal legal systems. The number of problems that can be identified in this respect is enormous. The minimum harmonisation clause, which until recently prevailed as a tool to approximate the legal systems of the Member States, while leaving a certain degree of freedom to the Member States regarding the method and the level of harmonisation, was at the same time very demanding for internal legal order. The present experiences of many national orders confirm enormous difficulties to maintain the internal coherency of the national legal system. In Poland, for example, such coherency was destroyed within the area of the sales contract regulation.45 Right now the problems arising in the context of implementation become even more challenging, as there is a clear shift in the European Commission’s policy from minimum to full harmonisation. Full harmonisation not only severely restricts the flexibility of the Member States regarding the transposed rules; it may also deeply affect national laws that remain outside of the harmonised area.46 One can observe that the approach of the Member States towards the various concepts of harmonisation is not uniform, which reflects in the cases decided by the European Court of

45 E ŁVtowska, M Jagielska, K Lis, P Mikłaszewicz and A Wiewiórowska-Domagalska, ‘Implementation of Consumer Law in Poland’ (2007) 15 European Review of Private Law. 46 Recently discussed by P Mikłaszewicz, ‘Antynomie paradygmatu ochrony konsumenta przez informacjV—prawo Unii Europejskiej a prace nad nowym Kodeksem cywilnym’ [Antynomies of a paradigm of consumer protection through information—EU law and the elaboration of a new Polish Civil Code], in M Jagielska, E Rott-Pietrzyk, A Wiewiórowska-Domagalska (eds), Recent developments in European Private Law and the Influence of European Consumer Law on National Legal Systems (Warszawa, 2011 forthcoming). The author claims that the flexibility and the complementarity of various instruments of civil law may be seriously undermined as a consequence of the full harmonisation approach. The rigid nature of full harmonisation is reflected in the ECJ case law—see judgments of 23 April 2009, C-261/07 and C-299/07 VTB-VAB and Galatea [2009] ECR I-2949; of 14 January 2010 C-304/08 Plus Warenhandelsgesellschaft [nyr]; of 11 March 2010, C-522/08 Telekomunikacja Polska [nyr]; of 9 November 2010, C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag [nyr].

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Marek Safjan and Aneta Wiewiórowska-Domagalska

Justice. A clash between the traditional general clauses of private law on the one hand, and EU legislation on abusive clauses on the other is only one of the possible examples.

III

A

CONCLUSIONS

What should be the Future Course of Discussion and Action?

First of all, there is a need for clear determination of the main purposes of private European law, which could be attainable for all the Member States, and which would determine the direction of our common efforts. Further in order to demolish barriers and divisions it is necessary —to establish a proper methodology of creating private law mechanisms, along with a comprehensive strategy for the development of private law. Such a strategy cannot consist of creating eclectic puzzle. This could be the case, when certain legal constructions would automatically become ‘European’ just because one of its parts has its roots in French law and another in German law. Creating private European law is not finding a consensus between three national legal systems, but looking for a new quality in law. For these reasons, we strongly need transparent rules and criteria for drawing up new private law mechanisms, but primarily we need a clear and precise strategy indicating areas of private law in which establishing new European designs would be most effective. Introducing a new quality in the discussion on private European law requires the rejection of the traditional comparative method. European law should be treated as an autonomous target in relation to internal legal regimes. Before establishing detailed methodological concepts in creating law in the EU, it is necessary to form a certain common attitude among European lawyers. The legal circles must open up to the new perspectives of thinking about a common European legal sphere, and be able to start authentic—not feigned—dialogue. Finally, institutional resources should be created to allow and secure a free exchange of views and opinions. The establishment, for example, of the European Law Institute go in this direction, therefore should be strongly supported, as it seems to enlarge the necessary space to conduct the discussion and formulate proposals regarding the future of private law in Europe.

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15 The Impact of Harmonisation of Private Law on the Reform of Civil Law in the New Member States PAUL VARUL

I

INTRODUCTION

W

ITH REGARD TO the East–West dimension of European private law, I propose the following question: what are the common interests of East and West, and to what extent do they differ?

II

HISTORICAL BACKGROUND

With regard to the East and West dimension in the scope of the European Union’s activities, we should understand by ‘East’, countries that became members of the European Union by 2004 and later, and by ‘West’, countries that were members before 2004. Therefore, we can also talk of ‘new’ and ‘old’ Member States. Differences regarding the interests of developing private law come mostly from the actual situation in which these countries find themselves; that is, with regard to the development of the private law in the new Member States, we must talk of a revolution. A revolution in the development of civil law in the Central and Eastern European countries started at the beginning of the 1990s, when the Soviet Union collapsed and the former socialist countries of Europe became free, democratic states orientated to a market economy. The former Soviet republics also became independent, most of them democratic and market economy orientated. These countries started to draft modern civil law at the beginning of the 1990s. As Bulgaria, Romania, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, Latvia and Lithuania have become members of the European Union, they will be referred to as the ‘new’ Member States. During the same period, for the ‘old’ Member States we must talk of an evolutional development, which was mostly affected by the directives of the European Union. All the new Member States shared a need for a new kind of private law from the beginning of the 1990s. However, a distinction should be made between the former

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socialist countries of Central and Eastern Europe and the former Soviet republics. After becoming independent of the Soviet Union and having forfeited the socialist order, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Bulgaria and Romania had no urgent need to immediately start drafting new civil codes. The existing civil codes were amended and supplemented and several new laws passed as necessitated by the newly-embraced market economy; however, this group of countries did not start drafting new civil codes in the early 1990s. The existing laws were still suitable for use; however, at the beginning of the twenty-first century it became clear that the old civil codes were redundant in the new context of European Union membership. Preparations for accession to the Union were a major driving force for the development of new civil legislation in these Central and Eastern European countries. Under the directives of the European Union, the candidate states had to harmonise their legislation with European Union law. Most Central and Eastern European countries started preparations for new civil codes at the end of the 1990s and early 2000s. In most of the countries discussed above, civil law has been historically codified. Hungary1, the Czech Republic2 and Slovakia3 have clearly set out to draft new civil codes, which are currently in the process of preparation and will hopefully be adopted in the near future. The destiny of the Polish4 and Romanian5 draft civil codes is less clear. Bulgaria6 and Slovenia7 have not decided to draft new civil codes. Civil law is not codified in these countries, while important single new acts have been passed in the field of civil law. The civil law of most of the countries observed has been influenced by the UN Convention on Contracts for the International Sale of Goods (‘CISG’),8 UNIDROIT Principles of International Commercial Contracts (‘PICC’)9 and Principles of European Contract Law (‘PECL’);10 in those countries which are drafting new civil codes, the

1 A Kisfaludi, ‘The Influence of Harmonization of Private Law on the Development of the Civil Law in Hungary’ (2008) XIV Juridica International 130–36. 2 L Tichy, ‘The Process of Modernisation of Private Law Compared, and the CFR’s Influence’ (2008) XV Juridica International 35–42. 3 M Jurcˇ ova, ‘The Influence of Harmonisation of Civil Law in Slovakia’ (2008) XIV Juridica International 166–72. 4 E Letowska and A Wiervorowska-Domagalska, ‘The Common Frame of Reference—The Perspective of a New Member State’ (2007) 3 European Review of Contract Law 277–94; J Rajski, ‘European Initiatives and Reform of Civil Law in Poland’ (2008) XIV Juridica International 151–55. 5 M Jozon, ‘Integration of the European Developments in Private Law into Domestic Civil Law: Factors Framing the Reception of the DCFR in Romania’ (2008) XIV Juridica International 156–65. 6 C Takoff, ‘The Present State of Harmonization of Bulgarian Private Law and Future Perspectives: Historical Development and Scope of the Private Law—Compliance with European Private Law’ (2008) XIV Juridica International 118–21. 7 D Možina, ‘Harmonization of Private Law in Europe and the Development of Private Law in Slovenia’ (2008) XIV Juridica International 173–80. 8 For an in-depth discussion of the Convention, see P Schlechtriem (ed), Commentary on the UN Convention on the International Sale of Goods (CISG) (Oxford, Clarendon Press, 1998). 9 For details see, UNIDROIT (ed), The Principles of International Commercial Contracts 2004 2nd edn (Rome, Unidroit, 2004). 10 For details, see O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II (The Hague, Kluwer Law International, 2000); O Lando, E Clive, A Prum and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer Law International, 2003).

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‘Draft Common Frame of reference’ (‘DCFR’)11 can be expected to make a significant impact. The situation of the Baltic states was much different from that of the former socialist countries of Central and Eastern Europe when it comes to civil law. The civil codes of the Soviet republics were more deeply socialist than the civil codes or individual civil law acts in force in the Central and Eastern European countries in the early 1990s. While the Central and Eastern European countries were able to apply their old laws in the newly established market economy by making amendments and adopting new laws, the Baltic states had an urgent need for an entirely new civil law, since their existing civil codes did not in principle meet the needs of market economy and democracy. Even amendments to the old civil codes would not have been enough. None of the former socialist countries of Central and Eastern Europe has adopted a new civil code so far, although since the late 1990s or early 2000s they have made thorough and lengthy efforts at preparing new draft codes. The Baltic countries needed a drastic change immediately after regaining independence in 1991. Estonia12 and Lithuania13 have completely new civil codes now, while Latvia14 adopted the Civil Code of 1937 with major amendments. Despite the varying pace at which new private law has been developed, the private law reform in the new Member States has a number of characteristics and also problems in common. III

CHOICE OF THE SYSTEM

The first and central issue in the development of new civil law is that of the basis and of the sources to be used. It is largely a choice firstly about whether to codify civil law. The next important question is: to what extent should the new civil law take into account former law, case law and domestic traditions, and to what extent should it make use of the experience of other countries as well as internationally developed model laws? It may be said with certainty that, as opposed to public law, international experience is more important than existing traditions and the particular context of the country when it comes to the drafting of new private law. New private law should not be pursued as a country’s own unique national law, but the 11 C von Bar, E Clive and H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition. Prepared by the Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group) (Munich, Sellier, 2009); C von Bar and E Clive (eds), (2009) Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition. Prepared by the Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group) (Munich, Sellier, 2009). 12 P Varul, ‘The Creation of New Estonian Private Law’ (2008) 1 European Review of Private Law 97–111. 13 V Mikelenas, ‘The Common Core Project and the Lithuanian Private Law System’ in M Bussani and UMattei (eds), Opening up European Law. The Common Core Project towards Eastern and South Eastern Europe (Berne, Stämpfli Publishers, 2007) 195–207; V Mikelenas, ‘The Influence of Instruments of Harmonisation of Private Law upon the Reform of Civil Law in Lithuania’ (2008) XIV Juridica International 143–150. 14 K Balodis, ‘Latvian Private Law and European Enlargement’ in Bussani and Mattei (eds), Opening up European Law, ibid, 223–31; K Torgans, ‘European Initiatives (PECL, DCFR) and Modernisation of Latvian Civil Law’ (2008) XIV Juridica International 137–42.

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aim should be to create private law that is effective in the conditions of democracy and market economy, and understandable to partners from other countries. It is essentially true that Western private law is being transported to the East, while we should keep in mind that no new Member State should set the objective of copying another, old Member State. It is reasonable and useful to introduce those regulations that have proved themselves under similar conditions for a length of time. Much depends on historical traditions and the examples that are mainly relied on, the principal choices being between: (1) the Romanic or Germanic legal family, and (2) codified civil law or civil law composed of separate acts.

IV

MODEL LAWS

Remarkably, two important phenomena have coincided in time: (1) the period of development of new civil law in the new Member States and (2) intensive work on harmonisation of private law––the three highly important sources being the PICC; the PECL and the DCFR. Legal drafting in the new Member States is largely based on the comparative method, while model laws are the results of comparative analysis and thus serve as a valuable source for legal drafting purposes. The PICC, PECL and DCFR as model laws play an important role especially in the development of the new legislation of the new Member States. The eventual legal implication of the DCFR is as yet unclear and I will come back to it later, but the PECL and PICC have, in addition to their academic value, served as a practical source for the new Member States in developing their civil law. We may thus conclude that, by creating the model laws, the professors of the West have made a major contribution to the development of law in the East.

V

CONTRIBUTION OF THE EAST TO THE WEST

It is accustomed to talk about the West’s contribution to the development of the East since the laws of the old member States have been important sources to the private law of the new Member States. But are the new Member States making any contribution to the West? I am sure they are. The PICC, PECL and DCFR have not had much of a practical impact on the civil legislation of the developed Western countries; not because they have been unsuccessful as projects, but because in an established and well-functioning legal system it is very complicated and difficult to make any changes, even if changes are justified and needed. There is thus quite a risk that even those successful models, which are the result of long-term work, will remain merely academic results. For the new Member States that are drafting new civil law anyway, the model laws have a much more substantial practical meaning. The PICC, PECL and also the CISG have thus served as the main sources for the largest part of the Estonian Civil Code, the Law of Obligations Act,15 while the PICC are one of the main sources for the Lithuanian Civil Code.16 Those new 15 16

Law of Obligations Act, passed on 26 September 2001, Riigi Teataja I 2001, 81, 487 (in Estonian). Mikelenas, ‘The Influence of Instruments of Harmonisation’, above (n 13) 146–47.

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Member States that are still working on draft civil codes have an excellent opportunity to use the DCFR as a source. It is therefore possible that some of the new Member States’ legislative drafting activities will be based on the rules contained in PICC, PECL and DCFR. The PICC and PECL have been practically applied in Lithuania since 2001 and in Estonia since 2002. This practical application should be of interest to other countries, including the old Member States of the West. Based on Estonia’s seven years of experience, I dare say that the rules of the PICC and PECL have worked well in practice. The new Member States may be regarded as a test for modern model rules. The success of this test should encourage also the old Member States to modernise their private law.

VI

POLITICAL WILL AS A KEY FACTOR FOR THE REFORMS

Certainly, the legislative drafting process in the new Member States is not only based on the model laws, but also of many other sources, such as the laws of other countries, case law and special literature. It is thus quite likely that the new private law of the new Member States is more modern and of higher quality than that of the old Member States. In the old Member States, development is hampered both by tradition and habit, nor have these states had an urgent need to conduct rapid legal reforms as the new Member States have. Political will is a key factor to urgent reforms. Many of the amendment proposals by academic circles have been discarded due to the lack of political will on the part of the legislature. From the beginning of the 1990s, until today, many leading civil law professors have had more chance of putting their innovative ideas to work as experts in the new Member States than in their respective homelands. Just one example: the proposed amendments to the German law of delict, drafted by Christian von Bar in 1981,17 were never adopted in Germany, but proved useful for the Estonian Law of Obligations Act in 2001.18 If, in addition to Lithuania and Estonia, new civil codes will also be adopted by the Czech Republic,19 Hungary,20 Slovakia21 and perhaps Poland22 and a few other countries; the situation can become somewhat paradoxical—the modern civil law of these countries could become an example for the modernisation of the civil law of the old Member States.23

17 C von Bar, ‘Deliktsrecht’ in Gutachten und Vorschläge zur Überarbeitung des Schuldrechts. Bundesminister der Justiz (hrsg) (1981) 2, 1681–78. 18 P Varul, I Kull, V Kõve and M Käerdi, Commentary on the Law of Obligations Act III (Tallinn, Juura, 2009) 622–710 (in Estonian). 19 Tichy, ‘The Process of Modernisation of Private Law’, above (n 2) 39. 20 Kisfaludi, ‘The Influence of Harmonization of Private Law’, above (n 1) 136. 21 Jurcˇ ova, ‘The Influence of Harmonisation of Civil Law in Slovakia’, above (n 3)170–72. 22 Rajski, ‘European Initiatives and Reform of Civil Law in Poland’, above (n 4) 154–55. 23 See, eg, F Zoll, ‘The Future of European Contract Law from the Perspective of a Polish Scholar’ (2006) ERA Forum, European Contract Law, Special Issue 90–95.

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SCOPE AND METHODS OF THE HARMONISATION OF THE PRIVATE LAW

One of the fundamental issues of legal drafting—including in the area of private law—is the question of the areas where laws should be harmonised and thus made similar to those of other countries, and of the areas where harmonisation is not important. It is important in legal drafting to take account of other countries’ experience and other sources, regardless of whether harmonisation of regulation is important in the particular area. This is necessary to ensure the quality of legislation. Harmonisation is especially required in those areas of law that regulate joint activities. As the areas of joint activities are constantly broadening in the framework of the European Union, the need for harmonised laws is also growing. I am not talking of the legislation of general application of the European Union, such as directives, but about the essential similarity between the laws of the Member States. An essential similarity between laws can be achieved mainly via two important preconditions: 1. The true interest and political will of the states to apply harmonisation as a means of solving practical problems, for which the provisions of private international law are not enough. 2. The existence of model laws drafted on the international level, which could serve as a common source for harmonisation of laws. With good reason, contract law has been the focus so far, as it is in this area that countries should be particularly interested in essential harmonisation. It is, at the same time, clear that as international relations intensify, harmonisation of contract law only is not enough; closely related to contract law are unjustified enrichment, transfer of ownership, securities, as well as a number of general provisions, without the harmonisation of which many individual provisions of contract law cannot be applied. I believe that the structure of the DCFR is suitable from this aspect and can be used as a model by the EU Member States to improve their laws, which in turn would lead to the essential harmonisation of the laws of the Member States. It is important to go beyond contract law, which has so far been the focus of political attention. This approach is too narrow and cannot be sufficient to safeguard the European Union’s objectives of free movement of people, goods and services. Alongside contract law, much more attention needs to be paid to non-contractual relations, the general provisions of civil law, as well as the law of property and regulations governing persons, including family law. I am now only talking of civil law, without touching on company law, insolvency and other areas where harmonisation of laws is also highly needed. VIII

POLITICAL MEANING OF THE DCFR

Could the DCFR have a broader meaning than that of a model law?24 What could the political interests and preferences of the countries be in this connection?

24 On the meaning and content of the DCFR see, C von Bar, ‘Working Together Toward a Common Frame of Reference—European Legal Harmony: Goals and Milestones’ (2005) X Juridica International

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Integration within the European Union has not yet reached such a level as to suggest that the Member States are ready for a European civil code. A significant aspect is that a state’s own law is a cultural value in itself, and thus that social and economic integration and the abolition of state borders cannot imply the replacement of national legal orders by a European Union legal order. An increase in the states’ political interest in the essential harmonisation of their laws should be the main trend, and from that aspect, the DCFR’s main role is still that of a model law. In addition, the DCFR could be established by the European Union as an optional instrument. This means that parties can agree to be governed in their relations by the CFR as the applicable law. Such a possibility would indeed provide a level playing field for persons of the EU Member States, since none of the parties would have the advantage of applying the law of that party’s home country. There is apparently a conflict of political interest in this issue between the old and the new Member States. It is currently common that where one contractual party is of a Western Member State and another from the East, they agree to apply the law of the Western state, as it is more developed, reliable, and backed by a longer history of application. However, such a practice gives the party whose country’s law is being applied a considerable advantage in the event of a legal dispute. If CFR could be chosen as the applicable law, this privilege would disappear. Therefore, it is especially the new Member States of Central and Eastern Europe who should politically support the idea of the CFR as an optional instrument.

IX

HARMONISATION OF THE PRIVATE LAW AND POLITICAL INTERESTS OF THE MEMBER STATES

Finally, can the harmonisation of laws serve for the states as a political aim and a value to be pursued? Is the DCFR a goal and an asset of its own?; ultimately, certainly not. In the legal sense, the goal can be seen as a regulation under which problems can be solved. Assuming that the European Union continues to evolve 17–26; C von Bar, ‘The Launch of the Draft Common Frame of Reference. European Initiatives (CFR) and Reform of Civil Law in New Member States’ (2008) XIV Juridica International 4–9; C von Bar, ‘Coverage and Structure of the Academic Common Frame of Reference’ (2007) 3 European Review of Contract Law 350–62; H Beale, ‘The Development of European Private Law and the European Commission’s Action Plan on Contract Law—European Legal Harmony: Goals and Milestones’ (2005) X Juridica International 4–16; H Beale, ‘The Nature and Purposes of the Common Frame of Reference. –European Initiatives (CFR) and Reform of Civil Law in New Member States’ (2008) XIV Juridica International 10–17; H Beale, ‘The Future of the Common Frame of Reference (2007) 3 European Review of Contract Law 257–76; E Clive, ‘Differences Between the Draft Common Frame of Reference and the Principles of European Contract Law.—European Initiatives (CFR) and Reform of Civil Law in New Member States’ (2008) XIV Juridica International 18–26; E Clive, ‘An Introduction to the Academic Draft Common Frame of Reference’ (2008) 9 ERA Forum, Journal of the Academy of European Law, Special Issue 13–31; O Lando, ‘The Structure and the Legal Values of the Common Frame of Reference (CFR)’ (2007) 3 European Review of Contract Law 245–56; H Schulte-Nölke, ‘EC Law on the Formation of Contract—from the Common Frame of Reference to the “Blue Button”’ (2007) 3 European Review of Contract Law 332–49; H Schulte-Nölke, ‘From the Acquis Communautaire to the Common Frame of Reference—the Contribution of the Acquis Group to the DCFR’ (2008) XIV Juridica International 27–31; von Bar, Clive, Schulte-Nölke et al (eds), Principles, Definitions and Model Rules, Outline Edition, above (n 11) 3–99; von Bar and Clive (eds), Principles, Definitions and Model Rules, Full Edition vol I, above (n 11) 1–63.

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towards greater social and economic integration, optimal legal solutions need to be sought to the problems that arise in the course of integration. A similarity in social relations requires similarity in legal regulation, or else law may become an obstacle to integration. Consequently, the fundamental issue is how far social integration will essentially go, as conflicts between the national and international, and the different interests of the larger and smaller states, may start to hamper integration. The harmonisation of private law in the European Union can therefore first and foremost be a method or means of integration of social and economic relations, and depends on the development and the needs of the latter. As the preferable method of harmonisation of private law, the Member States, based on their political interest and will, would harmonise their national law voluntarily and the DCFR would serve as a good model law for this purpose. Mandatory harmonisation by way of the EU directives would be an accompanying method. Secondly, it is advisable to give the DCFR the official status of an optional instrument in the European Union, so that contracting parties can use it as the applicable law. When speaking about the harmonisation of civil law, it should not be reduced to merely contract law and consumer law.

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16 European Private Law: Political Foundations and Current Challenges REINER SCHULZE

I

THE DUALISM OF NATIONAL AND SUPRANATIONAL LAW

T

HE DISCUSSION REGARDING the political foundations of European private law primarily requires enquiring into the specific political and historical prerequisites of the origin and development of this law. From this perspective, the understanding of European private law is not to be separated from the political process of European integration. Whoever wants to examine the political foundations of European private law more closely must thus, above all, pay attention to the development of European integration, to its objectives as specified in the treaties and to its present status. The visions and initial concepts of such political foundations for a common European law arose following the First World War.1 After the Second World War, the first great steps towards the realisation of these ideas were the foundation of the Council of Europe and the agreement of the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR). The right to respect for private and family life (Article 8 ECHR), the right to marry (Article 12 ECHR), the prohibition of discrimination (Article 14 ECHR) and further provisions within this Convention achieved lasting influence on the development of private law in the signatory states.2 The Schuman Declaration showed the way to a higher level of integration through the founding of the supranational communities. On this basis, the integration advanced from the creation of the European Coal and Steel Community to the Treaties of Rome and the creation of the European Union, up to the entry of the youngest Member States from Eastern Europe. Over the course of this integration, European Community legislation has increasingly expanded to cover private law matters. Already in 1964, the first president of the European Economic Community, Walter Hallstein, emphasised the inclusion of private law in the

1 G Clemens, A Reinfeldt and G Wille, Geschichte der europäischen Integration (Paderborn, Schöningh, 2008) 49 et seq; P Stirk, A History of European Integration since 1914 (London, Pinter, 1996). 2 eg, the protection of privacy in von Hannover v Germany (2005) 40 EHRR 1; decision of the German Federal Court of Justice (Bundesgerichtshof; BGH) from 06.03.2007, VI ZR 52/06.

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European integration process.3 Throughout the subsequent years, the legislative acts of the European Communities, and henceforward the European Union, have gradually referred to most areas of private law;4 a development that is reflected in new terminology, such as Community private law,5 ‘Europeanisation’ of private law6 and European private law.7 A characteristic of the present status of European integration is the existence of a political and legal dualism: on the one hand, a supranational community with its own supranational law; on the other, its members, namely nation states, with their own different laws. The Member States have devolved a part of their sovereignty to the European Communities, and now to the European Union; in doing so, there are two different forms of legislators operating alongside in the European Union whose tasks and competences are now determined in the Treaty of Lisbon. In comparison to the earlier treaties of the first European Community in the 1950s, these tasks and competences have considerably grown with regard to private law matters, albeit still firmly limited by the Treaty. It would contradict the concept of this supranational union if its laws were the exclusive laws in its territory and no national laws would exist. The European Union is not even a federal state and, according to its nature, cannot claim sole legislative competence in the field of private law. According to many, the European Union is only a union of states,8 although the more preferable view is that it is a community sui generis below the threshold of a federal state (possibly however with a dynamic that could lead in the direction of a federal state).9 3 W Hallstein, ‘Angleichung des Privat- und Prozessrechts in der Europäischen Wirtschaftsgemeinschaft’ (1964) Rabels Zeitschrift für ausländisches und internationales Privatrecht 211; G Beitzke, ‘Probleme der Privatrechtsangleichung in der europäischen Wirtschaftsgemeinschaft’ (1964) Zeitschrift für Rechtsvergleichung 80. 4 See J Basedow,‘Europäische Vertragsrechtsvereinheitlichung und deutsches Recht. Einführung’ in J Basedow (ed), Europäische Vertragsrechtsvereinheitlichung und deutsches Recht (Tübingen, Mohr, 2000); K Langenbucher, Europarechtliche Bezüge des Privatrechts 2nd edn (Baden-Baden, Nomos, 2008); C Twigg-Flesner (ed), The Cambridge Companion to European Union Private Law (Cambridge, Cambridge University Press, 2010). 5 cf P-C Müller-Graff, ‘Privatrecht und Europäisches Gemeinschaftsrecht—Gemeinschaftsprivatrecht’ in P-C Müller-Graff and M Zuleeg (eds), Staat und Wirtschaft in der EG (Baden-Baden, Nomos, 1987) 17 et seq; R Schulze, ‘Gemeinschaftseuropäisches Privatrecht und Rechtsgeschichte’ in P-C Müller-Graff (ed), Gemeinsames Privatrecht in der Europäischen Gemeinschaft 2nd edn (BadenBaden, Nomos, 1999) 130. 6 H Coing, ‘Europäisierung der Rechtswissenschaft’ (1990) Neue Juristische Wochenschrift 937; P Ulmer,‘Vom deutschen zum europäischen Privatrecht?’ (1992) JuristenZeitung 1; W van Gerven, ‘The Case Law of the European Court of Justice and National Courts as a Contribution to the Europeanisation of Private Law’ (1995) 3 European Review of Private Law 367; C Joerges, ‘The Science of Private Law and the Nation State’ in F Snyder (ed), The Europeanisation of Law: The Legal Effects of European Integration (Oxford, Hart Publishing, 2000) 74 et seq. 7 J Basedow et al, ‘Editorial’ (1993) Zeitschrift für Europäisches Privatrecht 1; R Schulze, ‘Allgemeine Rechtsgrundsätze und Europäisches Privatrecht’ (1993) Zeitschrift für Europäisches Privatrecht 442; O Remien, ‘Gemeinsames Privatrecht in der Europäischen Gemeinschaft—Tagung in Trier, 2–4 April 1992’ (1993) JuristenZeitung 301. 8 See, eg, the decision from the German Federal Constitutional Court (Bundesverfassungsgericht; BVerfG) BVerfG, 2 BvE 2/08 from 30 June 2009, para 148, in which the European Union is described as a ‘Staatenverbund’. 9 D Chryssochoou, Theorzing European Integration 2nd edn (Oxford, Routledge, 2009) 8; W Wessels, A Maurer and J Mittag, ‘The European Union and Member States: Analysing Two Arenas Over Time’ in W Wessels, A Maurer and J Mittag (eds), Fifteen into One?: the European Union and the Member States (Manchester, Manchester University Press, 2003) 9.

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One can therefore note from the political foundations of the European Union that supranational and national laws exist alongside one another. The monism of national law belongs to the past, accompanied by its ideal of codification as a uniform and exclusive work of one sole legislator for civil law as a whole. Its place has not taken over a new monism of a supranational nature (and cannot do so according to the character of the European Union). The political foundations of today’s European law rather require parting from monist legal concepts and the transition to a dual model10 (or, with respect to international tendencies beyond the European Union, to legal pluralism).11 At the beginning of the academic research into European private law the former aspect, the supranational law, was often underestimated. It is the greatest weakness of the Principles of European Contract Law (‘PECL’) compiled by the Lando Commission12 that they have almost not considered such supranational law at all, and that they wanted to create a European contract law solely by comparing national laws. Since the end of the 1990s, equally intensive research has, however, taken place that has been concerned with the principles of existing Community law and with the approaches to its systemisation for private law matters.13 This research accommodates the core development with respect to European private law, namely the origin of a private law of the European Communities and European Union respectively. Such research corresponds to the challenges arising from the supranational side of the political and legal dualism in Europe (see section II below). The dynamics of developments over the previous decade in these areas should, however, not lead to underestimating the other side: the diversity and variety of the national laws. All concepts that would aim at a European codification of the civil law instead of the national civil laws, would not correspond to the political foundations on which European private law is currently based. Such perceptions would possibly be inspiring as provocations or Utopia; however, they would not have anything to do with European private law existing in the European Union at present—or in the foreseeable future—which is rightly the subject of research. 10 R Schulze, ‘The New Challenges in Contract Law’ in R Schulze (ed), New Features in Contract Law (Munich, Sellier, 2007) 11. 11 M La Torre, ‘Legal Pluralism as an Evolutionary Achievement’ in F Snyder, The Europeanisation of Law, above (n 6) 135 et seq; B Lurger, Grundfragen der Vereinheitlichung des Vertragsrechts in der Europäischen Union (Vienna, Springer, 2002) 131. 12 O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II (The Hague, Kluwer, 2000); O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). See also H Beale, ‘Towards a Law of Contract for Europe: The Work of the Commission of European Contract Law’ in G Weick (ed), National and European law on the Threshold to the Single Market (Frankfurt, Lang, 1993). 13 S Grundmann, ‘Europäisches Schuldvertragsrecht’ (2000) Neue Juristische Wochenschrift 14; R Schulze and H Schulte-Nölke, ‘Europäisches Vertragsrecht im Gemeinschaftsrecht’ in H SchulteNölke, R Schulze and L Bernardeau (eds), Europäisches Vertragsrechts und Gemeinschaftsrecht (Cologne, Bundesanzeiger, 2002); K Riesenhuber, System und Prinzipien des Europäischen Vertragsrechts (Berlin, De Gruyter, 2003); R Schulze and G Ajani (eds), Gemeinsame Prinzipien des Europäischen Privatrechts—Studien eines Forschungsnetzwerks (Baden-Baden, Nomos, 2003). A provisional result of the research undertaken on the principles of existing European law in the field of contract law has since been published: Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services (Munich, Sellier, 2009).

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Furthermore, European private law allows itself to only be understood as one side of the dualism, whose other side is made up of the national laws. The academic work undertaken within European private law includes correspondingly—and necessarily—the consideration of its relationship and interplay with national private laws (see section III below).

II

CHALLENGES FOR RESEARCH IN EU PRIVATE LAW

Private law as the private law of the European Union forms its own subject of research. It should be treated as an autonomous target in relation to the legal systems of the Member States.14 This does not only refer to the scope, structure and the main areas of academic work on future EU law, but the methods as to how principles, rule or definitions of European private law are to be drafted. One cannot just simply compare the models and solutions from national law and schematically transfer that—which is appropriate for national law—to the supranational level. The concepts and doctrines of EU private law must rather focus on the specific political and legal character of the supranational union—in particular therefore on its ‘constitution’ (also when this is not officially so named) in the treaties; on the values and the tasks that are determined therein; the fundamental rights of the EU and on the acquis communautaire that has already arisen on this foundation. As an illustrative example, a specific task for supranational law—in contrast to national laws—is the integration of previously separate markets and the consolidation of the internal market:15 for example, the distribution of goods and services by distance selling thus has significant importance for the supranational law (as most national laws have traditionally concentrated on face-to-face contracts); many other examples may also be added. With respect to property law, real estate law plays a central role in national legislation; this subject-matter is also of relevance for European private law (especially with regard to the cross-border possibilities of securing a loan). However, intellectual property is of at least the same importance for the supranational law (although it does play a lesser role in the civil codes of several Member States). The nature of intellectual property means that it is not related to a geographical area, and thus supranational laws are of great necessity (and have arisen in recent years). In general, the issue to be addressed is, with regard to the specific tasks of the supranational law, whether several matters pertaining to commercial law deserve greater academic attention than is usually the case in several national laws. It is therefore to be considered whether integration is required in the doctrine of civil and commercial law on a supranational level;16 a challenge that has been considered in a

14 cf M Safjan, ‘Political Foundations of European Private Law: Rethinking the East–West Division Lines (ch 14 in this volume). 15 Schulze and Schulte-Nölke, ‘Europäisches Vertragsrecht im Gemeinschaftsrecht’ in Schulte-Nölke, Schulze and Bernardeau (eds), Europäisches Vertragsrechts und Gemeinschaftsrecht, above (n 13) 18. 16 R Schulze, ‘The Academic Draft of the CFR and the EC Contract Law’ in R Schulze (ed), Common Frame of Reference and Existing EC Contract Law 2nd edn (Munich, Sellier, 2009) 20.

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number of more recent research papers,17 and also regarding some elements of the recently published outline version of the ‘Draft Common Frame of Reference’18 (‘DCFR’) (in particular Book IV on specific contracts). For the most part, the DCFR has, however, remained very much bound to the traditional codification structure as exists in some of the aforementioned Member States (for example, it includes the benevolent intervention in another’s affairs,19 but not company law, competition law or intellectual property). A further challenge for the research in EU private law arises in the appropriate consideration of the particular role of consumer law—above all in terms of contract law and tort law. With regard to the former, such a challenge has recently been faced by the Principles of the Existing EC Contract Law 20 (Acquis Principles) in particular. On the basis of the existing EC and EU law—the acquis communautaire—these principles approach European contract law within the scope of the general law of contract. Some of these principles have been included within the DCFR with respect to consumer law (above all in Book II, chapters 3 and 5). The inclusion of consumer law in contract law by means of the Acquis Principles and the DCFR is an important step on the path to the consideration of the specific tasks of Community law; however, many further steps will be necessary in order to deal with European law as an autonomous target corresponding to its own needs and principles. The crucial task for legal science in the field of European private law will be to develop a doctrine that is appropriate to the specific characteristics and needs of EU supranational private law. Overcoming this task will not be accomplished in the short term as it necessitates an intensive and broad exchange of thoughts among jurists from all EU Member States. The private law of the European Union as a common basis of activity for jurists in all Member States affords and requires common concepts, arguments and theories from legal science in order to guarantee an application as uniform as possible and a coherent development of the law. However, until now the discussion surrounding European law has often appeared to be involved within the framework of the individual legal science within a Member State.21 Expressed bluntly, there is a law of the European Union, however many national legal sciences on the law of the European Union. The differences 17 Schulze, ‘The Academic Draft of the CFR and the EC Contract Law’ in Schulze (ed), Common Frame of Reference, ibid, 17; J Basedow, ‘Ein optionales Europäisches Vertragsgesetz—opt-in, opt-out, wozu überhaupt?’ (2004) Zeitschrift für Europäisches Privatrecht 1; such integration was also acknowledged much earlier, see Hallstein, ‘Angleichung des Privat- und Prozessrechts in der Europäischen Wirtschaftsgemeinschaft’, above (n 3) 211, 221 et seq. 18 C von Bar and E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009. 19 N Jansen, ‘Negotiorum Gestio und Benevolent Intervention in Another’s Affairs’ (2007) 15 Zeitschrift für Europäisches Privatrecht 958. 20 R Schulze, ‘Die “Acquis Grundregeln” und Gemeinsamer Referenzrahmen’ (2007) Zeitschrift für Europäisches Privatrecht 731; Schulze, ‘The Academic Draft of the CFR and the EC Contract Law’ in R Schulze (ed), Common Frame of Reference, above (n 16) 3 et seq; G De Cristofaro (ed), I ‘princìpi’ del diritto comunitario dei contratti. Acquis communautaire e diritto privato europeo (Turin, Giappichelli, 2009). For a critical view of the DCFR, see H Eidenmüller, F Faust, HC Grigoleit, N Jansen, G Wagner and R Zimmermann (eds), ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies 659. 21 G Ajani and P Rossi, ‘Multilingualism and the Coherence of European Private Law’ in B Pozzo and V Jacometti, Multilingualism and the Harmonisation of European law (Alphen, Kluwer, 2006) 91.

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between the languages, education and the national legal experiences are barriers that make the integration of legal science in the field of European private law more difficult.22 Textbooks and casebooks, which are published in a variety of languages; legal journals with editors and readers from a number of different countries; cross-border courses and research projects; access to law faculties to scholars from different countries, and much more show that a change has already taken place in Europe over recent years—however the aforementioned barriers do not allow themselves to be overcome overnight. One way, alongside many others, of creating understanding amongst jurists in Europe of shared private law is the drafting of principles and sets of rules. Such drafts provoke discussion on the content of European private law and can offer a frame of reference for further research. Above all, they could contribute to giving greater coherence to EU private law, although legislation at European level is somewhat ‘fragmented’ in most areas.23 ‘A coherent European contract law’ is also the main objective that the planned ‘Common Frame of Reference’ (‘CFR’) shall serve as according to the Action Plan from the European Commission.24 Over recent years, a number of papers have discussed the methods by which such drafts of principles and sets of rules are to be drafted on the basis of existing EC and EU private law respectively and how these can promote coherency in the supranational law.25 The Acquis Principles for contract law26 and those parts of the DCFR that—predominantly on the basis of the Acquis Principles—are based on existing EU private law,27 now stand for discussion as such drafts.28 The underlying concept of the Acquis Principles strives towards showing how the large amount of ‘fragmented’ rules in EU law in this area can be attributed to overarching principles and can be systematised. It contains—alongside definitions (in particular of ‘consumer’ and of ‘business’) and rules on notice and form—central areas of contract law and matters closely connected to contract law: pre-contractual duties; non-discrimination; formation of contract; withdrawal; non-negotiated terms; performance of obligations; remedies. In each of these parts it firstly states the general provisions based upon existing EU law; thereafter (either deviating from or expanding upon these provisions) specific provisions for individual types of contract

22 T Wilhelmsson, ‘Introduction: Harmonization and National Cultures’ in T Wilhelmsson, E Paunio and A Pohjolainen (eds), Private Law and the Many Cultures of Europe (The Hague, Kluwer, 2007). 23 L Vékás, ‘Models in Central-Eastern European Codes’ in S Grundmann and M Schauer (eds), The Architecture of European Codes and Contract Law (The Hague, Kluwer, 2006) 121. 24 Commission, ‘Action Plan on a more coherent European contract law’ (Communication) COM(2003) 68 final (12 February 2003). 25 Schulte-Nölke, Schulze and Bernardeau (eds), Europäisches Vertragsrechts und Gemeinschaftsrecht, above (n 13); R Schulze, ‘European Private Law and Existing EC Law’ (2005) 1 European Review of Private Law 3; G Dannemann, ‘Consolidating EC Contract Law: An Introduction to the Work of the Acquis Group’ in Research Group on the Existing EC Private Law (Acquis Group) (ed), Contract II, above (n 13) xxxvi; De Cristofaro (ed), I ‘princìpi’ del diritto comunitario dei contratti, above (n 20). 26 Principles of the Existing EC Contract Law (Acquis Principles), above (n 13). 27 Alongside consumer law (Book II, chs 3 and 5 DCFR) can also be included, eg, a large proportion of the provisions on non-discrimination in Book II ch 2 of the DCFR, and on unfair terms in Book II ch 9 of the DCFR. 28 See above (n 20).

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(for example, contracts negotiated away from business premises; contracts for the delivery of goods etc).29 The Acquis Principles on contract law discuss a central field of European private law. The discussion surrounding the methods and techniques employed deserves more attention than the task presents, to make, by similar means, other matters the subject of academic research. One can above all consider the current EU law in the field of tort law,30 intellectual property31 and also the progressive development of the acquis communautaire in further fields, such as European competition and company law.32 These Acquis Principles have already been referred to in European case law.33 They also offer valuable suggestions for the proposed Directive on consumer rights.34 However, the proposal from the Commission for this directive made very little use of this possibility; it also appears doubtful whether this deficit can still be overcome through the further work on this directive. These drafts could also possibly be helpful for when the European Commission should create the CFR, which was originally announced to be complete in 2009,35 over the course of 2010.36 It is also conceivable that these drafts can belong to starting points in order to perhaps prepare an optional instrument that can exist as an alternative alongside national contract law.37 These examples show that drafts from academics could be of assistance in order to give greater coherence to EU law, and that the use of this possibility is uncertain within a political framework; this has been shown by the European Commission’s

29 For further details on this structure, see H Schulte-Nölke and F Zoll, ‘Structure and Values of the Acquis Principles: New Features and their Possible Use for Political Purposes’ in Research Group on the Existing EC Private Law (Acquis Group) (ed), Contract II, above (n 13) xxiii. 30 W Wurmnest, Grundzüge eines europäischen Haftungsrechts (Tübingen, Mohr, 2003); H Koziol and R Schulze (eds), Tort Law of the European Community (Vienna, Springer, 2008). 31 A Ohly (ed), Common Principles of European Intellectual Property Law (Tübingen, Mohr, forthcoming 2011). 32 Schulze, ‘The Academic Draft of the CFR and the EC Contract Law’ in Schulze (ed), Common Frame of Reference, above (n 16) 16. 33 Opinion of Advocate General Poiares Maduro in Case C-412/06 Annelore Hamilton v Volksbank Filder eG [2008] ECR I-02383; Opinion of Advocate General Trstenjak in Case C-489/07 Pia Messner v Firma Stefan Krüger. 34 Commission, ‘Proposal for a Directive on consumer rights COM(2008) 614 final (8 October 2008). See G Howells and R Schulze, ‘Overview of the Proposed Consumer Rights Directive’ in G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009); B Jud and C Wendehorst (eds), Neuordnung des Verbraucherprivatrechts in Europa? (Vienna, Manz, 2009); B Zypries, ‘Der Vorschlag für eine Richtlinie über Verbraucherrechte’ (2009) 2 Zeitschrift für Europäisches Privatrecht 225; C Twigg-Flesner and D Metcalfe, ‘The Proposed Consumer Rights Directive—Less Haste, More Thought? (2009) 3 European Review of Contract Law 368; H-W Micklitz and N Reich, ‘Cronica di una muerte anunciada, The Commission’s Proposal for a Directive on Consumer Rights’ (2009) 46 Common Market Law Review 471. 35 Commission, ‘European Contract law and the revision of the acquis: the way forward’ (Communication) COM(2004) 651 final (11 October 2004). 36 An Evaluation of the Hague Programme and Action Plan (SEC (2009) 767 final (10 June 2009) 114. 37 Considered in Commission, ‘Action Plan on a more coherent European contract law’, above (n 24). See also D Staudenmayer, ‘The Commission’s Plan on European Contract Law’ (2003) European Review of Private Law 113; Schulze, ‘Die “Acquis-Grundregeln”’, above (n 20) 731, 734; H Schulte-Nölke, ‘EC Law on the Formation of Contract—from the Common Frame of Reference to the “Blue Button”’ (2007) 3 European Review of Contract Law 332.

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apparent lack of reference to the DCFR in its Proposal for a Directive on consumer rights.38 When reflecting on the past century, one can say that the announcement from the Commission in 200139 and the subsequent Action Plan for a Coherent European Contract Law, with the promise of a political perspective, certainly greatly encouraged and inspired academic work on European private law (and also directed public interest towards it). One can say with less certainty whether these academic works will have any influence on European legislation. However, the academic outcome of these works is neither solely nor primarily to be measured against the realisation of such political projects. Moreover, it would be questionable if the academic interests was only concentrated on drafts that are motivated by the expectations of legislative behaviour. These drafts are primarily a means to provide understanding in the exchange of thought amongst jurists in Europe on the content and structure of European private law. They are—alongside textbooks and casebooks, for example—only one of the many different ways in which the doctrine of EU private law emerges as the core of a scientific European private law.

III

COMPARATIVE STUDIES IN NATIONAL PRIVATE LAWS

The dualism of supranational and national law not only requires that the European Union’s own tasks, terms and concepts of private law are considered; it also requires that respect is shown to the diversity of the national laws as the dualism’s correlative other side. The actual political and academic challenge exists in recognising the legitimacy of both sides and creating an interaction between them as efficiently as possible.

A

Consideration for National Laws

In a political context this is also shown, for example, in the development of the European Union’s particular legislative instruments and techniques that allow national law to be spared as much as possible. In this respect, one can use the example of the harmonisation of laws through directives (instead of harmonisation through regulations) and the use of minimum harmonisation where the protective objectives of European law are concerned. As far as a harmonisation of the law is not required, it can come into consideration to make it possible, via legal acts of the Community, for the affected parties to choose between the national laws and the European law. Regulations can also spare the national law if they are employed as optional instruments: they do not offer a set of rules instead of national provisions, but alongside them (for example in company law with the Council Regulation on

38 MW Hesselink, ‘The Consumer Rights Directive and the CFR: Two Worlds Apart?’ (2009) 5 European Review of Contract Law 290; Twigg-Flesner and Metcalfe, ‘The Proposed Consumer Rights Directive’, above (n 34) 368. 39 Commission, ‘Communication from the Commission to the Council and the European Parliament on European Contract Law’ COM(2001) 398 final (11 July 2001).

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the statute for a European company40 and the European cooperative society41, but as was also considered for contract law).42 According to the European Commission’s Action Plan, the Common Frame of Reference would not affect the validity of the national contract laws: it shall simply serve as a guideline or ‘toolbox’43 in order to create present Community legislation and future legal acts more coherently. In some instances concerning the coherency of contract law, the CFR could contain elements that are currently not regulated in European law; in this respect the CFR would simply serve the purpose of a form of ‘protective film’. It would, for instance, not predetermine that all of these elements would have to be harmonised. If it were to be the case that legal harmonisation of some of these elements is strived towards in the future, one would have to examine whether the requirements under European Union law are fulfilled and, thereafter, decide over the enactment through the usual legislative procedure. The CFR would, however, offer the advantage that the content of possible future legislation would generally show greater coherency with European contract law as has been the case up until now. If individual Member States acting in their own interests and decisions would so wish, then the CFR could however also again serve as a ‘protective film’, though for a voluntary harmonisation of the national contract laws in Europe.44 This would not be an intrusion in the national laws, but would be a voluntary and organic development ‘from below’—corresponding to the growing together of the economy and the harmonisation of the ways of life in many areas within the European Union. It is certainly not unusual that communities, which stand in close relation to one another, make use of the solutions to legal problems, the concepts and structures and the legal experiences that have developed in the other, doing so voluntarily and without a legal obligation. Within the European Union, this is equally valid for the relationships between the individual Member States and in the relationship between the Union and the Member States—in this latter case the exchange of experiences etc is by all means reciprocal. Member States have often voluntarily ‘expanded’ on Community directives during their transposition into national law.45 For its part, the European Union has also made great use of the Member States’ positive experiences in the field of private law in order to develop its own law—from suggestions for individual directives (such as the Directive on Self-Employed Commercial Agents46 and the Directive on Unfair Terms in Consumer Contracts)47 the concept of a general contract law, which forms the basis of the 2003 Action Plan.

40 Council Regulation (EC) 2157/2001 of 8 October 2001 on the Statute for a European Company (SE) [2001] OJ L294/1. 41 Council Regulation (EC) 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE) [2003] OJ L207/1. 42 ‘Action Plan’ of the European Commission (above n 24) 16. 43 COM(2004) 651 final, 3. 44 COM(2001) 398 final, 14. 45 A practice commonly referred to as ‘gold-plating’; see W Voermans, ‘Gold-plating and Double Banking: An Overrated Problem?’ in H Snijders and S Vogenauer (eds), National Law in the Context of Transnational Law (Munich, Sellier, 2009) 79, 83. 46 Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents [1986] OJ L382/17. 47 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993] OJ L95/29.

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National Inspiration for Union Law

The task is thus presented to legal science to make fruitful the experiences from national legal systems, gathered through comparative studies, both for other national law and supranational law alike; such experiences can then be used as a source of inspiration. Since the 1980s, the work undertaken by the Lando Commission, from which the PECL emanated,48 has shown that inspiration for the development of European private law can be gained through the comparison of national laws. In the following years, a number of publications on the subject of European private law have been published using comparative law as there basis, for example from the research network Common Principles of European Private Law49 and above all from the Study Group50 and the Common Core51 project.52 However, the individual projects and studies on a comparative basis have pursued very different objectives with regard to European private law—from the development of common literature for European private law for students and practitioners,53 to the development of common legal terminology in the European Union54 and to the creation of restatements or a European civil code.55 With respect to the functions and methodology of comparative law, there are primarily two approaches that are to be distinguished from one another: on the one hand, the research on ‘common principles’, a ‘common core’ or an ‘acquis commun’; on the other hand, the search for the ‘best solutions’. The former approach played a considerable role at the beginning of the work undertaken by the

48 Principles of European Contract Law, Parts I and II; Principles of European Contract Law, Part III, above (n 12). 49 Members of this research network included the Universities of Münster (coordinator); Barcelona; Berlin (Humboldt); Lyon III; Nijmegen; Oxford and Turin. The network was established as part of the Training and Mobility of Researchers Programme (TMR) of the European Community funded by the European Commission. For an overview of the results of the research and the resulting publications, see R Schulze, ‘Gemeinsame Prinzipien des Europäischen Privatrechts’ in Schulze and Ajani (eds), Gemeinsame Prinzipien des Europäischen Privatrechts, above (n 13); a list of the publications is listed under: www.unimuenster.de/Jura.iwr/Schulze/Forschungsvorhaben/Research%20 Network%20I/publi.pdf. 50 The members of Study Group on a European Civil Code have published a number of volumes as part of the series ‘Principles of European Law’: eg, Service Contracts (Munich, Sellier, 2006); Lease of Goods, (Munich, Sellier, 2007); Sales (Munich, Sellier, 2008); Non-Contractual Liability Arising out of Damage Caused to Another (Munich, Sellier, 2009). 51 The members of the Common Core of European Private Law have published a number of volumes within the scope of this project: eg, R Zimmermann and S Whittaker (eds), Good Faith in European Contract Law, The Common Core of European Private Law (Cambridge, Cambridge University Press, 2000); E-M Kieninger (ed), Security Rights in Movable Property in European Private Law (Cambridge, Cambridge University Press, 2004); R Sefton-Green (ed), Mistake, Fraud and Duties to Inform on European Contract Law (Cambridge, Cambridge University Press, 2005). 52 National law also forms the starting point—however mainly on the basis of the legal system of one country, namely Italy—for a further project: ‘Code Européen des Contrats—Avant-projet’ conducted by the Academy of European Private Lawyers under the coordination of Guiseppe Gandolfi. See G Gandolfi (ed), Code Européen des Contrats—Avant-projet 3rd edn (Milan, Giuffré, 2002); translated into English in O Radley-Garner, H Beale, R Zimmermann and R Schulze (eds), Fundamental texts on European Private Law (Oxford, Hart Publishing, 2003) 439. 53 Schulze, ‘Gemeinsame Prinzipien des Europäischen Privatrechts’ in Schulze and Ajani (eds), Gemeinsame Prinzipien, above (n 13) 14. 54 cf, eg, M Ebers, ‘Uniform Terminology for European Private Law—Ein neues Forschungsnetzwerk der Europäischen Union’ (2003) Zeitschrift für Europäisches Privatrecht 185. 55 See above, (n 50).

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Lando Commission; European law itself assumes that common principles exist in the laws on the Member States, which in turn can be used as a guideline in particular situations for European law (in particular, liability according to the former Article 288 II TEC and now according to Article 340 II TFEU). Beyond such situations that are stipulated in EU law,56 studies have been undertaken over a number of years in comparative law and legal history concerning the existence of common principles or—with a somewhat extenuated wording—of a ‘common core’ of European private law.57 On this approach is based, in part, the presupposition that a comparative-historical founded ‘acquis commun’ is to be respected alongside the acquis communautaire of the European Union.58 In the first instance, this postulated coexistence of acquis communautaire and acquis commun does, however, pose a number of questions—for example, the binding nature, ‘validity’ or other questions of the practical relevance of the acquis commun; its territorialpolitical reference to the EU, Europe or the Western world as a whole and the scope of the consistencies that it postulates. In general, it appears to be a characteristic of the ‘common principles’ approach that the relationship of observation and assessment regarding the assumed consistencies is not clearly fixed. A problem may also be the danger of too much abstractness. In terms of how the scale of the comparison is to be determined, the level of abstraction does influence the amount of common points that can be found, ie, the greater the abstraction, the more common points can be found. In contrast to the ‘legitimate’ views based on the ‘common principles’ and the acquis commun, the concept of the ‘best solution’ does not suppose a concordance with national law, but rather its own estimation of the qualities of a particular national concept, principle or rule. This approach ought not to be principally considered as less ‘pro-European’ than the ‘common principles’ approach. The discourse on the quality of different solutions can sometimes be more convincing than a postulated ‘common principle’. In this sense the majority of the parts of the academic DCFR ought to be discussed as suggestions (alongside the many other suggestions that are possible) to find the ‘best solutions’ for the development of European Private law: it ought not be burdened with the demand to convey existing ‘common principles’ of national laws. However, studies or sets of rules which do not enquire into ‘common principles’ but ‘best solutions’, do not draw on the legitimation based on existing consistencies in the national laws. They rather have to admit that they are solely based on the

56 Schulze, ‘Allgemeine Rechtsgrundsätze und Europäisches Privatrecht’, above (n 7) 442; S Vogenauer, ‘Gemeineuropäische Methodenlehre’ (2005) Zeitschrift für Europäisches Privatrecht 234; D Shachor-Landau, ‘Reflections on the Two European Courts of Justice’ in Y Dinstein et al (eds), International Law at a Time of Perplexity (Nijhoff, Martinus, 1989); R Schulze, ‘Pluralismus der Rechte und Konvergenz des Rechtsdenkens—Zur geschichtliche Rolle allgemeiner Rechtsgrundsätze’ in H-D Assmann, G Brüggemeier and R Sehte (eds), Unterschiedliche Rechtskulturen—Konvergenz des Rechtsdenkens (Baden-Baden, Nomos, 2001). 57 Schulze, ‘Allgemeine Rechtsgrundsätze und Europäisches Privatrecht’, above (n 7) 442, 467; R Zimmermann, ‘Das römisch-kanonische ius commune als Grundlage europäische Rechtseinheit’ (1992) JuristenZeitung 8. 58 N Jansen and R Zimmermann, ‘Restating the Acquis Communautaire? A Critical Examination of the “Principles of the Existing EC Contract Law”’ (2008) 71 Modern Law Review 505, 516.

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assessment of the author in each given case. The designation ‘restatements’59 for such suggestions is therefore highly problematic. If a set of rules is suggested as ‘best solutions’, it thus has to be supported by an alternative to that which is appropriate for ‘common principles’. ‘Notes’, as in the PECL,60 can show the extent to which the proposed rules expressed consistencies or predominant tendencies in the national laws. Such notes are less sufficient the less one bases the suggested solutions upon such consistencies. The decision for a solution being the ‘best’ requires a thorough discussion of the merits and disadvantages of the different options, and a clarification of the criteria that shall determine their quality. As to the DCFR, it mainly remains with the ‘Notes’ in the style of the PECL without giving these a particular task, although in many parts it clearly does not draw on either ‘common principles’ or existing EU law.

C

Challenges for Comparative Studies

In the future, comparative law can continue to make a great contribution in the field of European private law alongside academic work on existing EU private law, as was also shown by the comparative studies on the PECL at the beginning of the research on European private law. However, comparative law will have to observe the aforementioned methodological problems. First, a subject of the study will particularly have to be the distinction between ‘common principles’ and ‘best solutions’. In no case should the opinion of the author of a draft be confused with ‘common principles’ or ‘restatements’ of European law. Secondly, it is necessary to always consider the peculiarities—the ‘proprium’ of supranational law in comparative research. Not all ‘common principles’ of national law are suitable for the specific purposes and tasks of EU private law—the ‘best solution’ in comparing national laws does not always have to be such at supranational level. At supranational level, for example, a directive allowing room for action, or even minimum harmonisation, may be appropriate, yet a precise and complete rule is required at national level. It may be decisive for supranational law to create cross-border markets, while the ‘common principles’ or ‘best solutions’ in the national laws want to primarily promote transactions in a smaller context more effectively.61 Whether ‘common principles’ or ‘best solutions’, the transfer of national experiences onto the level of Union law always requires that the specifics of the latter are brought to account. Underestimating these differences between national laws and supranational law would mean making a typical mistake while comparing: equating ‘apples to pears’.

59 cf C von Bar, ‘Coverage and Structure of the Academic Common Frame of Reference’ (2007) European Review of Contract Law 351, 354; H Schulte-Nölke, ‘Die Acquis Principles (ACQP) und der Gemeinsame Referenzrahmen. Zu den Voraussetzungen einer ertragreichen Diskussion des DCFR’ in R Schulze, C von Bar and H Schulte-Nölke, Der akademische Entwurf für einen Gemeinsamen Referenzrahmen (Tübingen, Mohr Siebeck, 2009), 65. 60 See, Principles of European Contract Law, Parts I and II; Principles of European Contract Law Part III, above (n 12). 61 Above (n 15).

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By acknowledging these limitations comparative law can, however, inspire the development of EU law on a number of levels. Above all, it can function to inspire and pioneer with respect to the further development of EU private law. This concerns a number of matters for which comparative studies can be of use: to use the experiences of national law for supranational law and furthermore, to create the supranational law in such a way that it is compatible with the national laws (as took place in the past during the preparation or examination of European legal acts).62 Moreover, a pioneer function for EU private law is attributed to comparative law with regard to the development of overarching principles and structures; for example, even the terms ‘European private law’ and ‘European contract law’ have only been introduced with the help of comparative law. Such terms neither originally existed in the treaties of the European Community or the European Union law, nor in their earlier legal acts. Comparative law studies transferred these terms from national to European level, for example the studies undertaken by the Lando Commission. After they were first used by legal scientists with reference to Community law,63 they have thereafter been—more or less—accepted by the institutions of the European Community and European Union respectively for both EC and EU law, in particular through the European Parliament64 and later from the European Commission’s Action Plan from 2003.65 In addition, comparative studies on national laws have also become of valuable assistance for jurisprudence and also with regard to existing EU law (as is shown in some Advocates General opinions).66 For academic works that concentrate on the principles of existing EU law, these studies provide an essential tool for filling gaps in the framework of sets of principles and rules.67 Lastly, it is the significance of comparative studies concerning the transposition of the directives in the Member States that should not be

62 eg, a number of comparative studies have been commissioned by the European Commission, inter alia, H-W Micklitz (project manager), Door to Door Selling—Pyramid Selling—Mulitlevel Marketing (1999); R Schulze and H Schulte-Nölke (coordinators), Analysis of National Fairness Laws Aimed at Protecting Consumers in Relation to Commercial Practices (2003); J Stuyck and E Terryn et al, An Analysis and Evaluation of Alternative Means of Consumer Redress other than Redress through Ordinary Judicial Proceedings (2007). 63 See above (nn 6, 7 and 8). 64 European Parliament resolution of 26 May 1989 on action to bring into line the private law of the Member States [1989] OJ C294/400; European Parliament resolution of 6 May 1994 on the harmonisation of certain sectors of the private law of the Member States [1994] OJ C205/518; European Parliament resolution of 12 November 2001 on the approximation of the civil and commercial law of the Member States [2002] OJ C140E/538; European Parliament resolution on the ‘Communication from the Commission to the European Parliament and Council—A More Coherent European Contract Law—An Action Plan’ (COM(2003) 68—2003/2093(INI)) [2004] OJ C76E/95. 65 See above, (n 25). 66 eg, Opinion of Advocate General Saggio in Joined Cases C-240/98 to C-244/98 Océano Grupo Editorial SA v Roció Murciana Quintero (C-240/98); Salvat Editores SA v José M. Sánchez Alcón Prades (C-241/98); José Luis Copano Badillo (C-242/98); Mohammed Berroane (C-243/98) and Emilio Viñas Feliú (C-244/98) [2000] ECR I-04941; Opinion of Advocate General Ruiz-Jarabo Colomer in Case C-117/01 K.B. v The National Health Service Pensions Agency and the Secretary of State for Health [2004] ECR I-00541; see also the comments made by Advocate General Roemer in Case C-29/69 Erich Stauder v City of Ulm—Sozialamt [1969] ECR I-00419, 428. 67 Dannemann, ‘Consolidating EC Contract Law’ in Research Group on the Existing EC Private Law (Acquis Group) (ed), Contract II, above n 25 xxxvi, xlvi.

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underestimated.68 There is a direct connection between academic work on existing EU law and comparative law in this respect, and as such it can assist in solving problems concerning interpretation, application and the further development of EU law. In addition, it can offer suggestions to the Member States regarding the development of their national law as far as the Member States transpose directives according to Article 249 TEC (now Article 288 TFEU), or if there is a voluntary expansion on the directive during its transposition.

IV

CONCLUSION

In but a few sentences, one can draw the following conclusion: the European integration, with the supranational community at its political core, forms the most important political foundation for the emergence and development of European private law. Such integration is characterised by a dualism of national and supranational political authority and from national and supranational law accordingly. In relation to national law, European private law ought therefore to be treated as an autonomous subject and, at the same time, the continuance of national diversity in the dualism of supranational and national law should be respected. Legal science can contribute to the development of the private law of the European Union through, above all, the identification and examination of the principles, main ideas and underlying values that are to be found in the many ‘fragmented’ provisions in the Community’s legal acts and in the decisions of the European courts. In this respect, European private law is a demure and difficult subject. Unlike most national laws, it is not already steeped in a long legal tradition nor is systematised. Correspondingly, European legislation is not—in contrast with most national codifications—based on a lengthy development of legal science and jurisprudence, nor a legislator’s plan, comprehensive and prepared due to this development. The research on EU private law must in fact often begin with an arduous task of collation, analysing and comparing the many different rules found within EU law. It is only on this basis that the progression from the specific to general can be made and to allow for the determination of the main ideas, principles and structures. Comparative law can primarily support this by making available the experiences in national law in order to allow for concepts to be developed, for gaps to be filled and for the development of new solutions in European law. However, one always has to specifically question whether the individual national experiences correspond to the specific requirements and tasks for supranational law. In this respect it would be problematic to assume that all ‘common principles’ or ‘best solutions’ in national laws could be adopted as a model of regulation. The challenges and the present status of European integration, the ‘constitution’ of the supranational union, its values, its fundamental rights and the specific tasks 68 eg, for the core areas of European consumer law, see H Schulte-Nölke, C Twigg-Flesner and M Ebers (eds), EC Consumer Law Compendium. The Consumer Acquis and its transpostion in the Member States (Munich, Sellier, 2008).

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for its law form the starting points for the academic development of the doctrine of EU private law and for academic drafts that concern the principles and rules of EU private law. Such drafts (for example, the Acquis Principles on contract law) can contribute to a better understanding among jurists from all Member States, with their differences in legal traditions, of the content of a common European law. These drafts, therefore, are not only—and not primarily—of significance for legislation at European level; above all they are a contribution to the academic discussion and can possibly offer a guideline to judges in the interpretation of EU law and to the Member States during their transposition or ‘expanded transposition’ (so-called gold plating) of directives.

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17 Of Jurisdictional Balancing in European Private Law LEONE NIGLIA I

INTRODUCTION

T

HE DEBATE ON private law ‘Europeanisation’ now refers, albeit episodically, to the potential or actual importance of ‘balancing’ techniques of legal reasoning.1 In this chapter, I expand on the notion of balancing as applicable to private law and consider one of the institutional (as opposed to substantive) factors that matter to balancing,2 which I name ‘jurisdictional balancing’—the balancing of interests encapsulated at the supranational and at the national jurisdictional levels central to the making of EU legislative determinations.3 As I explain below, it seems to me obvious that we should take seriously ‘jurisdictional balancing’, if only because it is a way in which to look at classical EU law proportionality issues in relation to private law harmonisation. In the sense that, even those who are sceptical towards applying balancing in the private law domain, cannot ignore the issue of the extent to which proportionality issues (should) nevertheless matter. The theme is challenging, to say the least. Not only do we know little about the internal decision making processes leading to the enactment of directives,4 but we lack a serious engagement with the attempt at an accurate descriptive and normative analysis regarding the extent to which the (EU) legislature balances the interests that it chooses to target through its harmonising work. The tendency is to assume— explicitly or implicitly—a hierarchical relationship between a ‘centre’ that legislates in the first instance, and a ‘periphery’ that enforces thereafter, without considering the need for critically reflecting on what the ‘centre’ may, or should, do to win consensus,5 in the ways indicated in the remainder of this chapter. Such neglect is partly due to the resistance of private law scholarship to focus on compliance and 1 cf D Kennedy, ‘A Transnational Genealogy of Proportionality in Private Law’ (ch 11 in this volume); N Reich, ‘Balancing in Private Law and the Imperatives of the Public Interest’ (ch 12 in this volume); L Niglia, The Transformation of Contract in Europe (The Hague, Kluwer, 2003). 2 Kennedy, ibid (on institutional considerations as relevant to balancing). 3 On jurisdictional qua institutional issues as relevant to European private law in federal perspective, cf L Niglia ‘Beyond Enchantment—The Possibility of a New European Private Law’ in Yearbook of European Law 2009 (Oxford, Oxford University Press, 2010) 60. 4 But see Niglia, The Transformation, above (n 1). 5 For such perspective see, eg, F Scharpf ‘The Joint-Decision Trap Revisited’ (2006) 44 Journal of Common Market Studies 845, 850 as discussed below.

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enforcement; and partly tractable to scholars’ no less heightened resistance towards the adoption of a balancing technique, the preference being for more formalistic modes of reasoning.6 This chapter contributes directly to the debate regarding whether and to what extent to adopt the balancing technique,7 and, indirectly, to literature on enforcement and federalism (through the issue of ‘proportionality’) by suggesting ways in which a jurisdictional mode of balancing may become part of the range of techniques available for private law, understood in European perspective. The chapter elaborates on the previous chapters in this part, in that it offers a concrete example of how one can benefit from thinking beyond crafting-texts only, towards engagement with the wider implications of private law regulation for society. It indicates what it might mean for scholars to engage analytically about private law ‘Europeanisation’, with respect to an eminently ‘political’ activity such as that of the EU legislative work on private law harmonisation.

II

A SUBSTANTIVE APPROACH TO JURISDICTIONAL BALANCING

The legislative activities in the private law arena are not consequential to an explicit allocation of competence. Neither Article 5 TEU nor Articles 114 and 115 TFEU lend themselves to being interpreted as conferring a fully-fledged and explicit constitutional competence to act in the private law field.8 At most, if competence exists, it is of a qualified kind, given the many ways in which it must be considered intertwined with issues of adequacy in ‘centralisation’.9 The Tobacco litigation saga teaches how fragile this competence can be.10 Assuming that the resolution of the issue of competence, understood in formal terms, leads to a positive assessment of some kind of qualified competence in relation to a specific piece of proposed legislation, one question remains unaddressed in the current vocabulary—that of avoiding or minimising action, even if formally justified in terms of competence, due to an ex ante ascertainable, concrete plausibility of low-level enforcement of the rules under consideration for the purpose of harmonisation. This is entirely about making regulation proportionate and responsive by avoiding formally justified legislative interventions that would result at best in low-enforcement and at worst in chaotic enforcement on the ground—by which I mean the many legal uncertainties and conflicts brought about by the mixture of enforcement, halfenforcement and no-enforcement that typically follow directives’ enactment.11

6 L Niglia, ‘Taking Comparative Law Seriously—Europe’s Private Law and the Poverty of the Orthodoxy’ (2006) 54(3) American Journal of Comparative Law 401. 7 Kennedy, ch 11 in this volume and Niglia, The Transformation, above (n 1). 8 cf S Weatherill, ‘Competence and European Private Law’ in C Twigg-Flesner (ed), The Cambridge Companion to European Union Private Law (Cambridge, Cambridge University Press, 2010). 9 ibid, 61. 10 Case C-376/98 Germany v Parliament and Council [2000] ECR I-8419 and Joined Cases C-154/04 and 155/04 Alliance for Natural Health (2005) ECR I-6451, as discussed in Weatherill, ‘Competence and European Private Law’, above (n 8) 62–63. 11 Literature that focuses on such developments on the ground includes: MW Reimann, ‘Product Liability in a Global Context: The Hollow Victory of the European Model’ (2003) 2 European Review of Private Law 128 (product liability); N Reich, ch 12 in this volume (right of cancellation and unfair

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But the key question to answer—if one wishes seriously to proceed on this ground—is ‘how’ to assess such situations ex ante. There is no way other than focusing on the actual substance of the legislative rules being considered for legislation, which takes us into the next section in which I discuss how that very operation may be actualised. III

ILLUSTRATIONS

In substantive terms, in this chapter contribution I would like to think of a novel and minimalist way in which to actualise jurisdictional balancing, that is, as a way to avoid the potential for misuse of the legislative powers implicated therein.12 For, any Commission-designed legislative project lends itself to an assessment in relation to the extent to which it can really change material law as organised at the domestic level. Union institutions that do not engage in such assessment run the risk of being out of line with the requirement of proportionality. Let me illustrate two such situations before reframing my argument in terms of proportionality.13 First, there may be specific legislative proposals that, at an ex ante assessment, are likely to attract absolute resistance in a few or many national systems.14 I can give an example taken from the practice of revising and replacing previously enacted directives, so as to show how the Commission has designed a revised version of a major piece of legislation such as the Directive on unfair terms without taking seriously at all post-enactment resistance événements, as they have manifested themselves over many years. I am thinking of the current work of the Commission in relation to the revision of that directive.15 Notably, with a view to overcome ‘legal fragmentation’,16 the Commission is attempting at winning consensus in the decision-making process on a Proposal for a Directive on consumer rights. The draft directive simply re-proposes the ‘test of fairness’ as incorporated in the directive, despite the fact that in major jurisdictions such as France and Germany that very test has been met with resistance.17 It appears that the Commission is insisting on the strategy of fixing the problem of legal fragmentation terms); Niglia, The Transformation, above (n 1) (unfair terms); G Teubner ‘Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergencies’ (1998) 61(1) Modern Law Review 11–32; L Niglia ‘The Non-Europeanisation of Private Law’ (2001) European Review of Private Law 575. 12 On the understanding of ‘misuse’ of EU legislative powers in legal comparative terms, an issue that in this chapter I deal with in terms of ‘proportionality’, cf L Niglia ‘Of Harmonisation and Fragmentation—The Problem of Legal Transplants in the Europeanization of Private Law’ (2010) Maastricht Journal of European and Comparative Law 116 et seq. 13 For further discussion in legal comparative perspective, cf Niglia, ‘Of Harmonisation and Fragmentation’ ibid. 14 The issue of ‘how many’ legal systems should be taken into account for avoiding or minimising EU legislative intervention is relative to the actual overall balancing act being made by the decision-maker— which notably involves both institutional and substantive factors—and, as such, it should be evaluated on the basis of our general understanding of the role of balancing in European private law. I am only offering an example of an extreme case of ‘resistance’. 15 Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614 final (8 October 2008) (so called Directive on Consumer Rights). 16 ibid. 17 Niglia, The Transformation, above (n 1).

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by entirely relying on the re-proposition of a key element of the contested directive such as the fairness test. It is not attempting at incorporating in the newly proposed version of the test changes that would make it less contentious than it has been in past years—and that it is likely to remain in the years to come, if unchanged—given the recalcitrance of national jurisdictions to implement it fully. I am thinking of some strongly market-orientated elements that the directive-mandated test of fairness is meant to promote, including the provision whereby a lower price should be taken into account in valuing (un-)fairness in order to save terms that—standing alone—would be burdensome.18 An approach that takes jurisdictional balancing seriously should have given thought to the option of explicitly excluding such a sub-provision.19 This would have been about ‘downsizing’ EU intervention with a view to minimising the many conflicts that have produced resistance vis-à-vis the directive. Secondly, there may be specific legislative proposals that are likely to attract a considerable degree of legal uncertainty as to how to apply them in the context of a few or many of the national legal systems. This is the case of the directive providing for the right of cancellation in doorstep contracts, a directive which has been only partly ‘enforced’ in relation to its applicability to guarantees as invoked by some litigants and heavily opposed by others before German courtrooms. After quite a few years of contrasting judicial determinations on the matter, deep uncertainties yet remain as to the key issue of the extent of the application of the right of cancellation to guarantees. For example, the landmark decision of the German Constitutional Court of 19 October 1993 has established that the domestic constitutional charter commands, that guarantors can be released from their obligations only in cases in which structural imbalances are at stake that require that private law be engineered so as to protect weak contractual parties.20 It remains unclear and contentious how ordinary courts should apply this command, in particular in situations in which it would appear counterintuitive to allow third parties to withdraw their guarantees given in support of small businesses’ loans.21 Surprisingly, the proposed ‘Directive on consumer rights’,22 if adopted, is bound to replace the Doorstep Directive and yet it does not contain any adaptation of the text aimed at regulating situations in which the right of cancellation is relied upon by guarantors; nor does it make explicit the reasons why it has ‘chosen’ to stay silent on this issue in the Explanatory Memorandum to the proposed directive.23 18 cf Case C-237/02 Freiburger Kommunalbauten GmbH Baugesellschaft & Co KG v Ludger Hofstetter and Ulrike Hofstetter [2004] ECR I-3403, paras 16 and 23, which, read in combination, suggest a reading of the Directive’s fairness test as meaning that, a guarantee given for the benefit of the buyers contributes towards reducing the price; and that, for this very reason, a contractual clause requesting payment before the actual conclusion of the contract is held in principle not to be unfair, despite otherwise disadvantaging the buyers: for extensive discussion cf L Niglia, ‘The “Rules Dilemma”—The Court of Justice and the Regulation of Standard Form Contracts in Europe’ (2006) Columbia Journal of European Law 124 et seq. 19 I am not saying that it ‘should’ have been excluded but only that the concerns that I am raising should have been taken into account in a conscious attempt at (jurisdictional) balancing—eg, by addressing them in the travaux préparatoires or in the recitals. 20 cf BVerfGE 89, 214 (232). 21 cf N Reich, ch 12 in this volume. 22 cf Directive on Consumer Rghts COM (2008) 614 final, above (n 15). 23 ibid.

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Similar to the case of the test of unfairness, more circumspection on the part of the Commission would have been desirable. The Commission could have encapsulated the solution adopted by the ECJ in Dietzinger in the revised directive text, that is, it could have provided for the application of the right of cancellation to guarantees given in support of consumer rather than commercial contracts.24 The Commission would have achieved the double aim of exercising legislative self-restraint in relation to the contentious German case law, by leaving it to national courts to resolve the (constitutional) issue of the applicability of the right of cancellation to guarantees given in support of business contracts;25 and it would have even widened the directive’s reach to cover an area previously not contemplated in the directive—that of guarantees ancillary to consumer contracts. To re-state the previous version of the directive can only amount to a ‘one-size-fits-all’ strategy of superimposing European law on national jurisdictions, given that the directive keeps being ambiguous on the point and lends itself to being interpreted as applicable to any doorstep-like transaction in which it is being relied on, including guarantees in support of commercial contracts, with little consideration for the many legal uncertainties developed at the level of judicial enforcement in Germany. This seems to me to be another missed opportunity for the Union legislature to balance jurisdictionally, by adjusting intervention so as to cope with the complex dynamics of legal harmonisation.

IV

BETWEEN BALANCING AND PROPORTIONALITY

In the vocabulary of ‘public law’, all of the above translates, at least partly, into a surprising disregard for the requirement of proportionality, understood as the art of avoiding unnecessary intervention and for opting for the least restrictive action. Specifically, ‘proportionality’ means—as per the case law of the ECJ that draws inspiration from the robust experience of German administrative law26—that Union institutions are required to select means effectively suitable for the purpose of achieving the objectives in view. This means that they are required, first, to disregard means that cannot plausibly be assumed ‘in logic and/or in experience’ to lead to attain the stated objectives and, secondly, to adopt means that could have achieved the objective through ‘imposing fewer net costs’.27 The current activities of the Commission above exemplified are a blunt reversal of such ‘rational relation’ test28 in two senses. First, the symptomatic cases above indicated offer evidence of how implausible it is ‘in logic and experience’ to expect successful enforcement in relation to adverse contextual conditions. To push the harmonisation project ahead despite them can only perpetuate uncertainties and conflicts. Secondly, to downsize 24

cf Case 45/96 Bayerische Hypotheken und Wechselbank v Dietzinger ECR [1998] I-1199. I am thinking, once more, of the decision of the German Constitutional Court of 19 October 1993 (BVerfGE 89, 214) and subsequent relevant case law. 26 cf GA Bermann, ‘Proportionality and Subsidiarity’ in C Barnard and J Scott (eds), The Law of the Single European Market. Unpacking the Premises (Oxford, Hart Publishing, 2002) 75, 80–81. 27 I draw on Bermann, ‘Proportionality and Subsidiarity’, ibid, 80 (reconstructing the requirement of proportionality as ‘rational relation’ test). 28 As Bermann himself names the proportionality test, ibid. 25

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intervention, or to ‘lighten’ it, as indicated above, would be the ideal ‘less costly means’ for the attainment of the objectives in view, if looked at in contrast to the dominant practice of regimented harmonisation. For employment of those techniques would potentially avoid the many ‘costs’ involved in the conflicts and uncertainties that have been caused (the Germanic saga of the right of cancellation being a case in point) while achieving the minimal possible harmonisation in the given circumstances—rather than aiming for a higher level of harmonisation in actual fact not attained at all, thus causing all sorts of economic and social costs associated with the episodes of poor enforcement. To put it positively: the Commission should frame its legislative proposals in line with the need for accommodating the requirements of unity and diversity by embracing balancing. The mind goes to what has been suggested in relation to other problematic cases of Union law regulation, where only agreements on the ‘lowest common denominator’ in the Council of Ministers are at hand—in situations in which heightened concern for the potential adverse impact of draft legislative measures leads the constituent units (the Member States) to resist agreement on substantive reforms, and favour the status quo.29 Thus, as a remedy to sub-optimal outcomes in decision making related to failures to adopt substantive reforms, it has been argued that: [T]he Commission may be able to assess the hardness or pliability of the interests and constraints defended by all member governments, and to develop win-win solutions which— though departing from the initial policy preferences of some or all veto players— may still be preferred to the status quo by all (or at least a qualified majority of) member governments.30

In our field, the Commission should do something similar, that is, to pre-empt the states’ resistance as it would manifest itself at the enforcement, rather than at the legislative level. Ours (in the ‘private law’ field) is a situation of over-harmonisation as it is engineered in a way that too frequently fails to work on the ground.31 The above invites reflection on how important it would be for Union institutions to engage not only with the issue of whether they have competence to act, and of whether such action is justified under subsidiarity,32 but with the no less important issue of drafting legislative proposals valued to be consistent with the requirement of proportionality. Note, for example, that in the Green Paper the Commission explicitly acknowledges the relevance of ‘proportionality’ to the subject area, yet rather limitedly.33 For one can find reference to the issue of ‘proportionality’ only with regard to one of the options put forward for the incorporation of the DCFR, holding that:

29

cf Scharpf ‘The Joint-Decision Trap’, above (n 5) 850. ibid. 31 cf above (n 11). 32 Both perfectly legitimate concerns: cf S Weatherill, ‘The European Commission’s Green Paper on European Contract Law: Context, Content and Constitutionality’ (2001) 24 Journal of Consumer Policy 339, 363 and E Steindorff, ‘Annotation to Case C-104–96’ (1999) 36 Common Market Law Review 191, 202–03. 33 Commission, ‘Green Paper from the Commission on policy options for progress towards a European Contract Law for consumers and businesses’ COM (2010) 348 final (1 July 2010). 30

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[T]his solution could raise sensitive issues of subsidiarity and proportionality. Replacing the plurality of national laws, in particular if domestic contracts are also covered, with a single set of rules might not be a proportionate measure to deal with the obstacles to trade in the internal market.34

And note that even the ECJ is believed not to take proportionality seriously in cases relevant to private law. But the fact is that not to balance (judicially and) legislatively damages the harmonisation project from within, considering the fragmentation patterns that the harmonisation process must confront. In fact, jurisdictional balancing can be read two ways. Sceptics of the harmonisation project would see it as a way to effectively decrease EU intervention in the area; harmonisers would see it as a way to rationalise it by avoiding unnecessary intervention that would not work anyway on the ground. It is ironic that an instrument that potentially meets the concern of almost all of the interested actors on the scene is given such poor consideration. V

CONCLUSION

Three intertwined conclusions seem to me possible. First, it is remarkable how concerns for proportionality are only peripheral to legislative activities,35 despite the need for awareness concerning the issues that arise in terms of jurisdictional balancing. This provokes unnecessary conflicts and uncertainties at the level of implementation and enforcement processes. The cautiousness and scepticism of private law scholars towards balancing in general also bars awareness of, and action about, jurisdictional balancing in particular. The recalcitrance of scholarship to embrace balancing must be reconsidered in the light of this very consequence. Secondly, the failure to employ balancing is largely tractable to the choice of scholarship to remain within a formalistic type of reasoning.36 The resolution of this methodological question is vital to shifting the private law discourse towards a foundational approach that looks courageously at the overall range of constitutional and institutional techniques available, rather than elevating concerns for textual rationality above those entailed in the balancing option. This seems to me one powerful way in which to keep the political dimension as far as possible away from consideration, given the many clashes of interests falling within jurisdictional balancing that are left unnoticed and under-determined. Thirdly, the DCFR as ‘code-in-waiting’37 is at odds with considerations of jurisdictional balancing, given that it throws on legal systems and traditions en masse a set of common rules and principles with no possibility of considering ex ante the degree to which each set of rules lends itself to be enforced on the ground. It is a code-like structure that makes it unfeasible to exercise jurisdictional 34 cf Commission, ‘Green Paper’, ibid, 11 (with regard to ‘option six’ regarding how to incorporate in EU law the DCFR through a ‘Regulation establishing a European Contract Law’). 35 ibid. 36 Niglia, ‘Taking Comparative Law Seriously’, above (n 6) 401 and Niglia ‘Beyond Enchantment’, above (n 3) 60. 37 To borrow from Weatherill (chapter 18 in this volume).

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balancing. It is far from the kind of flexible instrument required to balance the variety of values and goals that underlie private law Europeanisation.38 From this vantage point, jurisdictional balancing is an ideal terrain for re-thinking the DCFR project in foundational terms. For, if the failure to exercise jurisdictional balancing can only produce further ‘fragmentation’, in addition to the current problematic situation of ‘legal fragmentation’ that the Commission officially acknowledges,39 we are really confronting a regulatory conundrum—with the Commission acknowledging a problem that the DCFR can only make worse. The perils of persisting in ignoring jurisdictional balancing only illustrate, once more, how the problematic character of European private law model-rules projects intimately relates to the no less problematic character of scholarship.

38 cf T Wilhelmsson, ‘The Variety of Welfarism in European Contract Law’ (2004) 10 European Law Journal 712, 733 (arguing that code-like structures are ‘too static an instrument’ for projects of private law regulation to flexibly open up to accommodating the variety of, often conflicting, ‘welfarist’ value considerations). 39 For discussion cf Niglia ‘Of Harmonisation and Fragmentation’ above (n 12).

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18 The Multi-level Structure of Private Law: Editorial Introduction STEPHEN WEATHERILL

I

T IS A plain truth that anyone with ambitions to map the several influences on the shape of private law in Europe must reckon with a plurality of sources. The quest, if conducted with comprehensive zeal, will embrace binding and nonbinding rules, legislation and case law, but also, and of particular relevance to the chapters which comprise this section of the book, it must take account of private law’s development in Europe beyond the exclusive grip of the state. Private law knows geographical boundaries—to be sure, national law remains immensely significant—but its evolution is neither defined nor limited by territorial scope alone. That means that sources ‘above’ the state—most conspicuously but by no means exclusively the European Union—infiltrate national legal orders and in some jurisdictions it also means that sources at regional or sub-state level play a part. Against this background of understanding of a multi-level structure on which is built European private law, the key theme which binds together the chapters in this section asks how one may cope with the differences that unavoidably emerge from this pattern. Governance in private law is the dominant concern. How can one foster convergence (or approximation, or harmonisation, or unification) of private law(s) in Europe: an inquiry which one may undertake without preconception as to whether one would ultimately wish to do any such thing. This requires assessment of the nature and purpose of institutions, laws (not just orthodox private law but also including constitutional rules governing binding force and resolution of conflicts and fundamental rights too) and softer sources. The ‘Draft Common Frame of Reference’ (‘DCFR’) has lately been a flashpoint, especially in so far as it has been treated as a ‘code-in-waiting’, but it is probably already instructive that its intended function has appeared to fluctuate under the influence of varying levels of ambition displayed by the Commission (or, more pertinently, by individuals within it). The lesson: there is no true way for the development of European private law in its multi-level environment. All is to play for. The contribution of Jan Smits considers the rise of sites of governance beyond the nation state. This agenda naturally embraces the European Union, and of particular current relevance the place and function of the DCFR, but also includes sources such as the WTO, IMF and the World Bank. Given the rise of this ‘plurality of sources’ Smits contends that there is a pressing need to rethink the notion of private law in the face of the blurring of lines between legal orders and the absence of

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formal hierarchy. Does this lead to incoherence? Does it destroy system? His inquiry ranges not only over geographical allocation of responsibility (from sub-state through state level to supra-state) but also matters of personal allocation (legislators, agencies, courts or the parties themselves). He then presents a case for governing this pattern of difference and, most of all, for encouraging plurality rather than merely tolerating it (and still less seeking to remedy it). A perfectly whole civil code is simply not on offer in Europe today—nor, he argues, should it be. Walter van Gerven shares with Jan Smits the driving perception that the rise of a multi-level political and economic environment has fundamentally altered the legal environment too. As he explains, whereas in the past one could write about the law of Belgium, now one must describe the laws in Belgium: and the same evolution affects all the Member States in the European Union as well as other jurisdictions beyond the Union. He demonstrates the need to grasp the interaction of laws sourced at sub-state, state and supra-state level while also pointing out that the complexity of the situation is increased by the blurring of lines between private and increasingly prevalent public law. Constitutional principles are required to govern the interaction of the several different types of rules involved, but, even beyond that, van Gerven explores the place for methods of governance—such as networks and the open method of coordination. In the latter case, he envisages an open method of convergence, drawing legislatures, courts, regulators and educators into a process of enhancing inter-jurisdictional consistency. The DCFR should, he argues, be part of this effort. Kare Lilleholt wishes to portray the DCFR as one of several possible instruments with which to achieve coordination of European private law, rather than as a means to achieve unification or harmonisation, while also situating his discussion according to an appreciation that one can observe all these processes occurring in the shaping over time of European private law. He draws on experience in the Nordic countries to point out that it is not necessary to create supra-state institutions or law-making processes in order to generate cross-border cooperation. There have proved to be sufficient incentives to pursue formal and informal patterns of mutual engagement. He sees no reason why comparable patterns should not also emerge within the EU, where, moreover, the EU’s own institutions could participate. The EU, then, may be sui generis, but this is not to deny that we may learn lessons from elsewhere. To sharpen the pace of development Lilleholt floats the idea of creating a permanent European Law Commission to act as a ‘hub’ for the many processes of dialogue that are currently underway. The contribution by Mathias Reimann and Daniel Halberstam examines whether the unification of private law is better achieved by the command of central institutions or according to a decentralised model involving scholars, teachers and practice. Data gathered from a number of jurisdictions around the globe leads them to the firm conclusion that the former is the better bet. Albeit that the detail varies significantly across the jurisdictions surveyed, it is in general true that codification and/or legislative act and/or constitutional norms, underpinned by central adjudication and, more broadly, by structural centralisation, represent the most effective routes to unification. The EU is from these perspectives deficient, and it is accordingly no surprise that, assessed according to this methodology, it shows a

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face that is far from legally unified—and far less unified than any national federal system. In the EU ‘top down’ forces are relatively weak, while ‘bottom up’ impulses, though a little more vigorous, are still inadequate to achieve unification. Reimann and Halberstam counsel that, among the ‘top down’ methods, centralised legislation is the most effective route to unification of private law in the EU. That of course is a quite different point from arguing that this should be pursued, but their challenge to those desiring unification is precisely to reckon with whether they are comfortable with the degree of centralisation that this analysis deems to be necessary. Matthias Storme adds a cautionary, even combative, tone to the discussion. He acknowledges the prevailing diversity of practice and custom but insists that one must separate out inspection of such phenomena from the question of whether they constitute ‘law’. There are normative questions involved—they surround defence of the rule of law, the allocation of authority and responsibility for law-making and the frequently contested claims to legitimacy made by different institutions and actors. The multi-level environment emphatically does not, Storme argues, do away with the need to address these issues—it does, however, complicate the inquiry. Especially—but not only—in the context of the EU, it is necessary to consider not only ‘horizontal’ questions about institutional choice, but to consider questions of ‘vertical’ distribution of competences between different levels. So he reveals the different types of ‘balancing’ which are at stake in these political and constitutional dimensions, and argues they should not be allowed to remain hidden under a rhetorical blanket of ‘pluralism’ or ‘diversity’. And he makes a specific proposal— contrary to the current pattern whereby national codes are set aside in a fragmentary way by EU rules, instead he prefers a European civil code from which each Member State may choose to deviate. The contribution of Lubos Tichy deals in particular with the place of private international law and procedural law in this environment of multiple sources. He shows how the impetus towards the construction and completion of the European Union’s internal market has brought about legal harmonisation which has gone some way to erasing differences between the participating Member States. This reduction in plurality applies to conflict and procedural rules, but also to substantive law too. This, indeed, is a process that is dynamic and which is driven by a combination of forces, actors and institutions. Tichy shows how the model chosen by the EU presents enduring challenges, such as the need for effective judicial cooperation across borders and between jurisdictions, as well as adequate specialised judicial expertise. Once again, the thematic question is raised: is the system of governance adequate to shoulder the load placed upon it? The breaking of a simple bond between law and territory—which, if it ever existed in a pure form, has in any event existed for a relatively short period in the history of laws on the European continent—is one element, but a vividly important one, in the changing shape of the nation state. The European Union itself is both response to and cause of the emancipation of some forms of economic, political and cultural activity from the rigid constraints of national frontiers—and law too has skipped clear of some of those national moorings. ‘Globalisation’ is the catchphrase—and it reminds us that this is by no means a challenge that is unique to Europe. Trying to understand the multi-level environment invites some deep

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questions about the nature of law, legitimacy and sources of authority, but it also forces us to consider how to seek to manage difference and change (if at all!). For example, Reimann and Halberstam’s account pins the search for unification to the adoption of centralised legislation—other routes simply cannot be as effective, or even effective at all. Those who would be prepared to take the longer road— wherever it may lead, which clearly may not be unification at all—are more sympathetic to softer forms of governance, such as van Gerven’s ‘open method of convergence’. These are not competing narratives. They reflect the space in the shaping of European private law for embrace of different objectives, different priorities, different methods. It is no accident that the DCFR has generated such a heated debate, because its very ambiguity of form and purpose has allowed it to assume the shape preferred by the observer: it is potentially the answer to everything until such time as concrete decisions about its form and purpose are taken, whereupon many will doubtless be disappointed. Perhaps the most pressing lesson of the chapters contained in this section is that the outcome which one hopes or expects to achieve should help to guide one’s approach to governance of private law in the multi-level environment.

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19 Plurality of Sources in European Private Law, or: How to Live With Legal Diversity? JAN M SMITS *

I

INTRODUCTION

T

HE ONGOING DEBATE about European private law1 and the publication of the ‘Draft Common Frame of Reference’ (‘DCFR’)2 prompt the need for a fundamental rethinking of our notion of private law. This aim of this contribution is to discuss a theme where such fundamental rethinking is in particular required: the relationship between the various legal orders that have come to exist within Europe (or even globally) and the consequences of this multiplication of sources for how we perceive private law. This phenomenon is usually discussed under the heading of the ‘multi-level structure’ of European private law, but—as we shall see in the following—this term only describes one possible way of dealing with (or understanding) the present plurality of sources— and possibly not the best one. The main argument of this contribution is that there is an urgent need to rethink our idea of private law sources. The emergence of new types of rules, emanating from both international (including European) and private law makers, cannot be explained by traditional theory that is largely based on the national states’ monopoly in law-making and that implies a hierarchy of sources. As this theory has lost much of its explanatory power, we need a new one. This contribution does not intend to offer the comprehensive theory that we need, but it does aim to put the theme on the agenda of private law scholars. It does so by raising several questions and by suggesting possible answers. This contribution is structured in the following way. Section II gives an overview of the well-known multiplication of sources of private law that we have witnessed over the last decades. This leads to the identification of various questions. The next * This contribution is based on the lecture given at the conference ‘The Foundations of European Private Law’ at the European University Institute (EUI) in Florence in September 2009. Thanks are due to Mark Kawakami for invaluable research assistance. 1 See the recent overview in C Twigg-Flesner (ed), The Cambridge Companion to European Union Private Law (Cambridge, Cambridge University Press, 2010). 2 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009).

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two sections deal with two of these questions: are we able to identify a ‘best’ level of regulation for a certain topic (section III) and which (other) strategies can we adopt when dealing with a variety of sources out of which private law emerges (section IV)? One preliminary remark should still be made. Although this chapter deals mainly with (European) private law, it addresses issues that are just as relevant in other fields where the number of sources of law has multiplied. Particularly in the field of constitutional law, there has been much debate about how to deal with the pluralism of different ‘constitutional authorities’ within the European Union.3 Where useful, this contribution borrows from that debate.

II

MULTIPLE SOURCES OF PRIVATE LAW

Over the last two centuries, private law was—at least on the European Continent— mostly seen as being ‘made’ by democratically legitimated national institutions (in particular the legislatures and the courts). This view, however, no longer reflects today’s complex reality.4 The activities of the European legislature to make binding rules in the field of private law are well known,5 but they are only the tip of the iceberg. Also, the drafting of rules by academics with a view to their future application by private parties, legislatures and courts—as in the case of the DCFR6— is only one example of the so-called ‘private global norm-production’.7 In reality, we have witnessed over the last decades the emergence of an increasing number of rules and policies that were developed ‘beyond the nation-state’ and with relevance for private parties.8 Apart from the activities of the European Union itself (and the existence of conventions like the United Nations Convention on Contracts for the International Sale of Goods), important policy decisions are now being made by organisations such as the WTO, IMF and World Bank. The activities of the WTO in particular can have an important impact on the autonomy of the state when it deals with free trade, taxes, intellectual property and protection of health, thereby also affecting the relationships between private parties. The old

3 A recent overview is provided by D Halberstam, ‘Constitutional Heterarchy: The Centrality of Conflict in the European Union and the United States’ in JL Dunoff and JP Trachtman (eds), Ruling the World? Constitutionalism, International Law, and Global Governance (Cambridge, Cambridge University Press) 326. 4 See also JM Smits, ‘Democracy and European Private Law’ (2009) 3 European Journal of Legal Studies 26. 5 See for a recent overview, eg, R Zimmermann, ‘The Present State of European Private Law’ (2009) 57 American Journal of Comparative Law 479. 6 Von Bar and Clive, Principles, Definitions and Model Rules of European Private Law, above (n 2). On the DCFR as a source, see MW Hesselink, ‘The Common Frame of Reference as a Source of European Private Law’ (2009) 83 Tulane Law Review 919. 7 See for this term, G Teubner, ‘Breaking Frames: The Global Interplay of Legal and Social Systems’ (1997) 45 American Journal of Comparative Law 149, 157. 8 For an elaboration of the idea of private law beyond the nation state, see R Michaels and N Jansen, ‘Private Law Beyond the State? Europeanization, Globalization, Privatization’ (2006) 54 American Journal of Comparative Law 843; N Jansen and R Michaels, ‘Private Law and the State’ (2007) 71 Rabels Zeitschrift 345; and the special issue of (2008) 56 American Journal of Comparative Law 527.

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example of the lex mercatoria 9 is now supposedly supplemented by a ‘lex laboris internationalis’10 and a ‘lex sportiva internationalis’.11 Additionally, various types of voluntary law,12 such as norms adopted by corporate networks (the most important example being codes of conduct for corporate social or environmental responsibility), rules of standardisation organisations for technical standards (such as the ‘codex alimentarius’) and other types of self-regulation13 are supposed to influence the conduct of private parties. Most of these authoritative rules, norms and policies from ‘sites of governance beyond the nation-state’14 would not be recognised as binding in a traditional conception of law because they do not meet the formal criterion of being enacted by the relevant authorities and backed by coercive power. But they often do set the norms for specific groups of people and they are important in predicting their behaviour. One can even argue that as the legitimacy of law was found in the laws of nature in the seventeenth and eighteenth centuries, and in democratic political legislation in the nineteenth and twentieth centuries, it is now time to find a new source of legitimacy.15 It is clear that this new source cannot (or cannot only) be the authority of the national state. Not only is the authority of the aforementioned norms independent of the state, but this authority is also not exercised within clearly defined territorial entities. Instead, the relevant rules are often chosen and applied across existing borders.16 Issues that were previously within the domain of democratic decision-making at the national level have thus shifted to the European or international level and to norm-generating communities of an ethnic, religious or functional nature. Yet there remains one other source of pluralism that must be added to the various sources generated by the emergence of European, international and private regulation. This is the possibility for citizens to choose their ‘own’ law. Within the limits set by private international law (that usually requires some connection between the parties or their activities and the designated state),17 people are often able to choose the law that best suits their interests. This has led to a ‘law market’18 that is already very real in some areas (like commercial and contract law).

9 cf recently, V Piergiovanni (ed), From Lex Mercatoria to Commercial Law (Berlin, Duncker & Humblot, 2005). 10 cf the contributions in JDR Craig and SM Lynk (eds), Globalization and the Future of Labour Law (Cambridge, Cambridge University Press, 2006). 11 See F Latty, La ‘Lex Sportiva’: Recherche sur le Droit Transnational (The Hague, Kluwer, 2007) and K Foster, ‘Is There a Global Sports Law?’ (2003) 2 Entertainment and Sports Law Journal 1. 12 See for this term, A-M Slaughter, ‘International Law in a World of Liberal States’ (1995) 6 European Journal of International Law 503, 518. 13 See, eg, F Cafaggi, Reframing Self-Regulation in European Private Law (The Hague, Kluwer, 2006) and D Schiek, ‘Private Rule-Making and European Governance—Issues of Legitimacy’ (2007) 32 European Law Review 443. 14 G De Burca, ‘Developing Democracy Beyond the State’ (2008) 46 Columbia Journal of Transnational Law 101, 104. 15 cf Teubner, ‘Breaking Frames’, above (n 7) 157. 16 J Delbrück, ‘Exercising Public Authority Beyond the State: Transnational Democracy and/or Alternative Legitimation Strategies?’ (2003) 10 Indiana Journal of Global Legal Studies 28, 29. 17 See for the EU, eg, Council Regulation (EC) 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6. 18 E O’Hara and LE Ribstein, The Law Market (Oxford, Oxford University Press, 2009).

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It is important to emphasise one particular feature of this plurality of sources: the lack of a formal hierarchy among them.19 Different authorities can legitimately compete on the same territory or about the same relationship without a higher authority deciding the conflict once and for all.20 In other words, different parts of private law are dealt with by different ‘law-givers’ without an overall responsibility for coherence and unity lying with one overarching institution.21 Multiple ‘systems’ of private law thus overlap with each other as they deal in divergent ways with the same questions. In this sense, the ‘system’ of private law is characterised more and more by pluralism:22 diverging substantive norms exist and they all have an equal claim to validity.23 This becomes particularly clear in private law, which has always been seen as a coherent system. Now that private law is dealt with at different levels, incoherence is likely to emerge because of the often divergent rationales behind the rules.24 This raises the question of whether we can still think of private law as a system and, if so, whether such a system should comprise only of national laws or whether it should incorporate European legislation, case law and private regulation. How is this pluralism in the field of private law usually perceived? Unfortunately, the emergence of rules emanating from the European legislature and courts (or other entities than the state) is often considered as a phenomenon that stands next to the ‘normal’ production of norms at the national level. This means, for example, that the debates about national private law and European private law are still largely separate, being conducted by different scholars in different journals and in different academic circles. To the extent that the ‘Europeanisation’ of private law is taken on board by nationally-oriented scholars, their analysis is often limited to how the European rules influence national laws.25 Furthermore, the legitimacy of the European rules is usually found in notions that are directly derived from the nation-state itself. Thus, the debate about how ‘democratic’ European rules actually are and to what extent they should come about in a procedure that resembles

19 cf F Cafaggi, ‘Introduction’ in F Cafaggi (ed), The Institutional Framework of European Private Law (Oxford, Oxford University Press, 2006) 6: ‘the phenomenon of multi-level law-making (…) has reduced the ability to solve conflict through hierarchy’. 20 Also see, M Avbelj and J Komárek, ‘Four Visions of Constitutional Pluralism’ (2008) 4 European Constitutional Law Review 524. 21 See on this development, eg, C Joerges, ‘Interactive Adjudication in the Europeanisation Process? A Demanding Perspective and a Modest Example’ (2000) 8 European Review of Private Law 1; O Remien, ‘Einheit, Mehrstufigheit und Flexibilität im europäischen Privat- und Wirtschaftsrecht’ (1998) 62 Rabels Zeitschrift 627; and MW Hesselink, ‘The Structure of the New European Private Law’ (2002) 6.4 Electronic Journal of Comparative Law. 22 The classic reference is to J Griffiths, ‘What is Legal Pluralism?’ (1986) 24 Journal of Legal Pluralism 1. 23 cf G Teubner, ‘The Two Faces of Janus: Rethinking Legal Pluralism’ (1992) 13 Cardozo Law Review 1443 and PS Berman, ‘Global Legal Pluralism’ (2007) 80 Southern California Law Review 1155, 1192: conflicting rules occupy the same social field. 24 See, eg, CU Schmid, ‘The ECJ as a Constitutional and a Private Law Court: A Methodological Comparison’ (2006) ZERP Diskussionspapier 4, 8 ff. 25 A paradigmatic example is AS Hartkamp, CH Sieburgh and LAD Keus (eds), De invloed van het Europese recht op het Nederlandse Privaatrecht (The Hague, Kluwer, 2007), discussing at length the influence of European law on Dutch private law. Hesselink, ‘The Common Frame of Reference as a Source of European Private Law’, above (n 6) 932, calls this a ‘nationalist perception’ of the Europeanisation of private law.

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law-making by national parliaments, is a clear example of this ‘methodological nationalism’.26 Stated differently, the increasing Europeanisation of private law has not yet been ‘internalised’ by most private lawyers. This is a pity considering that the emergence of law flowing from sources other than the national legislatures and courts raises several important questions about how we should ‘re-conceptualise’ private law in a more inclusive manner, also taking into account other sources than the national ones. In the following, two of these questions are discussed. This does not mean that these are the only questions to think of,27 but I believe that they are the two most salient issues if pluralism is taken seriously in private law. The first question is whether we are able to identify a ‘best’ level of regulation for a certain topic (section III). But even if we can establish what is, in theory, an ideal governance system for European private law, this does not mean existing competition among the various sources of law is (or even should be) eliminated. Section IV therefore addresses the issue of which strategy to adopt when dealing with a plurality of non-hierarchical sources).

III

LEVELS OF REGULATION—TOWARDS CRITERIA FOR ESTABLISHING AN OPTIMAL LEVEL FOR DEALING WITH PRIVATE RELATIONSHIPS?

The development towards an increasing importance of law coming from both European and other international sources and self-regulators as sketched in the previous section is well known and was a phenomenon described in detail by others.28 However, until now, relatively little attention was paid to the normative question29 of what the decline of the state monopoly in the making of private law means for the regulation of private relationships.30 There is a clear need for a new theory of sources of private law that puts less emphasis on the national states and that allows us to decide not only at which geographical level of regulation private relationships are best dealt with (the local, regional, national, European or supranational level), but by whom (legislators, regulatory agencies, courts or the parties themselves) and for which topics.

26 On which in more detail, JM Smits, ‘The Draft Common Frame of Reference, Methodological Nationalism and the Way Forward’ (2008) 4 European Review of Contract Law 270. 27 Another one is how to identify what is law if rules are no longer exclusively based on the authority of the State. Thus, Berman claims that in a pluralist approach, it is not decisive who has the formal authority to give norms, but which rules are treated as binding in practice; see Berman, ‘Global Legal Pluralism’, above (n 23) 1178. 28 See, eg, Cafaggi (ed), Reframing Self-Regulation, above (n 13); and H-W Micklitz, ‘The Visible Hand of European Regulatory Private Law. The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’ EUI Working Paper LAW No 2008/14. 29 Theories of multi-level governance typically explain reallocation of authority upwards (to the supranational level), downwards (to the sub-national) and sideways (to networks): see, eg, the seminal paper by L Hooghe and G Marks, ‘Types of Multi-Level Governance’ (2001) 5 European Integration Online Papers No 11: eiop.or.at/eiop/index.php/eiop. 30 See, however, F Cafaggi and H Muir-Watt (eds), Making European Private Law: Governance Design (Cheltenham, Elgar, 2008) and K Heine and W Kerber (eds), Zentralität und Dezentralität von Regulierung in Europa (Stuttgart, Lucius & Lucius, 2007).

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This does not mean that the existing literature on optimal levels of regulation cannot offer guidance. However, this guidance is often too general to be really useful. In so far as economists of federalism have dealt with the question,31 their main finding is that fragmentation of governance across multiple jurisdictions is better than a state monopoly. Usually, three reasons are put forward to justify the division of competences among authorities operating at different levels. First, political scientists and economists claim fragmentation of governance is the only way to capture policy externalities to a sufficient degree. Because externalities of the provision of public goods have a different territorial reach, the scale of governance should be adjusted accordingly. Global warming thus needs a different level of regulation than parties not performing their contracts.32 While this is an argument for centralisation in case of inter-state externalities, two other arguments point in the direction of regulation at a lower level. One of these arguments is that decentralisation allows for the satisfaction of different preferences of citizens and thus for jurisdictional competition.33 The other is that legal diversity that results from division of competences usually better facilitates experimentation with innovative solutions than if a monopolistic regulator would address the same issue.34 In addition to these three general points, one can point at insights of other disciplines beyond economics. Thus, political scientists often claim that in so far as governments want to distribute wealth among the citizens or want to reach other distributional goals, they should make use of the democratic procedures at the state level. A public choice perspective on the other hand would lead to the conclusion that competences should be allocated at the level where the impact of pressure groups (and bureaucrats) is the least.35 This may be the level where decisions are made in the most transparent way (not necessarily the national level). Finally, one could even refer to general insights about the ideal size of institutions. The classic work on this is probably EF Schumacher’s Small is Beautiful,36 in which it is pointed out that, when designing institutions, it is better to have many small autonomous units combined with a large-scale (possibly global) coordination than a supranational regulator. Despite the importance of these general insights, they do not offer much guidance as to which level of regulation is best for dealing with a certain topic. The conclusion that Kerber reaches on basis of a survey of economic criteria dealing with the question of multi-level governance, is that the optimal solution depends completely on the specific circumstances: easy and clear answers do not exist.37 This is because there are both advantages and disadvantages of regulation at the national or other levels. Applied to European private law, Grundmann and Kerber 31 See W Kerber, ‘European System of Private Laws: An Economic Perspective’, in Cafaggi and Muir-Watt (eds), Making European Private Law, above (n 30) 64, where seven groups of relevant economic criteria are distinguished. 32 See, Hooghe and Marks, ‘Types of Multi-Level Governance’, above (n 29) 4. 33 C Tiebout, ‘A Pure Theory of Local Expenditures’ (1956) 64 Journal of Political Economy 416. 34 The obvious reference is to Friedrich A Hayek, Der Wettbewerb als Entdeckungsverfahren (Kieler Vorträge N.S. 56, 1968). 35 cf E Noam, ‘The Choice of Governmental Level in Regulation (1982) 35 Kyklos 278. 36 EF Schumacher, Small is Beautiful: A Study of Economics as if People Mattered (London, Blond & Briggs, 1973). 37 Kerber, ‘European System of Private Laws’, above (n 31) 85.

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rightly reach the conclusion that ‘any more centralised tool than an optional European code would all too easily give up all advantages of decentralised rule-making’.38 But this does not provide us with an answer about what actually is the optimal level of regulation and what is the optimal role of the actors involved in the making of European private law. An important question now is whether we are able to go further and establish not only that there is in general a need for decentralised law-making (as we just saw), but find the relevant criteria for which level of regulation is best. It is obvious why this question has not been on the agenda of private law scholars for a very long time: they simply considered the national level as the ‘natural’ one. A promising line of research would be to try to find these criteria. This is not an easy task: just as the idea of private law being a matter for the national states is clearly based on a more elaborate philosophy about the role of state and citizen, new criteria should have their foundation in another theoretical framework that still needs to be developed. At this place, it seems logical to mention the criterion that is used within the European Union to demarcate European from national competences.39 According to the principle of subsidiarity, laid down in Article 5(3) Treaty on European Union, in areas which do not fall within its exclusive competence, the Union only takes action if and insofar as the objectives of the proposed action ‘cannot be sufficiently achieved by the Member States (…), but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level’. This means that decisions have to be taken at the lowest appropriate level of government. Again, the difficulty with this criterion is that it does not clearly define what ‘sufficiently’ means or how to determine such an illusive concept. Should we, for example, find guidance in political or economic criteria? Other than that legislation should be enacted ‘as closely as possible to the citizens of the Union’,40 subsidiarity is largely an empty term, or—to quote Easterbrook41—a ‘weasel word’, to be filled with whatever one deems appropriate for other reasons. But even with its limitations, the subsidiarity principle is important because it forces the European legislator to give reasons for the action it undertakes and to consider whether other norm-givers would be better suited to deal with a problem. However, it still does not give substantive reasons for regulating at one level rather than at another.

38 S Grundmann and W Kerber, ‘European System of Contract Laws—A Map for Combining the Advantages of Centralised and Decentralised Rule-making’ in S Grundmann and J Stuyck (eds), An Academic Green Paper on European Contract Law (The Hague, Kluwer, 2002) 295, 296. This leads them to a plea for a two-level system of contract laws in the EU with mandatory and facilitative law at both levels. 39 See in this context, eg, RJ van den Bergh, ‘Subsidiarity as an Economic Demarcation Principle and the Emergence of European Private Law’ (1998) 5 Maastricht Journal of European and Comparative Law 129. 40 EU Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality [2008] OJ C115/206; cf W van Gerven, The European Union: a Polity of States and Peoples (Oxford, Hart Publishing, 2005) 140. 41 F Easterbrook, ‘Federalism and European Business Law’ (1994) 14 International Review of Law and Economics 125, 126.

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What could these other reasons be? Without aiming to define specific criteria in this chapter,42 I like to point at what— in my view—is a promising way to find such optimal levels. It is based on a functional view of the regulation of relationships between private parties: what are actually the functions that private law at the ‘natural’ national level serves and could these functions not be achieved in a better way at another level? The ‘unpacking’ of these component elements of national private law should lead to the identification of an ideal governance structure. But I should immediately add that this approach is not as straightforward as it may seem: different opinions exist about what the functions of private law actually are. If we would for example adopt Weinrib’s view that ‘the purpose of private law is to be private law’,43 it does not matter so much at which level it is laid down. This is different if we put more emphasis on its functions of, for example, providing legal unity, being an expression of a people, allowing individuals to engage in market transactions or provide a certain level of social justice—arguably all goals that private law needs to achieve at the same time. It is important to note that, even if we are able to identify optimal levels of regulation, we will still not have an overarching institution that can deal with the dangers of incoherence (in so far as these are indeed dangers) caused by the existence of different ‘producers’ of private law.44 The next section therefore addresses the question of how to deal with such a plurality of sources.

IV

STRATEGIES FOR DEALING WITH A PLURALITY OF SOURCES IN EUROPE

The above section can be seen as a plea to think more about optimal levels of regulation in European private law. However, even if these optimal levels can be established—and it is not likely that consensus can be reached about this—this will not take away the need to deal with plural and partly overlapping sources. Plurality of sources of private law is already a pervasive phenomenon. What is more: also in a multi-level private law with clearly demarcated competences for each level, ‘competition’ among the various law-givers distinguished in section II will remain. This competition urges the need to adopt a strategy for dealing with plural law. In this section, I distinguish several of these strategies, loosely categorised into two different categories: strategies that attempt to eliminate pluralism (or legal diversity) and those that try to accommodate or even encourage it. These strategies are well known as such, but they are not always looked at through the lens of dealing with a pluralist private law.

42 See for an example of how to ‘unpack’, eg, the notion of democracy in private law, Smits, ‘Democracy and European Private Law’, above (n 4). 43 EJ Weinrib, The Idea of Private Law (Boston, Harvard University Press, 1995) 5. 44 For the thesis that multi-level theory is unfit to explain European constitutionalism (is ‘a fallacy’), see R Barents, The Fallacy of European Constitutionalism (forthcoming).

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Eliminating Plurality

A first strategy is to try to eliminate existing diversity altogether. This is usually done by attempting to create universal norms with a view to harmonisation. Here, it does not matter so much whether this harmonisation will indeed follow: much more important is that the method through which private law is presented is one that tries to erase normative differences. An obvious example are the rules of private law as presented in the DCFR for European Private Law: the existing plurality of norms (of the 27 national jurisdictions, the European rules coming from the European legislator and the ECJ and private regulation) is not in any way reflected in the end result. I believe this is wrong: the DCFR should have presented a much more discursive view of what private law in Europe actually is about.45 The DCFR represents European private law as if there is only one European conception of what is just, whereas there are in reality different conceptions and all with an equal claim to being ‘valid’. Another—though less radical—strategy to deal with plurality of sources by eliminating it (thus not recognising that multiple norms could be applicable to the same situation) is by locating disputes territorially.46 If multiple sets of national norms are applicable to the same situation, private international law chooses one of these sets as the governing law. However, O’Hara and Ribstein recently explained why the decision about which law is applicable should not be based on a territorial approach. Their conclusion, based on a number of arguments, is that the ‘mobility of people, assets and transactions makes deciding which laws to apply to a legal problem increasingly arbitrary.’47 The fundamental issue of how to deal with normative differences is then not resolved.48 In addition, it is clear that in a territorial approach, the legitimacy of other norm-generating communities than the nation-state has to be rejected. This became very clear with the drafting of the Rome I Regulation:49 although the draft version allowed for a choice for another than a national law, this possibility was in the end rejected.50

B

Managing Legal Diversity

A second strategy is to attempt to manage the plurality of sources. I believe this is a more fruitful approach because it assumes that normative conflict is unavoidable and that the only thing we can do is try to ‘govern differences’.51 It means taking 45 See in more detail, JM Smits, ‘The Draft Common Frame of Reference: What is Wrong and How to do Better?’ in H-W Micklitz and F Cafaggi (eds), European Private Law after the Common Frame of Reference (Cheltenham, Elgar, 2010). 46 See Berman, ‘Global Legal Pluralism’, above (n 23). 47 O’Hara and Ribstein, The Law Market, above (n 18) 4. 48 See also Berman, ‘Global Legal Pluralism’, above (n 23) 1229. 49 Council Regulation 593/2008 (Rome I), above n 17. 50 See in more detail, H Heiss, ‘Party Autonomy’ in F Ferrari and S Leible, Rome I Regulation (Munich, Sellier, 2009) 9ff. 51 See Cafaggi and Muir-Watt, Making European Private Law, above (n 30) 7 and Berman, ‘Global Legal Pluralism’, above (n 23) 1192. The idea of normative conflict being unavoidable is worked out in detail in JM Smits, Omstreden rechtswetenschap (The Hague, Boom Juridische uitgevers, 2009).

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seriously the idea that different authorities can legitimately compete on the same territory and about the same relationship. And, like in real competition, there is no higher authority to decide what is the ‘best’ solution. It is difficult for lawyers to think along these lines: as Glenn convincingly shows, there has always been a strong tradition of having (and teaching) only one law (the ius unum) because states are allergic to allow several normative orders to exist on their territory at the same time. With the decline of the normative authority of the state, this is bound to change52 and it calls for a rethinking of our very idea of private law. I will discuss two strategies of managing diversity within the European Union.53 The first is based on the idea of coordination among actors, which means it is still the state (or European or international institution) that is in charge of the managing process. The second strategy puts much more responsibility on other actors (in particular on the citizens themselves). The first strategy to deal with a diverse private law is one that seeks to avoid the deficiencies of overlapping and multiple legal regimes by coordination. The most prominent example of this at the European level is the use of the so-called Open Method of Coordination (OMC). This method was explicitly accepted as a method of governance at the 2000 Lisbon European Council. The method implies that the European Member States agree on defining certain policy goals or common problems, while recognising that the question of how to reach the goal or address the problem is a responsibility of the Member States. Coordination takes place through a procedure in which the Commission, the European Council and the Member States are involved: the Commission and the Council make guidelines and set benchmarks, Member States make national action plans and report back to the European institutions. If necessary, the Council can make recommendations. An explicit goal of this process is that Member States (and the various other actors involved) can learn from each other’s experiences.54 The European institutions can even identify one ‘best practice’ and recommend it to the other Member States, without forcing them to introduce it. In this respect, OMC is a mechanism that allows for mutual learning and experimentation.55 Although coordination can certainly help to deal with some of the problems caused by law coming from different sources, we must be modest about what it can remedy: the success of the coordination efforts is completely dependent on the coordinating entities themselves. In addition, OMC itself is a method only used within the European Union and not at the global level. Most importantly, however, coordination is no solution for the lack of unity or coherence that is particularly a problem in the field of private law. Even with coordination, it remains difficult to

52 HP Glenn, ‘A Transnational Concept of Law’ in P Cane and M Tushnet (eds), The Oxford Handbook of Legal Studies (Oxford, Oxford University Press, 2003) 839. 53 There are other mechanisms, neatly summed up by Berman, ‘Global Legal Pluralism’, above (n 23) 1196. 54 See, eg, W van Gerven, ‘Bringing (Private) Laws Closer to Each Other at the European Level’ in Cafaggi (ed), The Institutional Framework of European Private Law, above (n 19) 37, 60 and Kerber, ‘European System of Private Laws’, above (n 31) 90ff. 55 The method can of course only function within the EU. See on coordination beyond the EU-level, eg, AJ Kanning, ‘Unifying Commercial Laws of Nation-States’ (PhD thesis, Maastricht University, 2003).

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make the European concepts and rules fit into the national private law system or to harmonise the different rationales of national and EC private law. This raises the question whether there is an alternative strategy to deal with pluralist sources. I believe there is, but it takes a willingness to no longer think in terms of coherent and relatively ‘closed’ national legal systems as a model for private law at the European level. When re-thinking private law at the European level, we should not attempt to use a concept of normative coherence of legal systems that is based on our national understanding of coherence. It would also be an approach that would not necessarily attempt to ‘remedy’ the consequences of a plurality of sources, but rather encourages such plurality. In other words, this approach would recognise that one can always debate about the right answer to a normative question56 and therefore, different communities should be allowed to compete with each other in their efforts to apply a certain set of norms to an act or an actor.57 The following sketches the contours of such an approach by making three points. Our starting point should be what is at the core of legal pluralism: the idea that people can feel affiliated with different groups and feel bound by the norms of these groups.58 If this idea is taken seriously, it means that it is wrong to make the state primarily responsible for deciding which law is to apply to its citizens. Instead, the citizens themselves should have a much more important role in deciding which law should apply to (at least part of) their activities. This fits in with the view that the present vacuum in global regulation (the traditional suppliers of law fail to regulate things at the global level)59 make the demand side (the end-users of law, such as consumers, businesses, pensioners, etc) more important. Practically speaking, this means that—within the limits set by mandatory law (see below)—people should be able to choose a legal system that in their view fits in best with the type of activity they engage in. The prerequisite then is that the end-users of law are not forced to ‘buy’ the entire bundle of public goods of one particular country, but are able to differentiate. As O’Hara and Ribstein recently argued for the American situation, people should be able to choose the law that best suits a part of their lives, for example, incorporate their corporation in Delaware, conclude their contracts according to the law of the state of New York and live in California.60 Managing legal diversity then consists of putting a procedure into place that allows such choices, without the European (or federal) level determining what is the best solution for everyone (because this solution does not exist). Secondly, managing legal diversity on a ‘law market’ as just described implies the need for a much clearer distinction between mandatory and facilitative rules.

56 See JM Smits, ‘Redefining Normative Legal Science: Towards an Argumentative Discipline’ in M Kamminga et al (eds), Methods of Human Rights Research (Antwerp, Intersentia, 2009), elaborated in Smits, Omstreden rechtswetenschap, above (n 51). 57 cf Berman, ‘Global Legal Pluralism’, above (n 23) 1236. 58 cf Berman, ibid, 1169 and in particular the work of A Sen, eg, Identity and Violence; The Illusion of Destiny (New York, Norton, 2006). 59 The failures to deal with the consequences of the economic crisis and of climate change at a global level are just two examples of this. 60 On the idea of people as buyers of law, see O’Hara and Ribstein, The Law Market, above (n 18) 14.

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Today, there is often doubt about what exactly counts as mandatory (national) law. One reason for this is that, in traditional private law, there was less need to think about what constituted mandatory law as national law as a whole (including facilitative rules) applied anyway. In a plural private law, this is different. Identifying the exact limits of party choice is a vital component of an approach that emphasises the importance of people choosing their own laws. Thirdly, there is the important question of how to consider the coherence and unity of the private law system in a view that takes legal diversity seriously. Several authors have dealt with the question of how Europeanisation should affect our idea of a coherent system.61 However, serious doubts must be cast about the ambition to consider present-day private law (flowing from the variety of sources identified in the above) as a system at all. If pluralism of sources is taken seriously, it means that there are several plausible and incommensurable claims without one of these prevailing over the other.62 This seems incompatible with the idea of a coherent system, or—to quote a famous statement of Kelsen—a system cannot serve two masters at the same time.63 If European private law can indeed be described as ‘type 2 governance’ in the terminology of Hooghe and Marks,64 it means there is a complex and fluid patchwork of many overlapping jurisdictions in which it is hard to discern a system. In my view, this is indeed an inevitable feature of a pluralist European private law, making it impossible to seek ‘the perfect wholeness of a civil code’.65 Is there an alternative? The function of a system has long been to make the law accessible and coherent. When applied to national jurisdictions, it also served the purpose of establishing a unitary and equal law for everyone within one country. It seems to me that if the European Union is seen more as a ‘law market’, these functions have to be reconsidered. Thus, the idea that everyone within one country is being governed by the same laws has already become obsolete as a result of parties increasingly choosing another law than their ‘own’ to be applicable to a certain situation (see section IV A above). If a diverse European private law is taken seriously, it means that the accessibility and coherence of law have to be guaranteed in other ways than through reference to a coherent system. One way to do this is to move away from a focus on rules, principles and concepts (all key elements of a legal system) towards an identification of arguments for and against certain solutions. In addition, it must be recognised that—in those areas where party choice is possible—the legal system will no longer ensure equal treatment of everyone. It would be wrong to see this as a problem: it is the inevitable consequence of an

61 See, eg, A Metzger, Extra legem, intra ius: allgemeine Rechtsgrundsätze im europäischen Privatrecht (Tübingen, Mohr, 2009). 62 N Walker, ‘The Idea of Constitutional Pluralism’ (2002) 65 Modern Law Review 338. 63 H Kelsen, Reine Rechtslehre (Verlag Österreich, 2000) 330: ‘Niemand kann zweien Herren dienen’. 64 Hooghe and Marks, ‘Types of Multi-Level Governance’, above (n 29) 4ff, with reference to Frey and Eichenberger’s idea of governance as FOCJ (functional, overlapping, and competing jurisdictions). 65 G Amato, ‘Multilevel Europe and Private Law’ in Cafaggi and Muir-Watt (eds), Making European Private Law, above (n 30) 39, 45.

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enhanced party choice. Put differently, overlap and incoherence are only problematic if we perceive law as a system. If we think of it in terms of a ‘law market’ (and as we saw before this is inevitable, whether we like it or not) this problem is less urgent.

V

CONCLUSIONS

The multiplication of sources of private law prompts several questions. Two of these questions were discussed in this contribution: can we find an optimal level of regulation for dealing with private relationships and what is the best strategy for dealing with a plurality of sources? The latter question was identified as the more important one because, even if we are able to establish optimal levels of regulation, private law will remain plural. My strategy is not to try to create a coherent system out of the conflicting sources, but to allow competition between diverging sets of norms with a relatively large role for parties to adopt the set of rules they like best. The necessary counterweight to this enhanced party choice is that its limits are clearly defined: legislatures should be more explicit about what counts as mandatory law.

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20 Private Law in a Federal Perspective WALTER VAN GERVEN I

MULTI-LAYERISM AND THE PRIVATE/PUBLIC LAW DIVIDE

R

ECENTLY I WROTE a second edition of Introduction to Belgian Private Law a book that was first published in 1969. With the passage of these years, what was once a rather easy task has now become a difficult—if not an impossible—one.1 Indeed, Belgium, which since its origin in 1830 has been a unitary state, became a federal state in 1993. However, precisely because of its unitary past, not one of a normal ‘evolutionary’ kind, that is, like the United States or Germany, constructed from ‘bottom-up’—from diversity towards unity—but one of a less normal ‘devolutionary’ kind, that is, like the UK, constructed ‘topdown’—from unity into diversity. Moreover, having been in 1952/1958 one of the six founding Member States of first the Coal and Steel Community (now expired) and then of the European Economic Community (now transformed into the European Union), Belgium has been, for more than half a century, an active partner of the European (and obviously also the international) community. All this has led to the consequence that the law now effective in Belgium comprises international law, European law, national law and regional law. In other words, Belgium has now on its territory—like other federal EU Member States—a multi-layer, or multi-level, legal order. That means that, in the second edition of the aforementioned book, I can—40 years later—no longer describe the law of Belgium, but will now have to describe the laws in Belgium. In other words, the unbreakable link which, in the (good?) old times of truly sovereign nation-states existed between law and territory has ceased to exist. Moreover, like many other states, Belgium is no longer a nation-state as it was before, that is, in spite of its bilingual or trilingual character, a state with a high degree of homogeneity, but has become a citizen-state with, also among its citizens, a mixed ethnicity and a variety of languages, races, cultures and traditions. Moreover, with federalisation and, in consequence thereof, a necessity to install legitimate government and governance at all state levels, public law has become so predominant that it is hardly still possible to write an introduction to become an introduction to the law(s) in Belgium which involves both private and public law at all of the intra and supranational levels of the multi-level legal order. Also, because 1 The book now has two authors: W van Gerven and S Lierman, and is called Algemeen deel, Veertig jaar later. Privaat- en Publiekrecht in een meergelaagd kader van regelgeving, rechtsvinding en regeltoepassing (Mechelen, Kluwer, 2010).

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of the interference of European Union law with Member State laws, private law can no longer be taken in its traditional understanding which refers to a body of ‘ground rules for private transactions’. Thus understood, private law as a body of law, no longer falls within the law making and harmonizing competences which the Member States have attributed to the EC/EU.2 Indeed, apart from (mainly) consumer law, European private law typically refers to non-binding rules, such as the ‘Draft Common Frame of Reference’ (‘DCFR’). That implies, as pointed out by Micklitz, that in order for the study of private law to have a truly European dimension, it must also focus on what he calls ‘the Visible Hand of European Private Law’3—which means that it must look at private law in its transformation, in a European context, from autonomy to functionalism in economic and governance matters. Thus understood, the study of private law includes techniques and devices of procedural and remedial law making as well as law enforcement devices and devices to distribute private law making among geographical levels of regulation.4 Those are matters which have long been neglected by makers of traditional private law projects, for being, in Micklitz’s words, areas ‘which are at the boundaries of traditional private law (von den Rändern her)’. The driving forces in these areas are competition and industrial policies which lead to ‘economisation’ of European private law, and democratic governance which leads to ‘politicisation’ of European private law.5 It is in this broader sense that private law is understood hereinafter.

II

FEDERALISM AND ATTRIBUTION OF COMPETENCES AND PRECEDENCE OF LEGAL NORMS AND CONSTITUTIONAL PLURALISM

Whatever its societal context: ‘evolutionary’ (ie, from beneath, like the United States or Germany, but also the EU as it is ‘in the making’) or ‘devolutionary’ (ie, from above, like Belgium or the United Kingdom), federalism is about attribution and delimitation of competences in a ‘democratic’ and ‘rule of law’ perspective at all levels of the federal structure.6 As a preliminary note, it is worthwhile seeing how many EU Member States are now confronted simultaneously with a devolutionary input at the national level—not only in the two states mentioned, but in other unitary states, like Spain or even France—and an evolutionary input at the European level, whereby the latter refers to the making of a confederate structure: a European Union of states and peoples, however, with a growing number of federal 2 For an exhaustive analysis, see M Ludwigs, ‘Harmonisierung des Schuldvertragsrect in Europa. Zur Reichweite der Gemeinschaftsrechtlichen Zuständigkeit für eine Europäisierung des Privatrechts’ in AS Hartkamp, CH Sieburgh and LAD Keus (eds), De invloed van het Europese recht op het Nederlandse Privaatrecht (The Hague, Kluwer, 2007) 243–80. 3 H-W Micklitz, ‘The Visible Hand of European Regulatory Private Law. The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’ EUI Working Papers Law 2008/14. 4 See the contribution of Jan Smits (ch 19 in this volume). 5 Micklitz, ‘The Visible Hand of European Regulatory Private Law’, above (n 3) 3–8. 6 On this and other subjects (accountable government, rule of law, good governance, open government, constitutionalism) in the context of the EU in comparison with the US, see W van Gerven, The European Union. A Polity of States and Peoples (Oxford, Hart Publishing, 2005).

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characteristics. To be clear, that this does not mean that the Union is becoming or should become a state, not even a citizen state, let alone a nation state.7 The main reason for that is that the states and peoples involved in the process do not wish to create a ‘super state’, as was confirmed in the draft constitutional treaty, and again in Article 4(2) of the new (post-Lisbon) EU treaty.8 These opposing trends are identified by the Canadian author Watts as ‘a paradigm shift from a world of sovereign nation-states to a world of diminished state sovereignty and increased interstate linkages of a constitutionally federal character’.9 It implies that alienation from national identity feelings and a loss of competences at the top of the component states through devolution is compensated by strengthening of identity (and closeness) feelings, and of competences at a higher supra-state European level—the latter also for reasons of greater efficiency in a global society. The multi-level structure inherent in federalism raises the issue of distribution of competences among the different levels of the multi-layer legal order. The issue is fundamental within the EU where it is closely linked to the issue of primacy of European law. In that respect, two ‘primacy’, or ‘precedence’, theories are available: the theory of union precedence and the theory of state precedence.10 The first is based on the idea that, on a specific territory and within specific areas of attribution, there is one (steadily growing) comprehensive legal order which consists of Union law and (each of) the laws of the 27 Member States, and within which any rule of the higher order, ie, the Union legal order, takes precedence over any rule, even the highest (thus including constitutional provisions) of the lower legal orders (ie, the Member State laws within the areas of attribution). By contrast, the second theory is based on the idea that on a specific territory (of each Member State), there are several autonomous legal orders (thus, the national and the Union legal orders) each of which is self-referential, meaning that, for each of them, only those rules have a normative value which are produced by that legal order, or, if they originate in another legal order, are recognised by that legal order as normatively relevant. Under this theory, the law of none of the autonomous legal orders will be recognised as having precedence over another, except when one of them, for example, national law, accepts this of another, for instance of Union law and/or international law. Under the first theory, there is a principled hierarchy between legal orders; under the second there is a principled heterarchy of legal orders (but see below). Obviously, the Court of Justice in Costa v ENEL 11 and in its wake all partisans of the federalist vision, have subscribed to the first theory which implies that it is for Union law to determine the scope, content and consequences of the precedence

7

Van Gerven, ibid, 36–41. The first sentence of Art 4(2) TEU reads: ‘The Union shall respect the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional, inclusive regional and local government’. 9 RL Watts, Comparing Federal Systems 2nd edn (Montreal, McGill Queens University Press, 1999) part ix. 10 See further, R Barents, ‘De voorrang van unierecht in het perspectief van constitutioneel pluralisme’ (2009) 57 Tijdschrift voor Europees en economisch recht 44–53. 11 Case 6/64 Flaminio Costa v ENEL [1964] ECR 585. 8

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attached to any Union rule over all Member State laws.12 By virtue of this theory, any validly created and binding Union rule takes precedence—from itself—over national laws, thus requiring all Member State organs to set aside any ‘Union incompatible’ rule of domestic law. In favour of this theory pleads the fact that only in this way is it possible to assure Community/Union law to be equally applicable and enforceable throughout the Union’s territory, and within the competences attributed by the Member States.13 Against the theory of Union precedence goes the argument that, except for consent ‘from below’ (the Member States and their peoples), the theory is unable to explain and justify the loss of sovereignty which the Member States sustain, and the fact that the states no longer hold the monopoly over the entire body of law in effect on their territory. From the viewpoint of loss of sovereignty, it is indeed entirely normal that the domestic constitutional courts check the validity of successive transfers of competences to the Community/Union in light of—and in accordance with—their respective constitutional laws which require as a minimum that such transfers be approved by the people below, and/or their elected—and therefore legitimate—representatives.14 To reconcile the two theories, each starting from a different constitutional point of reference, a model of constitutional pluralism needs to be designed. Such model parts from the idea that there is no exclusive relationship between one legal system and one territory, but that on the same territory several autonomous legal orders do co-exist, and several legislatures are empowered do enact own laws.15 This requires a relationship of precedence, or coexistence, between the legal orders,16 on which the respective legislators have agreed. In such a pluralist system, each legal order decides how it will address rules coming from another legal order, ie, for the European Union vis-à-vis Member State law, by way of a system of precedence (as in Costa/ENEL) and for the Member State legal orders vis-à-vis Union law, by way

12 Leaving aside second and third pillar Union law, that is, before the entry into effect of the Lisbon Treaty. 13 In this sense, I Pernice, ‘Multilevel Constitutionalism in the European Union’ (2002) 27 European Law Review 520. 14 Barents, ‘De voorrang van unierecht in het perspectief van constitutioneel pluralisme’, above (n 10) 48–49. See particularly the Maastricht judgment of the German Constitutional Court of 12 October 1993 in re Brunner et al. v The European Union BVerfGE, 1993, Neue Juristische Wochenschrift 3047. For comments see M Herdegen, ‘Maastricht and the German Constitutional Court: Constitutional restraints for an ‘Ever Closer Union’ (1994) 31 Common Market Law Review 251. See also recently the Lisbon judgment of the same court of 30 June 2009. Barents draws the attention of his readers to how French and Spanish constitutional judges have used extremely artificial arguments to reconcile the primacy clause of Article I-6 of the draft Treaty establishing a Constitution for Europe with their national constitutions: ibid, 49, with references in fn 50. As for Belgian law, see P Popelier, ‘Ongrondwettige verdragen: de rechtspraak van het Arbitragehof geplaatst in een monistisch tijdperspectief’ (1994–95) 73 Rechtskundig Weekblad 1076–80. 15 See W van Gerven, ‘Over codificatie, convergentie en algemene beginselen in een meergelaagd privaatrecht’ (2008) 56 Tijdschrift voor Europees en economisch recht 414, 418–19. 16 Federal legal systems can part from the idea that legislatures at different levels enact rules which are equal, each within the competences attributed to the level on which it operates. The Belgian federal system is an example: see A Alen and R Ergec, Federal Belgium after the Fourth State Reform of 1993, Ministry of Foreign affairs, External Trade and Development Cooperation (March 1994) 28 with reference to F Perin and A Pluymen, ‘Primauté du droit federal: ‘Bundesrecht bricht Landesrecht’. Une controverse en droit belge’ (1983) Journal des Tribunaux 17–21. Accordingly, the maxim ‘Bundesrecht bricht Landesrecht’ does not apply in Belgium. It is for the Constitutional Court to determine the scope of competences attributed to each level.

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of a system of equality combined with an element of granting precedence to Union law regarding—and only regarding—the transfers of competences which have been agreed on. The latter system includes the involvement, as mentioned above at the end of the preceding point, of Member States’ constitutional courts, or similar judicial committees, which act as a ‘checkpoint’ for admitting Union law through the opening which that Member State’s constitutional law permits.17 Between Member States, the transfer of competences from the national to the supranational level is a matter of consensus laid down in a Treaty between transferors and with the transferee—that is among Member States and with the EC/EU.18 From a viewpoint of democratic legitimacy, in all of these instances the peoples—as represented by their universally elected parliaments and appointed executives, and reassured as to the legality of the transfer by their courts—are acting as ultimate decision makers and beneficiaries, at the national and the European level.19 Precedence between legal orders, and between legal norms belonging to these legal orders, is generally determined on the basis of the higher or lower rank which the legal order is assumed to have.20 Thus, international law has precedence over European law, European law over national law, national law over regional law, regional law over local/municipal law. That, however, is not an immutable rule.21 Another—and perhaps better—possibility is to make precedence dependent on the quality of legal protection, and enforceability, granted by a legal system to a specific protected interest. The latter system may be more appropriate in a framework of ‘network community’22 (or constitutional pluralism), as exists for example with regard to human rights and fundamental freedoms. The concept underlies the maximalisation clause set out in Article 53 of the European Convention on Human Rights according to which ‘[n]othing in this Convention shall be construed as limiting or derogating from any of the human rights and fundamental freedoms which may be ensured under the laws of any High Contracting Party or under any 17 Again Belgian law is special in the sense that it has enacted special legislation excluding jurisdiction of its Constitutional Court for legislation approving EU treaty law. The reason behind the law is that the transfer of competence is admitted directly by Art 34 of the Belgian Constitution which states that ‘[t]he exercising of determined power can be attributed by a treaty or by law to international public institutions’. See A Alen, ‘Les relations entre la Cour de justice des Communautés européennes et les Cours constitutionnelles des Etats membres’ in Liber Amicorum Paul Martens (Larcier, 2007) 665, 671–72. In that article, the author also examines the case law of the German, Italian, French, Spanish and Austrian courts. 18 Consensus as a basis of constitutional pluralism implies (as P Craig and G De Bùrca summarise the legal situation in EU Law. Text, Cases and Materials 4th edn (Oxford, Oxford University Press, 2008) 344) that ‘[m]ost national courts do not accept the unconditionally monist view of the ECJ as regards the supremacy of EC law. While they accept the requirements of supremacy in practice, most regard this as flowing from their national constitutions rather than from the authority of the EC Treaties or the ECJ, and they retain a power of ultimate constitutional review over measures of EC law’. 19 See Pernice, ‘Multilevel Constitutionalism in the European Union’, above (n 13) 518–20. 20 That is the position of EC law which according to Costa v ENEL takes precedence over Member State law, but grants precedence to international law: see inter alia the judgment of the ECJ of 24 November 1992 in Case C-286/90 Poulsen [1992] ECR I-6019, rec. 9ff. The Costa v ENEL doctrine was incorporated in Art I-6 of the draft Constitution for Europe but the art was not incorporated in the Lisbon Treaty but replaced by Declaration 17 concerning primacy, attached to the Lisbon Treaty, which refers to the Court’s case law. 21 See above (n 16). 22 The term is used by LFM Besselink, Een samengestelde Europese constitutie (Groningen, Europa Law Publishing, 2007) 9–12.

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other agreement to which it is a Party’.23 However, applying the clause is not an easy matter, not only because determining what is of a ‘maximal’ (or ‘higher’) quality’ is difficult, but because ‘giving better protection to one right or freedom’ goes often at the expense of another equally protected but conflicting right or freedom.24 Another illustration of giving precedence, among several norms, to the more protective one may be perceived in the ‘so lange’ doctrine invented by the German Constitutional Court. According to that doctrine, precedence to European laws cannot be given as long as the European integration process does not include protection to fundamental rights on a par with the German Basic law.25 Furthermore, the Court of Justice’s refusal, in its judgment of 3 September 2008 in Kadi and Al Barakaat 26 to give precedence to international law to cope with violations of fundamental rights can be perceived as an example of how the ‘better protection’ principle will apply when international law grants no, or less, relief than can be found in European Union law. III

MULTI-LAYERISM AND CONVERGENCE—ENHANCING LEGITIMACY, INCREASING SOFT METHODS OF APPROXIMATION

Constitutional pluralism rejecting the (Court of Justice’s) unconditionally monist view regarding the supremacy of EU law,27 and showing respect for other legal orders, requires constitutional convergence, that is, founding the Union on constitutional values and principles which the Member States have in common (Article 6(1) EU). Such a ‘bottom-up’ approach dictated by the EU Treaty, and also applied by the Court outside the field of fundamental rights and freedoms, namely in the field of state liability law on the basis of Article 288(2) EC (now Article 340 TFEU) and related Francovich case law, has two advantages. First, it has for effect to root European law in the national legal systems which enhances the legitimacy of the European legal order, and secondly, it may render potentially delicate primacy considerations, in favour of one or the other legal order, superfluous in that it brings European and national laws closer together as to the protection to be achieved. The Omega judgment of the Court is an example.28 In that case, the Court accepted the German plea that the protection of human dignity which is specially protected in the German Basic Law, could play a role in interpreting the public policy derogation laid down in Article 46 EC. This permitted the Court to condone the German prohibition of commercial exploitation of laser games 23 See also Art 52 of the EU Charter of Fundamental Rights which contains similar but more detailed wording. 24 See P Popelier, ‘Prejudiciële vragen bij samenloop van grondrechten’ (2009–10) 73 Rechtskundig Weekblad 50, 61, with references to case law of the European Court of Human Rights, pro and contra, at 61, fn 97. 25 On the ‘so lange’ doctrine, as a method of conditional judicial cooperation in a broad context, see E-U Petersmann, ‘Judging Judges: From “Principal-Agent Theory” to “Constitutional Justice” in Multilevel “Judicial Governance” of Economic Cooperation among Citizens’ (2008) 11 Journal of International Economic law 827, 854–67. On its German origin and later development, see ibid, 856–57. 26 Cases C-402/05 P and C-415/05 P [2008] ECR I-6351, paras 305ff. 27 See above (n 20). 28 Case C-36/02 Omega Spielhallen [2004] ECR I-9609.

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simulating the killing of human beings, which were imported from the UK into Germany. The Court accepted the argument even though conceptions of the appropriate level of protection of human dignity may differ from state to state. It ruled that a provision of German constitutional law may—within the limits defined in the EC Treaty—overrule a fundamental internal market freedom (services), if it amounts to a general principle of EC law. For that, the Court added, it is not indispensable that the conception underlying the principle in one Member State is ‘shared by all Member States as regards the precise way in which the fundamental right or legitimate interest in question is to be protected’ (paragraphs 34 and 37). This line of thinking allows EU general principles of law to be drawn from domestic general principles and underlying values; the technique is of crucial importance in a multi-layer legal order as it shows respect for its components and makes cooperation possible between courts operating on different levels. Actually, any kind of convergence is essential in a multi-level legal order which, because of its multi-layer character, renders codification (or maximal harmonisation) difficult, if not impossible, in any area of law—whether private or public— that is affected by European and/or international regulation. That is particularly so in a federal state which, in itself, already has different levels of regulation.29 Furthermore, during the last decade the necessity of convergence goes hand in hand with a shift from binding unification and harmonisation to soft approximation, and from law as an instrument of European integration to policy. The importance of the latter grows with the extension of Union powers in areas for which the Member States do not wish to abandon too much of their sovereignty. Sometimes, even harmonisation of national laws is not permitted, as is for example in Articles 149(4), 150(4), 151(4) and 152(4) of the EC Treaty concerning respectively education, vocational training, culture and public health (now Articles 165(4), 166(4), 167(5) and 168(5) TFEU respectively). In those areas harmonisation of laws is replaced by coordination of policies while the so-called ‘new modes of governance’, namely the Open Method of Coordination (OMC) and voluntary accords with and by private actors, take over from the traditional modes of governance previously known as the ‘Community method’. Characteristics of such new modes are: voluntarism (non-binding targets and soft law, without formal sanctions); subsidiarity (measures are decided by Member States and/or private actors rather than by Community organs); and inclusion (all actors concerned are included and invited to participate in defining policy goals and putting in place the instruments to achieve these goals). Notwithstanding their merits, the new modes of governance are also at the origin of deficiencies, particularly in respect of ‘political accountability’ (no or minimal input and review by an elected parliament) and ‘rule of law’ (lack of binding and court enforceable rules). Because of its merits, the OMC can serve as a model for what I have called elsewhere the ‘Open Method of Convergence’, which could be used to stimulate

29 The federal character of a state may lead to serious legislative deficiencies when, eg, European directives must be implemented at the national level by authorities situated at different levels of the state structure, and those authorities, legislative or executive, do not succeed in harmonising the implementing measures between themselves—thus rendering the harmonisation effort undertaken at the European level useless or inefficient.

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convergence of laws within the European Union and, beyond that, to encourage convergence of minds, styles and mentalities between the major legal families.30 Such method would imply: for legislatures to pursue consistency between rules in different areas, and different levels of legislation; for courts at the supra and international level to avoid collision between their case law and for domestic courts, particularly supreme or high courts, to compare notes in deciding similar cases; for regulators, by spreading good practices and for educators, by preparing and using common learning and teaching materials. Obviously, the DCFR should be made part of such an Open Method of Convergence effort.31

IV

MULTI-LAYERISM AND JUDICAL INTERPRETATION—TRANSFORMING CONFORM INTERPRETATION OF NORMS INTO CONSISTENT (AND HOLISTIC) INTERPRETATION OF LEGAL SYSTEMS; TURNING THE METHOD INTO A GENERAL PRINCIPLE OF COHERENCE

An important device to stimulate convergence within a multi-level legal order is the judicial instrument of ‘conform interpretation’. The instrument became well known with the Court’s Marleasing judgment concerning ‘directive conform’ interpretation of national laws. The case was about a provision of the Spanish Civil Code on nullity of contracts. In its judgment, the Court instructed the Spanish court which had asked for a preliminary ruling, to interpret that provision in conformity with the First Directive on Company Law harmonising, among other matters, the grounds for nullity of a company—and this although the domestic law provision much predated the directive concerned.32 The theory of conform interpretation which often concerns a horizontal situation involving two private parties, is based on the principle of primacy of Union law over national law. In that context, it is also applied by Union and national courts in other situations where lower law has to be interpreted in light of higher law, for example, national law, or Union law, in light of international law.33 In later case law, the doctrine of conform interpretation has been extended to become a method affecting the whole system, and not just one rule, therefore becoming a matter of overall consistency;34 thus in Pfeiffer where the Court ruled that the judicial obligation of interpretation relates not only to a 30 See further my contribution on ‘Bringing (Private) Laws closer to each other at the European Level’ in F Caffagi (ed), The Institutional Framework of European Private Law (Oxford, Oxford University Press, 2006) 37, 62–77. 31 See also the analysis by Fernando Gomez in his contribution to this book (ch 7); also the contribution of Jan Smits (ch 19 in this volume). 32 Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135. However, the Marleasing judgment made it clear that the method of conform interpretation also applies to horizontal relations between private parties. The method was first applied in the Von Colson judgment of 10 April 1984 in Case 14/83 Von Colson and Kamann [1984] ECR 1891. 33 For national courts see, eg, the judgment of the Belgian court of Cassation of 12 February 2003, Journal des Tribunaux 2003, 243 with annotation by P D’Argent, ‘Monsieur Sharon et ses juges belges’ concerning the conform interpretation of the (then) Belgian genocide law with international penal customary law on immunity of heads of state and government in office. For Union courts, see the judgment of the Court in Case C-286/90 Poulsen [1992] ECR I-6019 (also above n 20) concerning the interpretation of a directive in conformity with international law. 34 Convergence relates in this context to specific legal norms whereas consistency refers to a legal system, or part thereof, as a whole. Both tend to preserve the coherence of applicable laws.

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specific national rule, but that it obliges a judge also to interpret the national legal system as a whole in conformity with Union law (in that case with a directive, not having direct effect between individuals), so that the whole national system does not reach a result that is incompatible with the directive concerned.35 In the same vein, a national court must, among the national methods of interpretation available to it under its whole law, choose the most appropriate one to achieve a result which is consistent with the directive at stake. Accordingly, where necessary and possible, the court must make an effort and adapt these methods.36 In other words, the court is required to do ‘whatever lies within its jurisdiction’.37 As mentioned, the previous conform interpretation process first concerned conformity of specific rules, and later consistency of whole legal systems, under the first (EC) pillar. In its Pupino judgment of 16 June 2005,38 the Court extended its doctrine whereby domestic courts are obliged to interpret national laws in conformity with European legislation, also to—then—third (EU) pillar legislation. It that case, it requested the national court to interpret its domestic law—the whole of it—in conformity with an EU Council framework decision on the standing of victims in criminal proceedings (such a decision was a legislative act enacted under Article 34(2)(b) of the EU Treaty pre-Lisbon), but remaining within the scope of ‘the general principles of law, namely legal certainty and non-retroactivity’ (paragraphs 43–44 of the judgment). While the Court did not specify whether it meant general principles of national law or of Community law (probably both), it added later on referring to Article 8(4) of the Framework Decision, that ‘the conditions for giving testimony that are adopted must in any event be compatible with the basic legal principles of the Member State concerned’ (paragraph 57); and moreover, referring to Article 6(2) EU, that the Framework Decision ‘must … be interpreted in such a way that fundamental rights, including in particular the right to fair trial as set out in Article 6 of the Convention and interpreted by the European Court of Human Rights, are respected’ (paragraph 59). It appears from the preceding that conform—and consistent—interpretation of national law— specific or whole—goes in all directions: both ‘bottom-up’ (domestic law must be interpreted to be compatible with EU framework law, and EU framework law must be interpreted to be compatible with the—higher?—ECHR and European Courts of Human Rights (ECtHR) case law); and ‘top down’ (conditions in the EU framework must be interpreted to be compatible with the general, Community and national, legal principles and with the basic principles of the Member State concerned). Therefore, the conclusion to be drawn is first, that the obligation of ‘conform’ interpretation is no longer seen as an application of the principle of primacy, but has been gradually transformed into a holistic principle of ‘consistent’ (or ‘harmonious’)39 interpretation of the whole legal order at all levels; and

35 Cases C-397/01 to C-403/01 Bernhard Pfeiffer [2004] ECR I-8835, paras 107ff, more specifically para 115. 36 Pfeiffer, ibid, paras 116–18. 37 ibid, para 119. For a comment on Pfeiffer, see annotation by S Prechal (2005) 42 Common Market Law Review 1445. 38 Case C-105/03 Maria Pupino [2005] ECR I-5285. 39 As it is called by Craig and De Búrca, EU Law, above (n 18) 287ff.

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secondly, that the emphasis is no longer—or no longer alone—on the ‘hierarchy’ of legal norms, or legal orders, but rather on consistency between levels of regulation. In two recent judgments, the youngest offspring of the Union judiciary—the Civil Service Tribunal—has rendered two judgments which have given a new dimension to the obligation of conform and consistent interpretation. In a judgment of 30 April 2009 in Aayhan and Others v Parliament, the tribunal turned the principle of conform/consistent interpretation of national laws into a general principle of coherence obliging the Union institutions to interpret secondary Community (now Union) law in light of Community (now Union) directives40—a position which the tribunal confirmed in a judgment of 4 June 2009 in Adjemian and Others v Commmision. 41 The question at issue concerned the practice of Parliament to employ auxiliary agents for the needs of the parliamentary sessions in Strasbourg by way of successive short-term contracts. According to the plaintiffs, this practice was incompatible with, inter alia, Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP).42 The position taken by the Tribunal in its judgments recognising that directives can be invoked against Union institutions is special for two reasons: first, because directives are in principle only addressed to Member States (Article 249 EC, now Article 288 TFEU); and secondly, because there is no hierarchy between secondary Community (now Union) norms. However, according to the Tribunal that does not prevent conform interpretation of one measure of secondary law with another, to occur for reasons of coherence of Union law. More specifically, according to the Tribunal, directives can be used against Union institutions when they are the expression of a general principle of law, or when the institution concerned has used, or has referred to, a specific directive to found a decision of its own. All things considered, the Tribunal’s position seems to be in line with Article 10 EC, now found in amended form in Article 4(3) TEU, which, in the Court’s interpretation, requires also Union institutions to cooperate, like Member States, to ensure the proper enforcement of Union law.43 And indeed to preserve the coherence of Community/Union law as whole is certainly part of that duty, as is recognised in the Court’s case law with regard to coherence between treaty provisions.44 Nevertheless, it will be necessary for the higher Union courts to approve and define the limits of application, of the principle—more particularly which measures are to be interpreted in conformity with which other measures of secondary Union law.

40 The principle of coherence has been used in case law of the Court with regard to primary law, ie, when interpreting treaty provisions, from a comparison of provisions of the other treaties which have resolved the question at issue more clearly. See K Lenaerts and P Van Nuffel, Constitutional Law of the European Union 2nd edn (London, Thomson, 2005) 17–59, 707–08 with references to case law. 41 The first judgment was given in Case F-65/07 Aayhan and Others v Parliament; the second in Case F-134/07 Adjemian and Others v Commission. For a comment on the first judgment, see T Collin, ‘Arrêt ‘Aayhan’: l’invocabilité des directives à l’encontre des institutions’ (2009) Journal droit européen 213–14. 42 Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP [1999] OJ L175/43. 43 See further, Collin, ‘Arrêt “Aayhan”’, above (n 41) 213–14. 44 See above (n 40).

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MULTI-LAYERERISM AND EXECUTIVE FEDERALISM—NETWORKS OF REGULATORS

Executive federalism is typical for the EU as a whole. It means that it is in principle for the Member State authorities to implement Union policy and Union law on their own territory. The principle is in contrast with the situation in the US where the matter is governed by the so-called ‘anti-commandeering principle’ which prohibits federal commands to be directed at state legislatures as well as at state or local executive officials.45 Within the EU, the principle of executive federalism flows from the aforementioned Article 10 EC, now found in amended form in Article 4(3) TEU, which obliges all authorities, legislative, executive and judicial, of the Member States to ‘take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of the Treaty or resulting from action taken by the institutions of the Community’.46 Over time, the Union’s institutional framework on enforcement may, in the words of Micklitz, ‘be understood as the interplay between private judicial enforcement and administrative enforcement, where Member States benefit from the leeway left to them under the doctrine of Vollzugsföderalismus. However, the prospective policy model of EU law enforcement as promoted by the European Commission seems primarily guided by decentralized enforcement through national public agencies with residual competences granted to the European Commission’.47 The role of national agencies cooperating in a network—within which the Commission, depending on the agency, plays a less or more prominent role (more in competition law, less in financial law)—has become significant in the many areas where the need exists to coordinate and/or harmonise the implementation of regulations and particularly directives in the 27 Member States. Surely, in principle, the Commission has no direct competence to legislate in matters of domestic law, the implementation of Union law being a reserved matter for the Member States. But, there is an urgent need in many areas to coordinate Member States’ implementing laws, if only to level the playing field. That is the case, for example, regarding the so-called ‘Lamfalussy process’—more particularly at level 3 of that process. Under the provisions thereof, the domestic regulators of the 27 Member States supervising financial enterprises and markets frequently meet, in three committees: banking, insurance and professional pensions, and financial markets, to make domestic implementation as consistent as possible. The financial crisis has made it clear that these committees of regulators (which have taken the legal form of a national association) need to be transformed in a kind of mixed (partly European, partly national) independent regulatory agencies; and that is indeed what

45 For a short description, see van Gerven, The European Union. A Polity of States and Peoples, above (n 6) 20–22. The principle is laid down in case law of the Supreme Court, particularly in Hodel 505 US144 (1992) and in Printz v United States 521 US898 (1997). 46 In its Pupino judgment (above n 38) the Court held that the principle of loyal cooperation is also applicable to the third pillar: para 40–43 of the judgment. 47 Micklitz, ‘The Visible Hand of European Regulatory Private Law’, above (n 3) 35–36.

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the Commission proposed to do (and was accepted by the European Council) on the advice of the ‘de Larosière report’.48 Networking between European and national regulators has become a popular instrument, now also in the field of consumer law by the creation of the consumer protection enforcement network (CPEN), and in the field of judicial cooperation through the European Judicial Network in civil and commercial matters (Civil Matters EJN), modelled on the rules of the European Judicial network in criminal matters (Criminal Matters EJN). Apart from these, and from the aforementioned Lamfalussy committees, there is the well-known European Competition Network (ECN) composed of the Commission and national competition authorities, as well as various sector-specific networks of regulatory authorities.49 Certainly in a multi-layer legal order, networking is a very useful form of government in preparing and making decisions as it combines efforts of authorities operating on different levels and/or in different jurisdictions. However, it may also create problems in that it diffuses and confuses responsibilities and accountabilities, thereby complicating matters when delicate questions arise such as to whom the network should be made politically accountable, and before which court of law should claims in nullity, in compensation, or for interim relief eventually be brought?50 The latter question concerns the rule of law, and is important for example with regard to decisions taken by the European Competition Network, like the allocation of a case to a particular national authority, which is of great concern to private parties. In these and other instances delicate matters, relating to rights of defence, access to file, legal privilege and language requirements, and others, need to be subjected to transparent and predictable rules and to clear-cut judicial review procedures— matters which, as yet, have not been dealt with in a satisfactory way.51

VI

MULTI-LAYERISM AND SOCIAL AND HUMAN RIGHTS RESPONSIBILITIES

In the past decades a human rights protection has become a matter of extensive multi-level regulation, so much that one may wonder whether the proliferation of 48 The report has been approved by the Commission, with minor changes, in its Communication of 27 May 2009 on the European financial supervision, and, thereafter, by the European Council at its meeting in Brussels on 18–19 June 2009. For an extensive overview, see A Coibion and E Dessy, ‘La réforme des services financiers en Europe un an après le début de la crise’ (2009) 17 Journal de droit européen 194–203, where the future (European) form of the present three Lamfalussy committees is dealt with at 196–97. 49 For a brief overview and discussion, see the ‘Epilogue on Perspectives for Network Convergence and Ius commune’ in S Brammer, Cooperation between National Competition Agencies in the Enforcement of EC Competition Law (Oxford, Hart Publishing, 2009) 490–525. 50 The issue was raised in W van Gerven, ‘Which Form of Accountable Government for the European Union?’ (2005) 36 Netherlands Yearbook of International Law 227, 254–56. On legal, political and financial accountability of EU agencies in general, see P Craig, EU Administrative Law (Oxford, Oxford University Press, 2006) 164–82. More specifically for the financial sector, see B De Meester, ’Multilevel Banking Regulation: An Assessment of the Role of the EC in the Light of Coherence and Democratic Legitimacy’ in A Follesdal, RA Wessel and J Wouters (eds), Multilevel Regulation and the EU. The Interplay between Global, European and National Normative Processes (Leiden, Martinus Nijhoff Publishers, 2008) 101–43. 51 See for a thorough discussion, S Brammer, above (n 49) 212–28 and 229–30.

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catalogues of rights, of enforcement procedures and of human rights agencies has not become more harmful than useful. Human rights are protected at the international, transnational, European, national and sometimes sub-national level. In some catalogues only traditional rights are protected; in others, like the European Charter of Nice, now Lisbon, modern rights are also protected (under the headings of Equality, Solidarity and Citizens’ Rights)52—but not necessarily in a binding manner, and if binding, then only indirectly through a positive obligation. By contrast, traditional rights have in many domestic legal orders obtained horizontal effect, that is between private parties and therefore in private law, directly or indirectly (ie, through open norms or concepts).53 The result is constitutionalisation, Europeanisation and globalisation of private law and—as a further (laudable) result—a narrowing of the so-called public/private divide thanks to the growing number of ‘common underlying values in public and private law’.54 Such growing together of private and public law is particularly apparent in cases where a person or body is in a position of power in relation to another, and a decision of the one in power may affect the dignity, autonomy, respect, status and security of the other.55 A special situation is created by the growing number of corporations, especially Multinational Enterprises (MNEs), whose power and influence often surpass that of states. Surely, they bring significant benefits to the countries where they operate, generating tax revenues, creating jobs, transferring skills and technologies and generally raising the standards of living; but at the same time, they may also cause human rights problems and give rise to international bribery undermining business, governments and security.56 And indeed, developing countries are often ‘clamouring for foreign direct investment and will compete to attract corporations by offering them attractive investment terms. Thus, they may be tempted to lower working and environmental standards in the hope of attracting MNEs in search of ever-lower production costs’.57 In this context, principles of good citizenship, more particularly corporate social responsibilities, come to the fore with the question at the heart of that debate, which approach—regulatory or voluntary—is the most appropriate for ensuring compliance with human rights protection and social and environmental responsibilities.58 The two approaches should not be seen as mutually exclusive, but as complementary. Nevertheless, and contrary to the European Parliament, the EU Commission after having tried to favour the mixed 52 For an overview, see N Reich, Understanding EU Law, Objectives, Principles and Methods of Community Law 2nd edn (Antwerp, Intersentia, 2005) 185–263. 53 See A Colombi-Ciacchi, ’Horizontal Effect of Fundamental Rights, Privacy and Social Justice’ in KS Ziegler (ed), Human Rights and Private Law. Privacy and Autonomy (Oxford, Hart Publishing, 2007) 53–64, with references to national laws. 54 Even in the common law of England: see D Oliver, ‘Common values in Public and Private Law and the Public/Private Divide’ [1997] Public Law 630. For an early publication see W van Gerven, Beginselen van behoorlijk handelen (Brussels, E. Story-Scientia, Tjeenk-Willink, 1983). 55 Oliver, ibid, 645. 56 See the illustrative book of A Addison Wrage, Bribery and Extortion. Undermining Business, Governments, and Security (Santa Barbara, Praeger Security International, 2007). 57 J Wouters and L Chanet, ‘Corporate Human Rights Responsibility: A European Perspective’ (2008) 6 Northwestern University Journal of International Human Rights 262, 262. 58 For an example of a voluntary approach see BW Heineman, High Performance with High Integrity (Boston, Harvard Business Press, 2008). The author is former General Counsel of General Electrics, and senior fellow at Harvard Law School.

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approach, has now resorted, under the influence of business, to a mainly voluntary approach.59 However, this has not prevented some elements of an ‘enabling’ regulatory framework to have been put in place. Thus, some progress has been made in providing consumers, investors and workers with access to credible information about the social and human rights record of corporations, but the result is far from satisfactory. In the same vein, corporations are now expected to report on social and environmental matters, but no guidelines have been adopted.60 Some benefit can be drawn from existing directives, especially the Unfair Commercial Practices Directive and the Directive concerning Misleading and Comparative Advertising but, granting too much flexibility to the Member States, the directives lack solid enforcement procedures and deterrent sanctions.61 A more successful method to encourage human and social rights compliance would be for the Commission to make use of public procurement procedures. That is possible thanks to the Court’s case law which allows the Commission to take a company’s environmental, social and human rights behaviour into account— obviously in addition to economic and financial factors—to determine the most economically advantageous offer.62 But, even then, victims of infringements in third countries should be enabled to rely on an effective system of remedies, mainly civil liability and criminal accountability sanctions, whereby damage claims can be brought, or penal action undertaken, against corporations registered or domiciled in the EU.63

VII

TO CONCLUDE

It will be clear from the above that the multi-level structure of our present laws has given rise to problems which would not have arisen under traditional Member State laws. This applies to public as well as private law which have both become part of a larger whole that is no longer autonomous, in the sense that it is no longer linked to a territory of a state, but is embedded in a multi-layer legal order. This development has created a completely new context of ‘constitutionalisation’, ‘economisation’, ‘politisation’ and ‘globalisation’, and is at the origin of a number of new issues and the search for tentative solutions, some described above, such as attributing competences, ranking legal orders and norms, shaping constitutional 59 Wouters and Chanet, ‘Corporate Human Rights Responsibility’, above (n 57) where the long process of ‘ups and ‘downs’ is described at 272–83. 60 ibid, 284–85. 61 ibid, 287–89. 62 ibid, 291–94, with a reference, inter alia, to the judgments in Case C-513/99 Concordia Bus Finland [2002] ECR I-7213 and in C-448/01 EVN AG and Wienstrom GmbH v Austria [2003] ECR I-14527. 63 Wouters and Chanet, ‘Corporate Human Rights Responsibility’, above (n 57) 294–302. In respect of civil liability cases the Court has lifted an important procedural hurdle to claims brought in a EU court in holding in its judgment of 1 March 2005 in Case C-281/02 Andrew Owusu v NB Jackson [2005] ECR I-1383, that the doctrine of ‘forum non conveniens’, applied by English courts, cannot be invoked under the Brussels Convention (now Reg I) to decline the court’s jurisdiction, based on the domicile of the defendant under Art 2 of the Convention, if an alternative forum exists to which plaintiffs may turn that would be more appropriate, unless substantial justice could not be done there—a doctrine that can even be invoked under English law in cases where the competing forum is that of a non-Member State (para 46): ibid, 297–98.

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pluralism, coping with convergence, consistency and coherence of the legal order, using harmonious interpretation, dealing with executive networking and shaping good citizenship and social responsibility. What this amounts to saying is that, because of multi-level regulation, the legal environment has become so different during the last half century that one may wonder whether we are not confronted with a new area of the law which draws its specificity from ‘multi-levelism’—and is perhaps not totally unlike international private law which draws its own specificity from ‘externality’.64 The fact that in both cases an alien element was/is introduced in any state’s legal order,65 might lead to a series of related issues which require answers; answers which, as such, might not be found in the framework of state law ‘pur’, and may have to be formulated with the help of new concepts, or transformed old concepts. This is not the time or the place to start this new ‘(ad)venture’ but it must be done sooner or later.

64 The essence of private international law is for each state to determine which attitude it will take vis-à-vis relations which contain such an external element (and to define what it means under ‘external’). Moreover, there may/will be a tendency in each state to choose for its own law (‘lex fori’) to regulate a relationship with an external element, or at least to do so when a matter is concerned which what it considers to be of ‘public order’. Is it not paradoxical that a branch of the law which is ‘international’ by nature, that is, because of its object, would react in a ‘national’ way? See further A Heyvaert, Belgisch international privaatrecht. Een inleiding (Gent, Mys & Breesch, 1995). See also J Meeusen, Nationalisme en Internationalisme in het internationaal privaatrecht (Antwerp, Intersentia, 1997) in which the author makes an assessment of Belgian private international law to measure how national, or international minded it is. 65 In the case of European international private law, a growing branch of EU law, both phenomena— multi-levelness and externality—are intertwined.

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21 European Private Law: Unification, Harmonisation or Coordination? KÅRE LILLEHOLT

I

INTRODUCTION

W

E SOMETIMES FUMBLE for words when we discuss the development of European private law. Are we talking about ‘unification’ of private law, about ‘harmonisation’, or about something else? Now and then we sense this uncertainty of terminology when we debate the Common Frame of Reference. The categorisation of the ‘Draft Common Frame of Reference’ (‘DCFR’) as a unification project, a harmonisation project or something else entirely will necessarily influence the scepticism or the enthusiasm with which the project is received.1 In the present chapter I submit that the DCFR may serve as one of several possible tools for the coordination of European private law, rather than a tool for unification or harmonisation. Private law differs from country to country in Europe. This fact may be regarded as a blessing or as a problem. Whichever approach they take, people seem to agree that the differences in private law, and the handling of these differences, matter. There is cross-border trade in Europe. People move around, for leisure or for work. They rent or buy houses in several countries. They marry, they divorce and they die in countries other than their home country. Businesses move from one country to another. Even if one prefers a maximum of diversity, there is a need for some coordination, at least in the form of coordinated choice-of-law rules. There is a need for knowledge of the law of other countries. Many would also agree that mutual understanding and interaction regarding private law is beneficial because it contributes to closer ties between the many cultures of Europe. The starting point, then, is that private law is important at the European level—not only at the national level. Words like ‘unification’ and ‘unified’ law signal that the goal is likeness and unity—a unity of rules in one or more areas of law. ‘Harmonisation’ may be taken to mean approximation, something less than unification, but still a process geared towards achieving rules of law and legal institutions that are more alike than they

1 The full edition of the Draft Common Frame of Reference was published in October 2009: C Von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009).

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were before.2 The term ‘coordination’, on the other hand, will be used in this chapter to refer to a less targeted process where one tries to remove obstacles to cross-border activities, to avoid unwanted differences in private law and to cooperate in drafting law reforms and developing private law in general.3 These terms are not neutral, and they may be given various meanings. Further, it is important to remember that it is not a question of either/or. Unification, harmonisation and coordination of European private law have been going on for a long time and will probably continue to do so in the future. What we are discussing is the preferable mix of measures and processes.

II

UNIFICATION OR FULL HARMONISATION OF EUROPEAN PRIVATE LAW?

One might consider a European civil code to be the ultimate form of unification of European private law. We shall see that this is not necessarily so; there may be forms of even more radical unification; but let us for a moment contemplate the idea of a European civil code. The signals from the European Commission have been clear for quite some time: the aim of the work on a political common frame of reference is definitely not a European civil code.4 Neither is such a code the goal of the groups behind the DCFR. Nowhere in the 642 pages of the ‘Outline Edition’ of the DCFR—including a 99-page introduction—are the words ‘civil code’ mentioned, apart from references to the name of the Study Group on a European civil code.5 Several other possible uses of the DCFR are, however, discussed in the introduction. It would be understandable if people were misled by the very name of the Study Group; you might expect a Study Group on a European Civil Code to prepare a civil code. Indeed, there may be members of the Study Group who favour the idea of a European code in some near or distant future. The grand old man of European private law, Ole Lando, has even advocated a global contract code.6 My impression, however, is that most of the members of the Study Group have more modest aims. The DCFR is composed like a traditional civil code. If we imagined some legislative body enacting the DCFR as a civil code for all Europe, it would of course mean a huge step towards unification of European private law. However, much would still be left to contract parties, as the contract rules of the DCFR—with the exception of some consumer rules—are mostly non-mandatory. Other parts of a 2 See also, MW Hesselink, ‘The Ideal of Codification and the Dynamics of Europeanisation: The Dutch Experience’ (2006) 12 European Law Journal 279, 287–89 on codification and harmonisation. 3 The term is inspired by, but not necessarily synonymous with, ‘the open method of convergence’ (or coordination); see van Gerven’s contribution to this volume (ch 20). 4 Commission, ‘Second Progress Report on The Common Frame of Reference’ COM (2007) 447 final (25 July 2007) 11. 5 C Von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009). There is reason to believe that the same holds true for the full edition (above n 1), but an electronic search is not possible for this edition. 6 See, eg, O Lando, ‘Have the PECL Been a Success or a Failure?’ (2009) 17 European Review of Private Law 367.

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possible code—like the rules on non-contractual liability and on property law— would to a certain extent be mandatory by their very nature, but even in such areas of law, party agreements and local rules and practices could play an important role. We have seen examples of unification of private law in Europe that, in my opinion, are no less radical than a civil code would be, albeit restricted to certain areas of private law. Three examples will be mentioned: the Proposal for a Directive on consumer rights, the new Consumer Credit Directive and the Financial Collateral Directive.7 The Proposal for a Directive on consumer rights is meant to entail full (or total) harmonisation for the issues covered. The same goes for the Consumer Credit Directive. The Financial Collateral Directive seems to be a minimum harmonisation instrument in form, but in real terms it has had much of the same effects as a full harmonisation directive, and some surprising effects at that. Three aspects of these examples of unification will be highlighted here: the type of legislative instrument, their general political trend and the political process which produced these texts. The above legislation takes the form, or—in the case of the proposal—is to take the form of directives. This should, in principle, leave some leeway for Member States (and other EEA states) to choose the form and method of implementation. However, the purpose of full harmonisation makes this rather illusory. National legislators must stick closely to the wording of the directive to avoid more or less involuntary deviations. Keeping on the safe side is not an alternative in the way it is in implementation of a minimum harmonisation directive. The rules may be integrated in existing legislation, but even that may seem risky sometimes. In Norway, the Financial Collateral Directive was implemented as a separate piece of legislation,8 without incorporation in the general legislation on the areas affected by the directive, and this has obviously obscured the real effects of the legislation. The point to be made here is that Union legislation of this kind leads to a radical form of unification, leaving not much more room for national variations than a regulation would have done. The second aspect is the general political trend of the directives and the proposal just mentioned. It is now well established that the Proposal for a Directive on consumer rights will, if it is enacted in its present form, lead to a considerable reduction of consumer protection.9 Priority has been given to reducing compliance 7 Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614 final (8 October 2008); Directive 2008/48/EC of the European Parliament and of the Council of 23 April on credit agreements for consumers and repealing Council Directive 87/102//EEC [2008] OJ L133/66; Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements [2002] OJ L168/43. 8 Lov 17/2004 om finansiell sikkerhetsstillelse. 9 See, eg, MW Hesselink, ‘The Consumer Rights Directive and the CFR: Two Worlds Apart?’ (2009) 5 European Review of Contract Law 290; H-W Micklitz and N Reich, ‘Crónica de una muerte anunciada.The Commission Proposal for a “Directive on Consumer Rights”’ (2009) 46 Common Market Law Review 471; H-W Micklitz, ‘The Targeted Harmonisation Approach: Looking behind the Curtain’ in G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009); K Lilleholt, ‘Notes on the Proposal for a New Directive on Consumer Rights’ (2009) 17 European Review of Private Law 335. See also regarding the justification of full harmonisation, JM Smits, ‘Full Harmonization of Consumer Law? A Critique of the Draft Directive on Consumer Rights’ TICOM Working Paper on Comparative and Transnational Law (Tilburg, 2009).

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costs for businesses. The idea is that businesses should not have to prepare for more protective rules when they are contracting with consumers in other countries. Most Member States (and other EEA states) have at least some rules that protect consumers better than required by the existing minimum harmonisation directives. There is no significant improvement of the consumer’s legal position in the proposal; on the contrary, the proposal in some respects goes below the existing minimum level of protection. I think it is fair to say that the tenor of the Consumer Credit Directive is much the same,10 and it seems that national legislators are having a hard time implementing it these days. The Financial Collateral Directive does not affect consumers.11 The directive has, however, led to some astounding changes, at least in some countries, to the position of unsecured creditors and of small businesses as parties to credit contracts. While the process started with the preparation of rules concerning big transactions between financial actors, in the end the scope of application was widened and the directive now alters the balance between financial institutions and businesses of any kind and size contracting even for quite small loans. At the same time, financial institutions have obtained a stronger priority than before over the general creditors of the borrower. As legal scholars, we are not in a position to tell anybody how much protection consumers or small businesses should have. We are not politicians, nor are we elected by anybody. Our job is to observe, analyse and inform. Political rhetoric does not always allow for the full picture. It is hardly to be expected that the Commission present a proposal for a consumer rights directive outright as a reduction of consumer protection. Such information is left for others to divulge. But so what? We may just have to observe and accept as a political fact that there will be no strengthening but, on the contrary, reduction of consumer protection in contract law, at least for the time being. Consumer meets capitalist; capitalist wins. Not everybody considers this an unacceptable outcome of the unification of private law. And if politicians think it is good for us all that financial institutions get some more elbow room, they are of course free to decide accordingly. This leads to my third point, concerning the process. The directives and the proposal just mentioned have probably had minimal exposure in open political discussions at the national level. Admittedly, the proposed Directive on consumer rights seems to have raised some concern in the media. The Consumer Credit Directive has been discussed mainly by experts. The Financial Collateral Directive passed more or less unnoticed not only by politicians and the media, but by many competent lawyers. In Norway, the responsible committee in Parliament obviously thought this was a piece of legislation affecting only big cross-border transactions, not least because the proposed legislation was drafted in alienating financial jargon.12 10 H-W Micklitz, N Reich and P Rott, Understanding EU Consumer Law (Antwerp, Intersentia, 2009). 11 See for a general presentation (not necessarily sharing my scepticism), H Beale, M Bridge, L Gullifer and E Lomnicka, The Law of Personal Property Security (Oxford, Oxford University Press, 2007) nos 10.01–10.07. 12 K Lilleholt, ‘Finansiell trygdgjeving’ Håkonarmål (Bergen, Det juridiske fakultet Universitetet i Bergen, 2006) (in Norwegian only).

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For a Norwegian that has observed, and taken part in, two referendums on possible membership in the European Communities and later the European Union, these legislative processes illustrate superbly an argument employed by many of the ‘no-advocates’ in both referendums, namely that the decision-making of the Union is very remote from ordinary people and that there is a ‘democratic deficit’ in the Union. Interest organisations, lobbyists and other so-called stakeholders play a very important role in the preparation of Union legislation. If a national legislator had prepared—in a correct manner, including a public hearing—a proposal to significantly reduce consumer protection, then elected politicians would be forced to engage in discussion. There would be critical questions from journalists demanding answers, on the spot. The responsible minister would have to defend the proposal in public. A proposal entailing important changes concerning credit agreements, priority of security rights and the enforcement of such rights would normally be prepared by a law committee, often with the participation of legal scholars, which would at least make it clear that the proposal was at odds with established norms, a break with tradition demanding some justification and discussion. Now, when it comes to Union legislation, Norway is in a very special situation (together with Iceland and Liechtenstein). The EFTA states in the EEA have little influence on preparation of Union legislation, and they must—in practice—accept and implement the results indiscriminately.13 This makes Brussels even more remote than it is in Member States. However, I suspect the fact that preparation of Union legislation does not attract the same public attention as other controversial political matters do may pose similar problems in other countries. Again, one might say: so what? Some people may consider that a certain distance between legislators and citizens is beneficial because it favours more consistency in the long-term governance. The point here is to illustrate that this form of unification leaves only little space for national or regional variations, and that it sometimes brings with it important changes relating to value norms and political choices, while avoiding the broad political discussion which should precede such changes.

III

COORDINATION OF PRIVATE LAW

Mathias Reimann suggests that ‘centralisation of power is an almost inevitable price for effective legal unification’.14 It seems probable that there is a strong connection between result and process. Unification, in its most radical form, leaves little room for national or regional variation and it may well be unrealistic to believe that such results may be achieved through consensus. In discussing how to handle differences in European private law, it is well worth considering whether alternatives to unification (in its most literal sense) exist, even if such unification may still be deemed necessary in some cases.

13 The option to ‘veto’ new relevant legislation, thus not including it in the Agreement, has not yet been utilised. 14 In his contribution to this volume (ch 22).

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Reimann has presented five means of ‘unification’: the exercise of central power; coordination among the Member States; unification by non-state actors; by legal education and legal practice; and through adherence to international norms. Here I shall discuss some aspects of coordination, but as a process not necessarily resulting in unification. Walter van Gerven prefers the term ‘convergence’,15 but for me this word, too, seems to presuppose some aim of likeness. My question is whether coordinated private law can be achieved by cooperation of independent states (or other entities). Legislative cooperation among the Nordic countries can serve as an example.16 From a distance, private law in the Nordic countries may seem quite uniform or harmonised. Comparatists sometimes refer to ‘Nordic’ or ‘Scandinavian’ law as more or less a unity, and scholars from the Nordic countries follow suit now and then and also refer to ‘Nordic’ or ‘Scandinavian’ law. However, we are talking about five independent states, each state with its separate legal system. With the exception of Iceland, where home rule was established only in 1874, none of the five countries has had a common parliament with another Nordic country, or been subordinated to a legislator in another Nordic country,17 for about 200 years. Private law has been a matter for each country for a very long time. The Nordic countries have a long history of cooperation on legislative matters, in particular within the private law area. The most prominent example is the concerted effort to prepare acts on the formation of contracts and on sale of goods in the first decades of the twentieth century. The resulting legislation in each country on formation of contracts—still in force—is not entirely uniform, but it is harmonised to a very high degree. Legislation on the sale of goods was introduced in the same period in all Nordic countries, except Finland. From the 1980s onwards, in connection with the implementation of the UN Convention on Contracts for the International Sale of Goods (‘CISG’), there was a new round of cooperation on sales law. This time, all countries except Denmark introduced acts on the sale of goods that are also harmonised to a high degree without being entirely uniform. Other areas of legislative cooperation have been, inter alia, maritime law, debt instruments, insurance contracts, intellectual property and non-contractual liability. The results have not always been as striking as in the area of contract formation and sale of goods, but a considerable degree of harmonisation and coordination has been reached. Originally, Nordic legislative cooperation was based on political ideas and strong sentiments regarding ties binding the Nordic countries together. Later on, the justification for cooperation became more pragmatic and utilitarian, and for many years now the mantra has been ‘Nordic synergy’. It must be added that Nordic cooperation is less important today than it used to be in earlier periods—something

15

In his contribution to this volume (ch 20). See for a presentation, S Blomstrand, ‘Nordic Co-operation on Legislation in the Field of Private Law’ (2000) 39 Scandinavian Studies in Law 59. 17 Finland was an autonomous part of the Russian Empire 1809–1917; Norway gained independence from Denmark in 1814, but was part of a personal union with Sweden under the Swedish king 1814–1905. 16

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that may partly be explained by the countries’ different relationships with the European Union. Similarities of culture in a wide sense and language in particular have contributed to the success of Nordic legislative cooperation. Danish, Norwegian and Swedish are mutually understandable languages, and these three languages are known to many people in Iceland and Finland as well (in Finland, Swedish is an official language), even if most Icelanders and Finns seem to prefer English in their contact with Nordic neighbours today. The traditionally close contact among Nordic legal scholars has also contributed to the success of cooperation. With a view to the future development of European private law, an interesting point is that Nordic legislative cooperation has not been based on supra-nationality of any kind. There has been no multi-level governance. Independent states have cooperated on the basis of mutual interests. Practical results have been reached, based on a wide range of measures, from formalised co-meetings of law committees to more informal consultations of administration officials and even personal relations among scholars. Nordic legislative cooperation is not necessarily something to be copied, but it may serve as inspiration when looking for alternative ways to handle differences in European private law. The prospects should not be much less favourable than they have been in the Nordic region. The Member States of the European Union share a common destiny in a stronger sense than the Nordic countries ever have done and English is a lingua franca throughout the Community.18 One important difference, of course, is that in the European Union, Union institutions could participate in cooperation as well as the Member States. Of course Nordic legislative cooperation is not the only example of coordination of private law. It is sufficient to recall the preparation of the Estonian civil code, in particular the Law of Obligations.19 The work was carried out on a national basis, without any supra-national binding. Still it was based on comprehensive comparative research, including cooperation with scholars from other countries, with a view to adapting the code to the international development of private law where possible. The result is an impressively modern piece of legislation. Three factors are vital to the coordination of private law: forums, people and knowledge. They will be discussed in the reverse order, even if it may be objected that forums come first, gathering people, who in turn create knowledge. Knowledge has been a prerequisite of the most successful parts of Nordic legislative cooperation. Much of the legislation has been based on thorough reports of a high professional standard. Law committees have been established in each country and these committees have cooperated in the preparation of the reports. Top legal scholars have participated in the committees, alongside—as is usual in the preparation of legislation in general—representatives of interest groups. The committees have often reached more or less uniform proposals for legislation. The

18 For a more reserved attitude towards English as a lingua franca, see R Sefton-Green, ‘Sense and Sensibilities: The DCFR and the Preservation of Cultural and Linguistic Plurality’ (2008) 4 European Review of Contract Law 281. 19 See Paul Varul’s contribution to this volume (ch 15) and, eg, I Kull, ‘Reform of Contract Law in Estonia. Influences of Harmonisation of European Private Law’ (2008) XIV Juridica International 122.

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legislator of each country is free to deviate from such proposals, but often the result of the committees’ work has had highly persuasive effect. The DCFR may be compared to such reports prepared by law committees. The DCFR is a rich source of knowledge of European private law and it presents model rules—solutions that have been regarded as possible common ground by legal scholars from all over Europe. One may object that the groups behind the DCFR lack the legitimacy of a law committee appointed by a government. In one sense this is of course true, even when we take into account that the last part of the work was commissioned by Union institutions as a research project.20 More important, however, is that legal scholars in law committees remain independent. They are appointed but not instructed by the government. They participate as academics, not as politicians. This was also the case in the preparation of the DCFR; the participants did not act as representatives of their country or of any particular interest. And like a report from a law committee, the DCFR has no binding effect whatsoever, only a possible persuasive effect. Political choices are left to the national legislator, or the Union legislator. So much for knowledge and people; when it comes to forums, the inspiration provided by Nordic cooperation is less obvious. Law committees have mostly been appointed ad hoc. There is a certain institutional framework for Nordic cooperation in general, and there are some agreements and programmes for legislative cooperation in particular, but this formal framework has not played a significant role in legislative cooperation. It is easier to envisage some common forum or institution for legal cooperation within the European Union, as the Union has supranational organs of governance. Models for such forums would have to be discussed. It is tempting to point to the permanent Law Commission for England and Wales and the Scottish Law Commission. There could be a European Law Commission, at least for private law. Members could be legal scholars and practitioners, appointed for definite terms. The commission could prepare legislation on its own initiative or on request from community institutions. A law commission would need an institutional framework, including possibilities for inviting researchers and funding research projects.21 The commission’s independence of national and European authorities should be secured by statutes and funding schemes. Details will have to be discussed, but the time seems to be right for establishing some kind of permanent forum. The preparation of the DCFR has engaged a great number of legal scholars, and there are other groups also working with European private law. The discussion on European private law has drawn the attention of a still wider circle of jurists. This work should be preserved, updated and improved. The commitment to, the knowledge of and the lively involvement in European private law should not be allowed to die out. A forum—a law commission or something of the kind—would of course not be sufficient in itself, but it could form the hub of a wide range of processes. 20

See von Bar and Clive (eds), DCFR Full Edition, above (n 1) 1–3. See also on ‘deliberative superliberalism’ and a possible ‘Private Law Institute’ in H Collins, The European Civil Code: The Way Forward (Cambridge, Cambridge University Press, 2008) 236–37 (and ch VII). 21

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In the end, the development of European private law will depend on political processes and decisions, at different levels, and that is also how things should be. Let us hope, however, that there will room for coordination, not only unification, reached through cooperation, not only dictate, following open discussions based on knowledge.

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22 Top-Down or Bottom-Up? A Look at the Unification of Private Law in Federal Systems MATHIAS REIMANN AND DANIEL HALBERSTAM

I

INTRODUCTION—LEGAL UNIFICATION UNDER CONDITIONS OF FEDERALISM

A

T ITS CURRENT stage, European private law is still more an aspiration than a reality. It is true that there is a substantial body of European private law on the Union level; and it is also true that there are private law principles and rules shared by many—often by most, and sometimes even by all—European legal systems. Still, in most areas, we do not at present have one body of positive private law for all of Europe, but rather a coexistence of more or less similar national laws. Thus, to the extent one considers a European private law desirable, one must seek to unify, or at least heavily harmonise, the current multitude of national regimes.1 In short, European private law today is essentially a legal unification project. A major problem with this unification project is that it must be pursued within the framework of a divided power system. The European Union rests on a division of powers, not only between the Union and the Member States, but among the Member States themselves. Of course, even with regard to private law, substantial law-making power has been delegated to the Union, but most of it still remains with the Member States. Even operating within the confines of European law, they retain considerable legislative competence, virtually all judicial power to interpret and apply private law and the entire executive machinery to implement the resulting decisions. There are two principal avenues leading towards legal unification in a federation: top-down and bottom-up. Over the last few decades, uniform private law for Europe has been pursued in both ways. On the one hand, we have seen an ever increasing volume of unification commanded from above, mainly through legislation from Brussels (and Strasbourg) and in (much smaller) part through case law 1 Whether (and in which substantive areas) one common body of private law rules for Europe is desirable is, of course, a highly controversial question but it is not our concern here. Suffice it to note that we count ourselves among the sceptics (at least regarding areas beyond the hard core law of the market).

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from Luxemburg; these efforts have largely focused on market regulation, ie, areas like consumer protection, corporate law and antitrust. On the other hand, there is a panoply of bottom-up efforts, mostly in the form of ‘principles’ and other drafting projects by private actors, but also in the form of promoting transnational legal scholarship and education; here, the main focus has been on the traditional core of private law, ie, contract, tort, property and family relations. At least until recently, the relationship between these two directions has been characterised more by separation rather than cooperation: while EU institutions have blazed ahead usually with little or no attention to (and often, it seems, in ignorance of) legal scholarship, legal scholars have often proceeded in happy disregard of (if not with hostility to) the regulatory jungle created on the EU level. The recent ‘Draft Common Frame of Reference’ (‘DCFR’)2 is perhaps the first sustained project that has closely involved both the official EU institutions (ie, the Commission as an initiator and supporter) and a large network of scholars (ie, the Study Group of European Private Law and the Research Group on European Private Law (Acquis Group) as actual drafters) but as of yet, its destiny is undetermined. In most contexts, politicians and bureaucrats on the one hand, and academic scholars on the other, continue to go more or less separate ways. This ongoing competition between (by and large legislative) top-down and (mainly academic) bottom-up efforts raises a fundamental question which underlies much of the current debate about private law unification in Europe: which approach is more promising? Will private law unification result primarily from command by central institutions? Or should we rather trust in the decentralised efforts of scholarship, teaching and legal practice? We—a comparative law scholar with a specialisation in private law and a European Union law scholar specialising in comparative federalism—recently undertook a study on ‘The Unification of Law in Federal Systems’3 which sheds some light on this question. Covering 20 jurisdictions around the world,4 the study pursued three principal goals: it sought to determine the impact of the various means and methods of unification;5 it attempted to measure the degree of legal uniformity, both in the respective federal systems and for various areas of law; and it tried to make sense of the data in light of various background factors.6 The

2 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009) 3 See D Halberstam and M Reimann, Federalism and Legal Unification: A Comparative Empirical Investigation of 20 Systems, University of Michigan Public Law Working Paper No 186 (2010), available at http://ssrn.com/abstract=1557690. 4 Argentina, Australia, Austria, Belgium, Brazil, Canada, Germany, India, Italy, Malaysia, Mexico, The (Kingdom of the) Netherlands (a loose federation of the mother country and some former colonies in the Caribbean), Russia, Spain, South Africa, Switzerland, the United Kingdom, the United States, Venezuela and indeed, the European Union. Nigeria was originally part of this study but we were unable to locate a competent reporter for it. 5 It envisages five principle ways of unification: by the exercise of central power (ie, top-down); by coordination among the Member States (ie, somewhat bottom-up); by non-state actors, via legal education and legal practice; and through adherence to international norms. The study gathered the requisite information primarily from one or more national reporters for each jurisdiction based on an extensive questionnaire. 6 The study deals only with the uniformity of legal rules, ie, the law on the books; it does not gauge the uniformity of outcomes in actual disputes, ie, with the law in action. A comparison of uniformity of

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findings of this study are obviously no recipe for particular action, but they allow us to put the project of private law unification in Europe into a broader context and thus get a better sense of its strengths and weaknesses. The first part of this chapter looks at top-down unification and its major drivers, especially in the private law context. The second part focuses on bottom-up projects and their much more limited contributions. The third part then considers the actual data on legal unification in the European Union and shows that they confirm the findings of the first two parts. The conclusion suggests that the price for effective private law unification in Europe may thus well be an uncomfortably high degree of power centralisation.

II

TOP-DOWN UNIFICATION—MAJOR DRIVERS

Top-down unification of private law can result from several factors. We will look at the three most salient ones roughly in order of their practical impact: central legislation, constitutional norms and judicial decisions. In addition, the degree of legal uniformity within a federation is closely related to the overall degree of ‘structural centralisation’ of the whole system.

A

Central Legislation

Our study indicates that on the whole, central—ie, federal—legislation is clearly the leading means of legal unification in federal systems. It is predominant in most jurisdictions and a very significant force in the rest, albeit to varying degrees. In the area of private law, this law-making consists mainly of formal legislation, either in the form of codifications or of more limited statutes.7 The leading role of central law-making in legal unification shows itself in several regards. To begin with, the national reporters attest to it almost without exception. Furthermore, there is a strong correlation between the extent of federal legislative jurisdiction and the degree of legal unification: systems with lots of federal law-making power, like Italy, have highly uniform law; systems with less such power, like Argentina, display greater diversity. The same holds true for particular areas of law: areas mostly subject to federal law-making are, on the whole, much more uniform than others. Thus, the centre usually has power over commercial law (ie, the law of the market) which, as a result, is highly uniform almost everywhere, while the Member States often retain power over areas like family law which are, accordingly, usually more diverse.8 outcomes would require an entirely different approach along the lines of the ‘Common Core of European Private Law’ project under the auspices of Mauro Bussani and Ugo Mattei; see M Bussani and U Mattei, ‘The Common Core Approach to European Private Law’ (1998) 3 Columbia Journal of European Private Law 339. 7

In other areas, especially in public law, central regulations play a significant role as well. See Halberstam and Reimann, ‘Unification of Law in Federal Systems’, above (n 3). There is a caveat. The extent to which federal law-making power actually creates legal uniformity depends not only 8

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These findings are not surprising, of course, but they allow two observations regarding the European situation in particular. First, they show that the increasing amount of top-down (and thus uniform) private law-making in the European Union is, in a sense, simply par for the course—central legislation is how most federal systems unify most law most of the time. In fact, compared with other federations, central legislation in the EU is still quite rare—the result being a comparatively low degree of legal uniformity.9 Secondly, the close relationship between the strength of federal legislative power (and its exercise) and the degree of legal uniformity also suggests that central legislation is simply the most effective means—at least as far as the law on the books is concerned. The European situation fits that impression: by far most of the private law uniformity created 10 in Europe over the last few decades is the result of directives forcing the Member States to march to the beat of a single drum.

B

Constitutional Norms

Federal constitutions have a unifying effect because they often contain norms which are immediately applicable throughout the whole system.11 Since these norms normally have supremacy effect, they displace potentially diverse Member State rules. The most important constitutional norms in this regard are fundamental rights provisions which provide common values and set common boundaries throughout the whole system. It is true that this effect is stronger in public than in private law, but even in the latter field, the unifying effect of constitutional law can be quite significant; its strength depends mainly on the content of the respective constitutional texts, the strength of judicial review and the degree of constitutionalisation of the legal culture. Thus, constitutional norms have a significant unifying effect in the United States (especially under the due process and equal protection clauses of the fourteenth amendment), Mexico (through its amparo procedure) but matter much less in the United Kingdom or Malaysia. These observations can help us to recognise not only that the unifying effect of central ‘constitutional’—ie, treaty—norms on European private law is comparatively weak; they also indicate why this is so: traditionally, few treaty norms applied directly to private law,12 and the European Court of Justice still has no general power under the treaty to review private law for its reasonableness or compliance on the degree to which legislative jurisdiction is formally allocated to the centre, but on the degree to which the center exercises its power. Again, this is true especially in private law. In some countries, like Germany, the federal legislature (or regulators) have virtually gone to constitutional limits and thus created maximum legal uniformity; in others, such as the United States, much of the central legislative power (herein under the ‘commerce clause’) has been left untapped, leading to greater legal diversity. 9

See below IV: Degrees of Uniformity. As opposed to pre-existing uniformity resulting from common traditions or from common responses to social and economic issues. 11 In addition, they also have an indirect effect on legal unification by allocating certain legislative jurisdiction to the centre which, if exercised, leads to legal uniformity; see above II.A: Central Legislation. 12 Notable early exceptions were the equal pay provision, now Art 157 Treaty on the Functioning of the European Union (TFEU), and the competition provisions, now Art 101 et seq TFEU. 10

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with fundamental rights. At least when compared with other federations, this means that one cannot expect ‘constitutional’ norms to contribute much to private law unification in the EU for the time being. C

Central Adjudication

Legal uniformity can also be created through decisions by central (federal) courts. Yet, their contribution varies hugely among federations. The main reason is that its extent depends almost entirely on the law involved and on the power of the courts.13 Leaving aside judicial review under a federal constitution14 and turning to the adjudication of secondary federal law (such as statutes and regulations), two types of adjudication must be clearly distinguished. First, central—ie, federal—courts usually have and exercise jurisdiction over matters arising under central (federal) law. They can thus ensure—or at least promote—uniform interpretation of that law. Here, central courts do not, strictly speaking, create (new) legal uniformity; instead, they preserve the uniform application of an existing (uniform) rule that was created by the central legislature. The degree to which central courts perform this function varies greatly. It is high where a central court of final instance is large and hears hundreds—if not thousands—of cases every year, as in Germany or Italy; it is much lower where such a court is small and decides only a very limited selection of disputes, as in Canada or the United States.15 Secondly, central courts actually help to create uniformity when they provide authoritative (uniform) interpretations of Member State laws. This, however, is more the exception than the rule. It requires that central courts have the power to decide state law issues with binding effect throughout the system, and that is true only in a minority of jurisdictions. Where central courts lack such power, the Member State courts have the last word in state law issues, and uniformity ultimately depends on their cooperation.16 We can see why the European central judiciary’s contribution to private law unification has been—and will continue to be—quite limited. Like many central courts, the Court of Justice of the European Union (CJEU) has jurisdiction only over central—ie, Union—law. It can thus provide binding interpretations of regulations and directives, ie, keep the interpretation of secondary Union law (more or less) 13 By contrast, it does not depend—at least not significantly—on whether a system operates under a formal rule of precedent or not. Of course, where the binding effect of higher court decisions is strong, as in the United Kingdom, these courts can more easily force the lower tribunals to follow a certain interpretation of law than in systems without such an effect, as in most civil law jurisdictions. But even in common law jurisdictions, lower courts may still ‘distinguish’ the case before them and thus escape unwanted precedent, and even in civil law systems, most lower courts will follow most higher court decisions so routinely (albeit ‘voluntarily’) anyway that open deviations are rare. The degree to which higher courts can effectively tell lower courts to toe the line depends primarily on the unity and hierarchical structure of the court system, the patterns and practices of judicial promotion and on the overall judicial mentality, especially the judges’ attitudes towards authority and obedience. 14 See above II.B: Constitutional Norms. 15 Especially in the latter, divergent interpretations of federal law abound, and the US Supreme Court has neither the resources nor the will to resolve more than a tiny portion of them. 16 See below III.A: Coordinate State Action.

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uniform. To be sure, within the scope of application of secondary law, the CJEU can also contribute to the uniformity of the Member States’ private law in an indirect fashion: the supremacy of even secondary Union law, as well as its indirect (horizontal) effect, ultimately forces the Member States to bring their domestic law into conformity with CJEU pronouncements. But this contribution can only be as strong as secondary legislation permits. Beyond that, the Court of Justice and the General Court (formerly the Court of First Instance) lack the formal power to interpret the law of the Member States. They can thus not contribute independently of the Union legislature to national legal unification across Member States on any broad scale. Like the United States—but unlike Canada—the EU does not have a central tribunal which can directly unify Member State private law through its decisions. In addition, the Court of Justice is a relatively small court—like the Supreme Court of the United States or the Supreme Court of Canada. Even when adding the General Court, the central high courts of the EU do not have the capacity to harmonise federal law—let alone, indirectly, Member State law—through large-scale adjudication. Central courts can, of course, informally influence the interpretation and application of state law by acting as a model. They can provide guidance (for example, in their interpretation of similar federal law), point in certain policy directions and endorse values the state courts might then adopt. Such a model function, however, requires that the central court have sufficiently broad jurisdiction to set enough examples, as well as sufficient general authority to exercise meaningful leadership. The CJEU is not in such a position. Its jurisdiction is limited to Union law, which many Member State judges still consider to be special matter separate from most domestic (private) law. The Court does not have general appellate jurisdiction over cases originating in the Member States and thus cannot directly decide them. Finally, while the style of its decisions has become more accessible over the years, it might still be considered too specialised to provide broad leadership or significant guidance in policy matters for domestic courts. That may change as the scope of Union law broadens, the stature of the CJEU grows and its opinions become widely read; but at least with regard to general private law, the Court is unlikely to become a major unifying influence in the near future.

D

Structural Centralisation

Beyond the unifying effect of federal legislation, constitutional norms and central adjudication, it seems that the extent of legal uniformity in a federation is also influenced by the degree to which the system as a whole is structurally centralised. A federation’s degree of ‘structural centralisation’ is determined by how much governmental power—legislative, executive, judicial, fiscal, etc—lies with the centre rather than with the Member States.17 To put it more colloquially: some federations, like

17 The study measured this ‘structural centralisation’ by combining six factors of centralisation and created a ‘structural composite’ index for each system, ranking from 1 (decentralised) to 7 (centralised). Such an approach can, of course, only provide approximations, but even on that level, it is clear that federations are structurally centralised to significantly different degrees.

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South Africa, are clearly more centralised than others, like Australia.18 Our study shows a significant correlation between the degree of—overall—‘structural centralisation’ and the degree of legal uniformity: highly centralised systems tend to have highly uniform law; less centralised systems usually show greater legal diversity.19 Of course, this is only to be expected, and of course, correlation does not guarantee causality. But the picture suggests that legal uniformity resulting from top-down forces is not only due to the formal exercise of governmental—for example, legislative and judicial power; it is also linked to the overall architecture of a federation. It seems that federations conceived primarily as one entity—albeit with several sub-units—generally push strongly for legal uniformity while federations conceived as a club of members (albeit under a common federal umbrella) generally tolerate greater diversity; many, of course, lie somewhere in between. If we thus envisage federations on a spectrum ranging from strong to weak structural centralisation, the European Union must be located on the weak end. Despite the progress of European integration, most of the constitutional, legislative, judicial, executive, fiscal and other government power continues to lie with the Member States. Indeed, EU law increasingly determines the content of Member State law, but the Union’s overall sovereign power is still comparatively weak—certainly much weaker than in virtually all national federations. As a result, the EU’s institutional architecture cannot exert much general gravitational pull towards uniformity in private law either.

III

BOTTOM-UP UNIFICATION—LIMITED CONTRIBUTIONS

Like the top-down process, bottom-up unification can occur through a variety of factors. There are coordinate efforts by state actors, especially legislatures and courts; non-state actor projects abound, mainly in the form of formulating principles or rules; there is the impact of legal education and transboundary practice; and there is unification through adoption of international legal norms. The global federalism study outlined in the introduction suggests that on the whole, most of these factors make rather limited contributions to the unification of law in federal systems.

A

Coordinate State Action

Legal unification is sometimes the result of coordination among state actors. In private law, this can involve both Member State legislatures and Member State courts. The prime example of Member State legislative coordination is, of course, the US-American National Conference of Commissioners on Uniform State Laws (NCCUSL, now called more simply Uniform Law Commission, UCL); a similar 18 South Africa’s ‘composite centralisation’ index was 5.8, while Australia’s was 4.4; see Halberstam and Reimann, ‘Unification of Law in Federal Systems’, above (n 3). 19 See Halberstam and Reimann, ‘Unification of Law in Federal Systems’, above (n 3).

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organisation exists in Canada. Informal cooperation mechanisms are reported for several other countries as well.20 While these efforts sometimes lead to uniform state legislation, experience shows that they accomplish complete—or even largescale—legal uniformity only in a few, rather exceptional instances, not across a broad spectrum of legal areas. This is true even for the often-cited showpiece in this regard, the United States, the notable exception of the much cited Uniform Commercial Code notwithstanding.21 In Europe, there are currently virtually no system-wide coordination efforts on the Member State level in private law—at least nothing comparable to the United States. Of course, much legislation is based on comparative surveys, but this is driven mainly by the search for good ideas rather than by a pursuit of Europe-wide unification. Thus, where Member State legislatures have not been forced by directives to harmonise their laws, they have largely gone solo. It is true that recently there has been a growing tendency to adjust national law to international or European sources.22 Outside their scope, however, the legislative process is still by and large national in scope because lobbying, log-rolling and party politics play out mainly on the national level as well. The contribution made by courts on the coordinate level is also quite modest in most federations. It is true that in federal nations, Member State tribunals often look at each other’s decisions, at least at the appellate level, and in some jurisdictions they do so routinely enough to create some unifying effect. But even where it occurs, such cooperation can only have a limited impact for three reasons: it can foster uniformity only where the same issue comes up before a significant number of state judiciaries; it creates uniformity only if all (or at least a clear majority) of state courts then actually adopt the same view—which is often not the case. And, most importantly, it works only for the particular issue at stake, not more broadly for a whole field of law. This is not to deny that state court cooperation can—and sometimes does—foster legal uniformity; it is simply to point out that in the grand scheme of things, its effects are comparatively minor and always ad hoc. In Europe, the effects of Member State cooperation on private law uniformity is even weaker than within most national federations—simply because there is, as of yet, so little of it. The fanfare with which comparative lawyers celebrate instances in which national courts pay any attention to sister state decisions attests to the rarity of such events. This rarity is no wonder: national courts continue to think very much in national terms;23 a few exceptions, the language barriers separating them range from inconvenient to insurmountable; and the considerable economic, 20

Australia, Austria, Belgium, Brazil, Germany, Spain and also the United States. Only about 10% of the more than 200 uniform laws promulgated by the NCCUSL since its foundation in 1892 have been adopted by 40 or more states; most have been adopted only by a small number of states, and many have not been adopted by any. 22 Perhaps the most notorious example is the reform of the German law of obligations in the BGB in 2002; see M Reimann, ‘The Good, the Bad, and the Ugly: The Reform of the German Law of Obligations’ (2009) 83 Tulane Law Review 877, 885–86. For national reactions to the Unidroit Principles, see MJ Bonell, ‘The ICSG, European Contract Law and the Development of a World Contract Law’ (2008) 56 American Journal of Comparative Law 1, 18–21. 23 Transnational judicial borrowing in private law does occur, of course, but it is on the whole quite rare in most jurisdictions; see U Drobnig, The Use of Comparative Law by Courts (The Hague, Kluwer, 21

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cultural and social differences still prevailing throughout much of the EU suggest great caution in adopting foreign judicial views. B

Non-state Actor Projects

Systematically organised (model) norm creation though non-actor efforts exists only in very few federations, notably the United States, Mexico and, of course, the European Union. In all these instances, their actual impact on legal uniformity has—at least so far—been quite limited or outright non-existent. Their effect is perhaps strongest in the United States where the American Law Institute has produced a substantial set of ‘Restatements of the Law’ (in successive editions). Some of these restatements have had a unifying effect because courts have adopted or otherwise been influenced by their rules. But one must not overlook that most restatement norms receive little attention from judges and none from legislators. As a result, the unification effect of the restatements is on the whole more apparent than real—and usually overrated by outsiders.24 In a similar fashion, the many initiatives currently underway in Europe have not yet had any significant unification effect—at least not in practice. So far, legislatures and courts have paid them little or no attention, some notable exceptions notwithstanding.25 Of course, should any of these projects receive legislative sanction in Brussels and Strasbourg, they would become major factors in the unification of European private law, and that is normally their ultimate goal.26 But such a sanction is extremely unlikely in most cases and not imminent in the rest. Again, this is not to deny that the drafting of ‘principles’ of European contract, tort and other private law can help to bring European laws together; but they do so only very slowly, incrementally and with uncertain success.27 C

Legal Education and Transboundary Practice

Interestingly—in the vast majority of the federations covered by our study—legal education has a primarily nationwide focus. That is true, firstly, with regard to the curriculum, ie, the subjects taught—most legal education covers federal and 1999). While this study is somewhat dated by now, whatever change has occurred in the meantime is scarcely dramatic. 24 It is a different matter altogether that many of the restatements’ rules simply reflect already existing consensus—which was, of course, the original intention of these projects. 25 Some examples are cited by Bonell, ‘The ICSG, European Contract Law and the Development of a World Contract Law’, above (n 22); see also, C Vendrell Cervantes, ‘The Application of the Principles of European Contract Law by Spanish Courts’ (2008) 72 Zeitschrift für Europäisches Privatrecht 535; D Busch, ‘The Principles of European Contract Law before the Supreme Court of the Netherlands—on the Influence of the PECL in Dutch Legal Practice’ (2008) 72 Zeitschrift für Europäisches Privatrecht 549. 26 If they receive such legislative sanction, the unifying effect would, of course, come from the legislation that enacts them—which brings us back to the top-down mode,. See above II.A: Central Legislation. 27 For the impact of legal scholarship, especially of the growing number of treatises on European private law, see Halberstam and Reimann, ‘Unification of Law in Federal Systems’, above (n 3) II.C.2.

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uniform, rather than local and diverse law. It is also true, however, with regard to the student body which is mostly recruited from all over the federation rather than exclusively from this state or that province only. It is, finally, true with regard to the qualification awarded—a law degree earned in one Member State usually allows access to the Bar examination (or directly to the Bar) all over the country. In addition, legal practice tends to have a nationwide scope in the sense that barriers between Member States are either non-existent or relatively easy to overcome. Yet the extent to which the mostly nationwide focus of legal education and practice promotes the unification of law is difficult to ascertain and far from clear even within national federations. On the one hand, it stands to reason that the study of law on a mainly national level and a legal practice largely unhindered by state boundaries will create a significant degree of ‘national consciousness’ among the legal profession. This, in turn, can be expected to create a predilection for legal uniformity. On the other hand, in many federations, the primarily national outlook of legal education and legal practice coexists with an amazingly high degree of legal diversity. Consider the United States: law schools teach little local law; much legal practice is nationwide; and at least the elite of the legal profession thinks of itself in national rather than local terms. And yet, private law, being largely the domain of the states, displays a bewildering diversity in many (though by no means in all) regards. Thus, a national outlook on legal education and practice is certainly no guarantee for legal uniformity; in fact, it seems questionable whether it is even a very significant force. In the European Union, this force is currently particularly small. In contrast to most national federations, legal education in EU Member States is not primarily system-wide to begin with, but rather focused on local (Member State) law. Although European law is now a mandatory subject in most universities, it is still a comparatively small—and rather separate—element; in most countries, one can obtain a law degree (and with distinction) without knowing more than a few basics of EU law. Of course, exchange programmes bring students from one Member State to another, but this involves only a minority, engenders exposure only to one other system and is usually limited to one or two semesters. There are, at best, a handful of truly ‘European’ law schools, and they typically operate only on the graduate level. In short, since there is no broadly based European legal education, it cannot have much of an impact on legal unification. The situation is similar with regard to transboundary practice. While its volume has, of course, been growing, it is still the business of a relatively small elite. Most lawyers in Europe practise local law locally—often in happy (though dangerous) ignorance of the European dimension. In addition, the number of lawyers from one Member State practising in another is comparatively tiny. Even though the legal barriers of transboundary practice have been lowered significantly, the language and cultural barriers remain formidable and much higher than in virtually all national federations.

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International Norms

Finally, hope for legal unification is sometimes found in international norms, ie, norms originating entirely outside a federation.28 More often than not, they come in the form of treaties. If a federation adopts a treaty, its rules may become commonly applicable throughout the whole system and thus unify its law. Yet, such a unification effect is actually quite rare for a variety of reasons. Many international treaties are not self-executing and thus without direct internal effect;29 most of them affect areas of law that are governed by federal and, hence, uniform law anyway; and very few of them have any impact on private law.30 Still there is, in European private law, the considerable unifying effect of the Convention on the International Sale of Goods (CISG). Not only have most EU Member States adopted it, it is usually treated as directly applicable and it has also influenced the purely domestic law of some Member States who have adjusted their sales provisions to the CISG. And yet, even the CISG’s unifying effect has severe limits. Most importantly, this effect is incomplete because some EU Member States (notably the United Kingdom) are not members. And even among the members, adoption of the CISG often unifies the law and fragments it at the same time by subjecting purely internal transactions to one set of rules (domestic provisions) and international sales to another (an international treaty).31

IV

DEGREES OF UNIFORMITY—A LOOK AT THE DATA

The review of the factors promoting legal unification in federal systems suggests that the European Union presents a more difficult case than most—if not all—other federations. This is because in the EU, the top-down forces, which usually drive unification, are relatively weak and the bottom-up forces, which are more developed, have a rather limited impact. This is exactly what our data show, and quite dramatically.32 28 In the European context, EU law is obviously not ‘international’ in that sense but rather ‘central’ in the sense described, above II: Top-down Unification. 29 Unless they are implemented by domestic legislation which then becomes the primary agent of unification, see above II.A: Central Legislation. 30 Hague Conventions have a very limited impact as well. Most of them concern private international law and procedure which are whole different matters to begin with (and many of them are now being superseded by European law, especially regulations on procedural matters). Of those pertaining to substantive private law, few have been adopted broadly enough to have a serious unifying effect. 31 Of course, the CISG normally applies only if both jurisdictions involved are members; see Article 1(1) CISG. 32 The data were obtained as follows. For each jurisdiction, we asked the national reporter(s) and at least one additional expert to rate the legal uniformity for more than 40 areas of law on a scale from 1 to 7. The scores were then averaged for each jurisdiction as well as for particular areas of law. We checked the reliability of the scores in two ways. First, we reviewed the responses against a set of neutral control questions which served to identify a respondent’s tendency systematically to over or underrate unification compared with the average response. Where such a tendency showed (ie, where the response to the control questions differed from the average of all responses by more than one standard deviation), the scores obtained from the particular expert were eliminated from the data set as unreliable; additional experts were then recruited for the respective legal system. Secondly, if the average scores obtained for each system (and controlled for systematic bias) deviated from each other by more than one point (a rare

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Mathias Reimann and Daniel Halberstam Uniformity of Law in General

According to our data, legal uniformity within the European Union with regard to law in general is far lower than in any national federal system. We measured the uniformity of law on a scale from 1 (not uniform at all) to 7 (completely uniform), with 4 being the mid-point (uniformity and diversity in equipoise). The average uniformity score for all 18 national systems surveyed is 5.833 while the score for the European Union is 2.7—ie, less than half. In all national systems, the uniformity of law was rated above the mid-point (law being, on the whole, more uniform than not), while the European Union fell way below that mark (law being, on the whole, much more diverse than uniform). In terms of overall average legal uniformity, it is, so to speak, the EU versus ‘The Rest of the World’ (of federations). No doubt, legal unification is a greater challenge in the EU than in any major national federation.

B

Uniformity of Private Law in Particular

The picture is similar with regard to private law. It confirms our general findings not only with regard to the gap between the EU and ‘The Rest of the World’ but also with respect to the relative impact of top-down versus bottom-up forces. In our study, ‘private law’ included two major categories. The ‘Classic Core’ contains the areas typically covered in continental civil codes, ie, contract, tort, property, family law and succession, each with various subcategories. The category of ‘Commercial Law and Regulation’ consists of commercial law areas, ie, business organisations, labour, negotiable instruments and intellectual property, as well as—at least partially—regulatory matters, ie, antitrust/competition, securities regulation, banking, insurance and bankruptcy. Let us first look at both these categories together, ie, at ‘private law’ in the larger sense of including both purely private rights and market regulation. Here, we see a picture highly similar to the one of law in general. Weighing both categories equally, the average uniformity score for all national systems is 6.1934 while the score for the European Union is 3.2—again, about half. These scores also reflect that all national federations’ uniformity scores are well above the mid-point while the EU’s is well below. In other words, while private law writ large is, on the whole,

occurrence), additional evaluations were obtained and added if they passed the control question test. Details are explained in the Appendix on Methods to the Study, above (n 3). Nobody is more keenly aware of the study’s methodological weaknesses and inherent limitations than its authors. In several regards, its data collection method does not meet the requirements of professional social science; most of its findings are in need of further refinement; and virtually all of its conclusions must be taken with considerable circumspection. Yet, the study does rest on information gathered from more than 50 legal experts all over the globe and is, in that regard, the best thing we have to date in this field. While its results should not be taken too seriously with regard to particular detail and small differences, the picture that emerges is clear enough in many regards. It can provide only useful information about the degree of legal uniformity in the major federal systems of the world as well as interesting perspectives on the problems faced by private law unification in Europe. 33 34

National scores ranged from a high of 7 for Venezuela to a low of 4.4 for the United States. Ranging from a high of 7 for Venezuela to a low of 4.6 for the United States.

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considerably more uniform than not in ‘The Rest of the World’, the opposite is true in the European Union.35 Let us now look at the two categories individually. What we see here confirms our finding that legal unification is driven primarily by top-down forces, especially by central legislation, rather than by bottom-up efforts. In the EU, the top-down forces (regulations and directives) are at work mainly in the area of commercial law and market regulation and the data show the impact: EU’s unification score in this area is 4.05. While this is still considerably lower than the national federations’ average score of 6.44, the relative difference is significantly smaller here than with regard to both law in general and to ‘private law’ as a whole. By contrast, bottom-up unification efforts (various Principles, Common Frame of Reference, scholarly treatises, etc) have focused mainly on the ‘classic core’ subjects of private law and the data show the weakness of the effect: the EU average unification score here is a mere 2.34. This is not only much lower than the EU market regulation score, it also lags dramatically behind the national federations’ average of 5.94. In other words, where EU legislation has been common, legal unification has significantly increased, clearly exceeding the EU’s average unification and narrowing the gap with the national federations. By contrast, where bottom-up efforts have been at work, legal unification has remained at a very low level, lagging behind not only the average for EU law (2.34 versus 2.7)36 but also widening the gap with ‘The Rest of the World’ (2.34 versus 5.94). The following table summarises these data. Average Uniformity Scores All law

All ‘private law’

Classic core of private law

Commercial law and market regulation

5.80 2.70

6.19 3.20

5.94 2.34

6.44 4.05

National systems (combined) European Union

V

CONCLUSION—CENTRALISATION AS THE PRICE FOR UNIFORMITY?

It is risky, of course, to draw conclusions from the experiences of other federations for Europe. Legal unification works differently in different contexts, and the European Union is, as has often been emphasised, sui generis in many regards. Still, two basic findings emanating from our broader study are clear enough to merit careful consideration in the European context. First, the most effective path to legal unification is top-down, and clearly the most powerful instrument is central legislation. Central constitutions can help but only if they significantly affect private law, which is rarely the case in the EU. Central courts can assist, but only if they 35 Both scores also suggest that private law within federations is, on the average, slightly more uniform than law in general, although the differences may well be too small to be significant. 36 Again, this difference may be too small to be significant.

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have power to settle issues of state law which is not true for the Court of Justice. Secondly, bottom-up unification efforts promise much less success. Coordinate state action can help through uniform legislation, and cooperation among Member State courts can make contributions as well, but both are virtually non-existent in Europe today. Non-state actor projects (‘Principles’) so far have had little direct impact beyond the academic sphere; legal education and practice make at best a minimal contribution; and international norms unify private law only rarely and imperfectly. Our data confirm the general message suggested by these findings, ie, that the European Union is a tougher candidate for legal unification than any national federation—its degree of legal uniformity remains hugely lower. This does not mean, of course, that legal unification is doomed to fail in the EU. On the contrary, there are good reasons to believe that it will continue to increase. One reason is the prevalence of the civil law tradition within the EU: as we show in greater detail elsewhere, civil law systems display a markedly greater tendency towards unification than common law jurisdictions, especially in private law.37 The other reason is time: the EU is still young, and federations that are ‘integrative’, ie, that are created by the coming together of previously independent units, tend—all other things being equal—towards increasing uniformity.38 In fact, where these two elements are combined, ie, in civil law based integrative federations, legal uniformity has mostly grown in the long run. Indeed, neither aspect guarantees increasing uniformity in Europe—the common law elements and the retarding force they can exercise are far from negligible, and it is far from clear whether the overall integration of Europe will continue in the near future or whether it has rather peaked, at least for the time being. Our data also confirm the more specific finding that top-down unification forces, especially central legislation and regulation, are much more effective than bottom-up efforts. Where top-down forces are at work, legal uniformity in the EU has achieved a level of unification much higher than its general law average—and indeed approximating that of some national federations. Where bottom-up efforts predominate, unification has remained even below that of its general law average, and the gap with the national federations remains huge. This strongly suggests that those who want to see private law in Europe unified (or at least heavily harmonised) should put their trust primarily in regulations and directives from Brussels and Strasbourg. Such a conclusion will not be popular. It will be outright unpopular among most European private law scholars whose efforts are thus relegated to preparatory work for legislation at best, and, at worst, left without any significant practical impact whatsoever. Before they protest too loudly, however, they should remember that the unification of private law in France, Germany or Switzerland did not occur when Pothier, Windscheid or Huber wrote their treatises; it occurred when a central legislature codified the law for the whole country.

37

Halberstam and Reimann, ‘Unification of Law in Federal Systems’, above (n 3) IV.B. In contrast, in federations that are ’devolutionary’, ie, that result from the gradual distribution of previously centralised power to the member units, time is likely to work in the opposite direction, ie, towards greater diversity; cf K Lenaerts, ‘Constitutionalism and the many faces of Federalism’ (1990) 38 American Journal of Comparative Law 205. 38

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The uncomfortable truth is that—at least in the absence of an effective uniform law movement or of a strong central court with jurisdiction over Member State law—broad scale private law unification normally does not happen without central legislation. Such central legislation, in turn, requires central power as well as its extensive exercise. Especially in light of the strong correlation between the overall ‘structural centralisation’ of a federation and legal uniformity,39 it seems that the centralisation of power is an almost inevitable price for effective legal unification. Those in Europe who want to have the latter without the former may well be victims of a grand illusion.

39

Above, II.D: Structural Centralisation.

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23 The Foundations of Private Law in a Multi-level Structure: Balancing, Distribution of Law-making Power and other Constitutional Issues MATTHIAS E STORME

I

N THIS RESPONSE to the questions raised under this topic and reply to the challenges made, I will basically deal only with ‘constitutional’ issues,1 and more precisely comment on the ideas of balancing2 and of diversity3 from a constitutional perspective. In doing so, I come to the defence of some values which we could call pre-postmodern and which have come under attack. I

‘LIVE WITH DIVERSITY’ AND THE NATURALISTIC FALLACY (IS-OUGHT GAP)

In the first place, the emergence or re-emergence of phenomena claiming to be law or to have primacy/supremacy does not oblige us to recognise them as law and/or simply accept this claimed supremacy. Evidently, new forms of diversity of customs and practices have arisen in recent times (as they have over the course of centuries). We could as anthropologists or sociologists describe them and measure their influence or success just as we could describe the ways in which those practices are countered by other practices or even attacked. We can as historians describe how certain practices and institutions have won or survived and others not. We can describe how societies have adapted themselves, either by changing their norms or 1 Evidently, there are many other interesting questions and perspectives on the foundations of private law in a multi-level structure. I have developed some ideas on other aspects in other articles, and will not repeat them here. See, inter alia, ME Storme, ‘Good Faith and Contents of Contracts in European Private Law’ in S Espiau and A Vaquer Aloy (eds), Bases de un derecho contractual europea (Bases of European Contract Law) (Valencia, Tirant lo Blanch, 2003) 17ff; (2003) 7 Electronic Journal of Comparative Law available at: www.ejcl.org/71/abs71–1.html), also at: www.storme.be/goodfaithl leida.pdf; my articles cited below (n 6); and for a practical study ME Storme, ‘Le rapport entre les Règlements européens en matière de procédure (en particulier celle relative aux petites créances) et le droit judiciaire interne belge’ (Revue de la Faculté de droit de l’Université de Liège, 2010) 5–30; also at: www.storme.be/procedureeuropeenne.pdf. 2 See especially the contribution of D Kennedy (ch 11 in this volume). 3 See especially the contribution of J Smits (ch 19 in this volume).

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on the contrary by maintaining their norms and adapting the way to enforce them. But this does not allow us simply to deny the difference between fact and law, to deny that law is essentially to some extent counterfactual, ie, normative. The latter does not deny that norms can be changed, but also this change is organised on the basis of other norms and not merely a registration as law of anything that claims to be law. Equally, it is not because certain rules or practices claim to govern Utopically—without territorial boundaries—and claim to be valid law anywhere and without boundaries, that we should take this for granted. There is a difference between accepting human diversity and diversity of custom and usage, and deducing from it that anything can be recognised as a source of law. It is still our task as ‘professional’ lawyers (and not merely legal anthropologists) to stand up for the rule of law and if possible a better law and a better legal system, and not merely to develop strategies to ‘live with legal diversity’. The existing legal diversity as a social phenomenon does not release us from the duty to reflect on the distribution of law-making power rather than recognise under the rhetoric of diversity any ‘source’ to govern anything anyone wants that source to govern. Neither does it release us from the obligation to analyse critically the notion of diversity itself. Reflecting on the foundations of private law in a context that can indeed be described as ‘multi-level’ is thus equally a normative reflection on attribution and distribution of powers, competences and tasks. The factual situation that there are different levels of rule making and governance invites and requires such a reflection. Whereas ‘constitutional’ issues arise even where there is only one ‘level’, they are the more complex in such a multi-level or federal context.

II

A QUESTION OF DISTRIBUTION OF POWER; ALSO A QUESTION OF BALANCING VALUES AND PRINCIPLES

A discussion on federalism, the multi-level structure of law and ‘diversity’ (the Newest Testament) in private law is first of all a discussion on the distribution of powers to make law and to regulate relationships on the market or of a private nature—and thus of the legitimacy of such powers. One could say this is also a question of balancing. However, it is balancing in a third degree already. I do accept the ‘modern’ (that is, since von Ihering) paradigm of law as a balancing activity (rather than the more mathematical paradigm of deduction from principles, more geometrico). Developing the law is to a very large extent a balancing activity. This is true for different types of legal activity. What we are balancing is partially different depending on the type of activity. Whenever rules are made or developed—whether in the form of codes or statutes or in other forms—this involves a balancing of different values and/or principles.4 This balancing in the first degree is to a large extent a political activity, at least in the large sense. It

4 I am for the moment not distinguishing between values and principles. For the distinction between rules and principles, see below.

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involves making political choices (at least in the large sense), striking a balance on which there is no unanimity in society. Any discussion of the sources of law can therefore not disregard the question of who has the authority to make law or whether such authority is legitimate. This involves a balancing of legal values and/or principles in a second degree, namely of values and principles precisely on the distribution of this ‘political’ power in society. In the European context, the question does not only arise in this second degree, but in a third degree. There is not merely the question of a ‘horizontal’ distribution and possibly separation of powers, especially between the legislator, the judiciary and private autonomy, but also the question of a ‘vertical’ or ‘federal’ distribution of power between different ‘levels’, especially between the Union and the Member States. This third degree also concerns the issue of conflict of laws: how far do the institutions of a given political level recognise and possibly implement or apply the law of another one.5 Both issues are issues about the scope of autonomy of different political communities. Summarizing, we have three degrees of balancing: — Law making or—developing in a certain domain involves balancing values/ principles relevant for the substance of law. — Making rules on distribution of law-making power involves balancing values/ principles relevant for the distribution of such ‘political’ power. — Making rules on the distribution of power among multiple levels involves balancing values/principles relevant for this distribution. The third degree can, however, in my opinion, not be discussed in a meaningful way without some view on the second level. Let me therefore just recall some basic ideas. We do not need any adjective such as ‘modern’, ‘classical’ or ‘traditional’, as such labelling is only a rhetorical figure.

III

HORIZONTAL DISTRIBUTION OF POWERS AND TASKS WITHIN A LEGAL ORDER

(a) The basic postulate of the rule of law to treat equal situations equally requires the idea of legal norms or rules and requires some distinction between the norm and its application. This does not necessarily mean that these functions have to be exercised by completely separated institutions and even less that these two functions can be completely separated, but the equality postulate requires at least a distinction. This postulate does not prohibit the modification of the rule, although this usually leads to a different treatment of the situations governed by the old rule and those governed by the new one. But it requires that as long as the rule is not changed, it be applied in a non-discriminatory manner. (b) The framing of a legal rule is an act of balancing in the first degree: balancing values or principles that are to a large extent and even in essence conflicting. I do 5 There are evidently differences between both issues of the third degree. Foreign law will in principle not displace domestic law in purely domestic relationships, whereas ‘federal’ law does also displace state law in many purely domestic relationships.

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not see a fundamental difference between values and principles, but I do see a fundamental difference between values and principles on the one hand and rules on the other.6 Certainly principles and/or values can be classified in different ways and listing them is already a choice. Identifying principles is an important task of legal scholars (see below). Rules do not apply absolutely, but under certain conditions. They spell out the conditions under which a principle prevails over another. When a rule is formulated as a principle, it means that only express exceptions apply and that they should be construed restrictively and not seen as the expression of a competing but equivalent principle. (c) Differing from values and principles as such, rules are the product of choices (an activity of balancing principles) which are ‘political’ in a large sense (see above) and the rule-maker (the principles-balancer) should therefore have political legitimacy. Recognising a rule-making power is not only—but first of all—a question of democracy; it further is a question of transparency and to some extent of efficiency. And finally it is a question of ‘checks and balances’—balancing in the second degree. The classical scheme of balancing in the second degree still is the ‘separation of powers’ in one of its forms. There are certainly variations possible, but there still is no better alternative. ‘Checks and balances’ require at least a democratically legitimised legislator and an independent judiciary. To say that ‘it is time to find a new source of legitimacy’ instead of the legitimacy of democratic political institutions7 is evidently a political choice, and more specifically a choice which precisely rejects the legitimacy of democracy as the source of law. When I stick to the ‘modern’ (instead of so-called ‘post-modern’) idea of legitimacy by democratic political institutions, this still leaves room for different tasks for different players. Next to legislators and judges, academics can also legitimately play a role in the development of the law: there is a role for ‘judges, legislators and professors’.8 But their respective tasks are different. Just as parliaments cannot claim exclusive legitimacy to make law, so too judges, professors or other players cannot be denied some measure of legitimacy. But the primary democratic legitimacy still lies with democratically elected political institutions (with reservation made for direct democracy, entrusting specific decisions to the people themselves). Whether other institutions (especially courts) have a sufficient legitimacy to have a—delegated— law-making power depends, inter alia, on the mode of selection of judges, their 6 I do imply a clear distinction between rules and principles which I have developed in other places, with reference to the doctrine of various authors such as N Luhmann (inter alia in ‘Positives Recht und Ideologie’ (1967) 53 Archiv für Rechts- und Sozialphilosophie 531ff, also in Soziologische Aufklärung vol I (Westdeutscher Verlag Köln-Opladen, 1970) 178, 189ff; JH Nieuwenhuis, ‘Legitimatie en heuristiek van het rechterlijk oordeel’ Rechtsgeleerd magazijn Themis (1976) 494, 505, available at: openaccess.leidenuniv.nl/bitstream/1887/3186/1/353_003.pdf) and others). See ME Storme, ‘Une question de principe(s)? Réponse à quelques critiques à l’égard du projet provisoire de “Cadre commun de référence”’ (European Legal Academy, The Draft Common Frame of Reference conference, Europäische Rechtsakademie Trier 6–7 maart 2008) 9; ERA-Forum Supplement 1, S65–S77; and ‘The (Draft) Common Frame of Reference as a Toolbox and as a Basis for an Optional Instrument’ in A Common Frame of Reference for European Contract Law (Uppsala, Iustsus Publishers, 2011) 139ff, also at storme.be/DCFRStockholm.pdf. 7 See J Smits in his contribution (ch 19 in this volume). 8 Also the title of a wonderful book by R Van Caenegem, Judges, Legislators and Professors: Chapters in European Legal History (Cambridge, Cambridge University Press, 1987).

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responsiveness and the acceptance of their authority, which will hopefully be proportionate to the quality of their work. Today, parliaments often do not seem to be the best instances to prepare legislation. But they are certainly not the best instances to apply rules in individual cases; a constitutional prohibition of Individualgesetze is an important element in the separation of powers. On the other hand, contemporary parliaments too often shift responsibility to judges, whereas citizens are entitled to sufficiently clear rules (legality principle), even if more so in public law (including criminal law) than in private law. (d) Certainly, the task of a judge is also very often a question of balancing (in the first degree). When finding, interpreting and applying the law, there will very often be conflicting interpretations of what the law is (the conflict can arise at different levels, for example, also on the question what the rule of evidence is). To what extent the judge is allowed to deviate from the choices made by the legislator is a question of continuous debate (the debate on the sources of law and the methods of interpretation), but this too is a political debate, or rather a debate that should deal first of all with the legitimacy of judge-made law (the second degree of balancing, as described above). The meaning of a rule cannot be reduced to the intention of the legislator, and it is often questionable whether there was such an intention and what it was. Judges evidently develop the law and give rules new meanings. But the margin of interpretation they should have is still a question of legitimacy. This legitimacy will depend on different factors, but certainly also on the way judges are selected, courts are composed, judges are controlled, etc. The legitimacy will diminish or increase depending on the way judges judge and how their judgments are received by public opinion. All this may differ from country to country and even from court to court. But in general, the courts in our contemporary society will have to find a middle way between the schizophrenia and the paranoia: the schizophrenia as a metaphor for a situation in which the meaning of rules shifts permanently and every rule or term can be interpreted in any way, and the paranoia as a metaphor for a situation in which the literal or received meaning of the rule has an intangible monopoly which prohibits any questioning.9 (e) Apart from the roles of the legislator and the judge, there is also a task for the legal scholars—the professors. Their first task is to analyse critically how the legislator and the judges are balancing and what the effects are of the rules and their interpretations. Effects include social, economic, moral effects. They should uncover and evaluate the political choices made. In a certain sense, it is the task of the scholars and not of the legislator to identify the values and principles that were or are deemed to have been balanced by the legislator. As a group, they have insufficient legitimacy to make the law, but as citizens they are evidently entitled to take part in public debate and to try to influence the evolution of the law. And as scholars they even have a social duty to propose better rules and better interpretations.

9 I borrowed this idea from J Defoort, ‘De simulatie voorbij’, Liber amicorum Albert Tiberghien (Antwerp, Kluwer, 1984) 113, 127.

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IV

VERTICAL AND TERRITORIAL DISTRIBUTIONS OF (LAW-MAKING) POWER—ISSUES

Before turning to some tentative answers and proposals, let me first put the questions. (a) When we turn to the question of ‘federalism’ and the foundations of private law, I would like to stress again the importance of the same values which had to be balanced on the second level: first of all legitimacy—especially democratic legitimacy—but also transparency, efficiency, etc. The question of the foundations of law in a multi-level structure remains firstly a question of the legitimacy of each level for the making of (private) law. The question is evidently much more complex than a simple either/or—either the Union or the Member States. We will not deny that some legitimacy does exist on more than one level. But there is more to say than a simple reference to the subsidiarity principle, even if we accept this principle as an important constitutional principle. Moreover, the issue is not merely an issue of federalism or pluralism of levels, and the level at which rules are made. There is also the challenge of those who believe different authorities can legitimately ‘compete’ in the same territory and about the same relationship10 and thus reject the territoriality of law in favour of a transnational ‘market’ of law. (b) As to the vertical distribution of law-making power, different techniques have been developed in the course of constitutional and legal history. They are the main objects of the study of federalism. The distribution of powers can be exclusive or concurring. In case of exclusive power, a separate conflict rule is unnecessary, and the question of hierarchy of norms between these powers does not arise. The Belgian model of federalism, for example, basically knows only exclusive powers, and there is thus no hierarchy between federal and regional rules (both subject to the Constitution). Where powers are concurring, there is either a hierarchy of norms or a non-hierarchic form of coordination. In case of a hierarchy, priority can equally well be given to the ‘higher’ level (Bundesrecht bricht Landesrecht) as to the lower level (Landesrecht bricht Bundesrecht, according to the old maxim lex particularis derogat generali). We are used to the idea that ‘federal’ or ‘uniform’ law must have priority, but there are important examples of the opposite principle. The old ius commune did not have priority over the ius particulare, and the states of the US may derogate from the Uniform Commercial Code just as the Scandinavian countries may derogate from the Uniform Nordic laws. Where priority is given to the ‘higher’ level, the power of that level may nevertheless be restricted by other techniques, such as the requirements of the subsidiarity and proportionality principles (for example, in the EU). Where there is no hierarchy of norms, powers either freely compete (a system which only works for certain matters of private law) or they have to be coordinated in an obligatory cooperation. Further, the criteria for the distribution of powers can lead to more or less homogeneous or to very fragmented domains of jurisdiction.

10

See Smits, ch 19 in this volume.

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Choosing the best technique of distribution of powers also requires the balancing of competing values or principles. Some forms of distribution have more democratic legitimacy than others—mainly because some levels have a higher democratic legitimacy than others. There may be economics of uniformity or economics of diversity, etc. A stricter separation of powers or an intertwining of them may each have some virtues. (c) Apart from these techniques, there is always the fundamental question which level has the last word on the distribution of powers itself—where lies the Kompetenz-kompetenz. (d) Finally, there is the question of conflict of law rules, including rules determining the priority between different sets of rules pretending to govern a relationship. Such conflict of law rules are also rules on the distribution of power to regulate relationships and not merely rules to manage diversity. When a federal level has the power to make these rules, it limits the power of each Member State or other legal order to determine itself the territorial or personal scope of application its rules. The choice of a conflict rule is neither neutral nor innocent: it involves a political choice and has a direct impact on the equality before the law or equality of rights of different persons at a single location. That is also true when the conflict of law rule claims to leave it to the market to determine the applicable law. This does not mean that enhancing the autonomy of the parties, either directly or by broadening the choice of law, is not a legitimate legal policy—it just means it is not a neutral policy. The use of words like ‘pluralism’ and ‘diversity’, however, hides the real questions and political or other choices to be made. These words frequently even constitute rhetorical devices intended to hide these questions. They moreover hide the fact that accepting pluralism or diversity in law can mean very different things. What is called pluralism or diversity is in my view firstly a question of autonomy and we should again frame it in those terms, thereby distinguishing at least three different questions: — First, the question of autonomy of national (or regional) law versus loss of autonomy by uniformisation of the law. — Secondly, the question of private autonomy versus mandatory law. — Thirdly, the question of the free choice of law versus mandatory connection in ‘international’ relationships (conflict of laws in the classical sense). The call for the recognition of diversity may however also hide a call for the recognition of ‘identities’ or feelings of affiliation. Thus Smits sees the core of legal pluralism precisely in ‘the idea that people can feel affiliated with different groups and feel bound by the norms of these groups’.11 As a conservative, I do not belong to those who find the idea of identity in itself already suspect. I do not believe that only voluntary relationships are legitimate, but this does not mean that I try to cover up the distinction between voluntary and involuntary relationships by putting them together in categories like diversity or identity. There may be good reasons to

11 With reference to A Sen, Identity and Violence; The Illusion of Destiny (London, Penguin Books, 2006).

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defend national autonomy, to defend private autonomy for private law relationships, to defend choice of law as a conflict rule; but this does not mean that invoking group identities is a sufficient justification to set aside the equality before the law and the application of the law of the land. The essential characteristic of territoriality is precisely that it guarantees the equality before the law of all on a given territory.

V

A

DISTRIBUTION OF (LAW-MAKING) POWER—SOME ANSWERS

Kompetenz-kompetenz

Let me start with the fundamental question of the Kompetenz-kompetenz. Are the Member States still the ‘masters of the treaties’? And should they be? This is fundamentally a matter of democracy, and from this perspective it is rather evident to me that the legitimacy of most Member States is much stronger than that of the Union, as much because of the internal constitutional organisation of the Union (inter alia from the perspective of separation of powers, but also the absence of a right of initiative for Members of Parliament, etc.) as because of the comparative weakness of a European demos (compared with the demos of most Member States), especially given the absence of a common language of the people. Democracy is under pressure in most Member States, but is still incommensurably more tangible than at the European level. I therefore support the German Constitutional Court in its arguments, especially in the judgment on the Lisbon Treaty,12 in favour of the nation states as the masters.

B i

Distribution of Powers in Relation to Private Law Actual Situation

The actual situation can be summarised as follows: — The European Union has only attributed powers. — Most of these are non-exclusive and thus concurring (with the Member States). — The exercise of these concurring powers is governed by complex rules (different procedures depending on the legal basis, use of the so-called coordination method, etc). — Union law has always priority over the law of the Member States and their subdivisions. — The power of the Union is de facto extended by the doctrine of effet utile. 12 Lisbon, Judgment of the Second Senate of 30 June 2009—2 BvE 2/08. Available at: www.bverfg.de/entscheidungen/es20090630_2bve000208.html and in English at: www.bverfg.de/ entscheidungen/es20090630_2bve000208en.html. Anyway, were standards of contract law applied, the Lisbon Treaty would be void because the consent of at least some Member States was obtained by threats and unfair exploitation, inasmuch as there has been any consent at all of the peoples concerned for whom the governments have acted as agents outside their authority as agents.

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— Within the—thus extended—scope of Union law, European judges have found and often also invented ‘principles common to the law of the Member States’.13 This loss of power of the Member States was up to now in part ‘compensated’ in part by: — Using directives instead of directly applicable instruments such as regulations (the ‘means’ are left to Member States). — Harmonising only minimum standards. The results of all this have been analysed in detail by many authors; especially the question of minimum versus full harmonisation (and the illusory character of full harmonisation in many instances) is today debated at length.14 ii

My ‘Principles’ for Vertical Distribution of Law-making Power

1. Where choices are political, separation of responsibilities has to be preferred over intertwining. The methods of obligatory cooperation between different levels are killing democratic accountability (no one is accountable; everyone can hide behind the others). 2. Unless there are excellent reasons for having or maintaining rules on more than one legislative level, a single level of legislation for every topic is to be preferred. The disadvantages of legislation on more than one level are in most cases greater than the advantages.15 The identity of the Union and the Member States is not served by maintaining power of both in all matters, and better served by distributing powers in a more homogeneous way. 3. Rules having priority over another level (in the present situation thus rules of Union law) should be construed restrictively instead of extensively: where the federal level has the power to overrule national law, it should do so explicitly and not in a hidden or creeping way.16 The old ius commune was indeed interpreted extensively, but it did not have priority over local law (ius particulare) (see below). 4. There are good reasons for the harmonisation of private law as well as for leaving it to the Member States, but there are also some bad arguments for the one or the other, such as ‘identity’ or ‘common values’. I do believe that a sufficiently common identity is important for a political community (and even a requirement for such a community to function in a democratic manner), and that we Europeans all have some multi-level identity (European, national and regional or local), but it does not give us helpful criteria for the precise distribution of powers over private law: it is only marginally relevant 13 For an example of an invented principle, see the decision in Case C-144/04 Mangold [2005] ECR I-9981, available at: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62004J0144:EN:HTML. 14 For a collection of relevant essays, see G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009). See also ME Storme, ‘Consumer Rights Proposal and DCFR: Editorial’ (2010) 18 European Review of Private Law 1, also available at: storme.be/ConsumerRightsProposalandDraftCFR.pdf 15 See, inter alia, the criticism of the present state of affairs by H Schulte-Nölke (ch 2 in this volume). 16 Compare the idea in the USA that there is in principle no federal ‘common law’ but only federal statutory law (Tompkins v Erie Railroad (1937) 304 US 64: laws.findlaw.com/us/304/64)—even if we all know that federal judges have interpreted the Constitution itself extensively.

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to judge which parts of private law can better be made uniform and which ones better remain on a lower level. ‘Common values’ is another misleading argument. In order to have a wellfunctioning private law, we do not so much need common values but rather common methods, common concepts and to a certain extent common rules. The fact that people share common values does not say much about how they fill in these values or how they balance them. Making rules is balancing values and principles in order to determine which gets priority in which circumstances. Article 2 TEU states that the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights. It is perfectly possible to be strongly divided over these common values. I would even say that most if not all of the sharp ideological conflicts in our societies—sometimes called essentially contested concepts17— are conflicts about the interpretation and balancing of common values. To some extent, even these conflicts are similar in the different member states. But precisely in these situations to impose uniformity of rules only makes things worse.18 Given the diversity of opinion on how to balance such values, there is already on the national level a serious problem of democratic legitimacy, but the problem only increases when moving up to the European level. 5. Democratic legitimacy and accountability of the decision-making institutions on the other hand are strong arguments in order to distribute power and to determine which level has the last word. And whether we like it or not, this does for the moment plead against the priority of Union law. Not only the legitimacy but also the accountability of the legislator, and even more of the judiciary, is today much lower at the European level. The national judiciary as a whole is much more representative of the people than a single European Court with judges appointed by the national governments. And on both levels, the democratic legitimacy and accountability of parliaments is much higher than of judges. However, the European Parliament has not even a right of initiative whereas on a national level every single Member of Parliament can start the legislative procedure by introducing a Bill.

17 In the words of WB Gallie, ‘Essentially Contested Concepts’ (1956) 56 Proceedings of the Aristotelian Society 167–98. 18 Compare the dissenting opinion of A Scalia in Planned parenthood of Southeastern Pa. v Casey: laws.findlaw.com/us/505/833.html: The Court’s description of the place of Roe in the social history of the United States is unrecognizable. Not only did Roe not, as the Court suggests, resolve the deeply divisive issue of abortion; it did more than anything else to nourish it, by elevating it to the national level, where it is infinitely more difficult to resolve. National politics were not plagued by abortion protests, national abortion lobbying, or abortion marches on Congress before Roe v Wade was decided. Profound disagreement existed among our citizens over the issue—as it does over other issues, such as the death penalty—but that disagreement was being worked out at the state level. As with many other issues, the division of sentiment within each State was not as closely balanced as it was among the population of the Nation as a whole, meaning not only that more people would be satisfied with the results of state-by-state resolution, but also that those results would be more stable. Pre-Roe, moreover, political compromise was possible. Roe’s mandate for abortion on demand destroyed the compromises of the past, rendered compromise impossible for the future, and required the entire issue to be resolved uniformly, at the national level. For Europeans, read evidently ‘federal’ or ‘Union’ for ‘national’.

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6. Diversity of rules certainly creates problems in private law, and uniformity thus certainly has advantages, but the most serious problem is not diversity of law as such, but intransparency of diversity. Making diversity transparent may be a better and more feasible solution than uniformisation. iii

My Proposal for a European Civil Code

Given these considerations, I would like to plead for the reversal of the existing situation in the field of private law (as described above). Instead of national codes that are overruled in a fragmentary way by Union law—in itself extensively construed by European judges—we should rather have a European civil code, leaving however to national parliaments the right to deviate from its rules in certain ways (basically in two ways, indicated below). This is basically the model of the American Uniform Commercial Code (UCC). (a) Such a European civil code should cover most of the ‘classical’ patrimonial private law (the whole law of obligations, including specific contracts and large parts of property law, including insolvency) as well as ‘new’ parts of private law, often of a ‘regulatory’ nature19 and nowadays often not integrated within the civil codes, such as most of consumer law, parts of marketing law, etc. It may turn out that the latter is more difficult than the former, as there is more ‘common core’ (in the sense of a shared heritage and common concepts) in the former.20 Such a code could probably be agreed under the umbrella of enhanced cooperation;21 if not a parallel treaty would be required. A real code would be required, as other methods of uniformisation (bottom-up) will never result in anything similar within a reasonable period of time.22 This is not contrary to the point that the preparation of such a code cannot be the work of political institutions only. A real code consists of rules; just formulating common terms and principles will not do.23 We certainly do need a common terminology. But in drafting the Common Frame of Reference24 we experienced very clearly that concepts do not exist without rules. We thus need common rules. As to common principles (in the sense clarified above), formulating them is not a task for a legislator and they do not belong in a code. Derogation by national parliaments would be allowed under rather strict conditions ((b) below), except where constitutional guarantees are at stake ((c), below).

19 See for a recent synthesis, H-W Micklitz, ‘Europäisches Regulierungsprivatrecht: Plädoyer für ein neues Denken’ (2010) 7 Zeitschrift für Gemeinschaftsprivatrecht 1. 20 Compare the contribution of R Michaels (ch 8 in this volume). 21 See Art 20 TEU and Arts 326–34 TFEU. 22 See the contribution of M Reimann and D Halberstam (ch 22 in this volume). 23 See Storme, ‘Une question de principe(s)?, above (n 6) and ‘The (Draft) Common Frame of Reference as a T’oolbox’, above (n 6). 24 C von Bar, E Clive, H Schulte-Nölke, H Beale, J Herre, J Huet, P Schlectriem, ME Storme, S Swann, P Varul, A Veneziano and F Zoll (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition available online at: http://www.storme.be/ DCFR.html or http://ec.europa.eu/justice_home/fsj/civil/docs/dcfr_outline_edition_ en.pdf.

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(b) As explained, diversity must in the first place be transparent. This implies that a derogation from a common code can in this proposal only be made expressly and in a precise manner, namely by specifically replacing a named rule by another one (‘Article X.1 ECC is replaced by/supplemented by’). In order to enhance transparency, derogatory provisions should be published in all official languages of the Union. Further, whereas the national ‘ius particulare’ would have priority, it would be interpreted in a restrictive manner (‘statute stricte sunt interpretanda’)25 and the ‘common’ law (ECC) on the contrary in an extensive manner. (c) These strict conditions should not apply for the priority of constitutional guarantees—fundamental rights and freedoms in national constitutions—which should anyway have priority. It is sad to say, but the major threats to our liberties and constitutional rights nowadays stem from the EU and other ‘supranational’ institutions with limited democratic accountability.26 Forced uniformity in this respect would only worsen things, as argued above. In necessariis diversitas! (d) I am aware that a common text does not guarantee a common interpretation. A fully uniform interpretation does not even exist within a national legal order. We will have to develop further techniques to enhance exchange of information and common interpretation without having to send every case to a single European Court.

VI

A LAW MARKET VERSUS MARKET LAW, THAT IS, RULE OF LAW

I have already criticised the rhetoric of pluralism and diversity as hiding the political questions related to conflicts of laws. Although I do advocate more freedom of contract and private autonomy in private relationships, I would also like to defend basically the present system of conflict of law rules, as found in the so-called Rome Regulations (subject to minor improvements, as always). The arguments given by Jan Smits to replace this by a ‘Law Market’ have not at all convinced me. Leaving the law to a free transnational market is the negation of the rule of law. Certainly, there can be good arguments to broaden the choice of law in certain matters. A certain degree of competition between legal systems can be beneficial; and an optional instrument which could be chosen as applicable law instead of a national law—especially in cross-border transactions—is a sensible idea. But it is also sensible to maintain in principle the application of (national) mandatory law, in principle on a territorial basis. Unlimited choice of law is often simply imposing the law chosen by the offeror (and the ‘country-of-origin’ principle

25 See W Zwalve, ‘Interpretatieproblemen voor de codificatie’ in J Erauw (ed), Liber memorialis François Laurent (Brussels, Story Scientia, 1989) 447ff; R Zimmermann, ‘Statuta sunt stricte snterpretanda? Statutes and the Common Law: A Continental Prespective’ (1997) 56 Cambridge Law Journal 315. 26 I could refer to the arrest warrant, limitations of free speech, freedom of association and freedom of religion by anti-discrimination rules governing also horizontal relationships; the abolition of bank secrecy; the restriction of the legal privilege of lawyers (rules on money laundering), etc.

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is a more limited form of this).27 It is justified to limit the choice of law in certain relationships, or at least to limit its effects by applying the mandatory rules of (for example) the country of the consumer, the tenant, the employee, etc. When we take the protective function of law seriously, when we believe that there are other values than private autonomy to be balanced, then we need a ‘Market Law’ rather than a ‘Law Market’; and then we cannot simply throw this rule of law away simply because a relationship is cross-border. There is no justification for a dichotomy between a protective domestic regime on the one hand and ‘anything goes’ in transnational contracts. It is also absolutely necessary to maintain the rule of law over claims by groups or organisations trying to impose their rules also outside the field of private autonomy as limited by national (or European) law. Whereas Smits defends the idea that people can feel affiliated with different groups and feel bound by the norms of these groups,28 I believe we should protect citizens against such norms, whether it is the shariah or the so-called lex sportiva (to name just two existing threats). I simply do not want to recognise either, unless the matter remains within the field of private autonomy and is accepted voluntarily as a contractual arrangement. If people freely become member of an association, they are bound by the rules of the association. Not in other cases. And where private organisations have a dominant position, like sport associations, private autonomy should be limited for that reason.29

VII

HOW TO MOVE FORWARD

The realisation of a European civil code, even if not fully binding on the Member States (in accordance with my proposal above), will require the combined efforts of different players, including as a minimum politicians and academics. Those efforts will be useful even if such a code would not result. As stated, parliaments are not the best place to draft codes, but they are the institution with the highest degree of legitimacy to decide the political choices to be made when making the rules and thus also the institution which is most properly justified to make these rules binding. In that sense, neither Savigny nor Windscheid have ‘made’ the BGB30— although one could say that Huber did really make the ZGB. And even the BGB would not have been there without the preparatory work of Savigny—malgré lui—and Windscheid, just as the Code Napoleon would not have been there without the preparatory work of Bourjon and especially Pothier. In that sense, there is certainly also today a ‘Vocation of Our Age for Legislation and Jurisprudence’— ein Beruf unserer Zeit für Gesetzgebung und Rechtswissenschaft. The res publica professorum has its own task and responsibility, indeed not the same one as that of the political institutions. It is not because they have no 27 See, (in this volume ch 2), the critical remarks on the country-of-origin principle by H Schulte-Nölke. 28 cf Sen, Identity and Violence, above (n 11). 29 Compare S Grundmann, ‘On the Unity of Private Law—From a Formal to a Substance Based Concept of Private Law’, ERPL 2010, 1055 ff.; F. CAFAGGI, ‘Private regulation in European private law’, EUI Working paper RSCAS 2009/31. 30 As is stressed in the contribution of Reimann and Halberstam (ch 22 in this volume).

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legitimacy to issue a code that they have no legitimacy to propose and draft one. They even have a responsibility to develop—with techniques proper to their profession—by teaching and writing, the law. In recent history, nearly all good codes have been prepared by law professors. Their success was partly dependent on the ability to formulate the political choices and present them to the political institutions. The realisation of the Dutch civil code of 1992 is a good example, where the ‘vraagpuntenprocedure’ (procedure of points in question) was used. The academic drafter, EM Meijers, presented to Parliament the main issues on which a political choice had to be made, in total 48 points ‘in question’. At the same time, he proposed answers in the form of rules in a first, ‘academic’ draft. This procedure took about one year. The academic drafter then made a revised draft based on these choices. Although Parliament had the last word, the translation of political choices into legal rules was first of all the task of the ‘professor’. Given this experience, the authors of the ‘Draft Common Frame of Reference’ (‘DCFR’) could maybe themselves make a list of points in question to be submitted to the European political institutions (at least to the European Parliament), maybe supplemented with alternative answers. This would evidently not prohibit anyone else from discussing the issues and proposed solutions, to propose alternative solutions and their respective effects. Whereas the idea of a Law Market for Citizens as a place where the rule of law itself is treated as a commodity should be rejected, in contrast the Law Market as a ‘market of ideas’—especially for legislators—could be useful. The other task of academics consists of teaching the ‘common law’ of Europe as well as variations between legal systems. Those differences should not be hidden, but showing them also requires that the law is to a large extent taught on a European and comparative basis. And the aim of providing materials for this form of teaching was precisely one of the aims of the DCFR itself. Maybe such teaching materials constitute, after all, the primary foundations of European private law.

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24 A New Role for Private International and Procedural Law in European Integration? A Critical Comment LUBOS TICHÝ

I

A

INTRODUCTION

Context

P

RIVATE LAW IN Europe is going through a period of self-reflection. During the last 15 years, its development has obviously been more active than ever before in the history of Europe. There are several characteristic phenomena behind this development. First, a number of states found themselves facing the need to make fundamental changes to their civil law codes. The ex-communist states were forced to change their private law due to economic system changes.1 Some states replaced existing codes with new ones;2 others radically changed their existing law.3 But even traditional codes like BGB,4 ABGB5 and Code civil6 were reformed. 1 SJ Frankowski and PB Stephan (eds), Legal Reform in Post-Communist Europe (Dordrecht, London, Martinus Nijhoff, 1995); W Gaertner, Die Neugestaltung der Wirtschaftsverfassungen in Ost-Mitteleuropa (Berlin, Berlin Verlag, 1996); K Hobér, Transforming East European Law (Uppsala, Lustu Forlag, 1997); M Mádl, Investitionsschutz und Transformation in Mittel- und Osteuropa (University Dissertation, Giessen, 2001). 2 On the types of reform, see L Vékás, ‘Models in Central-Eastern European Codes’ in S Grundmann and M Schauer (eds), The Architecture of European Codes and Contract Law (The Hague, Kluwer, 2006). 3 Within a huge literature see, eg, G Ginsburgs, DD Barry and WB Simons (eds), The Revival of Private Law in Central and Eastern Europe (Leiden, Kluwer, 1996); N Horn (ed), Die Neugestaltung des Privatrechts in Osteuropa (Polen, Russland, Tschechien, Ungarn) (München, CH Beck, 2002); S Stalev, ‘Transformation der Rechts- und Wirtschaftsordnung Bulgariens’ (1996) 4 Zeitschrift für Europäisches Privatrecht 444; A Harmathy, ‘Zivilgesetzgebung in Mittel- und osteuropäischen Staaten’ (1998) 6 Zeitschrift für Europäisches Privatrecht 553; J Poczybut, ‘Zur Reform des polnischen Zivilrecht’ (1999) 7 Zeitschrift für Europäisches Privatrecht 75; L Vékás, ‘Über Neugestaltung des ungarischen Zivilrechts’ in J Basedow, K Hopt and H Kötz (eds), Festschrift Drobnig (Tübingen, JCB Mohr, 1998) 713, 724; L Vékás, ‘Privatrechtsreform in einem Transforamtionsland’ in J Basedow et al (eds), Aufbruch nach Europa (Tübingen, Mohr Siebeck, 2001). 4 See the reform of the German law of Obligations 2001. 5 See I Griss, G Kathrein and H Koziol, Entwurf eines neuen österreichischen Schadenersatzrechts (Vienna, Springer, 2006). 6 On the reform of the Code Civil, see B Fauvarque-Cosson, ‘L’Avant—projet francais de réforme du droit des obligations et de la prescription: presentation générale’ (2007) 6 European Review of Private Law 761f.

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At the same time, essential changes occurred in some branches of private law as a consequence of the legislative effort of the EU.7 A third characteristic aspect of the development of private law is attempts of so-called spontaneous codification.8 These projects are, in their consequences, more far-reaching than the previous two as they propose, sooner or later, gradually to undertake the entire harmonisation of private law in Europe. As will be seen, a revolution in the field of private international and procedural law has taken place especially in the last ten years as private international law has made greater progress than during the previous 50 years.9 Was this enormous development of private international law caused by its immediate legal context—that is the development of private law? This chapter intends to demonstrate—that the development of private law in the final decade of the twentieth century was just one of several, but by no means the main reason, for the development of private international law. Private international law had to reflect some new phenomena in private law, including tendencies towards harmonisation (directives in the field of banking, consumer law etc) but this chapter will make the case that the main and immediate cause of development was the process of European integration itself. Integration means, first of all, the improvement of the functioning of the market (and in consequence, among other things, increase in competitiveness and living standards), which is undoubtedly connected with the functioning of the law.10 Then further questions are posed about efficiency,11 justice, legal certainty and predictability.12 It is undoubtedly easier to bring these goals into effect in a single law system—in a single legal order with one common system of the enforcement of law. In the course of the equalisation of standards of justice—along with gradual

7 See especially the development of consumer protection under the influence of the EU harmonisation efforts. 8 First of all see Lando Group, Principles of European Contract Law (‘PECL’): O Lando and H Beale (eds), Principles of European Contract Law, Parts I and II, prepared by the Commission on European Contract Law (The Hague, Kluwer, 1999); O Lando, E Clive, A Prüm and R Zimmermann (eds), Principles of European Contract Law, Part III (The Hague, Kluwer, 2003). Further see ‘Draft Common Frame of Reference’ (‘DCFR’) prepared by the Study Group on a European Civil Code and the Research Group on Existing EC Private Law (Acquis Group): C von Bar, E Clive, H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009) so called Academy Pavia (The Academy of European Private Lawyers) under Professor G Gandolfi: G Gandolfi (ed), Code Européen des contrats—Avant-projet, livre premier (Milan, Giuffrè, 1999); livre deuxieme (Milan, Giuffrè, 2007). The Commission on European Family Law (CEFL), a working group on European family law established under the initiative of Boele-Woelki (Utrecht) (www.law.uu.nl/priv/cefl.). See K Boele-Woelki and D Martiny, ‘Prinzipien zum Europäischen Familienrecht betreffend Ehescheidung und nachehelicher Unterhalt’ (2006) 1 Zeitschrift fürEuropäisches Privatrecht 6–20, 190–92; K Boele-Woelki et al (eds), Principles of European Family Law regarding Parental Responsibilities (Antwerp, Intersentia, 2007); E Örücü and J Mair, Juxtaposing Legal Systems and the Principles of European Family Law on Divorce and Maintenance (Antwerp, Intersentia, 2007). 9 This applies not only to quantitative changes. This statement does not need to be proved. 10 See H Eidenmüller, Effizienz als Rechtsprinzip 2nd edn (Tübingen, Mohr Siebeck, 1998). 11 From the huge literature see, eg, M Zuleeg, ‘Rechte und Pflichten der Einzelnen’ in R Schulze and M Zuleeg, Europarecht (Baden-Baden, Nomos, 2006) 266f. 12 See, eg, D Scheuing, ‘Rechtsstaatlichkeit’ in Schulze and Zuleeg, Europarecht, ibid, 2230–248.

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integration—it is necessary to attend to relatively high standards in the approach towards law in all Member States.

B

Definition of the Problem, Hypothesis

Against the background of private law changes and the process of integration in Europe, there are well-founded questions: what is the function and what should be the function of private international and procedural law? Is the basic direction denoted in Article 81 TFEU correct and what is the necessary degree of further development by interpretation? Should the essence of private international law change? That is, should it internally reform aspects of its structure and its technique of law? Accordingly, we can formulate a hypothesis that after the increase in importance of private international law its relevance in realising the above-mentioned ambitions will necessarily increase.

C

The Structure of our Comments

The aim of these comments is to answer the above questions and to prove these formulated assumptions or hypotheses. To be able at least partially to achieve the aim of this chapter, it is necessary to present a very brief abstract of the development and the present state of the issue under examination—private international and procedural law in Europe. One can briefly—but even so in a critical manner—sketch the main and the specific features of this state, before proceeding to analyse and evaluate this state, to answer the aforementioned questions and, in conclusion, to attempt to prove a pronounced hypothesis.

II

CHANGES IN PRIVATE INTERNATIONAL LAW IN THE TWENTIETH CENTURY

The development of private international law in the first half of the twentieth century indubitably served as preparation for the revolutionary changes which we have witnessed lately. The first 50 years of the twentieth century indicated that it would be a calm, continuous and perhaps dull process. The end of the 1950s and the 1960s were influenced by ‘revolutionary’ theoretical opinions and a certain development of jurisprudence in the United States;13 then the 1990s started the development which revealed itself in a turbulent way at the very end of the twentieth century, and particularly at the beginning of the twenty-first century in the EU. 13 See District Court of New York, Babcock v Jackson [1970], 191 N.E. 2d279, which caused a real revolution within PIL. On this see FK Juenger, Zum Wandel des internationalen Privatrechts (Karlsruhe, CF Müller, 1974).

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396 A

Lubos Tichý The Original Concept

The development is determined by the traditional concept of private international law and by an understanding of conflict of laws rules in the sense of Savigny.14 Though we have witnessed the inception of the ‘third school’ (‘Dritte Schule’)15 of private international law in Germany—which will determine further development on the Continent—even this school relates to the original concept of private international law; the thoughts and projects of the Hague Conference,16 Frankenstein17 and Mancini18 are not the order of the day.

B

Developments in the USA and its Influence

In the United States, a few brilliant thinkers are at the top of their careers. They have, even in a very provocative way, influenced the further development of private international law, mostly by impelling and motivating theoreticians to think about the functioning of its basic instruments. The ‘American revolution’ comes from an assumption that the traditional style of private international law has not proven itself to be adequate as the price which has to be paid for use of this system is too high.19 The premises of this system are arguable.20 An ever growing amount of international transactions and globalisation require new solutions. The traditional system of private international law remains locked in a mode of positivism and negativism.21 Its oscillation between the principle of territoriality and transformality illustrates the inconclusiveness of the situation.22 The principle of the better law will make the construction of ‘real’ private international law founded on universality possible. Even if the hope in this system were to be unjustified, it would still be better than the ideal of a so-called harmony of deciding on which the classic system was based. This ideal is no more than a dream.23 14

FC von Savigny, System des heutigen römischen Rechts VIII (Berlin, Deit und Comp, 1849) 24–28. See so called Dritte Schule, based on idea of Ernst Rabel of relatively independent position of PIL vis-á-vis substantive law. Here belong such brilliant personalities as K Zweigert (see FS Raape, 1948, 35 ff), G Kegel and others. 16 See Conference on Private International Law: www.hcch.net. On the recent development and the accession of the EU, see B Hess, Europäisches Zivilprozessrecht (Heidelberg, CF Müller, 2010) 68f; T Kruger, ‘The 20th Session of the Hague Conference: A New Choice of Court Convention and the Issue of EC Membership’ (2006) 55 International and Comparative Law Quarterly 447; JA Bischoff, ‘Die Europäische Gemeinschaft und die Haager Konferenz für Internationales Privatrecht’ (2008) 2 Zeitschrift fürEuropäisches Privatrecht 334. 17 E Frankenstein, Project d’un Code europeén de droit international privé (Leyden, 1950). 18 PS Mancini, Diritto internazionale (Napoli, Giuseppe Marghieri, 1873; new edn Jayme, Torino, 1994). 19 FK Juenger, Choice of Law and Multistate Justice (Dordrecht, Martinus Nijhoff, 1993) 265, but see very critical comments of A Flessner, ‘Zwischen Kollissionsrecht und Gemeinrecht—Gedanken zu FK Juenger “Choice of Law and Multistate Justice”’ (1995) 59 Rabels Zeitschrift 713f. 20 Juenger, Zum Wandel des Internationalen Privatrechts, above (n 13) 19f. 21 Juenger, ibid, 20f. 22 See Juenger, Choice of Law and Multistate Justice, above (n 19) 173. 23 See Juenger, Choice of Law and Multistate Justice, above (n 19) 172 and M Mühl, Die Lehre vom ‘besseren’ und ‘günstigeren’ Recht im IPR (München, CH Beck, 1982). 15

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The system of the better law,24 the principle and the choice of a better law respectively, rests on the doctrine of Cavers,25 who invented the principle, Ehrenzweig26 and Leflar.27 A further radical step was made by Currie,28 who founded his teachings on governmental interests. Yet despite the revolutionary character of the development of the doctrine in the US, it has had hardly any impact on European doctrine or case law.29

C The Development of Private International Law in the EU until the End of the Twentieth Century The development not only in individual European jurisdictions, but on the Community level witnessed a rise of a new phenomenon, which influenced material private law in particular, but through its development also had an impact on private international law. This is the phenomenon of the concern to protect the weak party.30 This term denotes above all the consumer, but soon also came to involve the special protection of workers as well. Even though the principle of equality constitues only one of the leading forces in the field of European law (see also the prohibition of discrimination), human rights are ‘invading’ the field of private law in the sense of a horizontal effect.31 i

Protection of the Weaker Party

Protection of the weak party in private international law means a restriction of the autonomy of the parties for the benefit of the weaker party.32 That means the choice of law must not be, in its consequences regarding substantive law, less 24 See a very strong critique of G Kegel, Wandel auf dünnem Eis in Juenger, Zum Wandel des Internationalen Privatrechts, above n 13) 35f. 25 DF Cavers, ‘The Choice-of-Law Problem’ (1933) 47 Harvard Law Review 173–208. 26 AA Ehrenzweig, ‘Wirklichkeiten einer “Lex-fori-Theorie”—Zwischen dem Begriffshimmel der Überrechte und der “Begriffshölle” des Eigenrechts’ in J Tittel (ed), Multitudo Legum Ius Unum, Festschrift für Wilhelm Wengler zu seinem 65. Geburtstag, vol II: Kollisionsrecht und Rechtsvergleichung (Berlin, 1973) 251–68. 27 RA Leflar, American Conflicts of Law 3rd edn (Bobbs-Merrill, 1977) 193–95. 28 Currie had written: ‘We would be better off without conflict rules’. See B Currie, Selected Essays on the Conflict of Law (Durham, Duke University Press, 1963). 29 G Kegel, ‘The Crisis of Conflict of Law’ (1964 (II) 112 Recueil des Cours de l’Academie de Droit International de la Haye 95–236. 30 A classic text on consumer protection is E von Hippel, Verbraucherschutz (Tübingen, JCB Mohr, 1974), so too U Bernitz, ‘On the Consumer Concept and Consumer Protection Priorities’ (1978) Zeitschrift für Verbraucherpolitik 214f. One of the first authors on that topic within PIL was J Kropholler, ‘Das kollisionsrechtliche System des Schutzes der schwächer Vertragspartei’ (1978) 42 Rabels Zeitschrift 634ff. Among the more recent see P von Wilmowsky, ‘Der internationale Verbrauchervertrag im EG-Binnenmarkt’(1995) 3 Zeitschrift fürEuropäisches Privatrecht 735. 31 The majority of jurisdictions acknowledge a direct effect of human rights; doctrine sources are huge. The attempts had been made in Germany (see G Dürig, ‘Grundrechte und Privatrechtssprechung’ in Festschrift für Hans Nawiasky (München, Isar-Verlag, 1956). This phenomenon and the impact of the human rights on PIL have been developed already in the 1970s. One of the results was limitation of party autonomy in consumer, labour and insurance law in the Rome Convention 1980. 32 The category of weaker party includes also employees, minority shareholders etc. On this topic see, eg, B Junker, ‘Die “zwingenden Bestimmungen” im neuen internationalen Arbeitsrecht’ (1989) Praxis des Internationalen Privat- und Verfahrensrechts 69.

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favourable for the consumer and for other weaker parties than the consequences of its application according to objective connecting factors. The general problem is up to which point to balance the substantive law results of different alternatives of the choice of law.33 Another problem is up to which point a bad choice of law is to be corrected for the benefit of the weaker party. ii

Human Rights and Private International Law

The case of the so-called ‘Spanish marriage’34 in Germany caused ripples on the then quiet surface of private international law, which had remained ‘immune’ from the influence of fundamental rights, which started to leak into the field of substantive private law (horizontal effect).35 iii

Growth of National Codes

The 1960s and the following decades are characteristic of the codification of the rules of private international law in single states. This period was started by—what was at that time—so-called socialist states, which, within the frame of codification of other law branches, also codified private international law.36 Let it be said that in this field the influence of socialist totalitarian regimes has shown itself in a very limited measure37 (the exception is represented by, for example, regulation of agency contracts in Czechoslovak law concerning private international and procedural law).38 Private international law was afterwards codified by other countries and this tendency continues to this day.39 In many states, this represented the very first codification of conflict of laws rules; only in certain cases (Czechoslovakia again or Poland)40 did new codifications replace preceding ones. It is characteristic for these attempts to codify not only conflict of laws rules, but some features which were invented by theory and sometimes contained in jurisprudence. This concerned the definition of public order, downward references, qualification and the like. 33 See the impact of this decision on the case law and legislation in Switzerland, Germany, United Kingdom, Netherlands and Hague Conference in (1971) 36 Rabels Zeitschrift 1f and K Siehr, ‘Revolution and Evolution in Conflict Law’ (2000) 60 Louisiana Law Review 1353f. 34 A decision of German Constitutional Court BVerfG 13, 58 is of fundamental importance. Its key sentence: ‘Provisions of the German private international law shall be—in applying them—assesed by human rights. (See (1971) 36 Rabels Zeitschrift 1f). From the current literature see, eg, U Becker, Grundrechtsschutz bei der Anerkennung und Vollstreckbarerklärung im europäischen Zivilverfahrensrecht (Frankfurt, Peter Lang, 2004). 35 See the impact of this decision on the case law and legislation in Switzerland, Germany, United Kingdom, Netherlands and Hague Conference in (1971) 36 Rabels Zeitschrift 1f and K Siehr, ‘Revolution and Evolution in Conflict Law’, above (n 33) 1353f. 36 See Polish Act on Private international law 1965 and the Czechoslovak Act on Private International and Procedural Law 1963 (PILA). But see the further development of codification on the countries: Albania (1964), Portugal (1996), Spain (1974), Hungary (1979), Jugoslavia (1982), Turkey (1982), Romania (1992), Italy (1995), Liechtenstein (1996); furthier codifications in Belgium and Bulgaria. In particular, see K Siehr, ‘Rechtsangleichung im IPR durch nationaler Kodifikationen’ in W Stoffel and P Volken, Mélanges von Overbeck (Fribourg, Éditions universitaires, 1990) 205. 37 See the unlimited (free) choice of law in § 9 of the Czechoslovak PILA. 38 See § 10 par 2 lit f PILA. 39 The new codifications: see above (n 37). 40 See the repeal of the PILA 1948 by PILA 1963 in Czechoslovakia.

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Mandatory Rules

After the discovery of this phenomenon, described in 1962 by the French scholar Franceskalis,41 vigorous discussion broke out about the establishment of these rules, in particular in cases concerning the possible influence of peremptory rules of third states, ie, a legal system which is neither lex fori nor lex causae.42 Accordingly, as in the case of the protection of the weak party, the problem of executory rules was solved mainly through the first international treaty created within the framework of the European Community: through the treaty concerning the applicable law for legal conditions from contracts in 1980 (see Article 7).43

III

THE DEVELOPMENT OF PRIVATE INTERNATIONAL LAW OUTSIDE THE EU

The international development of private international law in the second half of the twentieth century was upheld mainly by the Hague Conference. It prepared a range of conventions, some of which were adopted, and some of these adopted conventions serve as applicable legal documents up to the present day. Among the most recent successful projects the Convention on jurisdiction is worth mentioning.

A

The Hague Conference

The Hague Conference traditionally endeavoured to unify private international law and procedural law. In the twentieth century, a total of 25 projects were drafted and introduced over a period of 50 years.44

B

Bilateral Conventions

Development is often determined by certain partial projects as well. Bilateral conventions are not of cardinal importance; however, it is necessary to mention them. At that time, they were widely developed among communist countries and most of these conventions persisted even after the contract parties became Member

41 P Francescakis, ‘Quelques précisions sur les “lois d’application immediate” et leurs rapports avec les regles de conflict de lois’ (1966) Revue critique de droit international privé 1f. There is huge scholarship on this topic. From the most recent works see, eg, R Freitag, ‘Die kollisionsrechtliche Behandlung ausländischer Eingriffsnormen nach Art 9 a Abs. 3 Rom I-VO’ (2009) 29 Praxis des Internationalen Privat- und Verfahrensrechts 109f; M Kuckein, Die ‘Berücksichtigung’ von deutschen und englischen internationalen Vertragsrecht (Tübingen, Mohr Siebeck, 2008). 42 This problem was resolved in some legal orders as, eg, in Art 29 of German EGBGB. 43 See Art 9 par 3 Regulation Rome I and R Freitag, ‘Die kollisionsrechtliche Behandlung ausländischer Eingriffsnormen nach Art 9 a Abs. 3 Rom I-VO’, above (n 41) 109f. 44 See: www.hcch.net of the Hague Conference.

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States of the Union. The latter conventions then have priority even over the regulations implemented through secondary EU law.45

IV

A

THE INTEGRATION PROCESS OF THE EUROPEAN UNION, ITS DEVELOPMENT AND EFFECTS

Objectives and Needs of the Internal Market

As mentioned in the introduction, one of the main reasons for the development of private international law is the further development of the internal market and the European integration process in general. The objective of this process is achieved through reliance on the integrated legal framework governing the functioning of the Union and its internal market. Law—including private international law—serves the functioning of European integration and its further development. In order for the European market to be able to work as a national market (an internal market within the meaning of Article 26 TFEU) constant improvement of the legal framework is a necessity. In light of the functioning of the market from the economic perspective, such a legal background is desired where in principle the same general model applies on the whole territory. That means that above all the principle of equality is respected: equal or similar cases are treated equally. This requires the effective enforcement of law. This implies the functioning of all judicial authorities, so that it ultimately resembles a national state model.46 The principle of free movement consequently concerns also the enforcement of justice and the functioning of judicial authorities. In particular, it stands for the free movement of judgments (titles) and an unambiguously fixed place of jurisdiction disregarding national borders. Instrumental are harmonised legal sources. This is being achieved especially in the field of procedural law. A second important factor is the interpretative function of the Court of Justice, which is an important motor of integration. A significant maxim is ‘effet utile’. The bases here are the systematical contexts of European law and in general the mode chosen by the European Union for the purpose of achieving its goals.47

B

Unification, Integration (of Law and by Law)

The basic starting point and source of the development of international private law and international procedural law is the development of the European Union and of 45 See for instance Protocols to the Agreement of Accession of the Czech Republic and other Countries to EU of 2003. 46 See the development of the procedural regulations limitation of the refusal grounds, eg, Council Regulation (EC) 805/2004 [2004] OJ L143/15, introduction of Direct Service Regulation (EC) 143/2007 [2007] OJ L46 and the apostille Hague Convention on Liberalisation of Legislation of foreign public deeds 1965. 47 See judgments of ECJ: Case C-159/02 Turner v Grovit [2004] ECR I-3565 or Case C-281/802 Owusu v Jackson [2005] ECR I-1383 and others.

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its legal order. There is no doubt that the integration process continues. The powers of the states are being transferred to the EU. The conception and further development of Article 65 of the EC Treaty—now Article 81 of the Treaty on the Functioning of the European Union—can be seen as proof of this. Therefore, the process of coordination, harmonisation and unification occurs. This is a base for the change of the position and function of international private law, not only within the Member States (national international private law), but of this branch as such. It is obvious that this trend has feedback: the harmonised international private law contributes to further integration. i

Mass Harmonisation of Conflict of Law and Procedural Rules

The harmonising, or rather unifying efforts, of the EU are crucial for future development. Because of its extent—and foremost because of the intensity of its modifications—there is a reason—especially after the Treaty of Amsterdam which extended the powers of the EU in this area—to talk about this process as a revolution in private international law. In the positive law of the Member States it affected more than 50 per cent of the foregoing regulations, which were changed as a result of the European Commission’s initiative.48 48 Council Regulation (EEC) No 2137/85 [1985] OJ L199/1 on the European Economic Interest Grouping (EEIG); Council Regulation (EEC) No 3921/91 [1991] OJ L373/1, laying down the conditions under which non-resident carriers may transport goods or passengers by inland waterway within a Member State; Council Regulation (EEC) No 684/92 [1992] OJ L74/1 on common rules for the international carriage of passengers by coach and bus; Council Regulation (EEC) No 881/92 [1992] OJ L95/1 on access to the market in the carriage of goods by road within the Community to or from the territory of a Member State of passing across the territory of one or more Members States; Regulation (EC) No 484/2002 [2002] OJ L76/1 of the European Parliament and of the Councl amending Council Regulations (EEC) 881/92 and 3118/93 for the purposes of establishing a driver attestation; Council Regulation (EEC) No 3577/92 [1992] OJ L364/7 applying the principle of freedom to provide sevices to maritime transport within Member States (maritime cabotage); Council Regulation (EEC) No 3911/92 [1992] OJ L395/1 on the export of cultural goods; Council Regulation (EEC) No 3118/93 [1993] OJ L279/1 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State; Regulation (EC) No 3288/1994 [1994] OJ L349/83 amending Regulation (EC) No 40/94 on the Community trade mark for the implementation of the agreements concluded in the framework of the Uruguay Round; Council Regulation (EC) No 2868/1995 [1995] OJ L303/1 implementing Council Regulation (EC) No 40/94 on the Community trade mark; Council Regulation (EC) No 1346/2000 [2000] OJ L160/1 on insolvency proceedings; Council Regulation (EC) No 1348/2000 [2000] OJ L160/37 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters; Council Regulation (EC) No 44/2001 [2001] OJ L12/1 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters; Council Regulation (EC) No 1206/2001 [2001] OJ L174/1 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters; Council Regulation (EC) No 2157/2001 [2001] OJ L294/1 on the Statute for a European company (SE); Regulation (EC) No 2560/2001 [2001] OJ L344/13 of the European Parliament and of the Council on cross-border payments in euro; Council Regulation (EC) No 743/2002 [2002] OJ L115/1 establishing a general Community framework of activities to facilitate the implementation of judicial cooperation in civil matters; Council Regulation (EC) No 1435/2003 [2003] OJ L207/1 on the Statute for a European Cooperative Society (SCE); Council Regulation (EC) No 2201/2003 [2003] OJ L338/1 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000; Council Regulation (EC) No 261/2004 [2004] OJ L46/1 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91; Regulation (EC) No 805/2004 [2004] OJ L143/15 of the European Parliament and of the Council creating a European Enforcement Order for uncontested claims; Third Directive 78/855/EEC [1978] OJ L295/36 of 9

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The Retreat of the European Element

Legal sources which serve the harmonisation efforts are usually applicable, disregarding the question whether there is a cross-border element in the particular situation.49 iii

Third States and EU law

Most of the unified legal instruments represent sources with general jurisdiction, ie, regardless of the third states’ element in the particular situation.50

October 1978 based on Article 54 (3) (g) of the Treaty concerning mergers of public limited liability companies; Council Directive 85/374/EEC [1985] OJ L/307/54 concerning liability for defective products; Directive 1999/34/EC [1999] OJ L283/20 amending Council Directive 85/374/EEC concerning liability for defective products; Council Directive 85/577/EEC [1985] OJ L372/31 to protect the consumer in respect of contracts negotiated away from business premise; Council Directive 86/653/EEC [1986] OJ L382/17 relating to self-employed commercial agents; Second Directive 88/357/EEC [1988] OJ L172/1 relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC; Council Directive 92/49/EEC [1992] OJ L228/1 relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive); First Directive 89/104/EEC [1989] OJ L40/1 relating to trade marks; Eleventh Directive 89/666/EEC [1989] OJ L395/36 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State; Council Directive 90/314/EEC [1990] OJ L158/59 on package travel, package holidays and package tours; Council Directive 90/434/EEC [1990] OJ L225/1 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States; Council Directive 93/7/EEC [1993] OJ L74 on the return of cultural objects unlawfully removed from the territory of a Member State; Council Directive 93/13/EEC [1993] OJ L95/29 on unfair terms in consumer contracts; Council Directive 94/47/EC [1994] OJ L280/83 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis; Council Directive 96/71/EC [1996] OJ L18/1 concerning the posting of workers in the framework of the provision of services; Council Directive 97/5/EC [1997] OJ L43/25 on cross-border credit transfers; Council Directive 97/7/EC [1997] OJ L144/19 on the protection of consumers in respect of distance contracts; Council Directive 98/26/EC [1998] OJ L166/45 on settlement finality in payment and securities settlement system; Council Directive 98/27/EC [1998] OJ L166/51 on injunctions for the protection of consumers’ interests; Council Directive 98/34/EC [1998] OJ L204/37 laying down a procedure for the provision of information in the field of technical standards and regulations; Directive 1999/34/EC [1999] OJ L141/20 amending Council Directive 85/374 concerning liability for defective products; Council Directive 1999/93/EC [1999] OJ L13/12 on a Community framework for electronic signatures; Council Directive 2000/31/EC [2000] OJ L178/1 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market (Directive on electronic commerce); Council Directive 2000/35/EC [2000] OJ L200/35 on combating late payment in commercial transactions; Council Directive 2001/17/EC [2001] OJ L110/28 on the reorganisation and winding-up of insurance undertakings; Council Directive 2001/86/EC [2001] OJ L294/22 supplementing the Statute for a European company with regard to the involvement of employees; Directive 2002/65/EC [2002] OJ L271/16 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC; Council Directive 2002/83/EC [2002] OJ L345/1 concerning life assurance; Council Directive 2002/8/EC [2003] OJ L26/41 to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid for such disputes; Council Directive 2003/72/EC [2003] OJ L207/25 supplementing the Statute for a European Cooperative Society with regard to the involvement of employees; Council Directive 2004/25/EC [2004] OJ L142/12 on takeover bids; Directive 2005/14/EC [2005] OJ L149/14 amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and Directive 2000/26/EC [2000] OJ L181/65 relating to insurance against civil liability in respect of the use of motor vehicles. 49 50

See Art 1, Regulation Brussels I. See Art 4, par. 2 Regulation Brussels I.

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An Attempt to Set Standards

The foundation of the internal market’s functioning, but also of the functioning of material justice, is the existence of some minimal standard in these areas in particular Member States so that some minimal common level of quality can be reached.51 This is what a new effort by the Commission is endeavouring to establish as it is aiming towards a full harmonisation of certain areas. It is also necessary to reach these standards in the area of law enforcement,52 which is a fundamental condition of its effective functioning. Furthermore, the reciprocal trust among Member States is a presumption and also a certain result of the development.53

D i

Retreats of State Sovereignty The Retreat of the Territoriality Principle

The territorial principle supposes the sovereignty of the state in its ‘absolute’ quality. This principle states that acts of a second state fall within a special regime and are basically restricted. This principle is therefore being altered by the sole existence of the European Community, which has now become the EU. Through individual acts of integration, the position of Member State authorities is brought closer to the position of authorities with full jurisdiction in EU territory. This applies not only to the case of decentralisation of the competences of EU, but also subsequently leads to the fact that a judgment made by one court of a Member State would be applicable across the whole EU territory. It is fundamentally important for the functioning of the internal market to surmount the borders between the Member States—that is the first presumption of the internal market.54 It is unquestionable that—whether we want it or not, whether we admit it or not—this trend is a condition to the functioning of the principle of the rule of law in the area of the EU. 51 See Hess, Europäisches Zivilprozessrecht, above (n 16) 9, 10. See the importance of respecting the human rights and decisions of the ECHR: Hornsby v Greece Series A no 69 (1997) 24 EHRR 250; N Fricéro, ‘Le droit européen à l’exécution des jugements’ (2002) Revue des Husissiers de Justice 6f; M Andenas, B Hess and P Oberhammer (eds), Enforcement Agency. Practice in Europe (London, British Institute of International and Comparative Law, 2005) 303f. Trust can be established also by transparency of enforcement of judgments. See the ‘Green Book on Improving the Efficiency of the Enforcement of Judgments in the European Union: The Attachement of Bank Accounts’; see: ec.europa.eu/justice-home/news/consulting. 52 ME Storme, Approximation of Judiciary, Rapprochement du droit judiciaire de l’Union Européenne (Dordrecht, Martinus Nijhoff, 1994). 53 On the effectiveness of the enforcement of judgments see the ‘Green Book of the European Commission’ of 10 April 2006, COM (2006) 618 final and ‘Green Book’ of 3 July 2008, COM (2008) 128 final. 54 See the case law of the Competition offices of Member States within the European competition network. National offices recognise decisions of other competition offices and respect decisions and other acts of other competition offices as acts of transnational nature and their effects on their territory, eg, L Tichý, ‘Recognition of Decisions of Competition Offices of the EU-Members States’ in J Basedow, JP Terhechte and L Tichý (eds), Private Enforcement of Competitionl Law (Baden-Baden, Nomos Verlag, 2010) 328f.

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Public policy as a reason for the rejection of the recognition of another state’s court decision is in retreat. That leads to a convergence of individual systems, distorting borders between jurisdictions and to integration in the field of law. ii

Retreat of State Citizenship as a Connecting Factor

In traditional public international law, state citizenship dominated as a connecting factor. As a result of integration, state citizenship remains the basis of EU citizenship, but within the scope of the EU its significance fades away.55 What confirms this is the prevention of discrimination based on state citizenship. This fact undoubtedly affects the function and standing of a conflict rule. iii

Relativisation of the Significance of National Legal Orders

The advancing integration of the Member States’ legal orders means their mutual harmonisation and rapprochement, as well as the elimination of particular differences.56 iv

Restriction of National Defence Instruments

Because of the growing level of trust and the stabilisation of legal standards, the extent of danger resulting from the application of foreign legal institutes is reduced.57 As a result, the understanding of defence clauses is shifted, which is best seen in the transformation of the term ordre public. In some areas it disappears, is transformed into European public policy and its use is less and less frequent.

E

Integration and its Direct Impact

i

European Conform Interpretation

Private international law has to be interpreted in conformity with European Community law, now European Union law. The first point of contact in this interpretation is European primary law. The prohibition of discrimination is one of the basic measures and acts as a limit accordingly. The imperative of conformity with European primary law has its basis in the general principle of the priority of application of European law. In this respect, a number of problems can occur. It 55 See Brussels I, Brussels II and other Regulations. On citizenship and domicile see K Siehr, ‘General Problems of Private International Law in Modern Codifications’ in P Šarcˇ evicˇ , P Volken and A Bonomi (eds), (2005) Vol VII Yearbook of Private International Law (Munich, Sellier, 2009) 7 56 See, eg, Lord Irvine of Lairg, ‘The Influence of Europe on Public Law in the United Kingdom’; Lord Bingham of Cornhill, ‘A New Common Law for Europe’; B Markesinis, ‘Our Debt to Europe: Past, Present and;uture’; C von Bar, ‘A New Jus Commune Europeaum and the Importance of the Common Law’ in B Markesinis, The Coming Together of Common Law and the Civil Law (Oxford, Hart Publishing, 2000) 11, 27, 37 and 67f. 57 This is evident on the very development of the case law of the ECJ, now CJEU. See C Last, Garantie wirksamen Rechtsschutzes gegen Maßnahmen der Europäischen Union (Tübingen, Mohr Siebeck, 2008).

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may be problematic to decide whether conflict of laws rules in directives on the protection of consumers and also in Regulation Rome I and Rome II,58 which put constraints on the choice of law, conform with European primary law, in particular with the freedom of movement of goods and services. If they, for example, constrain the choice of law by a third state, this could mean a disadvantage for companies which have residence in the area of the internal market and therefore are subjects of European law compared with their competitors who have residence outside the area of the European Union and thus are not limited in this manner. If this interference with the autonomy of parties is equal to interference with their fundamental rights, it is necessary that this discrepancy with primary law is justified within the principle of proportionality by mandatory rules in the public interest.59 It is doubtless true that conflict of laws rules with purely national origin have to be in accordance with primary EU law as well. The case law of the European Court of Justice (ECJ) contributes to the functioning of the law and to the further rapprochement of legal systems. The ECJ, now the CJEU, plays an important integration role because of its emphasis on so-called ‘autonomous interpretation’. This means a uniform understanding of the key instruments, especially those which were established by the harmonisation efforts of the EC (now EU). ii

Increase of Mutual Confidence and Cooperation

A prerequisite of coordination, harmonisation and unification is indubitably and completely necessarily also an atmosphere of mutual confidence—the principle of cooperation. In order for the European law (judicial) area to work in the sense of a quasi-single system, cooperation among all judicial authorities is necessary.60 Cooperation not only among authorities of Union on one side and authorities of Member States on the other, but first and foremost among individual authorities61 of Member States, as found by the Court in Zwartfeld,62 is a necessary condition. Mutual cooperation is assumed for the fulfilment of certain mainly technical, but indispensable, functions of the judicial system such as taking of evidence, service and cooperation in insolvency proceedings.63 Even though it is generally disregarded, the most outstanding in these relations is the direct contact and immediate cooperation among courts, including direct

58 See A Staudinger, ‘Internationales Privat- und Zivilverfahrensrecht’ in Schulze and Zuleeg, Europarecht, above (n 11) 871. 59 See W Schroeder, comment on Art 30 TEC (now 34 TFEU), side note 751 in R Streinz (ed), EUV/EGV (München, CH Beck, 2006). 60 See U Magnus and P Mankowski, Brussels I Regulation (Munich, European Law Publisher, 2007) 382. 61 On this see Hess, Europäisches Zivilprozessrecht, above (n 16) 34f. 62 See Case C-2/88 Zwartveld [1990] ECR I-4405. Against H Vallender, ‘Die Zusammenarbeit von Richtern in grenzüberstreitenden Insolvenzverfahren nach der EuIns VO’ in W Moll (ed), Festschrift für Hans-Jochen Lüer zum 70. Geburtstag (München, CH Beck, 2008) 479. Further see CG Paulus, ‘Die EuInsVo-wo geht die Reise hin?’’ (2008) 3 Neue Zeitschrift für Insolvenzrecht 1. 63 See Hess, Europäisches Zivilprozessrecht, above (n 16) 525f and suggestions of H Eidenmüller, ‘Der nationale und internationale Insolvenzverfahrensvertrag’ (2001) 114 Zeitschrift für Zivilprozeß 3.

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service.64 This model, currently still international, is moving towards a system which applies to a single judicial area on a national model. The whole system is conditioned by mutual confidence among, above all, the judicial authorities. This undoubtedly presumes a few factors which will be fulfilled during and in the course of cooperation. It concerns particularly a certain awareness of a foreign element in the operation of other Member States’ authorities. To face up to this element, despite uniform instruments (forms, legal terminology and the like) means foremost the understanding of different approaches. Distrust is joined especially with ignorance of different approaches, to which frequently the diverse inadequate causes and consequences are attributed. Cooperation and coordination are especially necessary in the case of parallel proceedings. Both the existence—and especially the possible consequences resulting from them (contradictory decisions)— are solved by lis pendens. Its austere application in cases of parallel proceedings is frequently the only possible but insufficient method to avert possible negative consequences. This concerns so-called ‘torpedo actions’,65 by which parties seek to prevent unfavourable outcome of other processes. Lawsuits on these evidently unfair practices should be at least promptly concluded; a more efficient instrument would be dismissal of these lawsuits as unfair practices which abuse the protection of civil procedure. I do not consider the attitude of the ECJ (now CJEU), regarding this issue stated in the judgment in Gasser to be adequate.66 Legal aid has recorded great progress.67 It is evident that plenty of acts by judicial authorities of one Member State on the territory of another Member State are no longer considered actions of a foreign state authority or sovereign, requiring further procedure. The regulation, banning and services of a second generation, enables the direct effect of procedural acts by the authority of one Member State on the territory of another Member State, including the service and the performance of the taking of evidence (Article 14 of the regulation on the service and Article 17 of the regulation on taking of evidence). The participation by procedural courts and the establishment of requests for legal aid by internal courts are also characteristic. A demanding procedural court can also require certain acts which are not known or even which are not acceptable at all before the local court (as, for example, cross-examination). The European Judicial Network is an important institutional instrument for ensuring mutual cooperation. The cooperation of judicial organs, including the European judicial network,68 is a very important factor of the functioning of the legal system of the EU. However, cooperation does not only mean a contribution to the application of law; it is

64 See evolution of the harmonisation of service of the judicial acts in Council Regulation (EC) No 1348/2000 [2000] OJ L160/37 and Commission Regulation (EC) No 143/2007 [2007] OJ L46/1. 65 See the comments of Hess, Europäisches Zivilprozessrecht, above (n 16) and decision OLG Munich of 2 June 1998 (1998) Recht der Internationalen Wirtschaft 631. This Court did not permit the parallel law suits. This is the typical case of an abuse. See S O’Malley and A Layton, European Civil Practice (London, Sweet & Maxwell, 1989). 66 Case C-116/02 Erich Gasse GmbH v MISAT Srl [2003] ECR I-14693. 67 See Hess, Europäisches Zivilprozessrecht, above (n 16) 467f. 68 E Storskrubb, Civil Procedure and EU Law: A Policy Area Uncovered (Oxford, Oxford University Press, 2008) 241f.

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significant also for the further rapprochement of national judicial systems and it contributes to the further harmonisation of both substantive and procedural regulations. Finally, it is a significant factor for ‘standardisation’ (the origination of certain standards and further mutual trust) in the scope of the EU legal system. The case law of the Court contributes to the functioning of the law and to further rapprochement of legal systems. As mentioned above, the Court plays an important integration role because of its use of so-called autonomous interpretation. Just as the national legal order has its institutes which are to ensure justice and the proper and proportional functioning of the legal system—including law enforcement—EU law also has its own specific institutes, which de facto simulate or replace the role of purely national institutes. Just as there are specific instruments for the protection of a debtor during execution, there are also some similar instruments on the European level. iii

The Importance of Recognition

The recognition as an act, or as the implementation process of the effects of a foreign decision on the territory of a Member State, is a result of a certain degree of standardisation of the legal culture and also a result of mutual confidence. An extraordinary level of intensity has been reached within the European area of justice. This intensity shows itself in its effectiveness. This means that formally a foreign decision approaches the status of a decision of a state’s own court. The recognition, which basically occurs ipso iure, follows according to the ECJ in the form of admission of effects of the judgment in the territory of the state in which recognition is sought.69 This means that in another Member State the judgment has the same character as it has in the state where it was issued, and not the character analogous to judgments made in the state in which recognition is sought (theory of equalisation). This is a kind of expression or penetration of the country of origin principle into procedural law. This means, for example, that a relatively broad scope of the legal force of the English judgments, which also includes the ratio decidendi, is to be recognised and has its effects in the state of recognition even if this is in conflict with its legal order. Possible problems which may arise from the distinctions between legal orders should be eliminated successively through harmonisation. It is significant that the definition of an equivalent decision is very broad and includes any procedural decision without regard to its denomination. Also, the effects of the recognition of a decision are very broad and include, in particular, the legal force.70

69

Case C-145/86 Hoffmann v Krieg [1988] ECR 645. HP Mansel, Anerkennung als Grundprinzip des europäischen Rechtsraums’ (2006) 70 Rabels Zeitschrift 362; Hess, Europäisches Zivilprozessrecht, above (n 16) 332. 70

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A

CHANGES IN TECHNIQUES OF PRIVATE INTERNATIONAL LAW

Significance of the Country of Origin Principle and Recognition

The country of origin principle is neither a conflict of law rule nor an establishment. It is understood as a ‘metarule’71 which particularly represses the importance of conflict of law rules and also the classical PIL methods. The country of origin principle is a kind of a display of reciprocal trust, solidarity and cooperation which has an effect on the limitation of the territorial principle. The country of origin principle also includes recognition, but these two are far from identical. The country of origin principle only assumes recognition as its ultimate part. However, recognition in terms of projection of consequences related to the application of recognition is only a direct result of the acceptance of the country of origin principle. B

Public Policy and its Development

Classical public policy should contribute to simplification and concretisation. A public policy clause should be adopted into the codex of private international law and its regulations should be equipped with norms that are to be applied. General contextual enactments in the sense of European public policy are not to be recommended.72 Public policy, understood as the expression of fundamental legal principles73 of European law, plays a markedly independent role apart from national public policy. Compared with national public policy, public policy partly serves as an instrument of corrections; it also limits national public policy in its conflict-rule effects. European public policy partly interferes with the fundamental principle of national law and it demands the enforcement of the fundamental principles of European law even in the areas where individual Member States hesitate to do so because of their national approaches. As far as the effect on third countries, other consequences result from the situation, compared with bilateral relations in the Union. The as yet fragmented character of European law and its slow development lead to the fact that the European public policy enters into the awareness of the broad legal quarters only gradually. In many cases, it definitely suffices when the state puts on 71 See the huge literature in connection with the draft Directive on services in the internal market, eg: J Basedow, ‘Herkunftslandprinzip und internationales Privatrecht in europäischen Binnenmarkt für Dienstleistungen’ in L Ogiegło, W Popiołek and M Szpunar (eds), Festschrift für Maksymilian Pazdan (Krakow, Zakamycze, 2005); P Mankowski, ‘Das Herkunftslandprinzip als internationales Privatrecht der e-commerce-Richtlinie’ (2001) Zeitschrift für vergleichende Rechtswissenschaft 137; P Mankowski, ‘Wider einer Herkunftslandprinzip für Dienstleistungen im Binnenmarkt’ (2004) Praxis des Internationalen Privat- und Verfahrensrechts 384; P Mankowski, ‘Herkunftslandprinzip und deutsches Umsetzungsgesetz zur E-commerce-Richtlinie’ (2002) Praxis des Internationalen Privat- und Verfahrensrechts 257. In the Czech doctrine: L Tichý, J Hrádek and J Vlastník, ‘Princip zemeˇ pu˚vodu v komunitárním právu’ (Country of Origin Principle) (2009) 1 Acta Universitatis Carolinae 5f. 72 KF Kreuzer, ‘Was gehört in den allgemeinen Teil eines europäischen Kollisionsrechtes?’ in B Jud et al (eds), Kollisionsrecht in der Europäischen Union (Vienna, Jan Sramek Verlag, 2008) 1f. 73 J Basedow, ‘Die Verselbstständigung des europäischen ordre public’ in Festschrift für Hans-Jürgen Sonnenberger (München, CH Beck, 2004) 291f.

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the robe of public policy—often it actually has to—because only national public policy is usually recognised by the crucial sources of conflict-rule law. Despite this, European public policy is to a great extent different from national public policy. This is most obvious in the areas where European law administers its imperative public policy74 and where it leaves no place for national law, such as in the Krombach case.75 More and more obvious outlines of European public policy distinguish it further from international public policy, even though it is still represented as a regional variation. International public policy still emanates from public policy, thus it is based on the conviction of the public policy of public bodies, therefore states. That is how it is linked to the state sovereignty. The European public policy is characteristic mainly in its supplementary function. As European law strives towards the application of foreign legal orders and movement of judgments, preferably in an untroubled way,76 the controlling mechanism based on public policy is indispensable. European public policy is based chiefly on the European concept of human rights. This leads to a certain shift from the national to European concepts which aim towards a uniform interpretation. Contemporary attempts to abandon the control through public policy in the Member States in international procedural law can only be successful in the case of its replacement by other procedural warranties, such as enumerating every reason for the rejection of recognition, or the unification of national legal orders in the areas where public policy is still relevant. The rapprochement of legal cultures is apparently more important than the unification of the legal systems, mostly because the legal cultures—when reflected in public proceedings—make public policy indispensable because of its specialty. C

The Change in Understanding of Conflict of Law Rules

Traditional classical PIL is based on the traditional understanding of conflict of law rule in the Von Savigny sense. However, not only has the conflict of law method been transformed but its importance has decreased. Apart from the classical conflict of law rules, a vast body of rules has developed which dissolves the classical open conflict of law rule and alters its importance. Even though the so-called vague establishment in terms of the centre of attention, the emphasis on legal relation or just the organisation of a legal relationship existed in the traditional understanding, this phenomenon was only an exception.77 The new types of conflict of law rules which now exist are laden with connecting factors which make clear that the conflict of law rule—which was originally an explicit strict rule—is more flexible and less strict.

74 D Martiny, ‘Die Zukunft des europäischen ordre public im internationalen Privat- und Zivilverfahrensrecht’ in Festschrift für Hans-Jürgen Sonnenberger (München, CH Beck, 2004) 523f. 75 Siehr, ‘General Problems of Private International Law’, above (n 55) 17f. 76 WH Roth, ‘Methoden und der Rechtsfindung und Rechtsanwendung im europäischen Kollisionsrecht’ (2006) 26 Praxis des Internationalen Privat- und Verfahrensrechts 338f. 77 ibid, 338f.

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(a) The conflict rules78 are contained in primary and secondary European law which has the task to define the international scope of substantive European law. Often they are unilateral laws, often hidden, and included in the laws of competition, corporate governance and air transport. (b) These rules, which are characterised by distinct and hidden links to the rights of Member states, as is stated in Directive 2004/38 on the right of movement for Union citizens, where the notion of a married couple is defined. Based on its vertical reference the European law can choose the law of a Member State: its choice however, is left to the national legal order. In that directive, as to the law of life partnerships it refers to the law of the state under whose laws the partnership was created, and on the other hand, it refers to the law of the state of residence, which decides on the status of various life partnerships and provides for applicable conditions. (c) European conflict law also includes the rules of primary and secondary European law on fundamental freedoms,79 non-discrimination and rights under Article 18 TFEU and conflict of law rules in many directives on insurance, consumer and other contracts, and others. (d) The fourth area of European law conflict is the conflict on the application of law of the Member States and third countries, like the rules in Rome I and Rome II. (e) The fifth area is the classic conflict of law rules, namely the national conflict rules. The Court has not commented on conflict rules and instead primarily refers to the operation of state regulations for the implementation of fundamental freedoms. This is welcome. Member States are thus given the necessary room for deciding whether they want to make the necessary proof in the material through substantive law or conflict of laws. The territorial scope of the application of conflict rules concerns fundamental freedoms.80 Fundamental freedoms oblige the Member States to respect the law of the state of origin. Examining the legality of putting into circulation requires a conflict rule (or the recognition of an administrative act). The obligation for the recognition of the facts properly incurred is a European concept that ensures the implementation of fundamental freedoms vis-a-vis limits due to different conflict of laws and forces Member States to adopt conflict rules. This correction may be effected by setting national rules for the recognition of the conflict rule, which differs from the classical open-ended conflict and refers to foreign law. The requirement in the legal recognition of situations arising under the law of another Member State requires the implementation of free movement. Such an interpretation of primary law makes the unification of conflict of laws unnecessary, but on the contrary should encourage discussion and effort.

78 79 80

ibid, 344. ibid, 343. Hess, Europäisches Zivilprozessrecht, above (n 16) 282, 283 and 311f.

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A New Role for Private International Law D

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The Development of Procedural Rules

The more jurisdictional options are available, the more important it will be necessary to prevent joint fixation of the law to allow one party to unilaterally determine the relevance through so-called forum shopping.81 The more efficient the functioning of judicial cooperation, the more flexible European international law can take into account national procedural specificities such as lis pendens, in specific cases, interim measures such as principal, etc. The conflict of laws should codify standards and not just some references to the judge to just create some conflict rule. Although based on the principle of closer links, the connection should in most cases be specified.

VI

A

ANSWERS TO QUESTIONS AND CONFIRMATION OF HYPOTHESIS

Hypothesis

This chapter began by laying down a hypothesis regarding the importance and the role of private international law. I mentioned that private international law would play a rather less relevant role. Then I stated an assumption that the development of private international and procedural law was mainly brought about through the integration process in the European Union. The inherent precondition for the functioning of the internal market is the functioning of its legal framework, which implies above all smooth enforcement of law, which further implies what could be called free movement of judgments according to unified legal process and lawsuit. Unification of private substantive law, administrative law and other legal branches is only one of several further demonstrations of the integration process in Europe and the fulfilment of requirements of the smooth functioning of basic market freedoms. A feature of integration in law is consolidation coupled to harmonisation of Member States’ legal orders. While harmonisation of conflict and procedural rules means a decrease in their plurality, the unification of substantive law means a decrease in their application in general. In this respect, one may observe quantitative changes in the field. Contrary to the traditional approach, it is also necessary to apply conflict law in the field of public law.82 Conflict law changes in nature and application and is at the same time constrained especially by the institute of comity, whose importance is 81 One has to pay attention to the efforts of the European Group for Private International Law (groupe européen de droit international privé: www.gedip-egpil.eu) and articles of Kreuzer, ‘Was gehört in den allgemeinen Teil eines europäischen Kollisionsrechtes?’ in Jud et al (eds), Kollisionsrecht in der Europäischen Union, above (n 72) 1f; KF Kreuzer, ‘Zur Stand und Perspektiven des europäischen internationalen Privatrechts’ (2006) 70 Rabelszeitschrift 4f; K Siehr, ‘Die Kodifikation des europäischen IPR-Hindernisse, Aufgaben und Lösungen’ in Jud et al (eds), Kollisionsrecht in der Europäischen Union, above (n 72) 77f; K Siehr, ‘Auf dem Weg zu einem internationalen Privatrecht’ (2005) Zeitschrift für Europarecht 90f. 82 eg, H Steinmeyer, ‘Sozialrecht’ in Schulze and Zuleeg, Europarecht, above (n 11) 1740f.

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increasing and thus, as it concerns the institute of international procedural law, increases the importance of this branch of law. In this respect, we can assert qualitative changes of private international law. This also corresponds to the field of international procedural law, as comity is to a large extent a different institute from that visible until the final decade of the twentieth century, as the level of legal culture has increased, differences between the understanding of many institutes have decreased and a European judicial network is in operation. In consequence of these essential and quantitative changes, changes in the understanding and use of instruments of private international law have occurred. In the future, in the course of integration, its importance in the framework of a common judicial area of the European Union will decrease.

B

Answers to Questions

i What is the Function and what should be the Function of Private International Procedural Law? The function and standing, importance and functioning of both of these branches have essentially changed during the last decade. As a consequence of the creation of the internal market, the influence of both branches has essentially increased. Through the unification of conflict and procedural rules, however—in particular by the increase of importance of other institutes such as comity—the function of international private procedural law changes and will retreat. ii Is the Basic Direction Denoted in Article 81 TFEU Correct and what is the Necessary Degree of its Further Development by Interpretation? In terms of the smooth functioning of a further integrated internal market, it is necessary to expand the competence of the European Union in the sense of a further unification of conflict rules and procedural rules and the creation of a European code of private international and procedural law. iii Should the Essence of Private International Law Change, Should it Internally Reform the Aspect of its Structure and Technique of Law? It is unnecessary to reform. Change in the law and changes in its functioning will come about spontaneously.

C

Codification or other Solution? Specialised Judges!

A European Code of PIL in a sense of Frankenstein or Kreuzer and a realisation of the Storme Group Code of European International Civil Procedure are very attractive and valuable ideas and they would surely improve functioning of the European Private Law order. But more important and more urgent is promoting specialised and dedicated judges in every Member State in order to interpret and apply a fairly large set of European legal rules in this demanding field in a sufficiently harmonised manner.

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25 Enforcement and Compliance: Editorial Introduction HANS-W MICKLITZ

T

HE FOCUS IN European private law has mostly been on ‘substance’. The whole exercise behind the codification of European private law in whatever form has more or less set aside the conventional wisdom that ‘Recht haben und Recht kriegen ist zweierlei’ (having a right and enforcing it are two separate issues). Whatever the rights that have been—or will be—created through the harmonisation of contract law, for instance via the development of ‘academic’ principles or through an Optional Code as seems to be the favourite solution fostered by academics and politicians, the crucial point for the European citizen is if, how and by whom these European private law rules are enforced. So far, European legislating could be characterised by a rather amazing approach bringing together substantive and procedural rules. The works undertaken by the Study and the Acquis Group remain the key elements driving the desired ‘integrated approach’ to European private law. This is a most obvious step back into an academic world, where substance remains distinct from procedure. In bringing enforcement and compliance back to the fore we have to recognise that enforcing rights and obtaining compliance has become overly complex in a European private legal order, which no longer respects the clear lines between private and public ordering. Most of the existing European private law rules are meant to integrate markets. They do not establish private autonomy in the spirit of the nineteenth century; rather they start from using ‘regulated autonomy’ as the key paradigm. The ‘Draft Common Frame of Reference’ (‘DCFR’) neglects the regulatory function of European private law rules, with the exception of consumer law and anti-discrimination law. But it does not look deeper into the whole area of services, where the regulatory function of private law in the existing body of EU rules is obvious. It is only in such a perspective that the true challenge for enforcement and compliance becomes clear. European private law as it stands blurs the boundaries between public and private law, between public and private enforcement, between individual and collective enforcement and, last but not least, between judicial and administrative enforcement. The collected contributions bring enforcement and compliance back to the fore and highlight the need to look even deeper into the interplay between substance and procedure, both theoretically and empirically.

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Ianika Tzankova and Martin Gramatikov seek to determine the proper role of procedural law and to explain its relationship to and interaction with substantive law in the context of the EU by using insights from the theories of distributive and procedural justice. They argue that those theories provide convincing arguments for reformulating the principles of effectiveness and national autonomy. Their proposition is that at the end of the day ‘effectiveness’ is more concerned with ‘function’ and ‘outcome’ than it is with ‘structure’ or ‘form’. Therefore they expect that integrating the theories of distributive and procedural justice in the European research agenda and debate, while focusing on the values underlying those theories, will have a positive effect on European integration and harmonisation. They start by giving an overview of contemporary legal research into the purpose and role of civil procedure, before discussing the theories of distributive and procedural justice. The idea is to draw some potential lessons from the theories of distributive and procedural justice for the EU harmonisation debate. Furthermore, the chapter goes on to discuss what kind of research is needed in order to reformulate the EU principles of effectiveness and national autonomy. Christopher Hodges explores the implications of the analysis of law under the twin categories of public and private, in relation to the enforcement of law in practical reality. Three main ideas are pursued. First, it is argued that legal and political systems need to take policy decisions on the balance that they seek to achieve between public and private enforcement. The implications of such decisions and the resultant balances between public and private enforcement will have major consequences, as illustrated by the contrasting architectures of the United States and the traditional European models. In the former, private litigation dominates, in the later public enforcement. Secondly, Hodges examines the need for a coherent and consistent public enforcement policy, which is said to be absent within the European Union architecture. He thereby refers to the discussions and the impact of responsive regulation in the United Kingdom. Thirdly, he analyses the implications for the design of civil justice systems which must distinguish between compliance, restitution and punitive prosecution. In light of the dominant public enforcement model in Europe for him Alternative Dispute Resolution (ADR) mechanisms rank on top, followed by regulatory assistance in restitution, while judicial collective procedures should be available as a last resort only. Unlike the somewhat negative responses of many private law scholars to these European developments, Hugh Collins understands the European approach as a salutary correction of the traditional thinking of private lawyers. For him it seems useful to view private law as part of the project of regulating markets. Private law is said to employ some characteristic methods and techniques that serve the purpose of guiding and controlling the behaviour of participants in market transactions, thereby blurring the line between public law and private law. In pursuing this line of investigation, he looks first into the setting of the standards of conduct required from market participants, before he moves on to deal with enforcement techniques, and in particular the costs and benefits of different methods of policing compliance with the relevant standard. His third issue concerns an assessment of the effectiveness of the different regulatory techniques in securing compliance with the standards. The conceptual separation of the issues enables him to highlight how

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European law has frequently adopted a hybrid approach, borrowing indiscriminately from public and private law traditions in the search for effective solutions to the problems of market integration. Johan Lindholm, meanwhile, starts from the premise that past experience in European Union law clearly shows that the application of national procedural rules can have an adverse effect on the effective enforcement of measures intended to harmonise substantive law. He therefore focuses on that particular aspect regarding the (effective) enforcement of the DCFR—the consequences of enforcing the provisions of the DCFR in ordinary national courts—and thereby necessarily supplementing it with the procedural law of the various Member States. In so doing, he aims at answering two questions: does the application of national procedural law constitute an obstacle to the effective enforcement of the DCFR and, if so, how can these obstacles be reduced? For him, the DCFR may contribute to the ‘Europeanisation’ of private law in its current form, but its harmonising effect would likely be more extensive if it were transformed into a binding EU act. This follows for Lindholm from the very format of the act. However, it also follows from this fact that the existing mechanisms in EU law capable of setting aside national procedural rules found to be hindering effective enforcement are largely unavailable to the DCFR unless its provisions are transformed into EU law. The focus in Marco Loos chapter is on the consumer’s access to justice through the ordinary court system. Therefore, he addresses neither the enforcement of consumer rights through regulatory agencies or by way of collective redress, nor the enforcement of individual consumer rights through ADR institutions. He argues on the basis of empirical findings that awarding consumer rights without properly regulating the consumer’s access to the court system renders these rights unenforceable through the ordinary courts. It is argued that this is so because normal rules of civil procedure in the national courts produce disincentives for consumers to maintain their rights. The result for him is that they do so in an insufficient manner, which leads to an under-enforcement of (European) consumer law. Loos then transposes his findings to the European level and discusses two fairly recent European regulations—the European Payment Order Procedure and the European Small Claims Procedure. He analyses the degree to which they help to improve the enforcement of consumer law and comes to the conclusion that they do not take away the disincentives identified at the national level sufficiently. Jules Stuyck identifies a general trend which transforms private law in general and contract law in particular (especially consumer contract law, labour law, landlord-tenant relations etc). Traditionally private law, he argues, both in the common law and in the continental European legal systems, is a question of individual relations: a tenant versus a landlord, spouses who want to divorce, a businessman who wants payment from a client, etc. However, private law is claimed to have gradually transcended individual relations. Taking an EU law perspective, his chapter focuses on the role of the European Court of Justice (ECJ) and secondary European Union law in the enforcement of private law. He starts with an overview of the basic principles of Community law that relate to the enforcement of private law: the principle of procedural autonomy of the Member States and the limited legal basis in the Treaty for EU action in this respect. He then looks into the role which the ECJ plays in shaping private law enforcement, the

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impact of EU non-discrimination law on the enforcement of private law and on the possibilities of EU action in the field of collective redress as defined in latest proposals of the Commission on collective consumer redress. He concludes that EU law increasingly sets the parameters for the enforcement of private law originating from it through collective enforcement and that the EU has the powers to adopt enforcement rules not only for cross-border litigation, but for domestic litigation Ewoud Hondius looks at the various functions the DCFR might have in law-making, in scholarly research and in enforcement. For him, however, its main purported aim—to serve as toolbox for the European Commission—has so far proven to be unsuccessful, although this could easily change. National legislators might also find the DCFR of interest, especially because the Notes are said to be highly useful by way of comparative law. Hondius foresees a limited use of the DCFR by courts and arbitrators, thereby drawing on the experience gained with the Principles of European Contract Law (‘PECL’) and the Principles of International Commercial Contracts (‘PICC). However, according to him, practitioners are the one group of stakeholders who could profit from the DCFR, but most probably will not, at least judging by the failure of the Convention on the International Sale of Goods (‘CISG’) to even attract their attention. That is why academics are said to be the main group. If legal science is to be worthy of the name ‘science’, it is essential for him that legal discourse is not limited to the confines of the domestic state. He proclaims a need to enter into such a discourse. While the quality of certain parts of the DCFR may be not entirely sufficient, he refers to other means of increasing the level of transnational discourse and points out that restatements and principles do have the advantage of making the debate more precise. Europe will in the future be seen as only a temporary phase. He sees the future obviously in a global legal science; the DCFR can therefore be of a temporary solution only: ‘reculer pour mieux sauter’. Frydryk Zoll looks into the three different approaches to the vision of the organisation of private law at the European level: namely the DCFR, the Acquis Principles (‘ACQP’) and the envisaged consumer rights directive. He argues that the DCFR represents a most conservative tradition in the ordering of a legal text. It is said to belong to the stream of the ‘pandectistic’ ways of building up a legal system. The Acquis Principles, while also using the pandectistic approach of generalisation of legal concepts, are claimed to provide for a more modern system as they do not create a closed system. The Acquis Principles should be regarded as more of a platform, ‘a frame’ for the systematisation of contract law. The Proposal for the Directive, however, confines itself solely to compilation. For him it does not use any kind of codification methodology (or if it does, then it uses it in a very limited scope). In his chapter he discusses these three approaches with a view of systematisation of contract law in (post) modern times. In my own contribution I am focusing on administrative enforcement in European regulatory private law. I defend the hypothesis that the starting point for getting to grips with administrative enforcement of European regulatory private law is the distinction between serious infringements left for the EU level of enforcement and less serious infringements where the Member States remain competent, first developed in the field of product safety. Competition law is the area where the European Commission transformed the distinction into a generally applicable

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policy, due to its genuine enforcement powers. In environmental law the European Commission is using, with the support of the ECJ, the infringement procedure as a European enforcement tool. In regulatory private law, the three strains are coming together and open perspectives for a new understanding of the going together of administrative and judicial, of individual and collective enforcement in private law matters.

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26 A Critical Note on Two EU Principles: Proceduralist View on the Draft Common Frame of Reference (DCFR) IANIKA TZANKOVA AND MARTIN GRAMATIKOV

I

INTRODUCTION

S

UBSTANTIVE LAW AND procedural law are linked in EC (European Community) law, to some extent taken into account in European private law, but set aside in the European codification project—the ‘end product’ of which was a ‘Draft Common Frame of Reference’ (‘DCFR’). The content of that end product has raised criticism by some who observed that: There [in the DCFR] appears to have been little sophisticated consideration given to the relationship between substantive law and procedural law, this relationship giving rise to a tension in the European context between the so-called principle of the national autonomy of procedural law and the EC ‘principle of effectiveness.1

The principle of effectiveness implies that domestic rules do not render impossible in practice or excessively difficult the exercise of rights conferred by the Community legal order.2 With regard to the principle of national autonomy, the general view is that in national European laws (including English law), a broad distinction is drawn between substantive law and the law governing the (typically court) procedure by which any dispute as to substantive rights may be adjudicated. This distinction is recognised in very broad terms at the EU level too, and for this purpose the European Court of Justice (ECJ) has recognised the principle of national autonomy of Member States—meaning, in general, that how substantive rights and duties are made effective is a matter for national legal systems.3 1 S Whittaker, The ‘Draft Common Frame of Reference’ An Assessment (London, Ministry of Justice of the United Kingdom, 2008) 5. 2 Case C-168/05 Mostaza Claro v Centro Móvil Milenium SL [2007] 1 CMLR 22, para 24: According to settled case-law, in the absence of relevant Community rules, the detailed procedural rules designed to ensure the protection of the rights which individuals acquire under Community law are a matter for the domestic legal order of each Member State, under the principle of the procedural autonomy of the Member States, provided that they are not less favourable than those governing similar domestic situations (principles of equivalence) and that they do not render impossible in practice or excessively difficult the exercise of rights conferred by the Community legal order (principle of effectiveness). 3 Whittaker, ‘The Draft Common Frame of Reference’, above (n 1) 74.

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The tension between these two fundamental principles of EC law, as observed by this commentator, is obvious: on the one hand the desire to have an effective body of EC law, and on the other the restriction on interfering with national law and the need to respect the autonomy of Member States. However, making EC law effective might imply that national procedural rules should be structured in a certain fashion, but that would interfere with the way national legal systems are designed and would conflict with the principle of national autonomy.4 The tension between the two principles becomes a vicious circle. This conflict is problematic, also, from another point of view. The conflict between those two EC principles is rooted in the distinction that is traditionally made between substantive and procedural law. It is embedded in the dependent position of procedural law with respect to substantive law. Both principles endorse the idea that procedural law is subordinated to substantive law: once procedural law does not ‘stand in the way’ of the harmonisation of substantive law, the principle of effectiveness is addressed. As long as harmonisation at the level of substantive law is accomplished, the EU legislator is satisfied as it trusts that the harmonisation of substantive law—or even just its perceived advantages—will somehow trickle down through the procedural levels in the Member States—or at the very least will not be ‘sabotaged’ by the national laws of civil procedure. On the other hand, the principle of national autonomy implicitly recognises that the main, if not the sole, function of procedural law is to make substantive law effective. Substantive law, thus, comes first. In the United States, there has been for many years a lively debate among scholars and practitioners about the nature of class actions and more precisely about the question whether the class action is a substantive or a procedural device. One can take many different standpoints on this. For example, provision for Dutch collective actions is to be found partly in the Dutch Collective Settlement Act, partly in the Dutch Civil Code and partly in the Dutch Code of Civil Procedure; whereas the US class action is only regulated under the Federal Rules on Civil Procedure. Behind the US discussions lies the presumption that the procedural economies of scale that characterise class actions lead to substantive changes. Although we will not address the interesting propositions underlying those discussions, we would like to point them out since they illustrate a debate that is relevant for the current European discussions with regard to the interrelation between substance and procedure.5

4 Professor Hodges offers a balanced approach with regard to the emerging European collective redress model. He shifts the discourse from the substantive-procedural balance towards more policybased analysis. Three core mechanisms are seen as capable of providing the building blocks of the European model—voluntary settlement, regulatory oversight and judicial supervision. The choice is not to select one approach over the others, but to integrate them into coherent framework which provides collective redress without creating the side-effects observed in the American system. Observing the emerging model, Hodges concludes there is ‘de-prioritising [of] the judicial pillar‘. C Hodges, ‘Collective Redress in Europe: The New Model’ (2010) Civil Justice Quarterly 370, 393. 5 See, Shady Grove Orthopedic Associates, PA v Allstate Insurance (2010) Co.130 S.Ct. 1431. Interpreting in a federal case the applicability of New York state law barring class actions unless specifically provided for in state statute. Complicated federalism precedents essentially hold that when a federal court hears a case arising under state law (under so-called ‘diversity‘ jurisdiction) the federal court applies relevant state substantive law but federal rules (not state court rules). Majority held federal

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This chapter seeks to determine the proper role of procedural law and to explain its relationship to and interaction with substantive law in the context of the EU by using insights from the theories of distributive and procedural justice. We argue that those theories provide convincing arguments for reformulating the principles of national autonomy and of effectiveness. Our proposition is that at the end of the day ‘effectiveness’ is more concerned with ‘function’ and ‘outcome’ than it is with ‘structure’ or ‘form’. Therefore, we expect that integrating the theories of distributive and procedural justice in the European research agenda and debate while focusing on the values underlying those theories will have a positive effect on European integration and harmonisation. The mode of treatment of this chapter is as follow. Part II will give an overview of contemporary legal research about the purpose and role of civil procedure. Part III will discuss the theories of distributive and procedural justice. In Part IV we will draw some potential lessons from the theories of distributive and procedural justice for the EU harmonisation debate. Furthermore, we will discuss what kind of research is needed in order to be able to reformulate the EU principles of effectiveness and national autonomy. In Part V we will summarise our findings. II

THE PURPOSE OF CIVIL PROCEDURE—CONTEMPORARY LEGAL RESEARCH

In 2001, the Dutch Ministry of Justice assigned a commission of three distinguished law professors (Law Commission) to conduct a fundamental review of the Dutch law of civil procedure. In its Interim Report that was published in 20036 the Law Commission does not draw a blueprint of a future organisation of the law of civil procedure, but develops a framework that should be taken into account when a society—not only the Dutch society but any society—is developing new systems of civil procedure or is reviewing existing ones. The stated added value of the framework is that alternative solutions that present themselves for a given problem can be evaluated within that framework and therefore help policymakers make an adequate choice for one solution or the other. The fundamental review resulted in the Interim Report mentioned above and in a Final Report.7 The reports are considered as one of the most significant and prominent studies in the field of civil procedure in the Netherlands in recent decades, but the reason they are discussed here lies in the fact that the framework they develop is stated to have a ‘universal character’.8 Furthermore, it was developed on the basis of the results of comparative research among several, mainly European, systems. Rule 23 specifying conditions for class actions trumped state law that on its face was substantive but in effect was controlling procedure in state courts, hence a procedural rule. See also E Chemerinsky, Federal Jurisdiction 5th edn (New York, Aspen Publishers, 2007). 6 WDH Asser, HA Groen, JBM Vranken and IN Tzankova, Een nieuw balans (Interim Report) (Den Haag, SDU, 2003). For an English summary see: ssrn.com/abstract=894841. 7 WDH Asser, HA Groen, JBM Vranken and IN Tzankova, Uitgebalanceerd (Final Report) (Den Haag, SDU, 2005). 8 In the Final Report the Law Commission applies the framework on the Dutch law of civil procedure.

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The three streams of thought that can be distinguished about the purpose of civil procedure in contemporary civil societies that are discussed below are inspired on the findings of that Law Commission.

A

A Classic View

The first, most classic and widely held view is that procedural law largely has a serving function with respect to substantive private law. It has to provide litigants with remedies and compensation. The civil court is a forum before which the litigants can appear to have their rights and powers arising from substantive private law established and enforced. The prime concern here is not to solve an underlying conflict, as this is not always needed. There are cases in which the only need is simply for a remedy or compensation, such as in the case of debt collection claims. A consensus does not always have to be reached to still bring about ‘peace’ between the parties. For a long time, the thinking about legal procedures has been dominated by this classical view, also reflected in the normative due process theory. In order to comply with the rule of law the procedures for solving legal disputes should be fair, just, quick and accessible. Most discussions about the revision of the law of civil procedure are very much concentrated on finding a balance between reducing the excessive length and high costs of proceedings, on the one hand, and where possible improving the quality of the administration of justice on the other. An example is Article 1 of the English Civil Procedure Rules. It states the ‘overriding objective’ of the new procedural law as ‘enabling the court to deal with cases justly’, where ‘justly’ stands for quick, not expensive, fair and of good quality. Legal scholars also focus on this paradigm, or more precisely on the estimation of the procedural guarantees and devices which sustain the normative predicaments, but here procedure is still serving or subordinated to substance. If a process is deemed fair or reasonably fair, the focus of analysis shifts to its distributive function, or the question is rephrased to ‘what outcomes do the parties receive?’ A more novel approach to answer this question stems from the law and economics movement. The ruling paradigm of the law and economics movement is that the disputants are (boundedly)9 rational actors and assess the process from the prism of the received outcome.10 A self-interest seeking disputant will assess the process in the lights of the received result. The assumption in this paradigm is that a favourable and fair outcome will cast positive shadow on the procedure and vice versa—an unfavourable outcome will urge the disputant to assess the process in negative tones. And still—even in this more novel law and economics oriented approach procedure remains subordinated to substance.

9

HA Simon, Models of Bounded Rationality (Cambridge, Mass, MIT Press, 1982). WLF Felstiner, R Abel and A Sarat, ‘The Emergence and Transformation of Disputes: Naming, Blaming, Claiming’ (1980–81) 15 Law & Society Review. 10

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Civil Procedure as a Synonym for Conflict Resolution

Another novel view of the purpose of civil procedure starts from the assumption that, in case of a dispute between parties, the underlying conflict must be resolved and the underlying relationships preserved and repaired. Conflict resolution should not be a fight; rather it should be ‘a cooperation experience’. In this view there is a great need for techniques and mechanisms—such as mediation in particular—which can serve this end. This view represents an idealistic approach that one must admit has its charms. This stream of thought criticises the law of civil procedure and therefore private law enforcement, as it is not aimed at conflict resolution but at dispute settlement. It can therefore, at best, act as a big stick and a safety net. The latter is because of the right of access to justice guaranteed by Article 6 of the European Convention on Human Rights. Provision of justice and enforcement, promotion of legal development and legal unity take a second place in this view. The prime concern is to resolve the actual conflict between the parties. The law of civil procedure plays no part at all in this, but rather stands in the way of it.11

C

The Independent Law-forming Value of Civil Procedure

What has not been taken sufficiently into account in the approaches discussed above is that judges who settle disputes regularly do more than determine, assure and protect the existing individual rights and powers of parties. Judicial decisions also have a law-forming value and have an impact beyond the individual case. Not only in common law but also in civil law countries. In most Western countries it is at present accepted without reservation that judges have a law-forming task. In particular this applies for the highest judicial bodies at national level (in the Netherlands the Supreme Court) and for the international judicial bodies, such as the European Court for Human Rights, the International Court of Justice and the European Court of Justice (ECJ). Their task is unquestionably partly aimed at law formation. The contribution of the courts to the development of the law has in a modern society to some extent become vital.12 In the development of the EC law the ECJ has played a leading role. The European Court of Human Rights has, particularly in the field of the law of persons, family and procedural law, brought about revolutionary changes.13 Discussions about the revision of the law of civil procedure and about the significance of Alternative Dispute Resolution (ADR)—including, in particular, mediation—often do not do sufficient justice to these aspects. In addition to

11 The Law Commission rejects this view and strongly supports the second one—the law forming value of the law of civil procedure in addition to the classic view. It endorses the independent position, virtues and values of the law of civil procedure within a legal system. 12 WDH Asser, HA Groen, JBM Vranken and IN Tzankova, ‘A New Balance. A Summary of the Interim Report Fundamental Review of the Dutch Law of Civil Procedure’ (2003) 8 Zeitschrift für Zivilprozeß International 329–87. 13 ibid.

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providing remedies and compensation, making a contribution to law development and to legal unity is also an essential and vital objective of the civil procedure. This view attacks the very core of the relationship between the law of civil procedure and substantive private law. Where this relationship is one-sided and static in the classic view, here it is on the contrary, dynamic, reciprocal, equal. The law of civil procedure is not merely ‘the servant’.

D

Intermezzo

Some of the insights about the role and purpose of civil procedure that were discussed above might seem novel or controversial to many civil proceduralists, especially to those who are educated in the ‘classical’ school that teaches that the purpose of civil procedure is mainly or solely to provide litigants with remedy and compensation and who view procedural law as subordinated to substantive law. Recognising the independent and equal value of civil procedure might already be a bridge too far for most civil proceduralists. Nevertheless, although the aforementioned effort to bring together and classify dispute resolution trends across contemporary legal societies is noteworthy, the picture that has been given about the role and purpose of civil procedure is incomplete. Apart from the analysis of the Law Commission about the independent and equal role of civil procedure in relation to substantive law, because of its law-forming value, there are other more convincing arguments for why the law of civil procedure deserves its own ‘place in the sun’, right next to that of substantive law. Those arguments are provided by the theory of procedural justice. Furthermore, the values underlying the classic view of the purpose of civil procedure that was discussed above show strong resemblance with distributive justice theories, so much can be gained from integrating insights from those theories into the current EU debate on harmonisation of private law: the notion of justice has received a large amount of research interest over the past 30 years. The distributive justice theories also build on the presumption that people who are involved in a legal conflict are interested in receiving favourable outcomes,14 ie, getting favourable compensation and remedies. The distributive justice theories argue that the outcome should reflect the effort people invest in something and that people judge an outcome as fair when their own outcome-to-input ratio equals that of a comparative other.15 In the next section we will discuss the theories on procedural and distributive justice more extensively.

14 JW Thibaut and L Walker, Procedural Justice: A Psychological Analysis (New York, Wiley, 1975); PJ Van Koppen, DJ Hessing, H Merckelbach and HFM Crombag (eds), Het recht van binnen: Psychologie van het recht (Deventer, Kluwer, 2002); L Klaming and I Giesen (2008) ‘Access to Justice: The Quality of Procedure’ TISCO Working Paper Series on Civil Law and Conflict Resolution Systems No 2008/2, 3–4. 15 JS Adams, ‘Inequity in Social Exchange’ (1965) 62 Advances in Experimental Social Psychology 335–343; Klaming and Giesen ‘Access to Justice: The Quality of Procedure’, above (n 14) 4.

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THEORIES OF PROCEDURAL AND DISTRIBUTIVE JUSTICE

Codification of substantive and procedural civil rules might look like a technocratic exercise guided by legal logic and reasoning. However, since Codex Justinianus statesmen and lawyers have observed that civil law is a complex mechanism which reflects or denounces individual, group and social values and preferences. Advancements in the contemporary social sciences provide insights into the interaction between procedural and substantive law, as well as on the ways in which the law has been seen and internalised by individuals and groups. The theories of procedural justice and distributive justice are a small but important part of these advancements. In the following paragraphs we outline the propositions of the two theories and comment on their applicability to the process of designing and drafting procedural rules and namely EU rules of civil procedures. A

Procedural Justice

The classic view or the due process theory was mentioned above in II A, together with the more novel approach dictated by the law and economics movement, based on the assumption of the (boundedly) rational disputant. In the 1970s, a significant body of social psychology research challenged that assumption. Thibaut and Walker in their book Procedural Justice: A Psychological Analysis,16 explore empirical studies which show that individuals are more satisfied with the outcomes of dispute resolution processes when they value the process as fair. The finding that actually people assess the outcomes in light of an evaluation of the dispute resolution processes is the core proposition of the theory of procedural justice.17 The most important policy implication from the procedural justice theory is that people are more likely to comply with adverse results and in general obey the law when they see the processes used by decision makers as fair and just.18 Following the pioneering work of Thibaut and Walker, sociologists, social psychologists and lawyers developed a vast body of theoretical and empirical research which largely supports the core of the procedural justice theory.19 Inquiries have been made on the application of the theory in different cultures, environmental settings,20 demographic groups and processes.21 In the paragraphs below we will 16

Thibaut and Walker, Procedural Justice: A Psychological Analysis, above (n 14). There is a debate whether ‘procedural justice’ is the most appropriate term for the theory. Some scholars suggest that what it studies are perceptions of procedural fairness. In fact most of the scholars use procedural justice and procedural fairness interchangeably. 18 TR Tyler, Why People Obey the Law (Princeton, Princeton University Press, 2006); TR Tyler and YJ Huo, Trust in the Law: Encouraging Public Cooperation with the Police and Courts (New York, Russell Sage Foundation, 2002). 19 For overview, see Klaming and Giesen, ‘Access to Justice: The Quality of Procedure’, above (n 14): ssrn.com/paper=1091105. 20 R Folger and MA Konovsky, ‘Effects of Procedural and Distributive Justice on Reactions to Pay Raise Decisions’ (1989) 32 The Academy of Management Journal; MA Konovsky, ‘Understanding Procedural Justice and its Impact on Business Organizations’ (2000) 26 Journal of Management 489; S Jackson and MR Fondacaro, ‘Procedural Justice in Resolving Family Conflict: Implications for Youth Violence Prevention’ (1999) 21 Law and Policy 101. 21 R Hollander-Blumoff and TR Tyler, ‘Procedural Justice in Negotiation: Procedural Fairness, Outcome Acceptance, and Integrative Potential’ (2008) 33 Law and Social Inquiry 473. 17

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focus on the most important question of procedural justice theory—namely, what do the disputants expect from a procedure. Knowledge on the criteria used by individuals to assess the fairness of the procedure could provide important guiding light for the debate on harmonization of the Member States procedural rules. Procedural justice theory differentiates between control over the process (‘process control’) and control over the outcome (‘decision control’). Numerous instances of research have indicated that process control has larger impact on the assessment of the fairness of the procedure than decision control. Individuals value as better justice processes which allow them to participate and impact the procedure through which an outcome has been achieved. A related concept is the degree of voice or the perceived ability of the party in a dispute resolution process to express his or her concerns, feelings, interests and positions. Procedures should also be accurate and based on correct and verifiable information. Neutrality of the third party decision maker is another dimension which individuals reflect on when assessing the procedural justice.22 Parties in justice processes want to know that they are treated even-handedly and have equal opportunities in relation to all comparable others but specifically in relation to the other parties in the dispute. Neutral decision makers could show neutrality in different ways—treating all parties the same way, avoiding personal biases, making up for those in disadvantaged position, deciding on the basis of objectively verifiable criteria etc. People also expect consistency from justice procedures, meaning that they will be treated in similar manner as others were treated in similar but non-related procedures or in procedures repeating over time. Last, but not least, the legal procedures should be correctable. This means that participants in the procedure should have the possibility that they can rectify information which they deem is incorrect. Such correction should be possible within the procedure, but also as an opportunity for an independent review by another neutral decision maker. Not surprisingly, when assessing the fairness of the procedures the individuals do not make a clear distinction between the objective structure and content of the process and the qualities of the interaction with the neutral decision maker or the other negotiating parties. People value being treated with courtesy and respect by the other participants in the procedure. Tyler and Bies find that perceptions on how respectful and polite people were treated impacts the assessment of the procedural fairness. While these outcomes might seem self-evident and to add ‘nothing new under the sun’, in Part IV we discuss the added value of the theory of procedural justice for the EU harmonisation debate.

B

Distributive Justice

The importance of the procedure could be observed also from a distributive justice perspective. In the section below we show the positive challenges that substantive 22 GS Leventhal, JW Michaels and C Sanford, ‘Inequity and Interpersonal Conflict: Reward Allocation and Secrecy About Reward as Methods of Preventing Conflict’ (1972) 23 Journal of Personality and Social Psychology 88.

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distributive norms face at the level of justice evaluation. We contend that distributive material rules are subject to uncertain assessment, and if regarded outside the context of procedural justice they cannot produce consistent justice evaluations. Support for this position is sought in the finding of distributive justice theory that individuals use three basic rules for assessing the fairness of distribution: equity, equality and need. Although there is no unified theory which predicts when a particular rule will be applied, research has found that rule preference is associated with a complex matrix of factors. Social and legal cultures are also found to have influence on the preference for distribution rule. These findings could have crucial consequences for the efforts to harmonise the European private law. In essence, what it tells us is that the distribution achieved with the same legal rule could lead to different justice evaluations in the Member States. What makes people believe that the disputed value has been split in a fair and just manner? Most of the research shows that there are three justice criteria or distribution rules that are used to assess the degree of fairness—needs, equity and equality.23 To this set of positive criteria Hensler adds the normative rule of ‘make whole’ which is widely used in contractual and tort law.24 We will not go into detail in discussing the content of each of the criteria. What is important for our discussion is to identify how the major assessment rules are applied in particular disputes and particular environments. This process of estimation of the justness of the outcome is known as justice evaluation. 25 In this section, we are interested in whether the distribution rules are used simultaneously in the justice evaluation, or if people tend to favour some of the rules. If the individuals are selective about the distribution rules, we have to answer the immediate question—what factors influence the selection of rules? In other words—what makes people need, equity or equality when they are judging how fair the allocation was? Much of the research on distributive justice recognises that the individual preferences for distributive justice rules depend on the specifics of the social situation.26 Leventhal finds27 that when the goal of the interaction is to increase productivity, the equity rule is preferred. When the interaction is intended to decrease the level of conflict in a group, equality is chosen for assessing the fairness of the allocation.28 Similarly, the equal distribution is seen as just when the parties

23 For summary of the literature, see KS Cook and KA Hegtvedt, ‘Distributive Justive, Equity and Equality’ (1983) 9 Annual Review of Sociology 217; M Deutsch, ‘Equity, Equality, and Need: What Determines which Value will be used as the Basis of Distributive Justice?’ (1975) 31 Journal of Social Issues 137; KA Hegtvedt and KS Cook, ‘Distributive Justice. Recent Theoretical Developments and Applications’ in J Sanders and VL Hamilton (eds), Handbook of Justice Research in Law (Heidelberg, Springer, 2001); JM Steil and DG Makowski, ‘Equity, Equality, and Need: A Study of the Patterns and Outcomes associated with their use in Intimate Relationships’ (1989) 3 Social Justice Research. 24 R Craswel, ‘Instrumental Theories of Compensation: A Survey’ (2003) 40 San Diego Law Review 1135; DR Hensler, ‘Money Talks: Searching for Justice through Compensation for Personal Injury and Death’ (2003) 53 DePaul Law Review. 25 G Jasso, ‘Formal Theory’ in JH Turner (ed), Handbook of Sociological Theory (Heidelberg, Springer, 2001). 26 KA Hegtvedt, ‘Justice Frameworks’ in PJ Burke (ed), Contemporary Social Psychological Theories (Stanford, Stanford Social Science, 2006). 27 GS Leventhal, ‘Fairness in Social Relations’ in JW Thibaut, JT Spence and RC Carson (eds), Contemporary Topics in Social Psychology (Morristown, NJ, General Learning Press, 1976). 28 Leventhal, Michaels and Sanford, ‘Inequity and Interpersonal Conflict’, above (n 22).

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in the transactions perceive themselves as attitudinally similar or expect further interactions.29 Several studies report that friends or relatives prefer the equality rule whereas non-friends opt for the more self-interest seeking (namely in situations when the evaluator contributes more in the interaction) equity rule.30 When the issue revolves around the question of wellbeing of individuals or there are tight links among the parties in the interaction or scarce resources to be distributed, the needs rule could be favoured.31 Personality traits have also been found to influence the preference of distribution rules under different situational conditions.32 On the other hand, studies of the influence of age and gender on the preference for distribution rules do not provide firm results about the direction or strength of the relationships.33 Social culture has also been found to influence the preferences for distribution rules. Leung and Bond report results from experiments with Chinese and American students in which the Chinese subjects preferred equity criteria when dealing with out-of-group transaction party and favoured an equality criteria for assessment of situation which involved a group member.34 Equality is also the criteria when the Chinese subjects perceive their input in the transaction as high. The subjects from the more individualistic US society more often opt for equity as a fair and just distribution rule. However, in a similar study with American, South Korean and Japanese subjects, Leung and Iwawaki fail to find similar effects.35 The authors hypothesise that the lack of effect is due to the fact that college students—all subjects in this study were college students—in collectivistic societies are more individualistic than the general population. Although there is no unifying theory to explain and predict the factors that govern the choice of the master rule in the process of judging the fairness of the transactional allocations, a considerable body of research indicates that the selection of assessment rules varies significantly. In different situations, different people prefer dissimilar distribution rules—equity, equality or need. The theory of distributive justice posits that the three distribution rules which are used to judge

29 J Greenberg, ‘Allocator-Recipient Similarity and the Equitable Division of Rewards (1978) 41 Social Psychology; EG Shapiro, ‘Effect of Expectations of Future Interaction on Reward Allocations in Dyads: Equity or Equality? (1975) 31 Journal of Personality and Social Psychology 873. 30 W Austin, NC McGinn and C Susmilch, ‘Internal Standards Revisited: Effects of Social Comparisons and Expectancies on Judgments of Fairness and Satisfaction’ (1980) 16 Journal of Experimental Social Psychology; AA Benton, ‘Productivity, Distributive Justice, and Bargaining among Children’ (1971) 18 Journal of Personality and Social Psychology 68; GF Wagstaff, JP Huggins and TJ Perfect, ‘Equity, Equality and Need in the Adult Family’ (1993) 133 The Journal of Social Psychology 439. 31 H Lamm and T Schwinger, ‘Norms Concerning Distributive Justice: Are Needs taken into Consideration in Allocation Decisions?’ (1980) 43 Social Psychology Quarterly; S Schwartz, ‘The Justice Need and Activation of Humanitarian Norms’ (1975) 31 Journal of Social Issues 111. 32 J Greenberg, ‘Equity, Equality, and the Protestant Ethic: Allocating Rewards following Fair and Unfair Competition’ (1978) 14 Journal of Experimental Social Psychology. 33 IM Lane and RC Coon, ‘Reward Allocation in Preschool Children’ (1972) 43 Child Development 1382; GS Leventhal and IM Lane, ‘Sex, Age, and Equity Behavior’ (1970) 15 Journal of Personality and Social Psychology 313. 34 K Leung and MH Bond, ‘The Impact of Cultural Collectivism on Reward Allocation’ (1984) 47 Journal of Personality and Social Psychology 793. 35 K Leung and S Iwawaki, ‘Cultural Collectivism and Distributive Behavior’ (1988) 19 Journal of Cross-Cultural Psychology.

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the fairness of the allocation operate exclusively. Probing for all three rules in a single interaction poses a significant threat of invalid results. An example could be an allocation among friends in which the need rule applies.

IV

LESSONS LEARNED AND RESEARCH AGENDA

What do the theories on procedural and distributive justice tell us about the relationship between substantive and procedural law in the EU harmonisation context? And what kind of research is needed to be able to reformulate the EU principles of effectiveness and national autonomy so that the initial tension between those two disappears? Those are the questions we will briefly address in the next sections.

A

Lessons from Procedural Justice

Procedural justice theory informs us what individuals expect from a fair procedure and—even more importantly—predicts that whenever the procedure itself is deemed fair, the outcome—even if adverse—will be more acceptable. There are important implications for the relationships between substantive and procedural rules. First, a vast body of research clearly indicates that the procedure cannot be regarded as a pure conduit for the vindication of substantive rules. No matter how distributively fair the rules are, a procedure which is deemed as unfair will cast a negative shadow on the overall evaluation of the experience with justice. Secondly, procedural justice theory implies that just as due process has universal applicability, there are sets of procedural values which different cultures and societies value similarly. In the context of the efforts to construct the domain of European private law, the refined cues of procedural justice could mean much more than assessment principles. If the EU legislator knows that people in Sweden and Germany have similar expectations regarding justice procedures as people in France and Italy, or for that matter in Poland and Cyprus, then this legislator would have clear guidelines for drafting a positively refined backbone of procedural principles. Furthermore, procedural justice theory tells us how inextricable the link between substantive and procedural law is at individual and social level. Similar substantive rules applied through processes which evoke different fairness evaluations will result in varying degrees of compliance. When the individuals see the justice processes as procedurally unfair and compromised, they will be less likely to comply voluntarily with the normative prescriptions. The effectiveness principle— discussed above—will be at odds with a situation in which similar substantive private law rules evoke considerably different compliance rates. Well-crafted procedural rules based on due process principles, but also taking into consideration the insights of the procedural justice theory, could contribute to legal certainty and sustainable internalisation of the harmonised European private law. The procedural justice theory has important implications with regard to the institutional framework which is required for structuring and implementation of European private law. It claims that the fairness of the process impacts positively on

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views on legitimacy and authority of institutions, and thus facilitates group or social compliance with the law. Decisions which are the result of processes evaluated as fair are more likely to be voluntarily accepted than outcomes which are the result of unfair procedures. Political scientists recognise the concept of diffuse support in the legal institutions which is the understanding that even if some policies might be dubious the institutions should be supported.36 People tend to find morally rational reasons to disobey unfair rules, but also maintain a ‘running tally’ of support to institutions which are seen as producing results through fair procedures. What is more important is that fair rules which are applied through unfair processes face higher risks of being rejected through non-compliance. What procedural justice theory teaches us is that the substantive law formulation is just the beginning of the legal regulation. Dispute resolution procedures are not just conduits for vindicating rights. Procedures which are—and are seen to be—fair induce individual and social compliance with the law; on the contrary, procedures which are seen as unfair ultimately undermine the perceived trustworthiness and legitimacy of the legal institutions.37 B

Lessons from Distributive Justice

Distributive justice theory sends an unenthusiastic message to all believers in the harmonisation of European private law. The theory suggests (but cannot explain why) that the criteria for judging the distributive fairness of the outcome of justice processes might be contingent on social and legal culture. In the language of harmonisation this could mean that a damage compensation rule in one legal culture could be evaluated on its equity. If the application of the same rule in another legal culture is assessed according to the equality distributive rule, the results of the outcome fairness evaluation will differ. Does this mean that harmonisation is impossible and unnecessary? It is an ideologically nuanced question, but our suggestion is that the uncertainty in the selection of distributive rule could be mitigated by a procedure which corresponds to the values that make people define a given procedure as fair. Introduction of the theories of procedural and distributive justice quickly leads to the next question of what type of research is needed in the frame of harmonisation of European substantive and procedural private law? C

Research Agenda—A Few Suggestions

In the area of procedural justice, we need to know with a greater degree of accuracy how people in the EU Member States experience and evaluate the fairness of the existing civil procedures. Defined like this, the central research question could be broken down to numerous subsets of explorative and confirmatory questions: 36 D Easton, ‘A Re-Assessment of the Concept of Political Support’ (1975) 5 British Journal of Political Science. 37 VA Baird, ‘Building Institutional Legitimacy: The Role of Procedural Justice’ (2001) 54 Political Research Quarterly.

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— Do different justice procedures in one country receive consistent procedural justice scores? — Is there a mode of dispute resolution which generates consistently higher or lower procedural justice scores as compared with other modes? — Do different justice providers achieve comparable scores for identical procedures—ie, is Court X assessed similarly to Court Z on the grounds of the perceived fairness of its procedures? — How does procedural justice relate to the acceptance of the outcome and compliance? — Do people in the 27 EU Member States give equal weights to the dimensions of procedural justice? Similarly, a deeper inquest into distributive justice could inform and rationalise the efforts to harmonise the European private law. Specifically, an investigation into the interactions and complementarities between procedural and distributive justice can reveal with more clarity the links between substantive and procedural law. Some distributive issues that merit attention are: — — — —

What are the determinants and covariates of perceived distributive fairness? Relationships between culture and distributive justice. Impact of opt-in and opt-out systems on distribution rules. How economic self-interest impacts the assessment of distributive fairness in real dispute resolution environment. — Do settled and adjudicated outcomes of dispute resolution differ in terms of perceived distributive fairness? Empirical data which answers this and many more related questions could greatly contribute to our understanding of the links between substantive and procedural law.38 Research39 has shown that ‘justice procedures’—metaphorically defined as paths to justice—which also include out of court procedures, are measured on three indicators—costs, quality of the procedure and quality of the outcome. People who had comparable legal problems and followed similar paths to justice were asked about their perceptions and attitudes on the three indicators. As result of the application of the methodology, the researchers draw a picture of the path to justice, expose its strong and weak sides and identify areas for improvement. Broader research on procedural and distributive justice could suggest answers to many practical questions that bother European legal professionals, policy makers and legal academics. When will a compensation rule be deemed fair by the people involved? To what extent can a claimant and defendant reach agreement on the fairness of the procedure and the outcome? Is Alternative Dispute Resolution better than litigation in delivering fair and just processes and outcomes? Looking at dispute resolution processes from the perspective of the people involved and their 38 M Gramtikov et al (eds), A Handbook for Measuring the Costs and Quality of Access to Justice (Antwerps, Maklu, 2010). 39 One example of the application of the theory on procedural justice is a project called ‘Measuring the Costs and Quality of Access to Justice’, organised and implemented by TISCO, Tilburg Law School. The researchers study justice processes from the perspective of individuals who use these procedures in response to their legal needs.

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perceptions and attitudes could suggest innovative and practical solutions to the current legal dilemmas in the field of European private law. A practical example of the value of taking multidisciplinary approach to the legal phenomena might be the topic of collective redress and private law enforcement which is ranked highly on the European policy agenda.40 More in-depth knowledge on distributive justice could enhance the process of harmonisation in that field. In that context we need to have a better understanding of the preferred distributive rule in all kinds of cross-border mass disputes—for example in the field of mass torts. As we discussed above, as yet inconclusive research suggests that preferences might change by legal and social culture. In the light of the European harmonisation debate, it is important to know if in certain types of situations litigants from different Member States have similar or differing distribution preferences. If the research outcome would be that most of the litigants or consumers in one country use equity as distribution rule, whereas the litigants or consumers from another country prefer equality, that would be an important finding. At first sight, it might look challenging and discouraging for EU policy makers in favour of the harmonisation of (substantive) European private law, but it would provide them with a better understanding about how the law works, how people experience and value it but more importantly—it will provide EU policy makers with the information needed to anticipate such differences and take measures to mitigate them, where possible.

V

CONCLUSION

The ‘classic view’ of the purpose and dependent role of civil procedure seems to be prevailing among European policy and decision makers, even among legal scholars. No consideration is being given to the independent virtues and values of procedural law and to its potential for increasing litigants’ satisfaction with substantive law. The EU principles of effectiveness and national autonomy of Member States are to be viewed as exponents of the ‘classic view’. Furthermore, those two principles create a tension that is challenging not only for EU, but for domestic policy makers. Framing the relationship between civil law and procedural law around contemporary socio-legal theories explaining the role and purpose of civil procedure in terms of its outcome, function and litigants’ satisfaction, rather than focusing on the ‘mechanics and technicalities’ of civil procedure, could eliminate or at least decrease that tension. We showed that the combined findings of the procedural justice and distributive justice theories are that codification of only substantive law will face significant challenges. Substantive European private law could only have success in terms of application, enforcement and internalisation if the procedure accounts for the criteria identified by procedural justice theory. A vast body of research shows that people place value in procedures under which they can voice their concerns and 40 See literature in I Tzankova and J Kortmann, ‘Remedies for Consumers of Financial Services: Collective Redress and Improvement of Class Representation’ (2010) Revue Européenne de Droit de la Consommation.

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feelings, impact the development of the procedure and receive polite and dignified treatment. If these values have any universal application, perhaps we can reconsider the principle of national autonomy. People want fair and just processes and democratic states bound by the rule of law should provide such procedures. Can we justify the pre-eminence of the principle of national autonomy over the procedural justice values? Or is it justified for an EU Member State to sacrifice procedural values that people find important, under the guise of an autonomy argument? The theories on procedural and distributive justice provide, in our view, convincing arguments for redefining the EU principles of effectiveness and national autonomy. Redefining (legal) society’s views on—and evaluation of—civil procedure and its position with respect to substantive law could change Member States’ attitude towards EC law in the sense that national legal systems would feel less ‘threatened’ by EC law and would tend to attach less importance to the principle of national autonomy. The advantage, if this were to be true, is obvious. If redefining the way Member States view and evaluate civil procedure led to a ‘less defensive’ attitude, national legal systems might feel much more inclined to ‘voluntarily’ apply the EC principle of effectiveness and further the objectives of EC law. Another advantage of this novel approach to the relationship between substantive law and procedural law, and to the role and function of civil procedure via the theories of distributive and procedural justice, is that it facilitates a meaningful comparative research of the law of civil procedure of the EU Member States. That will help increase understanding of each other’s systems, will stimulate learning from each other’s experiences and in the end will promote ‘spontaneous harmonisation’: legal systems are always interested in adopting models that prove successful. The advantages of those two theories and their contribution to the European harmonisation debate seem overlooked and underappreciated. Ignoring the independent role and value of procedural law is a missed opportunity for the EU to enhance litigants’ satisfaction and evaluation of the EU legal order as predicted by procedural justice theories. Enhanced litigants’ satisfaction with the EU legal order stimulates harmonisation. The ‘bad news’, however, is that reformulating the EU principles of effectiveness and national autonomy has to be based on further empirical research. We made a few suggestions in the field of collective redress. That is a start.

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27 Public and Private Enforcement: The Practical Implications for Policy Architecture CHRISTOPHER HODGES

T

HIS CHAPTER EXPLORES the implications of the analysis of law into twin categories of public and private, in relation to the enforcement of law in practical reality. Three main ideas are pursued. First, legal and political systems need to take policy decisions on the balance that they seek to achieve between public and private enforcement. The implications of different decisions and balances will have major consequences, as illustrated by the contrasting architectures of the United States and of the traditional European models. Secondly, the need for a public enforcement policy is examined, and the absence of any such policy is noted within the European Union architecture. Thirdly, the implications for the design of civil justice systems are identified, and some developments are noted.

I

WHAT BALANCE BETWEEN PUBLIC AND PRIVATE LAW ENFORCEMENT?

One approach to analysing law is to categorise it into two separate pillars of public and private law. Broadly speaking, public law relates to the activities of public bodies, and private law relates to the relations between private individuals, although public bodies may sometimes enter into private transactions. In the area of enforcement of substantive law, public enforcement is any enforcement of substantive legal rules that is carried out in the general public interest, usually by public bodies. It can be known also as administrative enforcement, involving the imposition of sanctions by public bodies without going through the courts, or by going through administrative rather than criminal courts. In contrast, private enforcement is the taking of action by private persons to vindicate their rights under private law, through the civil courts. These two broad paradigms can overlap, or be fused in ways so as to contain elements of both sides. Thus a public body may take civil action to enforce a private contract that it has entered into but which has been breached, but the fact that the public body chooses to take action for an injunction or to recover damages may itself send a strong signal about its policy on the need for general public observance

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of particular substantive rules. A contrasting example is where a private person takes private action to recover damages for breach of tort law, and in so doing can also be viewed as enforcing public standards on the need for the general population to observe duties of care towards others, since the individual action may have an element of deterrence in relation to the particular defendant or to all persons who engage in similar activities to that defendant. Thus, it can be said that the function of public enforcement is, or emphasises, deterrence, whereas the function of private enforcement is, or emphasises, compensation or rectification. But enforcement activity of either type may contain elements of both types. The above statements are deceptive and—deliberately—simplistic and far more could be said on these subjects, but the characterisation of these two broad pillars will serve to introduce what follows. It is a matter of fundamental importance for a legal and socio-political system to decide what balance between public and private enforcement it desires. What activities are to lead to enforcement consequences by individuals, and what to consequences by the state? To what extent should people take the law into their own hands? To what extent should the state intervene in individuals’ or commercial activities, and how much can it afford to do so? Why is all this important? Different models that answer these questions in strikingly different fashion, can illustrate these points. Two models will be outlined here: the American model and what will be described as a European model. The caveat should immediately be stated that there is, again, far more that could be said, but the purpose of this chapter is to illuminate through simplification. The American legal system has strong divisions between public and private action. It has a sequence of high-profile federal public regulatory agencies, which have powerful enforcement powers.1 It also has extensive use of private litigation. The balance that exists between these two pillars in practice—and as a matter of policy—is striking. Private litigation is used as an extensive mechanism for public enforcement. Thus, private individuals are incentivised to seek out and take action to rectify breaches of law (in the broadest sense), and in so doing to act often with a strong function of public enforcement. Intermediaries are also incentivised to act as ‘private attorneys general’, continuing the model of traditional bounty hunters. Thus, one finds the following essential features of private law enforcement: — The availability of contingency fees, so that the plaintiff does not have to fund the action. — No cost-shifting, so that the claimant has no risk, or one-way cost-shifting in certain cases in which enforcement is positively encouraged. — Procedural rules that provide powerful mechanisms for private parties to investigate whether there has been wrongdoing, hence extensive depositions and discovery of tangible evidence. — Damages being awarded by fellow-citizens through juries, giving some democratic accountability to reflect prevailing public perceptions.

1 Leading players are the Department of Justice (also at state level, led by Attorneys General for each state), the Securities and Exchange Commission, the Federal Trade Commission, the Food and Drug Administration, the Office of Safety and Health Administration.

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— Generally higher damages than in Europe, reflecting in part the absence of comprehensive healthcare coverage. — The possibility of punitive damages, or triple damages in antitrust cases. Such a system has strong coherence in its internal logic. It may also have a number of advantages. For example, it may save public money on funding enforcement by public bodies, through privatising this function. Conversely, it may rectify a limited level of enforcement activity by public bodies, such as through under-funding, or their political control by the Administration of federal agencies. Hence, the courts might perform a strong rectificatory or safety-valve function in enabling a satisfactory level of enforcement to be sustained, or opportunities for social change, or for challenge to the Administration. But the American system is not the European system. It may be premature to identify exactly what the balance between public and private enforcement is in Europe. Indeed, it may be challenging to identify a European ‘model’, in view of divergences between national approaches and between national and EU-level approaches, taking account also of differences between sectors. In view of the dearth of analysis on these points, it will be necessary to undertake an empirical investigation of the exact balance between public and private enforcement at Member State and EU levels before drawing firm conclusions. It will, furthermore, not only be necessary to identify what the current position is, but to determine what it should be in future. Without anticipating more detailed analysis on the above points, some initial observations can be made. Europe certainly has an extensive number of public regulators, and the entire European market concept is an exercise in regulation.2 Certain principles that are strongly supported in Europe are less significant than in the United States, such as the level of commitment to the European Convention on Human Rights and to the concept of solidarity, which finds practical expression and major transatlantic differences in universal healthcare and social security coverage, as opposed to more individualistic and adversarial expressionism. But it is simple to conclude that both European states and the European Union have a different balance between public and private enforcement from the balance that exists in the United States. That conclusion is apparent from the factual observation that we have less litigation in Europe, or at least that litigation plays a less central role in European legal systems, than it does in the United States. European states certainly do not demonstrate the American features that are designed to encourage litigation. Cost shifting (loser pays) is a universal principle,3 success fees may be permitted but pacta de quota litis are widely banned, punitive damages and juries are almost non-existent and the acceptance of ‘class actions’ for collective damages is rare and still widely contested.4 In short, the generalisation is

2

Among many writings, see G Majone, Regulating Europe (London, Routledge, 1996). C Hodges, S Vogenauer and M Tulibacka (eds), The Costs and Funding of Civil Litigation: A Comparative Perspective (Oxford, Hart Publishing, 2010). 4 C Hodges, The Reform of Class and Representative Actions in European Legal Systems: A New Framework for Collective Redress in Europe (Oxford, Hart Publishing, 2008); F Cafaggi and H-W Micklitz (eds), New Frontiers of Consumer Protection. The Interplay between Private and Public Enforcement (Antwerp, Intersentia, 2009); C Hodges, ‘From Class Actions to Collective Redress: A 3

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that the traditional pillars are largely intact: public bodies take action to enforce public law, and private parties take action to enforce private law, although there has been some blurring. Interestingly, private claimants in civil law states may ‘piggy back’ on criminal investigations (as parties civile, the converse of a privatised class action approach). Some enforcement of private consumer rights is undertaken by consumer associations and/or by public bodies. The emerging model for private consumer collective redress includes the involvement of public bodies, and the use of judicial procedures only as a last resort.5 The debate on what policy and mechanisms should be introduced in Europe for collective redress has opened up an ideological rift between public and private enforcement. In the competition law area, the European Commission (DG Competition) has pursued the opening up of private damages through strong reliance on various techniques that are clear imitations of American privatised enforcement, including no less than two collective procedures and extended access to evidence.6 In stark contrast, the Commission (DG Consumer Affairs) has issued a strong political rejection of the American model of class actions, which itself implies rejection of the American private enforcement model. The Commission said in 2009: US style class action is not envisaged. EU legal systems are very different from the US legal system which is the result of a ‘toxic cocktail’—a combination of several elements (punitive damages, contingency fees, opt-out, pre-trial discovery procedures) … This combination of elements—‘toxic cocktail’—should not be introduced in Europe. Different effective safeguards including, loser pays principles, the judge’s discretion to exclude unmeritorious claims, and accredited associations which are authorised to take cases on behalf of consumers, are built into existing national collective redress schemes in Europe.7

It would currently appear that the model that is being proposed for competition enforcement differs from the model that is being crafted for consumer law enforcement. Whichever model is used, there needs to be some coordination between the two main enforcement consequences of damages/restitution and penalties/fines. Such matters have so far received scant attention, and this provides little confidence in the ability of the system to provide level markets and to inspire virtuous behaviour. Much of the political debate has failed to recognise the stark reality that a privatised enforcement mechanism will be ineffective unless there is provision for aggressive uncovering of evidence and liberal funding incentives for

Revolution in Approach to Compensation’ (2009) 1 Civil Justice Quarterly 41; C Hodges, ‘Collective Redress in Europe: The New Model’ (2010) 29(3) Civil Justice Quarterly 370. 5 European Commission, DG Sanco, Consultation Paper on the Collective Consumer Redress presented at the public hearing 29 May 2010, available at: ec.europa.eu/consumers/redress_cons/docs/ consultation_paper2009.pdf. 6 European Commission, ‘White Paper on Damages Actions for Breach of the EC Antitrust Rules’ COM (2008) 165 final (2 April 2008); European Commission, ‘Commission Staff Working Paper accompanying the White Paper on Damages Actions for Breach of the EC Antitrust Rules (‘Staff Working Paper’)’ SEC (2008) 404 (2 April 2008); European Commission, ‘Commission Staff Working Document accompanying the White Paper on Damages Actions for Breach of the EC Antitrust Rules: Impact Assessment 405 (‘Impact Assessment Report’)’ SEC (2008) 405 (2 April 2008). 7 European Commission DG Sanco, ‘Green Paper on Consumer Collective Redress—Questions and Answers’ MEMO/08/741 (27 November 2008) 4.

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private intermediaries, but that if those two features are present there will inevitably be significant transactional cost and abuse. The conclusion for present purposes is that it is important for legal systems to identify what balance they seek to achieve between public and private enforcement. That decision will have major implications for the architectural design of the legal system, for the resources and mechanisms that will be necessary and the level of activity by state or private bodies. At the extremes, we need to ask whether we want our civil law policemen to be officials or lawyers. Decisions on such important policy issues seem often to be taken by evolution or accident. There has been until now effectively no debate on such issues in Europe, particularly at European level. Identification of the American system as placing strong emphasis on private enforcement has been known but has received no critical analysis (but plenty of criticism of some of its effects, such as high transactional costs, politically active lawyers and ineffective, captured federal agencies). It is of some relevance to note that states in Central and Eastern Europe may yet have to confront these policy decisions in relation to their internal legal architecture, but the legacy of central communist control leaves a legacy of public bodies and minimal private action. This architecture and culture can be more readily adopted to the traditional Western European division between public and private enforcement than it could to adopt an American private enforcement approach. The choice of emphasis between public and private enforcement may have significant impact not only in relation to enforcement issues, but on the development of the rules of substantive law. American private law of tort and strict product liability, for example, is designed to enable private enforcement. There may be almost no difference between the substantive rules in a sector that apply in different parts of the world, but there may be considerable differences between the local enforcement policies, architecture and practice. A striking example is that of regulation of medicinal products. The substantive rules for placing a product on the market, evaluating a product’s safety pre-marketing and post-marketing and the general obligations of researchers, manufacturers, distributors, retailers and public authorities in this sector are essentially the same not just as between all the EU Member States and the United States, but throughout the developed world. Global agreement of research scientists and medical scientists on what standards should be applicable on these issues, plus the fact that the mode of operation of the pharmaceutical industry is global, the fact that the safety issues are also global and the extensive dialogue of national regulators through bilateral discussions and through the International Conference on Harmonisation, has produced almost complete cohesion and uniformity on both the scope and content of the standard legal rules that apply in every advanced country. This situation thereby facilitates exchange of safety data between public authorities globally, to assist the safety protection of the safety of their populations and avoids unnecessary duplication of research, thus enabling industry to operate globally with economies of scale. But what does differ between blocks of countries are the rules and practice on enforcement.

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THE NEED FOR A PUBLIC ENFORCEMENT POLICY

The existence of any public enforcement mechanisms—especially if they are extensive—raises the need for an enforcement policy to be adopted. This should be so irrespective of whatever the balance may be between public and private enforcement. Adoption of such a policy is an important political decision, since the populace needs to have democratic influence over and acceptance of the budget for, modes of operation of, priorities of and practical results and effectiveness of, the activities of its public officials and the general level of compliance with common rules that results. Academic analysis has concluded that enforcement plays an essential role in regulation and the design of enforcement mechanisms and their policies and practical operation are all crucial for the effectiveness and success of the system.8 It may be debatable—but has yet to be debated—whether the same enforcement policy should apply in all situations and market sectors, or whether some differential may be justifiable. Regulatory theory may support reasoned differences in approach, depending on the conditions that pertain in a given sector. Different theoretical enforcement policies certainly exist, ranging from traditional ‘command and control’ types, as found in a military organisation, to more liberal types, such as those that emphasise behavioural science (ie, seeking compliance based on a wider understanding of regulatees’ motivation and behaviour than mere economic deterrence), risk evaluation, low cost for enforcer or regulatee. In this connection, one again notes the existence—referred to above—of different philosophies applying in relation to competition and consumer law. But the question of what the enforcement policy is might validly be asked in relation to many sectors. The EU has a growing number of regulatory agencies at EU level, while many other sectors are regulated at national level. It appears that few Member States publish national or sectoral enforcement policies. The United Kingdom has introduced some transparency and modernisation into this area comparatively recently, basing its decisions strongly on academic theory as well as economic priorities. Against an overriding economic policy of encouraging economic health and competitiveness, specific policies are encouraged9 of reducing administrative burdens,10 adopting a risk-based and

8 R Baldwin and M Cave, Understanding Enforcement (Oxford, Oxford University Press, 1999) ch 8; R Cranston, Regulating Business (London, Macmillan Press, 1979). See also P Selznick, ‘SelfRegulation and the Theory of Institutions in G Teubner, L Farmer and D Murphy (eds), Environmental Law and Ecological Responsibility (London, John Wiley & Sons Inc, 1994); and E Bardach and R Kagan, Going by the Book—The Problem of Regulatory Unreasonableness (New Brunswick, Transaction Publishers, 2002) ch 5. 9 See CJS Hodges, ‘Encouraging Enterprise and Rebalancing Risk: Implications of Economic Policy for Regulation, Enforcement and Compensation’ (2007) European Business Law Review 1231. 10 It has been estimated that UK small businesses spend 9.5% of their total working time ensuring compliance with regulations, excluding regulations on tax, employment relations, health and safety and environment issues: F Chittenden, S Kauser and P Poutziouris, Regulatory Burdens of Small Business: A Literature Review (Manchester Business School, 2002) available at: www.berr.gov.uk/files/file38324.pdf. That study also found that in businesses with less than 20 employees, the compliance costs were at least 35% higher than for firms with more than 500 staff. It further found that governments had yet to discover how to reduce this relatively higher burden, which led to the small business sector and the economies of the countries studied being smaller than they otherwise would be: see also G Bannock and A Peacock, Governments and Small Businesses (London, Paul Chapman Publishing, 1989) 17.

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impact-assessment11 approach towards regulation and enforcement,12 aligned to the government’s view of a contemporary world in which competition is fierce, consumers are better informed, and resources are scarce, both for enforcers and economic operators.13 Hence, the philosophy that risk assessment should comprehensively underpin regulatory and enforcement policy seeks ways in which the administrative burden of regulation on business can be reduced, while maintaining or improving regulatory outcomes. This risk assessment policy is expressly based on ‘responsive regulation’ theory developed by Ayres and Braithwaite.14 Their ‘enforcement pyramid’ comprises an ultimate peak sanction of removal from society (removal of liberty or licence to operate) and a broad base of simple, low key discussions up which regulators would progress depending on the seriousness of the regulatory risk and the non-compliance of the regulated business. They argued that regulatory compliance was best secured by persuasion in the first instance, with inspection, enforcement notices and penalties being used for more risky businesses further up the pyramid. A separate stream of academic theory on ‘restorative justice’ has also been adopted. This approach seeks to link attempts to influence behaviour with rectification of the adverse consequences that have been caused by the wrongdoer. In a review of sentencing for regulatory breaches, Macrory stated Six Penalties Principles:15 1. Aim to change the behaviour of the offender. 2. Aim to eliminate any financial gain or benefit from non-compliance. 3. Be responsive and consider what is appropriate for the particular offender and regulatory issue, which can include punishment and the public stigma that should be associated with a criminal conviction. 4. Be proportionate to the nature of the offence and the harm caused. 5. Aim to restore the harm caused by regulatory non-compliance, where appropriate. 6. Aim to deter future non-compliance. Principles 2 and 5 have clear links with private compensation law. In adopting a ‘restorative justice’ approach he focuses on a holistic process that addresses the repercussions and obligations created by harm with a view to putting things right.16

11 Cabinet Office, ‘Better Policy Making: A Guide to Regulatory Impact Assessment’ (2003); Cabinet Office, Better Regulation Executive, ‘The Tools to Deliver Better Regulation: Revising the Regulatory Impact Assessment: A Consultation’ (2006) available at: www.bis.gov.uk/files/file44543.pdf. 12 P Hampton, ‘Reducing Administrative Burdens: Effective Inspection and Enforcement’ (HM Treasury, March 2005). See also Cabinet Office, Better Regulation Executive, ‘Less is More: Reducing Burdens, Improving Outcomes’ (2006); Department for Trade and Industry, ‘Moving Towards the Local Better Regulation Office: The Way Ahead’ (2005). 13 HM Treasury, Better Regulation Executive and Cabinet Office, ‘Implementing Hampton: from Enforcement to Compliance’ (November 2006). 14 I Ayres and J Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford, Oxford University Press, 1992); J Braithwaite, Restorative Justice and Responsive Regulation (Oxford, Oxford University Press, 2002). 15 RM Macrory, Regulatory Justice: Making Sanctions Effective (HM Treasury, 2006). 16 ibid, para 4.32.

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The emphasis is on a process ‘whereby those most directly affected by a wrongdoing come together to determine what needs to be done to repair the harm and prevent a reoccurrence’.17 Even though Macrory’s approach was focused on sanctioning from the regulatory and compliance perspective,18 and not from the perspective of compensation, the approach has led to revolutionary developments in relation to compensation and restoration policy, especially in collective redress, as mentioned below. The government wishes to ‘develop an enforcement culture that focuses first on compliance, second on restoring any damage done to consumers by breaches of the law, and only third on punitive prosecution’. The government ‘does not want to see a surge in monetary penalties as the new powers are used more and more. Rather it wants companies who have infringed legal provisions to take the opportunity to put things right before any formal public enforcement takes place. Many good businesses do this already’.19 The government has stated: Enforcement authorities should take into account any compensation awards by the business in their decision making. They should use the new powers to help persuade businesses to do the right thing, reserving formal action only for those who refuse to do so. But if businesses break the law and refuse to compensate, they should not be allowed to gain from this refusal.

The acceptance of these theoretical underpinnings on enforcement by government has led to a revolution in policy on the enforcement of regulation of corporate activity in the United Kingdom. The policy is to adopt new approaches to delivering better outcomes for consumers, while at the same time reducing unnecessary burdens for business and promoting fair and competitive markets. The government introduced legislation providing a new enforcement framework and powers, involving a combination of components: 1. A duty on many regulatory bodies20 to observe principles of good regulation, including transparency, proportionality, consistency, targeting at need (the Hampton principles).21 2. A requirement on regulators to aim to eliminate any financial gain or benefit from non-compliance.22

17 RM Macrory, ‘Restorative Justice and Practices’ (Third International Winchester Restorative Justice Group Conference ‘Restorative Justice in Action (…) into the Mainstream’, London, March 2006); quoted in Macrory, Regulatory Justice, above (n 15) para 4.33. 18 Macrory recommended wider use of Profit Orders to address the level of illicit gain by an offender, Confiscation Orders under the Proceeds of Crime Act 2002, and the introduction of Corporate Rehabilitation Orders, designed to address a company’s poor practices and prevent future noncompliance, such as through commitment to a plan of action to remedy a matter. 19 Underlying this approach are ‘restorative justice’ and ‘responsive regulation’ policies: see Ayres and Braithwaite, Responsive Regulation, above (n 14) and Hodges, ‘Encouraging Enterprise and Rebalancing Risk’, above (n 9) 1231. 20 See Minister for Communications, Technology and Broadcasting, ‘Legislative and Regulatory Reform (Regulatory Functions) Order 2007’, SI 2007/3544’, in force from 1 September 2009. 21 Legislative and Regulatory Reform Act 2007, s 21. 22 Department for Business Enterprise and Regulatory Reform, ‘Regulators’ Compliance Code: Statutory Code of Practice for Regulators’ (17 December 2007) available at: www.berr.gov.uk/files/ file45019.pdf, para 8.3. The Code is made under s 22 of the Legislative and Regulatory Reform Act 2007. Essentially the same approach was previously mandated under ‘Purpose (e)’ of the purposes of

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3. Enabling regulators to exercise a new category of civil sanctions, including imposing discretionary requirements that the offender must take steps specified by the regulator, within a stated period, designed to secure (a) that the offence does not continue to recur (a ‘compliance requirement’) and (b) that the position is restored, so far as possible, to what it would have been if no offence had been committed (a ‘restoration requirement’).23 If a person refuses to comply with a discretionary requirement or undertaking, the enforcer may decide to bring a prosecution for the original offence.24 The government has issued a ‘Code of Practice on Guidance on Regulation’25 and—for civil servants—a ‘Guide to Code of Practice on Guidance’, which cover issuing good guidance on regulation. The various regulatory bodies are now being required to revise, or publish for the first time, their enforcement policies in the light of the particular conditions in their sectors. In April 2009 the Local Better Regulation Office issued guidance advising local authorities on the operation of the Primary Authority Scheme,26 offering the opportunity for local authorities to develop a constructive partnership with a business that can deliver reliable advice and coordinated and consistent enforcement for the business.27 On 6 July 2009, the Financial Services Authority (‘FSA’) issued a consultation on its new enforcement policy which is exactly on ‘restorative justice’ principles: it prioritises disgorgement (restitution), discipline (penalties for offenders) and deterrence, in that order.28 In March 2009, the Office of Fair Trading (‘OFT’) published its Annual Plan promising to adopt a responsive approach that includes continuing sentencing set out in s 142 of the Criminal Justice Act 2003: ‘Any court dealing with an offender in respect of an offence must have regard to the following purposes of sentencing … (e) the making of reparation by offenders to persons affected by their offences’. Criminal courts possess a general power to order a person convicted of an offence to pay compensation for any personal injury, loss or damage resulting from that offence, or any other offence that is taken into consideration by the court in determining sentence: Powers of Criminal Courts (Sentencing) Act 2000, s 130, traceable back to the Powers of Criminal Courts Act 1973. The Financial Services Authority was also given power to seek a compensation order as part of its enforcement powers: Financial Services and Markets Act 2000, ss 382 and 383. 23 Regulatory Enforcement and Sanctions Act 2008, s 42. See Department for Business Enterprise and Regulatory Reform, ‘Regulatory Enforcement and Sanctions Act 2008: Guidance to the Act’ (July 2008) available at: www.berr.gov.uk/file47135.pdf. 24 Department for Business Enterprise and Regulatory Reform, ‘Regulatory Enforcement and Sanctions Act 2008: Guidance to the Act’ (July 2008) para 50. The coercive background is, therefore, strongly similar to the powers of Nordic Consumer Ombudsmen referred to above. 25 Department for Business Enterprise and Regulatory Reform, ‘Regulators’ Compliance Code: Statutory Code of Practice for Regulators’ available at: bre.berr.gov.uk/regulation (7 July 2008). 26 The Primary Authority Scheme coordinates enforcement action by different local authorities, such as local council Trading Standards Departments and local health and safety executive offices: see The Co-ordination of Regulatory Enforcement (Enforcement Action) Order 2009/665, The Co-ordination of Regulatory Enforcement (Procedure for References to LBRO) Order 2009/670 and The Co-ordination of Regulatory Enforcement (Regulatory Functions in Scotland and Northern Ireland) Order 2009/669. 27 Primary Authority, ‘Primary Authority Guidance’ (issued under the Regulatory Enforcement and Sanctions Act 2008) available at: www.lbro.org.uk/FileUploads/200942_Primary_Authority_Guidance. pdf, s 33. 28 Financial Services Authority (FSA), ‘Consultation Paper on Enforcement of Financial Penalties’ (CP09/19) available at: www.fsa.gov.uk/pubs/cp/cp09_19.pdf. Other UK agencies are also reviewing their enforcement policies for compliance with the new regime: see The Water Services Regulation Authority (Ofwat), ‘Ofwat’s Approach to Enforcement’ (2009) available at: www.ofwat.gov.uk/ regulating/enforcement/pap_pos_090731enforcementapproach.pdf.

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to focus on high-profile enforcement action, including the first ever criminal convictions against individuals for price-fixing offences.29 It may be wondered whether such an approach in fact continues a command-and-control or US-style deterrent policy, rather than truly responsive policy, although the top of Ayers’ and Braithwaite’s enforcement pyramid does provide for effective deprivatory sanctions. The OFT also published a Simplification Plan30 particularly intended to set out how it proposes to meet its new obligations under the Regulatory Enforcement and Sanctions Act 2008 and giving an indication of how the OFT will continue to address the government’s better regulation agenda more generally. Further, the OFT published revised leniency guidance for businesses and individuals that come forward with information about their involvement in a cartel.31 An additional development has been increased support for the development of private sector positive incentive schemes and for further self-regulation though the OFT’s Consumer Codes Approval Scheme.32 Among a number of other agencies, reviews of enforcement practice have recently been issued by the Communications Regulator (Ofcom),33 the Water Services Regulation Authority (‘Ofwat’)34 and the Office of Rail Regulation (‘ORR’).35 Turning now to observe enforcement at European level, one of the most striking—and worrying—features of the European Union is the inability to agree a consistent, Community-wide enforcement policy. The absence of an enforcement policy within a legal system that comprises such extensive use of regulatory rules and covers such a large population is simply an appalling gap in coherence and threat to the effectiveness of the entire enterprise. It is possible to identify an enforcement policy for competition law, but the substance of that policy raises serious questions about its coherence, effectiveness and adverse effects. Some areas demonstrate varying elements of horizontal collaboration, such as for consumer trading protection,36 consumer product

29 Office of Fair Trading (OFT), ‘Annual Plan 2009/2010’ (26 March 2009) available at: www.oft.gov.uk/shared_oft/about_oft/ap10/oft1036.pdf 30 OFT, ‘Simplification Plan’ (March 2009) available at: www.oft.gov.uk/shared_oft/529862/ oft1067.pdf. 31 OFT, press release: ‘OFT publishes revised guidance on leniency’ (11 November 2008) available at: www.oft.gov.uk/news/press/2008/144–08. 32 See the Government’s Consumer Strategy. Department of Trade and Industry. ‘Extending Competitive Markets: Empowered Consumers, Successful Business’ (2004) available at: www.dti.gov.uk/ccp/ topics1/consumer_strategy.htm. 33 Ofcom, ‘Enforcement Report. A Report on Ofcom’s Approach to Enforcement and Recent Activity’ (2009) available at: www.ofcom.org.uk/enforcement/enforcement_report. Ofcom’s principal duties under the Communications Act 2003 are to further the interests of citizens in relation to market communication matters and to further the interests of consumers in relevant markets, where appropriate by promoting competition, and it also has a duty to set regulation where appropriate for Alternative Dispute Resolution and Communication Providers’ complaints handling procedures. 34 Ofwat, ‘Ofwat’s Approach to Enforcement’ (2009) available at: www.ofwat.gov.uk/regulating/ enforcement/ltr_stk_enforcementapproach. Ofwat is the economic regulator of the water industry in England and Wales. 35 Office of Rail Regulation (ORR), ‘Economic Enforcement Policy and Penalties Statement’ available at: www.rail-reg.gov.uk/upload/pdf/395.pdf. ORR is economic regulator for the main railway in Great Britain and contains the penalties statement required by the Railways Act 1993, s 57B (as amended). 36 Regulation (EC) 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws

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safety,37 or where European Agencies exist. But there is a striking absence of enforcement policies, let alone coordinated ones, on horizontal or vertical bases. There is, of course, an institutional barrier to development of an EU enforcement policy, which rests partly in the principle of subsidiarity38 but more in that of procedural autonomy.39 In short, the constitutional settlement is that competence over enforcement of Community rules lies with Member States: the national obligation is merely to achieve the effect by means that are proportionate, effective and dissuasive. From the perspective of citizens and businesses who wish to see the Community deliver an effective, cost-efficient and competitive single market, the above constitutional impediment is a barrier that simply must be overcome. It is simply pointless to create a vast edifice of rules if they are going to be enforced differently, or to different extents, in different areas of the Community. If enforcement is an integral and necessary function of delivering effective regulation, all regulatory authorities should have an enforcement policy. This would apply to agencies at European and national levels. There is a striking absence of such policies generally, and this gaping hole needs to be filled. Further, since the internal market relies on effective coordination between European and national agencies, there needs to be strong consistency between the policies of different agencies. No attempt has been made to debate the substance of what any coordinated policy might be, and no such coordination exists. This gap, therefore, also needs to be filled. States might validly debate whether to adopt a ‘responsive regulation’ policy, as the United Kingdom has, or some other policy, but it is time that these important gaps were filled. It will be seen that there is some conflict between an enforcement policy based on deterrence (which regulatory theorists would characterise as a command-and-control type, and possibly somewhat old fashioned and ineffective) and a responsive regulation policy. For example, DG COMP’s strongly policy strongly emphasises deterrence, and might benefit from a fundamental rethink on how to integrate rectification with behavioural incentives in a modern enforcement policy.40 One major disadvantage of a deterrence policy is (the Regulation on consumer protection cooperation) [2004] OJ L364/1, which mandates a network of national regulatory agencies. 37 Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety [2002] OJ L11/4, and its RAPEX system. 38 EC Treaty, Art 5.2. 39 See E Storskrubb, Civil Procedure and EU Law. A Policy Area Uncovered (Oxford, Oxford University Press, 2008) 19; M Andenas, ‘National Paradigms of Civil Enforcement: Mutual Recognition or Harmonization in Europe?’ in M Andenas, B Hess and P Oberhammer (eds), Enforcement Agency Practice in Europe (London, British Institute of International & Comparative Law, 2005) 7–24; W van Gerven, ‘Of Rights, Remedies and Procedures’ (2000) 37 Common Market Law Review 501; S Prechal ‘Community Law in National Courts: the Lessons from Van Schijndel’ (1998) 35 Common Market Law Review 681; C Kakouris, ‘Do the Member States Possess Judicial Procedural ‘Autonomy’?’ (1997) 34 Common Market Law Review 1389. For limitations to this autonomy, through the principles of equivalence and effective protection, see: Case 33/75 Rewe-Zentralfinanz eG et Rewe-Zentral AG v Landwirtschaftskammer für das Saarland [1976] ECR 1989; Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043. A more recent case: C-446/04 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue of 12 December 2006, OJ C331/08 (30 December 2006) para 5. 40 Professor Wils has argued that public enforcement is the superior instrument to pursue the objectives of clarification and development of the law and of deterrence and punishment, whereas

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that it may lead to continuous upward spiralling in fines, in an attempt to disrupt cynical calculations of wrongdoers such as cartelists who calculate that illicit gains can outweigh likely fines. The conclusion of this section is that the European Union and Member States need urgently to address the architecture of enforcement, policies, resources, budgets, effectiveness, efficiency and outcomes. III

THE NEED FOR COHERENT PRIVATE ENFORCEMENT—WHAT SORT OF CIVIL JUSTICE SYSTEMS DO WE WANT?

The same logic of the need to settle what sort of public enforcement system and practice it is that we need applies to the civil justice system. The development of a single European civil justice system is as logical for the functioning of a single market as is a single currency. Harmonising the ‘back end’ of dispute resolution and law enforcement may not be such an important or urgent topic as harmonising the ‘front end’ of the regulatory and trading rules, but it may still be of some relevance. Civil justice, accordingly, has not received much attention at European level until recently, but is now rising slowly up the agenda. It makes little sense to propose a uniform contract code or DCFR without undertaking two related examinations. First, should the rules of substantive law be reviewed in the light of enforcement processes, to see whether they should be changed so as to lead to clearer provisions on breach or enforcement, more effective or efficient enforcement? Such an examination has not been undertaken. Secondly, should there be some improvement on the existence of 27 different national systems of civil procedure or dispute resolution, and no EU-level system? As always, questions arise at European level and within Member States. A significant amount of harmonising civil justice has already been achieved at European level.41 First, within litigation systems, developments have taken place in the context of a ‘European Judicial Network’ in civil and commercial matters (‘EJ-NET’),42 and a Community framework of activities to facilitate the implementation of judicial cooperation in civil matters.43 Individual measures include rules private actions for damages are superior for the pursuit of corrective justice through compensation: WPWils, ‘The Relationship between Public Antitrust Enforcement and Private Actions for Damages’ (2009) 32 World Competition 1. He argues that those separate tasks should be pursued independently, respectively through public and private procedures. However, it is suggested that it is both possible and advisable to pursue compensation through an enforcement policy that combines both elements, such as through a ‘regulatory oversight’ model that has emerged in consumer collective redress in the United Kingdom, as argued below. 41 Storskrubb, Civil Procedure and EU Law, above (n 39); Hodges, The Reform of Class and Representative Actions in European Legal Systems, above (n 4) ch 4; S Saastamoinen, ‘Achievements and Initiatives of the European Union in the Area of Civil Justice’ in S Vogenauer and C Hodges (eds), Civil Justice Systems in Europe. Implications for Choice of Forum and Choice of Contract Law (Oxford, Hart Publishing, forthcoming 2011). 42 Council Decision (EC) of 28 May 2001 establishing a European Judicial Network in civil and commercial matters [2001] OJ L174/25. See also proposals in Decision (EC) 568/2009/EC of the European Parliament and of the Council of 18 June 2009 amending Council Decision (EC) 2001/470/EC establishing a European Judicial Network in civil and commercial matters [2009] OJ L168/35. 43 Council Regulation (EC) 743/2002 of 25 April 2002 establishing a general Community framework of activities to facilitate the implementation of judicial cooperation in civil matters [2002] OJ L115/1.

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on the service of judicial and extrajudicial documents in civil or commercial matters,44 on cooperation between Member State courts in the taking of evidence in civil or commercial matters,45 on insolvency proceedings46 and a European Enforcement Order for uncontested claims.47 A European Order for Payment procedure applies from 12 December 2008,48 and a European Small Claims Procedure (that does not require representation by a lawyer but in which the loser must pay costs) for claims under €2000 from January 2009.49 Among other matters is the Regulation on insolvency proceedings, which entered into force on 31 May 2002.50 Secondly, there is the important extra-litigation measure of the Directive on mediation, adopted on 21 May 2008.51 Thirdly, important measures in relation to harmonisation of rules on proper law are the Regulation on jurisdiction and the recognition and enforcement of judgments,52 the Regulation on the law applicable to non-contractual obligations

44 Council Regulation (EC) 1348/2000 of 29 May 2000 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters; Proposal for amendment COM (2005) 305 final 2 (11 July 2005). 45 Council Regulation (EC) 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters [2001] OJ L174/1. See also, European Commission, ‘Report on the Application of the Council Regulation (EC) 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters’ COM (2007) 769 final (5 December 2007) available at: eur-lex.europa.eu/LexUriServ/site/en/com/2007/com2007_0769en01.pdf. 46 Council Regulation (EC) 1346/2000 of 29 May 2000 on insolvency proceedings [2000] OJ L160/1. 47 Regulation (EC) 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims [2004] OJ L143/15. See C Crifò, ‘First Steps towards the Harmonisation of Civil Procedure: The Regulation Creating a European Enforcement Order for Uncontested Claims’ (2005) 24 Civil Justice Quarterly 200. 48 Regulation (EC) 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure [2006] OJ L399/1. For the preliminary Green Paper on a European order for payment procedure and measures to simplify and speed up small claims litigation, see COM (2002) 746 final. The aim is to expedite the transmission of documents, which is to be made directly between local bodies designated by the Member States. A wide variation exists between Member States in the time for transmission (between 1 and 6 months in 2005) and the costs and their transparency. 49 Regulation (EC) 861/2007 of the European Parliament and of the Council of 29 May 2000 establishing a European Small Claims Procedure [2007] OJ L199/1, see Art 2 and Annex 1 Art 7. The legal basis under art. 61 EC for coverage of domestic disputes as well as cross-border ones was a matter of debate. Art. 16 provides that the court shall not award costs to the extent that they were unnecessarily incurred or are disproportionate to the claim. 50 Council Regulation (EC) 1346/2000 of 29 May 2000 on insolvency proceedings [2000] OJ L160/1. 51 Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters [2008] OJ L136/3. 52 Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and enforcement of judgments in civil and commercial matters [2001] OJ L12/1. See also Commission (EC), ‘Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of Council Regulation (EC) 4/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters COM (2009) 174 final (21 April 2009); Commission (EC), ‘Green Paper on the Review of Council Regulation (EC) 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters’ COM (2009) 175 final (21 April 2009).

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(Rome II),53 which applies from 11 January 2009, and on contractual obligations (Rome I), passed on 17 June 2008.54 A report has been published on enforcement of civil judgments55 and a Green Paper was published on 6 March 2008 aimed at improving enforcement of judgments through the transparency of debtors’ assets.56 A Green Paper was also presented in October 2006 on the project for the creation of a European system of attachment of bank accounts.57 Civil justice systems have also not received much attention within Member States until comparatively recently, and the absence of consensus on what might constitute a general model represents a significant barrier to European harmonisation. Indeed, although there are perceived to be two broad and quite different traditions in civil procedure—namely the civil law and common law traditions—there is very extensive disparity between the procedures of all Member States.58 However, there is also extensive and ongoing reform of civil procedure systems and of dispute resolution systems generally, at nation levels, even involving some signs of convergence. A distinguished scholarly attempt was made to identify a model civil procedure in 199359 but led to little. Some criticism has been made of proposals to introduce individual new procedures of any type into national civil justice systems, in the absence of evaluation of the likely effects and of a comprehensive European plan for civil justice.60 A new initiative seeks not to define a model civil procedure (top down) but to study the existing diversity of practice and experience and thereby to identify best practice (bottom up). Further details of this initiative will become available shortly. It will, however, be noted that some lessons have been learned from the DCFR project in relation to the goals and methodology of this project. The essential aim of this civil justice project is to review the totality of dispute resolution systems, and the essential interrelation between different types of dispute resolution systems within a national system (for example, judicial procedure, alternative dispute 53 Regulation (EC) 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to contractual obligations (Rome II) [2007] OJ l199/40, applicable from 11 January 2009. 54 Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6. 55 M Andenas, B Hess and P Oberhammer (eds), Special Issue: Enforcement Agency Practice in Europe, (2006) 17 European Business Law Review 515. 56 European Commission, ‘Green Paper on the Effective Enforcement of Judgments in the European Union: The Transparency of Debtors’ Assets’ COM (2008) 128 final (6 March 2008). 57 European Commission, ‘Green Paper on Improving the Efficiency of the Enforcement of Judgments in the European Union: The Attachment of Bank Accounts’ COM (2006) 618 final (24 October 2006). 58 See chs by V Varano ‘Domestic Civil Justice Systems in Europe: Current Approaches, Techniques and Trends’ and C Hodges ‘Towards Parameters for EU Civil Justice Systems’ in Vogenauer and Hodges (eds), Civil Justice Systems in Europe, above (n 41). 59 M Storme (ed), Groupe de Travail sur le Rapprochement du Droit de la Procedure Civile en Europe: Final Report (Dordrecht, Nijhoff, 1994). See RR Verkerk, ‘What is Judicial Case Management? A Transnational and European Perspective’ in CH van Rhee (ed), Judicial Case Management and Efficiency in Civil Litigation (Antwerp, Intersentia, 2008) 27. 60 M Tulibacka, ‘Europeanization of Civil Procedures—In Search of a Coherent Approach’ (2009) 46 Common Market Law Reports 1527; PMM van der Grinten, ‘Challenges for the Creation of a European Law of Civil Procedure’ (19 April 2009) available at: papers.ssrn.com/sol3/papers.cfm?abstract_id= 1392006.

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resolution, ombudsmen, compensation schemes, codes of conduce and so on). The civil justice project needs to be based on empirical research and also on the principles that are fundamental to European legal systems—as noted above— notably not just free trade, but market confidence, fundamental rights, solidarity and proportionality. Meanwhile, the evolution of a new model for collective redress is highly instructive of how policy may develop on civil justice generally. The model61 has been adopted by the European Commission for consumer collective redress62 (but not for competition damages claims) and by the United Kingdom government for all types of collective redress,63 specifically including consumer collective redress.64 The model comprises three pillars, prioritised in the following order: 1. Encouragement of voluntary settlement. This may be done through techniques such as mediation (sometimes closely linked with judicial procedures, sometimes independent or ad hoc), or a range of non-court pathways, such as ombudsmen, tribunals, compensation schemes or business codes of conduct. Developments in all of these techniques may be anticipated. 2. Regulatory assistance in restitution. Again, a range of possible levers and powers exercisable by public authorities may be used to promote and facilitate resolution of disputes. The authority should have an enforcement policy that includes restorative justice powers and flexibility. Again, developments are occurring in techniques involved here, such as through regulatory oversight by agencies. Interesting experience is available from Denmark and the United Kingdom.65 3. Judicial collective procedures. These would be available only as a last resort, where other alternatives could not reasonably be used, but the existence of such an option would, like pillar 2, encourage swift and voluntary negotiation between responsible parties. The judicial route would be available against unreasonably unresponsive traders or governments, and where no relevant ADR or regulatory solutions were appropriate. This model is a sophisticated and integrated modern approach towards achieving outcomes, rather than a dogmatic approach that adopts particular techniques. It is an attempt to combine both public and private enforcement techniques. It is an almost complete antithesis of the judicial approach with private class actions as

61 The model was analysed in Hodges, The Reform of Class and Representative Actions in European Legal Systems, above (n 4). 62 European Commission, ‘Green Paper on Consumer Collective Redress’ COM (2008) 794 final (27 November 2008) available at: ec.europa.eu/consumers/redress_cons/collective_redress_en.htm. 63 UK Ministry of Justice, ‘Response to the Civil Justice Council’s Report: “Improving Access to Justice through Collective Actions”’ (July 2009) available at: www.justice.gov.uk/about/docs/ government-response-cjc-collective-actions.pdf. 64 The Secretary of State for Business, Innovation and Skills, ‘A Better Deal for Consumers. Delivering Real Help Now and Change for the Future’ (presented to the UK Parliament, July 2009) Cm 2669 available at: www.berr.gov.uk/files/file52072.pdf. 65 The UK broadcasting regulator, Ofcom, stated that the fine of £2,000,000 imposed on a company that breached various provisions of the Broadcasting Code and ITC Programme Code arising out of phone-in competitions would have been higher if the company had not taken a series of remedial steps, including the resignation of responsible officers, strengthening of compliance systems, and offering refunds to individuals in relation to a potential 25 million entries, plus making a £250,000 donation to a children’s charity.

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found in America. It is also consistent with the OECD recommendation66 that all states should adopt mechanisms that enable consumers to be able to resolve disputes effectively, whether individually, collectively or through public authorities, and its stressing of a need for a combination of mechanisms and for direct negotiation as the first option.

IV

CONCLUSIONS

There needs to be debate and resolution within Europe on a sequence of important issues. First, what is the desired balance between public and private enforcement? Secondly, what should public enforcement policy be, and how should it be adopted so as to enable coherent operation between European and national law? Thirdly, what is best practice for a modern model for a European civil justice system? Work is continuing on all these issues, some of which are fairly close to resolution.

66 OECD, ‘OECD Recommendation on Consumer Dispute Resolution and Redress’ (2007) available at: www.oecd.org/dataoecd/43/50/38960101.pdf.

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28 The Hybrid Quality of European Private Law HUGH COLLINS

I

INTRODUCTION

T

HE EUROPEAN UNION challenges implicitly many of the foundations of national private law systems. Indeed, it may be more accurate to argue that, in its approach to the regulation of the internal market, the European Union has never accepted the traditional distinction between public law regulation and private law. The question posed by the European legislators has been how to make the internal market function better. The resulting legislation chooses the regulatory technique that seems most appropriate to provide a solution to the perceived problem. From this perspective, the legislator’s task is viewed as one of problem solving, not justice between the market participants, and certainly not one of securing legal integrity or doctrinal coherence. This insensitivity of European law to the integrity of national private law systems has certainly generated some confusion and raised the hackles of many private law scholars.1 Responses to the European initiatives have predictably diverged, with some private lawyers arguing for the preservation of the independence of national private law systems, while others favour the construction of a system of European federal private law system. These heated debates among private lawyers may have taken the European legislator by surprise. It seems to me likely that the European legislators have not self-consciously been embarking on the voyage towards some kind of comprehensive private law system, but rather they have been just playing through the variety of possible options for effective market regulation. The European Commission—and to some extent the European Court of Justice (‘ECJ’)—as in the Courage litigation,2 may be repeatedly stumbling into the terrain occupied by private law involving claims for compensation between private citizens and businesses, without foreseeing the potential consequences. Perhaps these initiatives should be regarded as accidental incursions rather than systematic attempts to occupy the terrain. 1 For a representative sample of differing views see S Grundmann and J Stuyck (eds), An Academic Green Paper on European Contract Law (The Hague, Kluwer, 2002); T Wilhelmsson, E Paunio and A Pohjolainen (eds), Private Law and the Many Cultures of Europe (Leiden, Kluwer, 2007). 2 Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others [2001] ECR I-6297.

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In developing this suggestion of viewing European legislative institutions as accidental tourists in the field of private law, the appropriate methodology would be a historical examination of the legislative record together with an exploration of the various texts and policy statements emanating from Europe. In this record we might hope to find clues that suggest European institutions have discovered themselves lost in unfamiliar countryside of private law while pursuing the goal of market integration. One might argue, for instance, that the call in the ‘Action Plan’3 for a Common Frame of Reference was effectively an admission of the need for legislators to have a ‘Rough Guide’ to the field of private law, though in drawing that analogy I would not wish to be thought to be derogatory with respect to the clarity, comprehensiveness, cultural sensitivity and usefulness of rough guides. But it is not my purpose here to examine the historical record. The issue to be considered here is how best to characterise these European initiatives that have been regarded—with some plausibility—by private lawyers as barely competent— and arguably illegitimate4—incursions into their terrain. Unlike the somewhat negative responses of many private law scholars to these European developments, my own view is that the European approach provides a salutary correction to the traditional thinking of private lawyers. It seems to me useful to view private law as part of the project of regulating markets. In other words, private law employs some characteristic methods and techniques that serve the purpose of guiding and controlling the behaviour of participants in market transactions. But these traditional methods and techniques constitute only one part of the legislator’s toolbox for controlling market behaviour; the overall effectiveness of the government of markets must depend on how all the different regulatory strategies—both private law and public law—combine to achieve compliance with the required standards. From this perspective, the question we should ask is: when will the use of characteristic private law-techniques of regulation make a valuable contribution to the achievement of the goals of market regulation? By trespassing across the boundaries between public law and private law—albeit perhaps unconsciously—European law has forced us to address more openly and critically this type of question posed about private law. At a more theoretical level, European law calls into question the fundamental, if always contested, contrast between public law and private law. In its approach to the regulation of the internal market, the initiatives of European law do not fit into these established categories of legal thought. Instead, what is innovative and exciting about European law is that the institutions enjoy the capacity—owing to its lack of attachment to traditional categories of legal thought—to address

3 Commission, ‘A More Coherent European Contract Law: An Action Plan’ (Communication) COM (2003) 68 final (12 February 2002); see also Commission, ‘European Contract Law and the Revision of the Acquis: The Way Forward’ (Communication) COM (2004) 651 final (11 October 2004). 4 S Weatherill, ‘Reflections on the EC’s Competence to develop a “European Contract Law”’ (2005) European Review of Private Law 405; M Kenny, ‘The 2003 Action Plan on European Contract Law: Is the Commission Running Wild?’ (2003) 28 European Law Review 538; J Ziller, ‘The Legitimacy of the Codification of Contract Law in View of the Allocation of Competences between the European Union and its Member States’ in MW Hesselink (ed), The Politics of a European Civil Code (The Hague, Kluwer, 2006) 89; W Van Gerven, ‘Codifying European Private Law: Top Down and Bottom Up’ in Grundmann and Stuyck (eds), An Academic Green Paper on European Contract Law, above (n 1) 405.

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problems in a fresh manner. The legislators can bring together the tools of social regulation and the mechanisms of private law in novel combinations. In this sense, European law—and in particular its incursions so far into areas traditionally regarded as matters of private law such as contracts and torts—may be best regarded as a form of hybrid law, joining together aspects of public and private law in new and unfamiliar combinations. To pursue this line of investigation regarding the hybrid quality of private law, it is helpful to separate three issues. The first concerns the setting of the standard of conduct required from market participants. The standard might specify, for instance, the avoidance of misleading statements or require the performance of written contracts. The second issue concerns enforcement techniques, and in particular the costs and benefits of different methods of policing compliance with the relevant standard. The enforcement techniques might involve, for instance, the characteristic public law approach of imposing a fine for breach of the standard or the characteristic private law approach of requiring the defendant to pay compensation to a person directly harmed by the defendant’s breach of the standard. The third issue concerns an assessment of the effectiveness of the different regulatory techniques in securing compliance with the standards. Of course, these three issues are intimately connected in practice and all three must be considered together when constructing a particular regulatory regime. The conceptual separation of the issues merely serves to clarify the difficult choices that have to be addressed; it also enables us to highlight how European law has frequently adopted a hybrid approach, borrowing indiscriminately from public and private law traditions in the search for effective solutions to problems of market integration. If we were, for instance, to think as a European legislator about the problem of unfair terms in consumer standard form contracts within this intellectual framework, we might reach the following conclusions. With respect to standards, although we can identify certain kinds of terms that will always be unfair to include in such a contract, that is, a black list of prohibited terms, at the margins we will need to use a broad standard of unfairness that permits an adjudicator to weigh up the fairness of a term in its particular context. With respect to enforcement, we might think that as well as some kind of public enforcement agency, we might permit other interested groups—particularly consumer groups—to bring complaints against businesses that use unfair terms, because those groups are funded for precisely this kind of purpose and this would enable them to promote their goals. As an afterthought, we might also add that if an unfair term crops up in a particular contract, we might also enable the individual consumer to challenge it—that would serve the goal of increasing the chances of compliance, if only a little, and might serve the purpose of restorative justice in a few instances. And there we have the accidental incursion into private law. As soon as the individual consumer is given the chance to be a complainant in his own right—to have private right of redress—we enter the territory of private law. But we have only got there as a result of reflecting on how to achieve compliance with a regulatory standard, not because we wanted to harmonise private law in Europe. It is true that such accidental incursions by European institutions into private law have become increasingly common in recent years, so the claim that they were ‘accidental’ begins to wear thin. Nevertheless, it should be appreciated that

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wherever we may be now with regard to grander plans for a European civil code,5 the early initiatives may have been more about enlarging the enforcement toolbox for social regulation than creating European private law. But the outcome of the European intervention, it will be argued, has been beneficial in collapsing the traditional distinctions in regulatory techniques between public and private law, and by forging new tools for controlling and guiding markets that may be described as a form of hybrid regulation.

II

STANDARD SETTING

When setting standards, social regulation typically asks what is the goal or outcome to be achieved. The desired outcome might be the protection of consumers from purchasing defective products that might injure them or from acquiring products that simply do not work properly. Having identified the desired outcome, the standard tries to articulate the demand in terms of rules and principles. The standard might require manufacturers never to place defective products on the market, or impose a lesser standard such as requiring the manufacturer to exercise reasonable care not to place defective products on the market. Private law characteristically asks the different question of what standard to apply with respect to claims brought by one individual for harms suffered as a result of the defendant’s conduct. Here the question about product liability becomes whether the manufacturer should always be liable for defects that cause loss, or whether the liability should be restricted by requiring proof of negligence or permitting certain kinds of defences and immunities. Public law thus focuses on the desired outcome in terms of how participants will conduct themselves in the market, whereas private law concentrates its attention on the issue of private rights of redress for injuries suffered by breach of the relevant standard. In setting these different standards, it is common—although with many exceptions—that public law regulation tends to favour strict liability standards, because even in the absence of negligence the outcome of cleansing the market of dangerous products has not been achieved, whereas private law tends to require proof of fault or some kind of blameworthiness in order to justify the imposition of a duty to compensate the injured party. While it remains true that social regulation tends to focus on market outcomes viewed in the round, whereas private law examines the particular instance of redress for harm suffered by an individual, this difference in emphasis should not obscure the mutual support afforded by both types of law. Consider, for instance, the Directive against unfair commercial practices.6 This directive is primarily aimed at cleansing the marketplace of unfair commercial practices; its ambition is to stop traders from using misleading statements, deceptive practices, intimidation and other forms of pressure in so far as these practices are likely to distort the competitive market by inducing consumers to make economic decisions that they 5 H Beale, ‘The Future of the Common Frame of Reference’ (2007) 3 European Review of Contract Law 245. 6 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market [2005] OJ L149/22.

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would not otherwise have chosen. But a desirable and intended side effect of the law is that it is less likely that consumers will suffer economic harm as a result of unfair marketing practices. In contrast, the primary goal of private law in this context is to achieve justice between the business and the consumer by requiring the business to forgo the advantage obtained by fraud and duress and to compensate the consumer for her consequent loss. A desirable, foreseeable—although not so clearly intended—side effect of private law is to cleanse the market of unfair commercial practices by reducing the economic incentives for businesses to engage in them. The difference in the primary purpose of these two branches of the law accounts for their contrasting legal frameworks. The directive seeks to identify marketing practices that are likely to distort fair competition in the marketplace, although there is no need to prove that they actually have led to a particular distortion. Private law remedies, in contrast, are only triggered where a consumer can point to a loss incurred personally, such as an unwanted transaction or wasted expenditure. Nevertheless, though differing in focus and method, the public law regulation and private law rules can be viewed as a whole as both contributing to the twin goals of cleansing the market of unfair commercial practices and reducing or compensating harm suffered by consumers. One significant difference between social regulation and private law relating to standard setting concerns the process by which standards are adopted. Increasingly, public law is concerned with the legitimacy of this process. The requirement of legitimacy may point to the need for a democratic process involving Parliament, but probably more crucially it is likely to demand consultation with stakeholders and a reasoned outcome of the deliberations of the legislators or regulators. The process for constructing private law has traditionally differed. In codified systems, the code will be legitimated by a democratic parliamentary process, although this is likely to be preceded by the deliberations of expert commissions; in common law systems, private law standards are more commonly established by judicial decisions and the practice of following precedent. But these differences can be exaggerated, since the codified systems provide ample opportunities for judicial development of private law. This practice of judicial elaboration of the principles and their application to concrete instances differs sharply from the participatory process that characterises social regulation. The standard method used for enacting European law, including directives that engage with private law, clearly fits squarely into the process associated above with social regulation. Before the enactment of directives, the European Commission engages in extensive discussions with stakeholders, experts and the Member States. It is a participatory process, providing considerable opportunities for revision of both the objectives to be achieved and the standards to be adopted. In the course of this process—unlike the methods for developing private law—the need to achieve consistency and coherence with other parts of the law is typically not a prominent consideration. In this sense, the hybrid quality of European private law emerges from its construction through a process that replicates that applicable normally to social regulation. In relation to standard setting, private law is notable for its willingness to delegate standard-setting through respect for freedom of contract. The parties to a contract can in effect determine most of the standards that will be applicable to

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their market relation. Contract law imposes some constraints through mandatory rules, but most of its provisions are merely default rules that apply in the absence of explicit agreement between the parties. The advantage of this kind of reflexive regulation or self-regulation is that it permits the parties to tailor the applicable rules to their particular concerns and interests. Although this support for selfregulation is central to private law, including European private law,7 it is also becoming a characteristic of European social regulation. Consider, for instance, the rules in the Directive on working time for employees.8 This directive purports to lay down minimum standards regarding maximum hours and rest periods in order to protect the health and safety of workers. Although the directive might be expected to lay down mandatory rules, in fact there are many possibilities for Member States to permit derogations from the standards. For instance, Article 18 states that ‘Derogations may be made from Articles 3,4,5,8 and 16 [the principal standards on periods of rest] by means of collective agreements or agreements concluded between the two sides of industry at national or regional level, or, in conformity with the rules laid down by them, by means of collective agreements or agreements concluded between the two sides of industry at a lower level’. The effect of this provision and others like it in the directive is to delegate to various types of collective representation the ability to agree on the relevant standard, which is much like contractual standard-setting. The only constraint on this self-regulation is that Article 18 of the directive provides that the derogations shall only be allowed on condition that equivalent compensating reference periods are granted to the workers concerned or where that is impossible that the workers are afforded ‘appropriate protection’.

III

EFFICIENT AND PROPORTIONATE ENFORCEMENT

For the enforcement of its standards, private law characteristically relies on claims brought by individuals either for compensation or a court order that the defendant should desist from breaching the standard. The individual has to finance the enforcement of his or her rights except to the extent that the public purse provides some financial assistance towards the costs of legal representation. The normal remedy of compensation is merely designed to make the claimant whole in the sense of being no worse off financially as a result of the wrong committed by the defendant. This compensatory remedy does not usually permit a court to award punitive or deterrent damages against the defendant. Private law insists rather that the remedy should be proportionate in the sense of being no more (and no less) that the injury or loss actually suffered by the claimant and caused by the defendant. Social regulation employs a much broader range of techniques to enforce its standards. What these techniques share in common is the paramount role of the state and its agencies in monitoring compliance and enforcing the standards. These 7 MW Hesselink, ‘Non-Mandatory Rules in European Contract Law’ (2005) 1 European Review of Contract Law 44. 8 Directive 2003/88 of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time [2003] OJ L229/9.

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techniques include licensing of businesses, inspections, punitive fines and even imprisonment. The emphasis on the choice of remedies is to select one that is likely to satisfy a cost and benefit analysis. A system of inspectors, for instance, certainly incurs a significant cost, but the benefit might be calculated to be such a marked reduction in breach of the standard that the benefits outweigh the costs. A key issue in the design of social regulation is a consideration of the test of proportionality. Under this test, the level and type of the sanction or penalty should be proportionate to the legitimate goal being pursued. Where the regulation is designed to prevent death and personal injury, the sanctions imposed on business for breach of safety standards are likely to be severe—either heavy fines or even imprisonment. In contrast, where the regulation merely concerns the accuracy of labelling on products sold to consumers, a proportionate sanction is likely to be regarded as a fine or even merely an administrative order to desist from using misleading labelling. The proportionality test used in social regulation could surely be used to advantage to reassess some of the debates in connection with European private law. European directives have introduced some unfamiliar remedies in the context of consumer contract law. For example, the right for a consumer to cancel a contract made away from business premises or entered into on the internet fits uneasily into standard private law accounts of when a binding contract is formed by offer and acceptance. Similarly, the consumer’s right under European law to demand that non-conforming goods should be replaced or repaired falls outside the normal private law remedies of price reduction, rescission, or compensatory damages. Inspired by these innovations originating in European law, the question that private lawyers should ask themselves is whether or not these remedies satisfy a test of proportionality in the sense used in social regulation, not whether they satisfy the test of proportionality used in private law which is focussed merely on corrective justice between the parties. In other words, private lawyers should not be concerned about the risk of over-compensation for a claimant, provided that the remedy pursues a legitimate aim such as consumer protection and it is necessary and appropriate to achieve that aim.

IV

COMPLIANCE AND EFFECTIVENESS

If one asks the question whether the private law system is effective at enforcement and securing compliance, the answer must be a record of mixed achievement. Private law typically functions ex post, that is, only after a breach of the standard, so does not harness the enforcement techniques of securing ex ante compliance by, for instance, licensing of businesses or inspections. Private law does not use the resources of the state to police compliance, only to secure enforcement of the compensatory remedy for the individual. In many legal systems, the state is not very effective in ensuring that the defendant actually pays the judgment debt, partly because the defendant may prove insolvent, but also commonly because the defendant has ample opportunity to delay and avoid payment by, for instance, disposing of assets. At the same time, private law does not usually use deterrent remedies in the sense of punitive remedies that exceed the actual losses to the

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claimant, thereby reducing the incentives for compliance. Indeed, a business is at liberty to examine private law standards from a cost and benefit analysis point of view to determine whether or not it may be more efficient to breach the standards than to incur the costs of compliance. Despite these weaknesses, private law may work well for many businesses operating in the marketplace that interact with other businesses with similar bargaining power. The private law system is rather flexible. For instance, the parties will typically settle a dispute informally without the need for the involvement of courts and public resources, and their settlement need not comply precisely with the official standard set in the codes of private law, but can be adapted to the particular circumstances. Furthermore, although the official legal standard may impose strict liability for failure to supply the goods on a given date, the parties may negotiate a settlement that acknowledges in its compromise some kind of exception for difficulties encountered that were outside the control of the supplier. Where one is considering the position of consumers and workers, however, one is likely to reach a less benign judgment about the effectiveness of private law. Lacking the resources to be aware of rights and how to make claims, these kinds of weaker parties are much less likely to enforce their legal rights under private law, and even if they do, a successful award of compensation for the small loss suffered will constitute no more than a pinprick on a business, undermining any serious incentive to avoid breaches of the standard, with the consequence that levels of compliance are much reduced. But public law also has its problems in securing effectiveness and compliance with its standards. It is not enough to declare that breach of standards will be punished; governments need to establish some kind of policing mechanism, give these inspectors the resources to monitor compliance and to bring some kind of proceedings to punish non-compliance or prevent deviance. All these measures are expensive, can be plagued by ‘agency capture’ types of problems and may suffer from under-funding and bureaucratic inefficiency or indolence. These weaknesses of both private law and public law in securing compliance with standards have intensified the search for alternative enforcement mechanisms. The pattern that emerges is one that tries to use a hybrid mechanism, which combines both public law and private law methods. European legislators have been in the vanguard of this search for more effective enforcement mechanisms. In connection with consumer law, Europe has increasingly used the collective enforcement mechanism by linking the Directive on consumer injunctions to all consumer protection legislation.9 There are further proposals for a European scheme for collective redress—including alternative dispute mechanism—which would be particularly useful for cross-border cases.10 Collective enforcement, understood either as a ‘representative action’ or as enabling qualified groups to enforce standards by means of applications for judicial injunctions, is a useful method for securing better compliance to certain kinds of private law standards. It 9 Council Directive 2009/22 on injunctions for the protection of consumers’ interests (Codified version) [2009] OJ L110/3. 10 European Commission, ‘Green Paper On Consumer Collective Redress’ COM (2008) 794 final (27 November 2008).

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permits the use of collective resources and expertise to pursue claims. The use of qualified groups to enforce standards seems to require the prior existence of such groups in civil society (which we have in some instances) such as consumers and labour organisations. Where the standard concerns the interests of the group (or the interests of their members), that technique will be a useful measure in the enforcement toolbox to help to secure compliance efficiently. The threshold for the utility of a representative action is lower, because it is possible that ad hoc groups might assemble around a particular issue, such as a financial scam practised on a wide section of the public by a particular trader. These collective enforcement mechanisms can be regarded as a hybrid mechanism for enforcement, because they imitate the public law’s use of collective resources and power to enforce the standard. On the other hand, these collective enforcement mechanisms remain largely private law measures because they are confined either to the remedy of an injunction against a particular type of market behaviour such as the use of an unfair standard contract term, or to the payment of compensation for loss, without the possibility of deterrent sanctions. Similarly, difficulties of enforcement and for compliance in the regulatory sphere have encouraged innovative thinking about techniques for promoting and ensuring compliance with regulatory standards in public law. In the UK, for instance, the government endorsed a study called (after the principal author) the Macrory Report ‘Regulatory Justice: Making Sanctions Effective’.11 The report was commissioned because of the evidence that punitive sanctions administered by agencies were not very effective in practice for one reason or another. Of interest to us here, is the recommendation to expand the ‘enforcement toolbox’ available to enforcers of regulations. One new tool in the box is to assist ‘restorative justice’. The review recommended pilot studies of how restorative justice might be included in the criminal prosecution procedure.12 It might be possible, for instance, for a court to be given the power to order compensation to be payable to a victim instead of (or in addition to) the imposition of a criminal penalty. The process of the courts might also be altered in order to give the victim of the breach of regulations the opportunity to explain to the perpetrator the full scale of harm caused and for the court or trained mediators to secure an agreement on the appropriate measures of redress. In simple terms, the recommendation envisages the possibility to encourage those adversely affected by breach of regulatory standards to bring forward a complaint by providing the incentive that the appropriate regulator, tribunal or court would be empowered to award the complainant a compensatory remedy or some other remedy securing restoration. The central idea here is to ‘empower consumers’ and other kinds of victims of breach of regulatory standards, because that is likely to improve compliance with regulatory standards and because it is likely to improve consumer confidence in markets. In line with this report, in 2005

11 RM Macrory, ‘Regulatory Justice: Making Sanctions Effective (Final Report)’ (November 2006) available at: www.bis.gov.uk/files/file44593.pdf. 12 ibid, Recommendation 7.

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the UK government consulted on the issue of representative actions,13 a form of collective redress mechanism and commissioned research on both the issue of representative actions and the scope for compensation from public enforcement.14 All these reflections were followed by new framework legislation. Under the Regulatory Enforcement and Sanctions Act 2008 Part Three, by statutory instrument a minister may make provision for an existing regulatory agency to use a ‘civil sanction’ through a non-criminal procedure. Among the civil sanctions that may be introduced is ‘a requirement to take such steps as a regulator may specify, within such period as it may specify, to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed’.15 It is possible that such a restoration to the prior status quo might involve the repayment of money to a consumer. Another type of civil sanction under the Act is an enforcement undertaking. Where the designated regulator reasonably believes that an offence has been committed, it may be empowered by statutory instrument to accept an enforcement undertaking instead of pursuing a criminal prosecution: The action specified in an enforcement undertaking must be— (a) action to secure that the offence does not continue or recur, (b) action to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed, (c) action (including the payment of a sum of money) to benefit any person affected by the offence, or (d) action of a prescribed description.16

This provision makes clear that rescission of any contract and compensation to the victim of an offence, including a consumer, could be part of an enforcement undertaking. Under the Act, if the business complies with the enforcement undertaking, it avoids any criminal prosecution,17 but there is no independent sanction for failure to comply with the enforcement undertaking. The point of this excursus into regulatory history in the UK is to highlight the way in which strategies for improving compliance in the regulatory sphere are increasingly experimenting with what is fashionably called ‘restorative justice’, which, I would argue, differs insignificantly from the traditional methods of private law. What we can discover in the discourses of regulators is an appreciation of how they might use a large tool box of enforcement techniques, including mechanisms that bear strong similarities to private law mechanisms, although always preserving some kind of public oversight. The same process is now occurring in relation to European competition law. Once the ECJ had decided that in principle there should be a compensatory remedy for a victim of a breach of the standards of competition law,18 the European 13 Department for Business Innovation and Skills, ‘Consultation on Representative actions in consumer protection cases’ (closing date 4 October 2006) available at: www.berr.gov.uk/consultations/ page30259. 14 Department for Business Enterprise and Regulatory Reform, ‘Consumer Law Review: Call for Evidence’ (May 2008) 33 available at: www.berr.gov.uk/files/file45196.pdf. 15 s 42(3)(c). 16 s 50(3). 17 Regulatory Enforcement and Sanctions Act 2008 Part 3, s 50(4). 18 Case C-453/99 Courage Ltd, above (n 2).

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legislator needed to address the practical problems of making this claim for restorative justice effective. In its White Paper on private redress for breach of competition rules,19 the Commission proposes rules about how compensation should be calculated and how private redress might be secured. It also proposes the use of collective redress mechanisms in order to overcome the problem that the victims of anti-competitive behaviour may comprise a diverse and otherwise unconnected group of consumers or small businesses. These innovations are justified by using similar arguments to those advanced by the Macrory review in the UK, namely that private redress may enhance compliance with the standards. In the words of the White Paper: More effective compensation mechanisms mean that the costs of antitrust infringements would be borne by the infringers, and not by the victims and law-abiding businesses. Effective remedies for private parties also increase the likelihood that a greater number of illegal restrictions of competition will be detected and that the infringers will be held liable. Improving compensatory justice would therefore inherently also produce beneficial effects in terms of deterrence of future infringements and greater compliance with EC antitrust rules.20 (emphasis added)

V

HYBRID REGULATION OF MARKETS

Although this chapter has focussed mostly on experimentation in enforcement mechanisms, the argument has been the broader one that the European Union has provided considerable impetus to the development of hybrid regulation of markets. Unconcerned about traditional distinctions between private law and public law or social regulation, the European legislator has been able to address issues afresh. It has been able to identify the outcome to be achieved, the standard to be imposed on market participants and then draw on a full toolbox of enforcement techniques in order to promote high levels of compliance. In so far as the European legislator has entered into the territory of private law in pursuing the goals of regulating the internal market, these measures have fitted poorly into national private law systems precisely because this kind of hybrid regulation neither accords prominence to the criteria of coherence and consistency that form the basis of legitimacy in national private law systems, nor is confined to the corrective justice idea of the proportionality of redress mechanisms. On the contrary, the European institutions rely on the participatory and deliberative processes associated with social regulation for the legitimacy of their directives and other measures. Although European regulation has certainly employed enforcement techniques drawn from private law—such as providing individual rights of redress for infringement of standards—these provisions may be best understood not as attempts to re-regulate areas of private law, but rather in general as additional enforcement techniques, bolted onto other measures such as administrative supervision, in order to enhance levels of compliance. 19 European Commission, ‘White Paper on Damages Actions for Breach of the EC Antitrust Rules’ COM (2008) (2 April 2008) 165. 20 ibid, 3.

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29 ‘DCFR, Please Meet National Procedure’: Enforcing the Frame of Reference using National Procedural Law JOHAN LINDHOLM

I

ENFORCING THE DCFR THROUGH NATIONAL PROCEDURE

T

HE ‘DRAFT COMMON Frame of Reference’ (‘DCFR’) provides a foundation for further European unification of the substantive aspects of private law. As impressive as it is, the DCFR is not wholly unique. Unification of the substantive law of the Member States has been a central feature of EU law ever since the Treaty of Rome.1 While not (yet) a measure of EU law, the DCFR forms part of a larger process of ‘Europeanisation’. The DCFR may distinguish itself from many other such measures with regard to the broad range of private law issues it addresses, but the fact remains that many previous measures have also had as their objective the unification of private law. Nor is it unique that measures that aim for unification, such as the DCFR, focus primarily on substantive matters. Rather, that the DCFR primarily contain substantive provisions and few procedural provisions makes it part of a tradition in EU law. Procedural issues have traditionally been considered to fall outside the competence of the Union and most procedural issues are not subject to harmonising EU legislation.2 That these characteristics of the DCFR are not unusual does not, however, mean that they are entirely unproblematic. On the contrary, as will be explained more fully below,3 past experience in European Union law clearly shows that the application of national procedural rules can have an adverse effect on the effective enforcement of measures intended to harmonise substantive law. This contribution focuses on that particular aspect regarding the (effective) enforcement of the DCFR: the consequences of enforcing the provisions of the

1

C Bernard, The Substantive Law of the EU 3rd edn (Oxford, Oxford University Press, 2010) 603. However—as will be discussed further below in Part II—that is not to say that procedural law is an area unaffected by EU law. 3 See below: III.B. 2

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DCFR in ordinary national courts, and thereby necessarily supplementing it with—and subjecting it to—the procedural law of the various Member States. In so doing, this contribution aims to answer two questions: does the application of national procedural law constitute an obstacle to the effective enforcement of the DCFR and, if so, how can these obstacles be reduced? There are reasons why these questions need answering. As was previously mentioned, national procedural law has proven capable of hindering the effective harmonisation of substantive law in Europe. In his assessment of the DCFR, Whittaker argues that little consideration has been given to the relationship between substantive and procedural law that has given ‘rise to a tension in the European context between the so-called principle of the national autonomy of procedural and the EC “principle of effectiveness”’.4 I agree with Whittaker that the DCFR contains only spotty consideration of procedural matters,5 but it is questionable what more could be expected: one can hardly blame the authors for limiting their task to its current, in itself herculean, proportions. That being said, the likely consequences of absence of procedural provisions warrant closer examination that this contribution intends to provide. The two questions posed above are herein answered on the basis of previous experiences with applying national procedural law to substantive EU law. In so doing, focus lies on situations when national procedural law detracted from the effective enforcement of substantive EU law.6 One might question whether it is correct and valuable to use previous experiences in EU law when making conclusions regarding the enforcement of the DCFR. After all, it remains uncertain (at the time of writing) whether the whole DCFR or parts thereof will be transformed into binding law and the uncertain status of the DCFR warrants taking extra care when making parallels to previous experiences with enforcing EU measures. However, I believe that there are three compelling reasons why such a comparison is valid. First, the DCFR is developed within the framework of the EU and forms part of the broader integration process from which previous experiences derive. Secondly, like the DCFR, many EU law measures intend to harmonise substantive law without providing necessary procedural provisions. Finally, the national procedural rules that the DCFR will encounter when enforced on the local level are the same rules as those that previous experiences in EU law build on. The DCFR is—as pointed out in numerous instances in the text itself—an academic product and not a binding legal text. As previously mentioned, it is currently uncertain if the DCFR will be transformed into binding EU law and, if so,

4 S Whittaker, The ‘Draft Common Frame of Reference’ An Assessment (London, Ministry of Justice of the United Kingdom, 2008) 5. The principles to which Whittaker refers are central in this contribution. 5 ibid, 74–77 (discussing the inconsistent approach in the DCFR to matters regarding burden of proof). 6 While warranted by the aim of this study, this perspective may give the reader the incorrect impression that national procedural law only serves as an obstacle to the enforcement of EU law. In reality, EU law is dependent on national courts for its enforcement at the local level and national procedural laws constitute a significant part of the framework that makes the enforcement of EU law possible.

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exactly how. The uncertain future of the DCFR constitutes a problem when discussing its effective enforcement. Enforcement is, in essence, a process that seeks to compel as effectively as possible that those who are intended to be bound by an act conform to the requirements stated in the act. How an act should be enforced and compliance ensured thus depends on the status, aim and content of the act in question. While it is possible that the DCFR in its current state may contribute to the Europeanisation of private law, this contribution approaches the question regarding the DCFR’s effective enforcement largely from the assumption that it will be transformed into binding law, in its entirety or individual parts thereof. The factor most strongly contributing to the present uncertainty regarding what impact the DCFR will have—and by extension what problems may lie in its enforcement—is how it will be received by the European Union. One possible scenario is that the DCFR will result in a Common Frame of Reference (‘CFR’) that has some formal status as a legislative EU Act. The research leading up the DCFR was funded by the Commission in order to provide the elements necessary to serve as a foundation for the final product: a CFR.7 Awaiting the EU institutions’ actions, we can only speculate as to whether there will even be a CFR and, if so, what shape it will take and, by extension, how it can and should be enforced. However, even if the CFR is adopted it remains unclear what purpose it will serve.8 It is unlikely that the DCFR in any foreseeable future will be adopted lock, stock and barrel as a binding secondary Act. This has been considered but the Commission has, at least previously, regarded this as unsuitable.9 A more likely scenario is that parts of the DCFR attain formal status as an EU Act through the CFR which would serve as a type of model code. This ‘model code’ would not be binding but serve as a guide or as ‘tool box’ to be used in future legislation. That the future of the DCFR remains uncertain invites discussion regarding the advantages and disadvantages of various, alternative strategies. While it does not constitute an independent purpose of this contribution, it will, by answering the two questions posed above, result in some conclusions regarding the suitability of various options of developing the DCFR from an enforcement perspective. This contribution consists of five parts. Part II contains a brief overview of the relationship between substantive EU law and national procedural law. It intends to present the current legal conditions and to serve as a foundation for subsequent parts. Part III addresses whether the application of national procedural law constitutes an obstacle to the effective enforcement of the DCFR. It contains a description of previous experiences in EU law where national procedural law has served as an obstacle to the enforcement of EU measures and analysis as to whether national procedures are likely to cause similar enforcement problems with regard to the DCFR. Based on those conclusions, Part IV then takes a similar approach to the existence of solutions: how have such problems previously been resolved in EU law

7 Commission, ‘Communication from the Commission to the European Parliament and the Council, European Contract Law and the Revision of the Acquis: The Way Forward’ (Communication) COM (2004) 651 final (11 October 2004) 9–10; (hereafter ‘The Way Forward’). 8 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009) 36. 9 Commission, ‘The Way Forward’, above (n 7) 5.

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and to what extent can those solutions be applied to the DCFR? Based on those findings, Part V contains some final conclusions regarding the enforcement of the DCFR using national procedure. The findings of the examination are—briefly summarised—that the effective enforcement of the DCFR can likely be adversely affected by the application of national procedural law, but also that the DCFR is less vulnerable to such adverse effects than many of the measures examined in ECJ case law. While the problems are in this respect smaller, so are the solutions. Many of the current mechanisms capable of preventing such negative effects only apply to measures under EU law. It is therefore concluded that a transformation into EU law would strengthen the enforcement of the DCFR not only because it would become legally binding, but because it would lessen the negative effects that applying national procedural rules may have on its enforcement.

II

A

RELATIONSHIP BETWEEN EU LAW AND NATIONAL PROCEDURAL LAW

Introduction

The relationship between substantive EU law and national procedural law has changed over time and the current situation differs in many important respects from what was only recently the case. As will be explained more fully below, the European Union has employed a number of strategies to resolve the perceived obstacle that the application of national procedural law poses to the enforcement of substantive EU law.10 In presenting these strategies, it is valuable for reasons of clarity to make a distinction between the case law of the European Court of Justice (ECJ) and the regulatory measures undertaken by other EU institutions. The role of national procedural law in relation to substantive EU law and, by extension, the ECJ case law addressing this relationship can only be properly understood bearing in mind that EU regulation of procedural matters is a relatively rare occurrence. Similarly, the broadening of the EU’s regulatory competence over procedural matters and its increased regulatory activity in the field of procedural law is of central importance when answering the questions posed herein.

B

EU Regulation of Procedural Matters

For almost five decades, the EU lacked direct legislative competence in the area of procedural law. Considering that neither the Treaty of Rome nor the early treaty revisions provided the EU with such competence, it is not surprising that EU regulation of procedural matters was (and largely still is) a rare occurrence. It appears, however, that the Member States’ reluctance towards the EU regulating

10

See below, part IV.

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procedural matters may also have been an important contributing factor when explaining the relative lack of such regulation.11 That the EU lacked direct legislative competence in the area of procedural law did not, however, prevent it from regulating procedural matters when exercising its competence in specific policy areas. There are several examples of binding secondary EU Acts regulating procedural matters based on such provisions. One example of an issue that has been the subject of such EU regulation is the allocation of the burden of proof. Secondary EU Acts have specified who shall have the burden of proving certain facts in proceedings regarding, among other things, consumer contracts,12 equal treatment of men and women,13 equal treatment between persons irrespective of racial or ethnic origin14 and competition law violations.15 Another issue that on several occasions has been regulated in EU measures are time limits within which a claim concerning a violation of a right must be brought before a court. Such measures can, for example, be found with regard to consumer purchases,16 product liability17 and environmental damages.18,19 Not all EU measures that affect procedure are this specific in what they require of national law. For example, Directive 76/207 aimed to strengthen the principle of equal treatment of men and women by imposing a duty on the Member States to make a judicial process available to individuals that wish to exert their rights under the principle.20 As evident in a number of decisions by the European Court of Justice, this provision required that national procedure be modified with regard to a broad range of issues.21

11 cf K Kerameus, ‘Political Integration and Procedural Convergence in the European Union’ (1997) 45 American Journal of Comparative Law 919, 925–26. 12 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993] OJ L95/29 Arts 6, 7. 13 Council Directive 97/80/EC of 15 December 1997 on the burden of proof in cases of discrimination based on sex [1998] OJ L14/6, Art 4. 14 Council Directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin [2000] OJ L180/22, Art 8. 15 Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1, Art 2. 16 European Parliament and Council Directive 1999/44/EC of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L 171/12, Art 5. 17 Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products [1985] OJ L210/29, Art 10. 18 European Parliament and Council Directive 2004/35/EC of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage [2004] OJ L143/56, Art 10. 19 As will be explained further below in Part III.B, cases concerning the adequacy of time-limits constitute quite a significant part of the ECJ’s case law in the matter. 20 Art 6 of Council Directive 76/207/EEC on the implementation of the principle of equal treatment of men and women as regards access to employment, vocational training and promotion and working conditions [1976] OJ L39/40 provides that ‘Member States shall introduce … such measures as are necessary to enable all persons … to pursue their claims by judicial process’. 21 See, eg, Case 14/83 Sabine Von Colson and Elisabeth Kamann v Land Nordrhein-Westfalen [1984] ECR 1891; Case C-177/88 Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassen [1990] ECR I-3941; Case C-271/91 M Helen Marshall v Southhampton & South-West Hampshire Area Health Authority (no 2) [1993] ECR I-4367; Case C-180/95 Nils Draehmpaehl v Urania Immobilienservice OHG [1997] ECR I-2195; Case C-63/08 Virginie Pontin v T-Comalux SA [2009] ECR I-10467.

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The legal framework governing the relationship between EU law and national procedural law has changed significantly in the last decade. The most important change was the transfer of legislative competence over the area of justice, freedom and security through the Treaty of Amsterdam to the so-called first or Community pillar. This gave the EU limited but independent regulatory power in the area of civil procedure. Article 81 of the Treaty on the Functioning of the European Union22 provides the European Union with the power to adopt measures for the purpose of developing ‘judicial cooperation in civil matters having cross-border implications’, including measures that harmonise national law. Since it entered into force, the EU has used this provision to enact several measures regulating arguably procedural matters. Article 81 provides a list of purposes for which such measures may be enacted. Many of the measures first enacted under this provision have as their purpose to ensure the mutual recognition and enforcement between Member States of judgments and decisions23 and the compatibility of national rules concerning conflict of laws.24 Other measures based on Article 81 intend to facilitate cross-border service of documents and taking of evidence.25 In addition to these relatively specific aims, Article 81 provides the EU with a broader competence to adopt measures to ensure ‘the elimination of obstacles to the proper functioning of civil proceedings, if necessary by promoting the compatibility of the rules on civil procedure applicable in the Member States’.26 This provision appears capable of supporting a quite broad range of EU measures in the field of procedural law. The Small Claims Regulation27 illustrates how the EU may use this provision as the foundation of regulating procedural matters. In short, the Small Claims Regulation created a new, alternative form of procedure in national courts that intends to be fast, simple and cheap. This procedure can be used in cross-border cases28 concerning civil and commercial matters where the value of the claim does

22

Ex Art 65 of the EC Treaty. See, eg, Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) [2001] OJ L12/1; Council Regulation (EC) 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility, repealing Regulation (EC) No 1347/2000 (Brussels II) [2000] OJ L160/19. 24 See, eg, European Parliament and Council Regulation (EC) 805/2004 of April 30 2004 creating a European enforcement order for uncontested claims [2004] OJ L143/15; European Parliament and Council Regulation (EC) 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) [2007] OJ L199/40; European Parliament and Council Regulation (EC) 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L177/6. 25 See, eg, Council Regulation (EC) 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil and commercial matters [2001] OJ L174/1; European Parliament and Council Regulation (EC) 1393/2007 of 10 December 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters [2007] OJ L324/79. 26 Art 81.2 (f) of the Treaty on the Functioning of the European Union (TFEU). 27 European Parliament and Council Regulation (EC) 861/2007 of 11 July 2007 establishing a European small claims procedure (Small Claims Regulation) [2007] OJ L199/1. 28 A ‘cross-border case’ being defined as ‘one in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court or tribunal seised’. Small Claims Regulation, Art 3. 23

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not exceed €2000. While preparing the Small Claims Regulation it was discussed whether Article 81 is capable of supporting measures harmonising the procedural rules applicable in intra-state disputes as well as disputes involving litigants from different Member States. The Commission had proposed that regulation should also be applicable in the resolution of intra-state disputes as these by extension affect trade between Member States.29 The Council and the European Parliament ultimately decided to limit the application of the Small Claims Regulation to cross-border disputes but the underlying question has not yet been definitively answered.30 It has been argued that unification of procedural rules can only achieve its full potential if the rules established apply equally to disputes that are wholly domestic and to those that contain foreign elements.31 It thus appears possible that Article 81 may serve as the legal basis for a more extensive unification of European procedural law. If the powers conferred on the European Union through the Amsterdam Treaty prove insufficient for adopting all the measures that the EU deem necessary, its regulatory powers in the field of procedure were further extended through the Lisbon Treaty. The Lisbon Treaty added to ‘ensure effective access to justice’ to the list of purposes under Article 81 for which the EU may enact legislation.32 To what extent this new ground for regulation will be used to unify European procedural law through binding EU acts remains to be seen.

C

Case Law of the European Court of Justice

The regulatory situation is thus, briefly summarised, that EU law regulates some procedural issues in some situations, but that this is a relatively rare occurrence. While there appears to be a trend towards increased EU regulation in the field of procedural law,33 the existence of a more extensive system of procedural rules capable of serving as the foundation for the enforcement of rights and obligations under EU law remains far away. The question thus arises, which procedural rules national authorities should apply when enforcing EU measures. The European Court of Justice formulated its approach to this questions in the twin cases of Rewe 34 and Comet 35 where the Court established a since often repeated statement that is herein referred to as the ‘Rewe/Comet-formula’: In the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay 29 Commission, ‘Proposal for a Regulation establishing a European Small Claims Procedure’ COM (2005) 87 final (15 March 2005) 5–6. 30 It should, however, be noted that the Council’s legal department concluded that Art 65 EC did support such measures. Statement, 30 June 2005. 31 K Kerameus, ‘Procedural Harmonization in Europe’ (1995) 43 American Journal of Comparative Law 401, 412. 32 Art 81.2 (e) EC. 33 J Lindholm, ‘Harmonisering av processrätten—utvecklingslinjer’ in Ö Edström (ed), Svensk rätt i EU (Uppsala, Iustus, 2007). 34 Case 33/76 Rewe-Zentralfinanz eG & Rewe-Zentral AG v Landwirtschaftskammer für das Saarland [1976] ECR 1989, para 5. 35 Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043, para 13.

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down the detailed procedural rules governing actions for safeguarding rights which individuals derive from the direct effect of Community law. However, such rules must not be less favourable than those governing similar domestic actions nor render virtually impossible or excessively difficult the exercise of rights conferred by Community law.36

It follows from the first sentence of the quoted paragraph that when EU law does not regulate a procedural matter, the national court should apply its ordinary national procedural rules. This is frequently referred to as expressing a ‘principle of national procedural autonomy’.37 The position of the Court is hardly novel or surprising. The general principle that national law applies in the absence of conflicting EU regulation unless the European Union enjoys exclusive competence in the field is almost too well known to repeat here. The term ‘national procedural autonomy’ is however unfortunate as it may lead one to wrongfully conclude that the Court of Justice thereby established that the European Union lacks power to regulate procedural matters and that the regulatory power over procedural matters remain wholly with the individual Member States. As discussed above, this is simply not true and there is little to suggest that this is what the ECJ intends. The first paragraph of the ‘Rewe/Comet-formula’ does not explicitly provide anything beyond that which applies in all areas where the Union and the Member States share competence: the Member States have a right (and possibly a duty) to regulate where claims based on EU law are to be heard and under what conditions. Considering that the EU has—or, at least, had—limited regulatory procedural competence and relatively infrequently exercises the competence it has, one could construe the statement broadly as meaning that there is a presumption that it is the Member States that provide the procedural rules that national courts apply to substantive EU law.38 Moreover, there are many limitations to the principle of national procedural autonomy whose combined effects on the principle of national procedural autonomy are so extensive that the term does not appear appropriate.39 It clearly follows from the second sentence of the ‘Rewe/Comet-formula’ that there are two important exceptions to the application of national procedural law. First, the ‘Rewe/Comet-formula’ contains the locution that the national procedure rules used

36 Joined Cases C-430 and 431/93 Jeroen van Schijndel and Johannes Nicolaas Cornelis van Veen v Stichting Pensioenfonds voor Fysiotherapeuten [1995] ECR I-4705, para 17 (citations omitted). 37 See, eg, M Hoskins, ‘Tilting the Balance: Supremacy and National Procedural Rules’ (1996) 21 European Law Review 365, 365–67; FG Jacobs, ‘Enforcing Community Rights and Obligations in National Courts: Striking the Balance’ in J Lonbay and A Biondi (eds), Remedies for Breach of EC Law (Chichester, John Wiley & Sons, 1997) 25–26; J McKendrick, ‘Modifying Procedural Autonomy: Better Protection for Community Rights’ (2000) European Review of Private Law, 565, 568. 38 M Dougan, National Remedies before the Court of Justice (Oxford, Hart Publishing, 2004) 14–20; W van Gerven, ‘Of Rights, Remedies and Procedures’ (2000) 37 Common Market Law Review 501, 502, 505. 39 See, eg, P Haapaniemi, ‘Procedural Autonomy: A Misnomer?’ in L Ervo, M Gräns and A Jokela (eds), Europeanization of Procedural Law and the New Challenges to Fair Trial (Groniingen, Europa Law Publishing, 2007) 89; J Lindholm, State Procedure and Union Rights—A Comparison between the European Union and the United States (Uppsala, Iustus, 2007) 98–151; C Kakouris, ‘Do the Member States Posess Judicial Procedural ‘Autonomy’?’ (1997) 34 Common Market Law Review 1389; E Storskrubb, Civil Procedure and EU Law—A Policy Area Uncovered (Oxford, Oxford University Press, 2008) 19–20.

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to adjudicate a claim under EU law ‘cannot be less favourable than those relating to similar actions of a domestic nature’,40 something it has subsequently referred to as the principle of equivalence.41 Secondly, it also follows from the quoted paragraph that national courts shall not apply national procedural rules to claims based on EU law if those rules impair the effectiveness of EU law to an unacceptable extent. The Court of Justice has referred to this as the principle of effectiveness.42 According to the European Court of Justice, the principles of equivalence and effectiveness embody the Member States’ obligation to ensure effective judicial protection of an individual’s rights under EU law.43 These principles and other exceptions to the so-called principle of national procedural autonomy44 can however also be viewed as conditions under which Member States may lay down the procedural rules to be applied by national courts when enforcing EU law. As will be discussed further below, these exceptions constitute the core part of the solution when national procedural rules impair the effective enforcement of EU law.45 III

A

NATIONAL PROCEDURAL LAW AS AN ENFORCEMENT OBSTACLE

Introduction

The preceding section presented the basic conditions under which national procedural law applies when European Union law is enforced. This section considers if and how applying national procedural law can act as an obstacle to the enforcement of the substantive rules on which the claim is based. In doing so, we begin by considering the experience thus far in the context of EU law. It would be preferable to study this issue considering a large sample of situations on the national level, studying the actual impact of different national procedural rules in different situations. To perform such a study would, however, be a massive undertaking and practical reasons thus require that this section builds on individual examples rather than statistically verifiable data. The first part of this section consists primarily of a presentation of cases in which the European Court of Justice was asked to determine if a national procedural rule that in one way or another detracted from the effective enforcement of EU law was consistent with EU law. These examples intend to illustrate when and how different national procedural rules may serve as an obstacle to the enforcement of EU law. One should therefore be careful not to define the conflict between national procedure law and EU law based on these examples. For example, the fact that several ECJ cases have 40

Case 33/76 Rewe-Zentralfinanz, above (n 34) para 5. See, eg, Case C-201/02 The Queen, ex parte Helena Wells v Secretary of State for Transport, Local Government and the Regions [2004] ECR I-723, para 67. 42 See, eg, Case C-326/96 Levez v T H Jennings (Harlow Pools) Ltd [1998] ECR I-7835, para 18. 43 Case C-268/06 Impact v Minister for Agriculture and Food et al [2008] ECR I-2483, paras 47–48; Case C-63/08 Virginie Pontin, above (n 21) paras 43–44. 44 As will be discussed further below, there are exceptions which do not follow as clearly from the Rewe/Comet-formula as the principles of equivalence and effectiveness. 45 See below, part IV. 41

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concerned national time limits does not necessarily mean that such rules are especially likely to have an adverse effect on the enforcement of EU law.

B

The EU Experience

The allocation of the burden of proof and time limits are two issues that have received a great deal of attention in EU law. As previously discussed, there are several examples of EU measures that define which party shall bear the burden of proof with regard to specific claims and that regulate the time limit within which certain claims must be brought.46 Such measures aim to unify the regulated matter and to replace the national procedural rules that would otherwise apply when enforcing the underlying substantive claim. That does not, however, mean that national rules regulating burden of proof and time limits are suitable in all instances not covered by such regulation. With regard to matters of evidence, the ECJ has declared, much in line with the principle of national procedural autonomy, that the national court shall apply ordinary, national rules in the absence of relevant EU regulation.47 Applying national evidentiary rules may, however, also prevent an individual from enforcing a substantive right under EU law. For example, San Giorgio concerned a national rule according to which unduly levied import duties were presumed to have been passed on to the consumer and would only be repaid if the party seeking repayment could prove by presenting documentary evidence that the fee had not been passed on to the consumer.48 The stated reason for this rule was to prevent unjust enrichment. The ECJ found that the rule in question rendered the exercise of the underlying substantive right ‘virtually impossible or excessively difficult’.49 There are many examples in the case law of the European Court of Justice that illustrate that national rules laying down time limits may have similar adverse effects on the enforcement of EU rights. This is well illustrated by the case of Pontin.50 Ms Pontin sought to challenge her employer’s decision to terminate her employment on the ground that it violated her rights as a pregnant woman protected by two EU directives.51 Pontin’s claim was, however, never heard by the national courts since she had failed to comply with the Labour Code which, according to the referring court, denies the applicant a legal remedy if she for any reason fails to provide her employer with a medical certificate as evidence of her pregnancy within eight days of the dismissal notice or fails to bring an action within 46 47

See discussion above, part II.B. See, eg, Case C-344/08 Criminal Proceedings against Tomasz Rubach [2009] ECR I-7033, para

28. 48 Case 199/82 Amministrazione delle Finanze dello Stato v SpA San Giorgio [1983] ECR 3595, paras 1–4. 49 ibid, paras 13–14. 50 Case C-63/08 Virginie Pontin, above (n 21). 51 Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding [2009] OJ L348/1; Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions [1976] OJ L39/40.

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15 days of the termination of her employment contract.52 These time limits intended to promote legal certainty but still made it extremely difficult for Pontin to enforce her legal rights.53 This is not to suggest that it is only evidentiary rules and time limits that may detract from the enforcement of EU law. While these two issues have attracted much attention from EU institutions, it is evident from the case law of the ECJ that a wide range of procedural rules are capable of detracting from the effective enforcement of EU law. A fundamental condition for individuals to be able to assert substantive EU law is that they are allowed to bring a claim before a court or tribunal to begin with. In accordance with the principle of national procedural autonomy, it is for the Member States to designate the courts and tribunals having jurisdiction.54 The system thus assumes that the Member States will give individuals intended to benefit from the substantive law access to a court, but this is not always the case. That Member States completely fail to designate a court having jurisdiction is likely a rare occurrence but there are examples where a Member State had designated jurisdiction in such a way that it impaired the effective enforcement of EU law. An example of such a situation can be found in Impact which concerned the framework agreement on fixed-term work. A national law had been enacted that designated certain courts as having jurisdiction over claims under the framework agreement but that law had not yet entered into force at the time of the dispute, thereby leaving the claimants without a competent court to hear their claims.55 Another example can be found in the aforementioned case of Pontin where the jurisdiction to hear a claim by a woman challenging her dismissal on the ground that she was pregnant lay only with the President of the Labour Court. This provision was interpreted strictly and an application addressed to the Labour Court ‘For the attention of the President and his fellow judges’ was dismissed on the ground of lack of jurisdiction.56 The ECJ indicated that this provision might violate the principle of effectiveness,57 especially considering the short time limit for bringing the claim.58 The Member State may also prevent the enforcement of EU law by denying the litigant the right to bring the action. For example, in Muñoz, national law did not allow a company to bring a civil tort claim in a national court against its competitor on the ground that the latter had marketed its goods under another classification than the one provided by an EU regulation. The ECJ concluded that EU law provided a right to bring such a claim as this was necessary to ensure the full effectiveness of an EU regulation, national law not withstanding.59 Similarly, in 52 Case C-63/08 Virginie Pontin, above (n 21) paras 27–28. It should be noted that the government of Luxembourg did not share its court’s interpretation of national law (para 34). 53 ibid, paras 61–68. 54 See above, text to n 36. 55 Case C-268/06 Impact, above (n 43). 56 Case C-63/08 Virginie Pontin, above (n 21) para 24. 57 See above, text to n 52. 58 Case C-63/08 Virginie Pontin, above (n 21) paras 57, 66. The ECJ left it to the national court to make the final determination. 59 Case C-253/00 Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing Ltd [2002] ECR I-7289, paras 27–30.

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Tele2 Telecommunication, the Court of Justice addressed whether someone allowed to appeal against a decision by a national regulatory authority following a market analysis proceeding also had a right under EU law to be party to such proceedings.60 The examples discussed thus far all deal with individual and quite specific procedural rules. However, in the context of EU law, the conformity with EU law of some of the most fundamental aspects of procedure has been questioned. For example, the ECJ has in a number of judgments addressed the compatibility of national rules that preclude the re-examination of a matter once it has been finally adjudicated by a competent court (res judicata). As illustrated by these cases, the application of the principle of res judicata can result in an outcome directly incompatible with EU law. Such was, for example, the situation in Köbler where res judicata was claimed to preclude a Member State from compensating for damages caused to an individual by infringements of Community law in accordance with the principle of state liability, and in Kühne & Heitz where res judicata was viewed as an obstacle to the reimbursement of sums paid due to the wrongful application of EU law. Similarly, Lucchini concerned the application of the principles of res judiciata when doing so precluded the recovery of state aid granted in breach of EU law.61 Finally, Fallimento Olimpiclub concerned the application of the principle of res judicata to a tax decision. In previous dispute, an Italian court had concluded that it had not been proven that Fallimento Olimpiclub had entered into a fraudulent contract to escape paying VAT. Because of the principle of res judicata, as interpreted by Italian courts, the judiciary was subsequently bound by this conclusion which made it impossible to examine whether EU law had been complied with.62 Another issue of similarly fundamental nature is whether a national court is under a duty to make certain determinations of its own motion (ex officio). The argument that the effective enforcement of EU law requires that national courts should consider applications of Union law of its own motion was addressed by the Court of Justice in two factually similar cases. In van Schijndel 63 and in Peterbroeck 64 the claimants had initially failed to raise the argument that national law was incompatible with EU law and to raise this plea at a later point was inadmissible according to national procedural rules. Finally, it is worth mentioning that there are also several cases from the ECJ that deal with remedies much in the same way as in the examples mentioned here above. In these cases, the essential question is whether the remedies available under national law are adequate for the purpose of effectively enforcing EU law.65 Despite 60

Case C-426/05 Tele2 Telecommunications GmbH v Telekom-Control-Kommission [2008] ECR

I-685. 61 Case C-224/01 Gerhard Köbler v Austria [2003] ECR I-10239; Case C-453/00 Kühne & Heitz NV v Productschap voor Pluimvee en Eieren [2004] ECR I-837; Case C-119/05 Ministero dell’Industria, del Commercio e dell’Artigianato v Lucchini SpA [2007] ECR I-6199. 62 Case C-2/08 Amministrazione dell’Economia e delle Finanze and Agenzia delle entrate v Fallimento Olimpiclub Srl [2009] ECR I-9047. 63 See above (n 36). 64 Case C-312/93 Peterbroeck, Van Campenhout & Cie SCS v Belgium [1995] ECR I-4599. 65 See, eg, Case C-453/99 Courage Ltd v Bernard Crehan [2001] ECR I-6297; Joined Cases C-295–298/04 Manfredi et al v Lloyd Adriatico Assicurazioni SpA et al [2006] ECR I-6619.

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being similar in nature, these matters lie somewhat outside the scope of this contribution and are, additionally, discussed in other contributions in this volume. These examples do not by any means provide a complete picture of all situations where national procedural rules hinder the enforcement of EU law. They do, however, illustrate that the range of national procedural rules capable of detracting from the effective enforcement of substantive EU law is quite broad. That procedural rules have an adverse effect on the enforcement of the underlying EU law cannot always be attributed to Member States trying to avoid enforcing the substantive rules or to national procedural law being in some sense ‘defective’. It lies in the very nature of procedural requirements that it is possible for a party to litigation to fail to meet these requirements and when this happens the party may not be able to exercise the right that the substantive law intended to confer on it. Moreover, it follows from the fact that procedural rules have an impact on what rights can be enforced that any differences in procedural laws of Member States result in corresponding differences in the rights that can be enforced in different Member States. In this sense, EU law experiences illustrate that the application of national procedural law may hinder the enforcement of substantive EU law and, by extension, threaten the unification of substantive law, at least with regard to its practical application.

C

Lessons for the DCFR—Is There a Problem?

Having concluded this, the issue to be examined next is whether the DCFR is likely to experience problems like those described above when encountering national procedure. The conclusions made above do not appear uniquely applicable to specific types of binding acts under EU law. In fact, the application of national procedural rules can have an adverse effect on substantive national rules in largely the same way. What distinguishes a situation where the procedural rules are applied to EU law is, first, that the law-maker which created the substantive rules is not the law-maker primarily responsible for determining if the procedural rules are adequate and appropriate for enforcing the substantive rules and, secondly, that variations in local procedural rules render the effectiveness of enforcing the substantive rules dependent on where the claim can be and is enforced. Its lack of procedural provisions makes the DCFR’s enforcement vulnerable in largely the same manner as in the examples presented above. There are, however, (at least) four reasons why it is reasonable to expect that experiences with enforcing the DCFR will vary from those described above. For these reasons, national procedural rules can be expected to be less of an obstacle to the enforcement of the DCFR than to many other measures under EU law. First, the Member States have relatively few incentives for using its procedural regulatory powers to impede the effective enforcement of the DCFR. Even if the DCFR is transformed into a legally binding document within the framework of EU law, its enforcement will primarily affect relationships between individuals. By comparison, some of the problems previously encountered under EU law have concerned the inability or unwillingness of Member States to fulfil an obligation that EU law places of them. For example, a disproportionally large part of the ECJ

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case law on the adequacy of national procedural rules concerns the conditions under which a Member State will repay unlawfully levied fees and charges.66 It would be unfair to accuse the Member States in those cases of deliberately using procedural rules to hinder individuals from effectively enforcing their rights against the state. However, a Member State does not have the same incentives to modify its procedural rules to enhance enforcement when it is it that such matters are the target of the enforcement. In this respect, the fact that the state is not a primary subject of the DCFR may reasonably make it less susceptible to this particular problem. Secondly, the substantive content of the DCFR is relatively uncontroversial. In line with what was stated above, the resistance against enforcing an instrument is likely less when the provisions it aims to introduce do not clash with a policy of the Member States. It is in this regard positive from an enforcement perspective that the provisions of the DCFR are partially based on existing, national provisions. There are certainly provisions that will not be well received in some Member States but one might expect that these will be fewer compared with many harmonising EU measures. With regard to these first two points it should, however, also be noted that the attitude of the Member States towards the substantive rules is but one factor. The case law of the ECJ shows that a special intent to hinder enforcement is not a necessary condition, and that even very common procedural rules have shown to be capable of hindering the effective enforcement of EU law. Thirdly, the DCFR is comparatively well grounded in national law. As a result of how they were developed, many of the provisions of the DCFR conform to the laws of many Member States. The harmonising effect of the DCFR requires relatively small changes in national law compared with many of the EU measures which the above described ECJ case law builds on. Because provisions with similar content can already be found in many national legal traditions, it is likely that national procedural rules do not unnecessarily undermine their effective enforcement. Finally, the DCFR addresses some of the specific issues that have already proven especially problematic and will therefore likely avoid some of the problems previously experienced in the enforcement of EU law. For example, it is not likely that the absence of adequate remedies is the most pressing concern regarding the enforcement of the DCFR. The DCFR contains several model rules pertaining to remedies.67 Similarly, the DCFR is not completely without regulation of the burden of proof. There are several examples of where the DCFR allocates the burden of proof to one party or the other.68 It can, however, be questioned whether the

66 See, eg, Case 68/79 Hans Just I/S v Danish Ministry for Fiscal Affairs [1980] ECR 501; Case 61/79 Amministrazione delle Finanze dello Stato v Denkavit Italiana Srl [1980] ECR 1205; Case 130/79 Express Dairy Foods v Intervention Board for Agricultural Produce [1980] ECR 1887; Case 826/79 Amministrazione delle Finanze dello Stato v SaS MIRECO [1980] ECR 2559; Case 811/79 Amministrazione delle Finanze dello Stato v Ariete SpA [1980] ECR 2545; San Giorgio (discussed above in text to nn 48–49); Case 309/85 Barra v Belgium and City of Liége [1988] ECR 355; Case C-255/00 Grundig Italiana SpA v Ministero delle Finanze (No 2) [2002] ECR I-8003; C-147/01 Weber’s Wine World Handels-GmbH et al v Abgabenberufungskommission Wien [2003] ECR I-11365. See also above (n 65). 67 See, eg, Book III, ch 3 and Book VI, ch 6. 68 See, eg Rules II-2:105 and II-3:104(3).

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allocation of the burden of proof has been systematically considered.69 Moreover, the DCFR does not provide a common standard for determining if the burden of proof has been met and must consequently be supplemented by national evidentiary rules.70 In conclusion, the application of national procedural rules to the DCFR is likely to have an adverse effect on the enforcement of the latter. Such effects will likely be less severe than those experienced with regard to some previous EU measures. However, it is undeniable that national procedural rules and practices may detract from the unifying effect of the DCFR by hampering its effective enforcement.

IV

A

HANDLING THE PROBLEM

Introduction

In light of these findings, we shall now consider if and how it is possible to reduce the potentially adverse effect of national procedural rules on the DCFR. In so doing we shall again draw on experiences in European Union law. More specifically, this section examines whether the various mechanisms used under EU law to modify national procedural rules can be applied to the DCFR. Primarily, four such mechanisms can be identified: general principles, the principle of equivalence, the principle of effectiveness and various measures contributing to the harmonisation of procedural law. It is in this context important to remember that it is neither possible nor desirable to wholly prevent procedural rules from affecting the enforcement of substantive rights and obligations. EU law accepts that effective adjudication is impossible without imposing sanctions and requirements on the litigants.71 Therefore, the pertinent question is not how to prevent procedural rules from having any effect, but rather how to prevent procedural rules that detract to an unacceptable extent from the unifying effect that the DCFR intends to have on European private law.

B

General Principles

It is now well established that the general principles that are common to the constitutional traditions of the Member States form part of EU law and must be 69

Whittaker, The ‘Draft Common Frame of Reference’ An Assessment, above (n 4) 77. This is hardly surprising. It is to me inconceivable how this could be achieved in an effective and workable manner. 71 eg, the ECJ has on numerous occasions expressed that EU law accepts that Member States create and enforce ordinary statutes of limitation even though doing so will completely bar claims based on substantive EU law. See, eg, Case C-90/94 Haahr Petroleum Ltd v Åbenrå Havn et al [1997] ECR I-4085; Joined Cases C-114 and 115/95 Texaco A/S v Middelfart Havn et al and Olieselskabet Danmark v Trafikministeriet et al [1997] ECR I-4263; Case C-188/95 Fantask A/S et al v Industriministeriet [1997] ECR I-6783; Case C-261/95 Rosalba Palmisani v Istituto nazionale della previdenza sociale (INPS) [1997] ECR I-4025. This is also consistent with the principle of national procedural autonomy discussed above, part II.C. 70

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respected by the European Union and, under some circumstances, by the Member States.72 Among these general principles are fundamental human rights—including certain procedural rights. The European Court of Justice has applied these general principles to set aside certain national procedural rules. For example, in Data Delecta, the ECJ ruled that a national rule requiring foreign applicants to deposit a security for the possible payment of opposing party’s litigation costs before bringing a claim violated the principle of equality which requires ‘perfect equality of treatment’ of nationals and nationals of other Member States.73 Similarly, in Steffensen, the ECJ considered, among other things, whether a national provision allowing a government agency to rely on wrongfully collected evidence violated the fundamental right to a fair hearing.74 General principles are especially important in criminal proceedings. For example, the Court declared in Rubach that in applying a regulation a Member State may not impose a burden of proof that violates the principle of the presumption of innocence which is a fundamental right protected by EU law.75 These are only a few examples of situations in which specific general principles of EU law have been used to set aside national procedural rules. There are, however, also general principles whose content is broader. Perhaps most importantly, the ECJ has declared that EU law contains a principle of effective judicial protection that imposes broad range of requirements on national procedural rule.76 The Treaty of Lisbon has strengthened the position of these general principles in EU law by giving the Charter of Fundamental Rights of the European Union the same legal value as the treaties.77 While there is still great uncertainty regarding how it will be applied,78 the Charter is important in that it more clearly defines some of the general principles previously applied—for the purpose of this contribution most importantly procedural rights of individuals.79 For the purpose of enforcement of the DCFR these general principles are, however, currently of limited importance. The general principles of EU law only bind the Member States when they act within the scope of EU law.80 The Treaty of Lisbon does not appear to change this fact.81 Thus, the general principles of EU law 72 See, eg, Case 29/69 Erich Stauder v City of Ulm [1969] ECR 419; Case 11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratstelle für Getriede und Futtermittel [1970] ECR 4537; Case C-4/73 J Nold, Kohlen- und Baustoffgrosshandlung v Commission [1974] ECR I-491; Case C-159/90 The Society for the Protection of Unborn Children Ireland Ltd v Stephen Grogan et al [1991] ECR I-5685. 73 Case C-43/95 Data Delecta Aktiebolag and Ronny Forsberg v MSL Dynamics Ltd [1996] ECR I-4661, para 16. See also, Case C-323/95 Hayes & Hayes v Kronenberger GmbH [1997] ECR I-1711; Case C-122/96 Saldanha & MTS Securities Corp v Hiross Holding AG [1997] ECR I-5325. 74 Case C-276/01 Criminal Proceedings against Joachim Steffensen [2003] ECR I-3735. 75 Case C-344/08 Rubach, above (n 47) paras 30–33. 76 See, eg, Case C-50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I-6677; Case C-432/05 Unibet (London) Ltd et al v Justitiekanslern [2007] ECR I-2271. 77 Art 6.1 of the EU Treaty. 78 See generally, M Dougan, ‘The Treaty of Lisbon 2007: Winning Minds, Not Hearts’ (2008) 45 Common Market Law Review 617, 661-–71. 79 Arts 47–50 of the Charter of Fundamental Rights of the European Union. 80 See, eg, Case C-260/89 Elliniki Radiophonia Tiléorassi AE (ERT) et al v Dimotiki Etairia Pliroforissis et al [1991] ECR I-2925, para 42; Case C-368/95 Vereinigte Familiapress Zeitungsverlagsund vertriebs GmbH v Heinrich Bauer Verlag [1997] ECR I-3689, para 24; Case C-60/00 Mary Carpenter v Secretary of State for the Home Department [2002] ECR I-6279. 81 Art 6.1 of the EU Treaty.

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can only be invoked to set aside a national procedural rule that hinders the enforcement of the DCFR if the latter is transformed into EU law. C

Principle of Equivalence

As previously discussed, two exceptions to the principle of national procedural autonomy follow explicitly from the ‘Rewe/Comet-formula’: the principle of equivalence and the principle of effectiveness.82 We begin with the principle of equivalence which the Court of Justice has only recently begun to apply more extensively.83 Cases in which the Court has used the principle of equivalence illustrate that as reasonable as it may seem, the principle is often difficult to apply. The principle of equivalence can only be applied if a national claim is sufficiently similar to a claim under EU law and it has proven difficult to identify such a claim. Whether a claim under national law and a claim under EU law are comparable depends on their objectives and ‘essential characteristics’.84 This examination can be difficult. It is perhaps for this reasons that the ECJ has largely limited its attempts to identify comparable national claim to those concerning repayment of unlawfully levied fees.85 Assuming that a comparable national claim is identified, it may still be difficult to determine if the treatment afforded the claim under EU law is less favourable than how the comparable national claim is treated. In determining this, the national court shall compare the actions generally, objectively and in the abstract, without regard to their impact in the specific case, ‘taking into account the role played by those rules in the procedure as a whole’.86 Another weakness of the principle of equivalence is that much of its practical application is dependent on national courts. The ability of the ECJ to identify claims under national laws that are comparable to those under EU law is limited87 and the Court has stated that it is for the Member State courts to determine whether a national provision violates the principle of equivalence or not—albeit with some guidance from Luxembourg.88 This means that the application of the principle of equivalence is dependent on the ability and willingness of the national court to identify comparable national claims. The principle of equivalence may thus be of limited practical effect when it comes to setting aside national procedural rules. For the purpose of ensuring the effective 82

See discussion, above part II.C. P Craig and G De Búrca, EU Law 4th edn (Oxford, Oxford University Press, 2008) 325. 84 See, eg, Case C-261/95 Rosalba Palmisani, above (n 71) para 38; Case C-326/96 Levez, above (n 42) paras 39, 43; Case C-78/98 Preston et al v Wolverhampton Healthcare NHS Trust et al [2000] ECR I-3201, para 49. 85 See, eg, Case C-231/96 Edlizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze [1998] ECR I-4951; Joined Cases C-219/99 and 222/99 Riccardo Prisco Srl v Amministrazione delle Finanze dello Stato and Ministero delle Finanze v CASER SpA [2002] ECR I-6761; Case C-147/01 Weber’s Wine World, above (n 66). 86 Case C-78/98 Preston, above (n 84) paras 61–63 (para 63 quoted). 87 A Biondi, ‘The European Court of Justice and Certain National Procedural Limitations: Not Such a Tough Relationship’ (1999) 36 Common Market Law Review 1271, 1274. 88 Case C-261/95 Rosalba Palmisani, above (n 71) para 33; Case C-326/96 Levez, above (n 42) paras 39, 43; Case C-276/01 Steffensen, above (n 74) para 65. 83

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enforcement of the DCFR, the most important limitation of the principle of equivalence is, however, that it formally applies only when enforcing measures under EU law. Like the general principles of EU law, the principle of equivalence only applies to the DCFR if it is transformed into EU law.

D

Principle of Effectiveness

The principle of effectiveness is broader than the principle of equivalence and as such more capable of enhancing the enforcement of substantive law by setting aside national procedural rules. Of the cases discussed above,89 the mechanism most frequently used by the ECJ to set aside the national measure in question is the principle of effectiveness. The primary weakness of the principle of effectiveness is the uncertainty surrounding its application. According to ECJ case law, when applying the principle of effectiveness one must consider the role played by the procedural rule considered in the system as a whole. In this regard, EU law takes into consideration that a procedural rule—although it may significantly detract from the effectiveness of Community law—can be upheld by basic principles, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure.90 This balanced approach to the application of the principle of effectiveness is in many ways welcomed as it affords the Member States a degree of ‘autonomy’ to structure its judiciary. The many factors that go into applying the principle of effectiveness does, however, make it more difficult to foresee which national procedural rules will fail it. This is exemplified by the ECJ’s decision in Lucchini regarding res judicata. The Court concluded that EU law can preclude a national court from applying a national provision laying down the principle of res judicata when to do so would prevent the recovery of state aid granted in breach of Community law.91 This does not mean, however, that application of the principle of res judicata is always contrary to EU law. On the contrary, the Court had in several previous decisions expressed that the principle of res judicata is important for both the Community legal order and for the national legal systems to ensure legal stability and foreseeability, and the sound administration of justice.92 The question of whether the principle limits the effectiveness of Community law is to be determined on a case-by-case basis, taking into consideration whether its application in the particular case is necessary to uphold fundamental principles of the judicial system.93 The most important thing to remember about the principle of effectiveness in this context is, however, that it too only applies when enforcing measures under EU law. 89

See discussion, above part III.B. See, eg, Case C-312/93 Peterbroeck, above (n 64); Cases C-430 and 431/93 van Schijndel, above (n 36); Case C-2/08 Fallimento Olimpiclub, above (n 62). 91 Case C-119/05 Lucchini, above (n 61) paras 59–63. 92 See, eg, Case C-126/97 Eco Swiss China Time Ltd v Benetton Interanational NV [1999] ECR I-3055, para 46; Case C-224/01 Köbler, above (n 61) para 38; Case C-234/04 Rosmarie Kapferer v Schlank & Schick GmbH [2006] ECR I-2585, para 20. 93 See, eg, Case C-2/08 Fallimento Olimpiclub, above (n 62) paras 22–31. 90

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Thus, the principle of effectiveness can only be invoked when enforcing the DCFR if it is transformed into EU law.

E

Procedural Harmonisation

A final mechanism worth exploring is procedural harmonisation. Harmonisation resolves the problems identified by replacing procedural rules that are perceived as ‘bad’ and helps to ensure that the substantive rights and obligations are enforced to the same extent in all national courts. Such procedural harmonisation could come about in two ways. A first way would be through binding legal Acts (‘hard harmonisation’). This could theoretically be achieved through a broad, harmonisation attempt encompassing all aspects of procedure. However, the limited outcome of the so-called ‘Storme report’94 and more recent experiences with the development of the area of justice, freedom and security95 suggest that the Member States’ support for such actions is limited. It then appears more likely that legal unification of European procedural rules would come about little by little. Although the European Union has limited direct competence in the area of procedural law there are, as previously discussed, several secondary Acts regulating procedural matters. However, while binding EU measures laying down rules generally applicable in disputes before national courts is thus a possibility, regulatory activity in the field of procedural law has so far concentrated on facilitating the efficient resolution of cross-border disputes. This is natural as the treaties do not provide the European Union with general competence to regulate procedural law; but one may also suspect that the political support among Member States for procedural harmonisation is limited, even when it comes to limited areas of procedural law.96 A second alternative is convergence of national procedure without enacting binding legal Acts (‘soft harmonisation’). Some commentators claim to observe a trend of Europeanisation of procedural law among nations outside the EU legal system. In essence, they argue that European legal traditions contain competing procedural models and that competitive nations will select and copy the best solution, leading eventually to a process of natural procedural convergence. For example, Zekoll has argued that there are several examples of European nations modelling their procedural law on the best practices among neighbouring states.97 In this regard, it appears feasible that the general principles of EU law—the principle of equivalence and the principle of effectiveness—may indirectly contribute to the convergence of the procedural law of the Member States. While these principles apply directly only when enforcing EU law, their application in such

94 M Storme (ed), Rapprochement du Droit Judiciaire de l’Union européenne—Approximation of Judiciary Law in the European Union (Dordrecht, Kluwer, 1994). 95 See above, text to nn 29–31. 96 See discussion, above part II.B. 97 J Zekoll, ‘Comparative Civil Procedure’ in M Reimann and R Zimmermann (eds), Oxford Handbook of Comparative Law (Oxford, Oxford University Press, 2008) 1327, 1335–38.

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instances may bring about changes in national procedural law that may also apply generally outside the scope of EU law. The theory of natural procedural convergence is not as such unrealistic. One can in this regard make parallels to the development in the United States where procedural differences among states are not as significant as those between European nations. This was not the result of binding harmonising legislation, but rather states voluntarily adopting elements from procedural models perceived as superior, for example the Field Code of Civil Procedure and the Federal Rules of Civil Procedure.98 One should, however, not be overly optimistic about the extent and speed by which such ‘soft-harmonisation’ is likely to occur. It is relevant to note that despite the passing of much time and conditions that are more favourable for procedural convergence than in Europe, significant procedural differences remain between the various jurisdictions of the United States.

V

THE WAY FURTHER FORWARD

As previously mentioned, Whittaker has argued that too little attention has been given in the DCFR to the tension between the principle of national procedural autonomy and the principle of effectiveness.99 On the basis of the examination above, I would take a broader approach to the underlying issue regarding the relationship between the DCFR and national procedural law. The result of the examination was, briefly restated, that while the threat of national procedural law to the effective enforcement of the DCFR is limited, the same can be said about the availability of solutions for resolving the threats that do exist. It was concluded that differences in the procedural law of the Member States are capable of hindering attempts to harmonise substantive law.100 In the absence of harmonising EU regulations in the procedural field—especially with regard to intra-state disputes—EU law provides a system of legal mechanisms capable of identifying and setting aside national practices whose application lead to unacceptable effects. These remedies are, however, only directly applicable to the DCFR if it achieves formal status under EU law.101 Without such transformation, natural procedural convergence is primarily the mechanism capable of reducing the potentially adverse effects of national procedural law.102 It remains to be seen if the DCFR is transformed from an academic product into a binding legal document, be it through the adoption of a ‘political’ CFR or use as

98 See generally, J Fleming, GC Hazzard and J Leubsdorf, Civil Procedure 5th edn (New York, Foundation Press, 2001) 22–25; CA Wright and MK Kane, Law of Federal Courts 6th edn (St Paul, West Publishing Co, 2002) 430; SC Yeazell, Civil Procedure 6th edn (New York, Aspen Publishers, 2002) 396–99. 99 See above, text to n 4. 100 See discussion above, part III.C. 101 See discussion above, parts IV.B–IV.D. 102 See discussion above, part IV.E.

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a model for a more informal Europeanisation of private law.103 Even if a CFR is adopted, it remains unclear what purpose it would serve.104 To conclude, the DCFR may contribute to the Europeanisation of private law in its current form, but its harmonising effect would likely be more extensive if transformed into a binding EU Act. This follows from the very format of the Act. However, it also follows from that fact that the mechanisms in European Union law capable of setting aside national procedural rules when these hinder effective enforcement to an unacceptable extent are largely unavailable to the DCFR unless its provisions are transformed into EU law.

103 104

Von Bar and Clive (eds), DCFR, Full Edition, above (n 8) 7–9. ibid, 36.

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30 Individual Private Enforcement of Consumer Rights in Civil Courts in Europe MARCO LOOS

I

INTRODUCTION

I

N MANY AREAS, mandatory substantive law protects consumers. At first glance, this seems to indicate that the position of consumers is well regulated and that consumers themselves are well protected. The question arises, however, whether consumers may actually make use of their substantive rights. Can consumers enforce their contractual rights through the ordinary courts when their counterpart is not willing to provide them with what they are entitled to receive under the contract? The focus in this chapter is on the consumer’s access to justice through the ordinary court system. Therefore, I will address neither the enforcement of consumer rights through regulatory agencies or by way of collective redress, nor the enforcement of individual consumer rights through ‘Alternative Dispute Resolution’ (‘ADR’) institutions. In this chapter, I will argue that awarding consumer rights without properly regulating the consumer’s access to the court system renders these rights unenforceable through the ordinary courts. It is argued that the normal rules of civil procedure in the national courts produce such disincentives for consumers to maintain their rights that the result is that they do so in an insufficient manner, which leads to under-enforcement of (European) consumer law. Two fairly recent European regulations—the European Payment Order Procedure and the European Small Claims Procedure—help improve the enforcement of consumer law, but do not take away these disincentives sufficiently.1 II

WILLINGNESS OF CONSUMERS TO TAKE ACTION AND KNOWLEDGE OF RIGHTS

Individual private enforcement of consumer law presupposes that the consumer maintains his rights by either taking action if he is not satisfied with the goods or services rendered, or by opposing a claim of his counterpart for payment for such 1 In this chapter I will only occasionally touch on the enforcement of consumer rights through ADR schemes.

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dissatisfactory goods or services rendered. A Dutch2 study from 20083 indicates that the willingness of consumers to undertake such actions is in itself considerable: no less than 93 per cent of the consumers who indicated that they had experienced a problem with goods or services in the preceding year in fact had taken action of some sort.4 The main reasons for taking action appear to be the feeling of ‘being entitled’ to a remedy, the poor quality of the goods or services rendered, the need to use the goods or services in their daily lives or work,5 as well as the personality of the consumer.6 Obviously, the price of the goods or services,7 as well as whether payments are due on a regular basis (as in the case of subscriptions or contracts for the supply of energy or telecom services) also influence the willingness to take action. The willingness to take further action is reinforced when the trader responds in an unkind or hostile manner to the complaint (be it in the store or on the phone).8 Which type of action does the consumer take? First, it should be made clear that ‘taking action’ is interpreted very broadly here. In the vast majority of cases, the consumer simply returns to the store where he has concluded the contract or otherwise contacts the trader directly.9 If that doesn’t help, some consumers will resort to self-help. Such self-help may range from withdrawing from the contract or simply refraining from purchasing new goods or services from that trader in the future, to a public protest, and occasionally even to violence.10 Whereas the latter manner of expressing dissatisfaction crosses the border to criminal action, the former two manners are, normally, perfectly legal. Of these two, public protest is

2 Where in this chapter I will use empirical evidence, I will base my comments on Dutch surveys. Of course, the data stemming from these reports cannot be transferred one-on-one to other European countries, but it will paint a picture which may at least to some extent be recognised throughout the European Union. 3 L Nikkels, W Wittenberg, S Mulder and M van Diepen, Kennen consumenten hun rechten en plichten? Onderzoek naar het kennisniveau van consumenten (Den Haag, Dutch Ministry of Economic Affairs, 2008) 9ff. 4 The authors report that in the year preceding the inquiry 37% of all respondents had obtained a good or service with which they had encountered a problem or complaint, cf Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 2. It should be noted that it is possible that in fact more consumers had experienced problems, but did not recall that at the time of the inquiry. In that case, the willingness to take action is actually considerably lower. On the basis of international surveys, WA Jacobs, ADR en consument, Een rechtsvergelijkende studie naar de mogelijkheden van alternatieve geschillenoplossing (Den Haag, Kluwer, 1998) 36–37, estimates that no more than half of dissatisfied consumers are willing to take some sort of action. 5 In particular: problems with refrigerators, transportation, energy, telecom, internet, cable and postal services. 6 The personality of the consumer is taken into account on the basis of that consumer’s response to statements like ‘I’m not shy’, ‘I take action easily’ and ‘I can’t stand injustice’. 7 Generally, the greater the loss, the likelier it is that a consumer will make use of more costly and time consuming means to enforce his rights, cf CD Scott, ‘Enforcing Consumer Protection Laws’ in G Howells, I Ramsay and T Wilhelmsson (eds), Handbook of Research on International Consumer Law (Cheltenham, Edward Elgar, 2010) and quoted as published on and to be downloaded at: papers.ssrn. com/sol3/papers.cfm?abstract_id=1441256, at 4. 8 Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 9f. 9 cf also Scott, ‘Enforcing Consumer Protection Laws’, above (n 7) 4. 10 cf P O’Shea and C Rickett, ‘In Defence of Consumer Law: The Resolution of Consumer Disputes’ (2006) 28 Sydney Law Review 148f.

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potentially much more harmful for the trader as it leads to negative word-ofmouth: instead of—or in addition to—complaining to the trader, they warn their family and friends of their negative experience with that particular trader, or complain to a TV programme, or web forum, or by means of a letter to a newspaper or a magazine.11 Those who do not take any action usually indicate that it costs too much time, energy and money to do so, and that it’s not worth the effort.12 These consumers often had little trust in a successful outcome anyway.13 Where the complaint is resolved to the satisfaction of the consumer, the consumer of course does not take further action. Research shows that in fact almost half of the cases are settled at this early stage.14 This does not, of course, mean that the consumer had always been right in complaining: in this figure is also included those cases where the trader has convinced the consumer that his complaint was unjustified. Moreover, the trader may also have been prepared to meet his customer—for instance to protect his reputation or to provide a good service— whether or not the consumer actually had a valid claim. Scott therefore rightly argues that market concerns with reputational damage stand behind consumers’ ability to secure remedies rather than the law.15 It is only when the complaint is not resolved at that stage a dispute between the parties arises.16 As follows from the above, consumer disputes typically are contractual disputes.17 Before legal action is taken, in many cases, the consumer has sought the intervention of an intermediary body, for example, a consumer organisation or a TV programme, to help resolve the complaint. In many cases, the intermediation does not amount to much more than just bringing the complaint (once again) to the attention of the trader, whether or not under pressure of the threat of negative publicity. In many cases, such intermediation, which is normally provided free of charge, leads to a satisfactory solution for the parties without the need to take further (much more expensive) legal action. When such an intervention does not provide solace either, the consumer can only resort to legal action to secure his rights (including also the opposition to a claim by the trader for payment for the defective goods or services rendered). The question then is whether the consumer is prepared to take legal action. Legal action is in fact taken only in a very small minority of cases: in another Dutch report it is indicated that in only 7 per cent of cases does the complaint end with a decision of a court or an ADR scheme,18 whereas 45 per cent of all complaints end 11 Jacobs, ADR en consument, above (n 4) 37, indicates that no less than 40–67% of dissatisfied consumers speaks of their negative experience with a good or service with friends and acquaintances; cp also Scott, ‘Enforcing Consumer Protection Laws’, above (n 7) 4f. 12 Scott, ibid 4. 13 Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 12. 14 BCJ van Velthoven, MJ ter Voert, Geschilbeslechtingsdelta 2003. Over verloop en afloop van (potentieel) juridische problemen van burgers (Den Haag, Boom Juridische uitgevers and WODC, 2003) 14. 15 Scott, ‘Enforcing Consumer Protection Laws’, above (n 7) 4. 16 Jacobs, ADR en consument, above (n 4) 25–26. 17 cf O’Shea and Rickett, ‘In Defence of Consumer Law’, above (n 10) 148. This is notwithstanding the fact that tort law (eg, product liability law) may also award rights to consumers rights; cf Scott, ‘Enforcing Consumer Protection Laws’, above (n 7) 1. 18 Van Velthoven and ter Voert, Geschilbeslechtingsdelta 2003, above (n 14) 14.

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without either an agreement having been reached or a decision having been made by a third party,19 implying that in almost half of all cases where consumers were dissatisfied with the goods or services provided and complained thereof, they ceased action without their complaint having been resolved. The taking of legal action, of course, presupposes that the consumer is already aware of his rights or at least is willing to be informed thereof: as long as the consumer does not know of his rights, he can’t enforce them.20 In many cases, consumers know they may obtain legal advice from, for instance, a consumer organisation or a lawyer. The question is, however, whether such advice will actually be sought. This is unlikely, in particular, where the consumer—for example, after a firm denial of liability by the trader (‘no Sir, the warranty has already expired, so I can’t do anything for you anymore’) wrongly assumes that he is not entitled to a remedy. In such a situation, the consumer often will not see the use in obtaining independent advice elsewhere. That implies that in order to be effective, the provision of information should precede the emergence of a dispute: the consumer should complain to the trader not before he has already been armed with at least some knowledge of his or her rights, thus being able to make it clear that he is aware of them. When the trader then does not appear to be willing to resolve the complaint, the consumer will (be able to) seek further information or advice. This means that consumers should be able to find information about their rights and obligations in a simple and inexpensive manner, and that this information should be such as to enable the consumer to resolve his quarrel with the trader by himself. The most effective means to provide such information would be over the internet, as consumers nowadays start to seek information there.21 This means that websites such as ‘Is it fair?’22 and ‘eYouGuide’,23 both set up by the European Commission, and national websites of governmental bodies or consumer organisations may answer to a large popular demand. However, a significant group of consumers—mainly consisting of people over the age of 55—do not have access to a computer, or the internet.24 These consumers will therefore have to be reached by other means, such as phone-based information, television commercials and brochures. When the consumer—whether or not they have already sought information through websites, legal advice or otherwise—tries to enforce his rights, he would in many cases be confronted with the fact that most traders are not aware of the rights of consumers either. In a situation where the trader does not promptly give in to the consumer for fear of reputational damage, they may well be inclined to think the

19 20

ibid, 15. EH Hondius, ‘Naar een Nederlandse Small Claims Procedure?’ (2006) Nederlands Juristenblad

198. 21 Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 34. 22 See: www.isitfair.eu. 23 See: ec.europa.eu/information_society/eyouguide/index_en.htm. At present (last accessed on 15 December 2009) this website is available in 10 languages. 24 Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 34.

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consumer’s claim is unjustified and therefore deny the consumer a remedy to which he may actually be entitled. In short, already the lack of knowledge on the part of consumers and traders of existing consumer rights stands in the way of an effective enforcement of consumer law by consumers themselves. III

PROBLEMS WHEN TAKING LEGAL ACTION IN COURT

In section II (above) it was made clear that only a very small number of consumers ultimately take legal action in front of a court (or an ADR institution).25 The question arises whether consumers are actually in a position to take legal action to enforce their rights. Is the consumer’s access to the court system safeguarded? Only then can the protection offered by European and national law be effective. In this section, I will pinpoint the problems that a consumer faces when he wants to enforce his rights in front of an ordinary court. First, it is possible that the consumer is unaware of the possibility that the dispute may be settled by a court (see below section III.A). The formal language and intimidating nature of the proceedings may deter consumers from making use of the procedure. That is, of course, also the case if the consumer is not sufficiently proficient in the language used in the court (below section III.B). There may also be formal obstacles before a procedure can start, such as the requirement to first attempt an amicable settlement of the claim (below section III.C). Moreover, the duration of the procedure can easily deter consumers from launching a formal claim in court (below section III.D). The biggest problem for consumers in submitting a claim to a court, however, is the cost of the procedure itself, and in particular the risk of having to pay the costs of the other party if the consumer loses the case (below section III.E). In section III.F, I will briefly go into the specific problems which consumers may experience in international cases. One additional burden should be mentioned. Having to go to court to enforce one’s right produces emotional strain for the consumer: it leads to stress and a lot of frustration. The emotional strain involved may very well prevent consumers from taking legal action. I will, however, not further expand on this practical obstacle. A

Ignorance of the Possibility of Settlement of the Dispute by a Court

When a well-informed consumer wishes to enforce his claim, he will have to find a party competent to decide it. In doing so, he must overcome a number of obstacles. First, he will need to know to whom he may turn. Research shows that only 66 per cent of all Dutch consumers are familiar with the possibility of having a consumer claim settled by an ordinary court.26 That is not in itself surprising, since consumers rarely instigate court proceedings themselves and, as such, do not have experience with the procedure: they are typically ‘one-shotters’. However, in most consumer 25 As indicated in the introduction, in the remainder of this chapter I will not go into the enforcement of consumer rights though ADR schemes. 26 Nikkels, Wittenberg, Mulder and van Diepen, Kennen consumenten hun rechten en plichten, above (n 3) 28.

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disputes, consumers are actually not the ones suing, but the ones that are being sued: they do not act as the plaintiff, but as the defendant. As such, a consumer has of course become aware of the fact that the court may hear his case. For traders, the court procedure is often better known; as repeat players, many of them have had previous experience in court and are as such aware of the possibility of submitting a claim to the court. B

Language and Formalities Relating to the Court Procedure

If the consumer has difficulty in understanding the often formal and complex language of judicial authorities, it may be necessary to invoke assistance or even legal aid.27 The formal character and the impressive entourage of court procedures, including the wearing of robes (and at least until recently, in Ireland and the UK also of wigs) by judges and solicitors, and the requirement of legal representation may also stand in the way of an effective enforcement of their rights by consumers.28 However, it should be noted that small claims (ie, most consumer cases) are dealt with by a small claims court or a JP, where there is usually no requirement of legal representation and where procedure also tends to be less formal. As a result, the need for legal aid—and in particular formal legal representation by lawyers—is less as well.29 An additional advantage of such small claims courts and JPs is that they often sit in more provincial towns and cities, closer to the place of residence of the consumer, which implies that the consumer—in particular when he is the defendant—normally need not travel too far, thereby reducing the costs involved. Submitting a claim to a court is also subject to regulations. Also in this respect, the formal nature of procedures before a court stands out. The procedure normally starts by way of a summons served on the defendant either by a clerk at the court after the claim is filed at the court, or by a bailiff (huissier) directly to the defendant, in accordance with national procedural law. At least in the second case, the plaintiff cannot start the proceedings himself, but is required to turn to another person to start the proceedings on his behalf. The formalities to be observed when submitting the claim and the legal jargon used, of course, constitute an extra threshold for consumers that do not master the language of the court sufficiently. The proceedings take place in the official language—or one of the official languages—of the country of the competent court; often, all documents must be made available in that language as well. Summons written in another language than that of the court will often be considered null and void. When the consumer opposes the claim in a language different from that of the court, the court may even deem the claim of the plaintiff as not having been 27

cp also Jacobs, ADR en consument, above (n 4) 161. ibid, 161, 169, 182. 29 cf P Cortés, ‘Does the Proposed European Procedure Enhance the Resolution of Small Claims?’ (2008) 27 Civil Justice Quarterly (available at: papers.ssrn.com/sol3/papers.cfm?abstract_id=983527); XE Kramer, ‘A Major Step in the Harmonization of Procedural Law in Europe: the European Small Claims Procedure. Accomplishments, New Features and some Fundamental Questions of European Harmonization’ in AW Jongbloed, The XIIIth World Congress of Procedural Law: The Belgian and Dutch Reports (Antwerps, Intersentia, 2008), also available at: papers.ssrn.com/sol3/papers.cfm? abstract_id=1120742, at 5. 28

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opposed at all. That implies that when the consumer is not able to communicate in the language of the court, he will require the assistance of an interpreter. In so far as the assistance of an officially registered interpreter or translator is to be invoked, additional costs must be incurred. Clearly, this constitutes a considerable additional obstacle for a consumer to submit a claim in any case in an international dispute. C

Prior Communications, Duty to Notify and Notification Periods

It depends on the national law of procedure whether prior communication between the parties is required for a party to be allowed to submit its claim. In practice, prior to the filing of a claim the parties will almost always have communicated with each other. A trader’s demand for payment will generally have been expressed in writing so evidence of that demand may normally be produced easily. When, on the other hand, the consumer has demanded repair or replacement of a defective good, he will most often not (immediately) have reported that in writing, but have communicated that in person at the store where he purchased the goods. The fact that such communication has taken place is usually not recorded in the correspondence between the parties. As a result, it is often difficult to prove for the consumer that such contact has taken place. When the contract was concluded online, the consumer will normally have made his complaint via email or through a complaints form on the website of the seller. When the seller reacts on the basis thereof, it will not be too difficult to prove that the consumer has complained to the seller, but that is certainly different where use is made of a web form and the seller has neither responded to the complaint nor sent an automatic notice acknowledging its submission. That means that where the consumer needs to prove that he has first complained to the seller before his claim may be heard in court, the consumer could be forced to complain again—this time in writing—which in itself may constitute an additional obstacle to the consumer’s access to the court system. In practice, the matter of proof is much more important where the national legislator has introduced a duty to notify the trader of an alleged breach of his obligations. Breach of the duty to notify may have far-reaching consequences. If such a duty is introduced, the consumer is required to inform the trader of a defect in the goods or services rendered within a short period after he has or—as the case may be under national law, apart from consumer sales contracts—should have discovered the defect. This is the case, for instance, in the majority of Member States with regard to consumer sales contracts, as 16 of the 27 Member States have introduced such a duty for consumer sales contracts, following the option to do so in the Consumer Sales Directive.30 The duty to notify is also included in Article 4:302 paragraph (1) of the Principles of European Law on Sales Contracts, where it is suggested that the buyer loses ‘the right to rely on the lack of conformity’, indicating that he will lose all remedies for non-conformity. Paragraph (6) indicates, 30 cf the Communication from the Commission to the Council and the European Parliament on the implementation of Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees including analysis of the case for introducing direct producers’ liability COM (2007) 210 final (24 April 2007) 10. The option stems from Art 5 para (2) of the Consumer Sales Directive (Directive 1999/44/EC [1999] OJ L171/12).

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however, that in the case of a consumer sales contract, the consumer retains the right to a price reduction and to damages not exceeding the contract price; however, all other remedies would be lost to the consumer. Interestingly, in Article III.-3:107 of the ‘Draft Common Frame of Reference’ (‘DCFR’), the duty to notify and the resulting loss of remedies in case of breach is applied to all obligations to supply goods or services, but paragraph (4) excludes the duty to notify in case the creditor is a consumer. This is explained in the Comments by pointing out that ‘lay people may be unaware of such a legal requirement and that it could be harsh to deprive them of remedies for failure to observe it’.31 The exclusion of consumers from the scope of the duty to notify in the DCFR also takes away the problem of the burden of proof as to the timeliness of the notification. For instance, in Dutch law, the consumer would even be required to state and—if challenged—to prove that he notified the trader within a reasonable period after the moment of discovery.32 The fact that the burden of proof of timely notification would be on the consumer constitutes a serious difficulty for consumers to enforce their contractual rights, as in many cases the initial complaint is not made in writing, but only in person. That individual contact is, as was already mentioned, normally not recorded. As a result, it is difficult for the consumer to prove that he has complained in time. Moreover, in many cases—and especially in cases where he acts without legal representation in the court proceedings—the consumer will not even realise that he bears the burden to prove that he has notified his complaint on time. In practice, he will often only then realise that he is supposed to put something forward when the trader argues the consumer has breached his duty to notify. As indicated above, this is exactly the reason why the duty to notify was excluded in consumer cases in the DCFR.33

D

Duration of the Procedure

A consumer needs a lot of stamina if he wants to pursue his claim through the court system: a procedure which takes less than half a year in most legal systems would be considered extremely short. Whenever a party is instructed to provide witness testimony, when an expert opinion is commissioned, or when the court wishes to visit a particular site (descente), the average duration of the procedure can easily exceed a full year. Moreover, the full duration of the procedure will be at least doubled, or even tripled, should either party appeal the judgment.34 The possibility to appeal against the judgment of the court of first instance—or even from the 31 Comment E to III.–3:107 DCFR. C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition, Volume I (Munich, Sellier, 2009) 807. The corresponding duty to notify in sales law also applies only to sales contracts between two professional parties. cf IV.A.–4:302 para (1); see in particular also Comment E to that Art, in von Bar and Clive, DCFR, Full Edition, 1355. 32 HR (Hoge Raad der Nederlanden) 23 November 2007, Nederlandse Jurisprudentie 2008, 552 (Ploum/Smeets and Geelen Tankstations BV). 33 cf Comment E to III.–3:107 DCFR, in von Bar and Clive, DCFR, Full Edition, above (n 31) 807. 34 See, for instance, the ‘Annual Report of the Dutch judiciary’, table 9a; De Rechtspraak, Jaarverslag Rechtspraak 2009 (Den Haag, Rechtspraak, 2010) available at: www.rechtspraak.nl/ Gerechten/RvdR/Publicaties/Jaardocumenten.htm.

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appellate court’s decision—therefore leads to a clear delay in the final settlement of a consumer dispute, but the same holds true for the application of the normal rules of civil procedure, in particular the rules on evidence. If the consumer’s claim is recognised by the court and the judgment is no longer subject to appeal, the consumer may demand immediate compliance with that judgment. Where the trader ‘voluntarily’ complies with the judgment, the enforcement of the judgment need not cause further delay or additional costs for the consumer. This is different when the trader does not comply with the judgment and the judgment must be enforced. To that extent, the consumer would have to invoke the assistance of a bailiff (huissier), to serve a writ of execution. The forced execution of the judgment will, of course, also take time and cause additional costs and will thus constitute an additional obstacle for the consumer to enforce his rights. E

Costs of the Procedure

Until recently, the costs of civil procedure were largely overlooked when evaluating how well the court procedure works.35 The lack of interest is unjustified, in particular with regard to the evaluation of the access to the court system in consumer cases: the costs of legal proceedings undoubtedly constitute the most important burden for consumers to submit a claim to the courts. In many cases, the consumer’s claim is of relatively low financial value, and the costs involved in court proceedings in practice often prevent the consumer from bringing such a claim. The higher these costs are, the more likely it is that the enforcement of consumer rights is beyond the reach of consumers, as they tend to have shallower pockets than traders.36 Where a party cannot afford to submit a claim or to oppose the other party’s claim, access to justice is simply denied and wrongs are not remedied or compensated.37 The costs the consumer may need to incur are manifold. First, the consumer may need to travel to the place where oral proceedings take place, and possibly also pay for accommodation. Certainly in international cases, these costs may even be higher than the amount of money claimed by the consumer. But even apart from such costs, there are many other expenses the consumer may encounter: charges to start the procedure—the costs for court fees and the costs for the services of a bailiff (see subsection i below); the costs of legal advice and representation (see subsection ii below) and the expenses involved with the hearing of witnesses and expert opinions (see subsection iii below). In principle, the parties will need to pay for these costs 35 cf C Hodges, S Vogenauer and M Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’ Oxford Legal Research Paper Series No 55/2009, 7. 36 cf, in more generic terms, G Musger, ‘The Impact of Costs on Cross Border Cases’ in P van der Grinten, P Meijknecht and F van der Velden (eds), Practical Obstacles in Cross Border Litigation. Speeches and Presidency Conclusions of the International Conference organized by the Dutch Presidency on 8 and 9 November 2004 in The Hague (The Hague, Kluwer, 2005) 81; cf also R Turner, ‘Costs and the Equality of Arms in Cross Border Cases’ in Van der Grinten, Meijknecht and van der Velden (eds), Practical Obstacles in Cross Border Litigation, ibid, 89. 37 Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 10, 32.

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when they occur.38 However, generally the costs will at least to some extent be shifted to the losing party (‘loser pays’ principle or ‘indemnity’ principle).39 In subsection iv below, specific attention will be paid to the problem that this principle causes in consumer cases. i

Costs Necessary to Start the Procedure

In almost all legal systems—the principal exceptions being France and Sweden40— the plaintiff is faced with the need to pay court fees directly at the beginning of the procedure; whereas most legal systems only levy one court fee, in some legal systems other fees apply with regard to subsequent procedural steps.41 Where the procedure starts by the bailiff serving a summons to the defendant, the consumer will sometimes have to pay for these costs separately, otherwise they tend to be included in the court fee.42 Where he acts as a defendant, the consumer may normally avoid the costs of serving a summons (sometimes even when he launches a counterclaim) and depending on national procedural law he may often also avoid the court fees. Whereas it thus seems attractive to simply wait until the trader lodges a claim, this is of course only possible if the consumer has not already paid. Moreover, as these costs are (to a large extent) shifted to the losing party anyway, in practice it does not make much difference whether the consumer acts as the plaintiff or as the defendant. What does matter, is the manner in which the court fees are calculated and, thus, the amount that is charged to the parties. In some legal systems, the court fees will be fairly modest as the access to the court system is seen as a fundamental right, which basically implies that the costs should not impede consumers from invoking the assistance of a court in settling a dispute. In other legal systems, the full cost of the use of the court system—including the judge’s and staff’s salaries—is recovered from the fees that the parties to a dispute have to pay.43 Obviously, in such a court system the access to justice in consumer cases may be in jeopardy. ii

Costs of Legal Aid

Where the parties are required to engage legal representation, the associated costs can easily stand in the way of filing a claim against the other party. There are huge differences in the way that the fees of attorneys are normally composed—varying from a contingency fee (‘no win, no fee’) to fixed fees and hourly rates. A recent European study by Hodges, Vogenauer and Tulibacka shows that hourly rates in Europe vary from €15–250 in Lithuania to €134–504 in Denmark and €75–700 in

38 39

Musger,‘The Impact of Costs on Cross Border Cases’, above (n 36) 81. cf Musger, ibid, 82; Turner, ‘Costs and the Equality of Arms in Cross Border Cases’, above (n 36)

88. 40 Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 11f. 41 ibid, and critical with regard to this approach, 33f. 42 cf Musger, ‘The Impact of Costs on Cross Border Cases’, above (n 36) 81. 43 cf Turner, ‘Costs and the Equality of Arms in Cross Border Cases’, above (n 36) 87.

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the Netherlands.44 It should be recognised that in most cases even the simplest consumer claim will cost a lawyer several hours in preparing and pleading, which probably means that these figures are to be multiplied at least by four in order to paint a complete picture of the costs of legal representation. Even so, the full amount of the costs of legal representation is based on calculated guesses, as lawyers from several legal systems indicate that it is difficult under their system to predict what the lawyers’ costs would be.45 This clearly indicates that these costs are not sufficiently predictable in those jurisdictions,46 which may deter parties from going to court as they will have trouble in ascertaining whether the costs of bringing a claim are proportionate to the value of the claim. Where legal representation is not required—which is usually the case if the proceedings take place in front of a small claims court or a JP—these costs may be avoided. However, in practice traders, and—depending on the value of the claim—even consumers have obtained legal representation, albeit normally not from lawyers, but from other providers of legal aid, such as trade unions and consumer organisations, or from family or friends. It seems likely that such providers of legal aid in any case charge lower rates than the hourly fee of solicitors, but nevertheless it appears that even in small claims often costs are incurred rather frequently. The fact that even in cases where no legal representation is required, legal advice is nevertheless often sought, is at least to some extent the consequence of the formal nature of the court procedure—the nature of which becomes immediately apparent to the parties at the start of the procedure. For instance, in any legal system requirements are set as regards the content of the summons and the way it is to be served to the other party. Defects in the summons may often be remedied, but only by way of a new summons, which entails additional costs. This means that in many cases the plaintiff, particularly if he is a ‘one-shotter’ such as a consumer, will need legal assistance when preparing the summons. The costs associated with such legal assistance will often not be proportionate to the value of the claim, which may deter consumers, in particular, from submitting relatively modest claims to the court.47

iii

Costs of Expert Opinions and Witness Hearings

Whenever an expert opinion is needed—for example, research is needed to determine whether the goods delivered were already defective on delivery—the judge has to determine whether one or both parties is required to deposit an advance in order for the expert to be paid. The normal situation will be that the party requesting the expert opinion is to pay the remuneration or an advance 44 cf Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 55 (Appendix III). The authors indicate, at 14, that these figures need further verification. 45 Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 17. 46 cf ibid, 35. 47 Jacobs, ADR en consument, above (n 4) 161–62.

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thereof.48 In many cases, that party will be the plaintiff. Nevertheless, the court may be allowed to shift the payment of any advance to the other party, or to divide it between the parties, in particular where the expert is to provide evidence for which each party bears a part of the burden of proof. For instance, it is the consumer who must prove that the goods delivered do not conform to the contract, but it is the seller, under Article 5, paragraph (3) of the Consumer Sales Directive, who bears the burden of proving that a lack of conformity which becomes apparent within six months of delivery of the goods, did not already exist at the time of delivery. In such a situation, both parties may profit from the expert opinion and the court may decide to order both parties to pay half of the advance. Someone who is called on to appear as a witness is required to appear and submit a statement. However, the witness has the right to compensation of the costs for travelling and—if necessary—for accommodation, as well as for loss of income. These costs are normally to be compensated for by the party that has called the witness.

iv

The ‘Loser Pays’ Principle

If the consumer loses the case he will, of course, not be able to reclaim the court fee, the costs for serving the summons and the costs of the expert opinion and the witness hearings, which he has paid for as a plaintiff. Moreover, whether he was the plaintiff or the defendant, he will normally be required to compensate the costs of the other party: almost all legal systems49 recognise, at least as a starting point, the ‘loser pays’ principle (also called the indemnity principle).50 This principle is also laid down in Article 16 of the Small Claims Procedure Regulation,51 which makes an exception, however, ‘to the extent that costs were unnecessarily incurred or are disproportionate to the claim’,52 an exception that seems also to have been accepted in most legal systems.53 The starting point, however, is that all costs of the proceedings incurred by the winning party should be compensated by the losing party. This includes the trader’s costs of legal representation—even in cases where the consumer was not represented himself. The risk of not only having to bear his own costs, but having to compensate the costs incurred by the trader, casts a dark cloud over the procedure.54 This is, of course, true for both parties, but may prevent in particular consumers—those who do not have the opportunity to spread the risk across multiple procedures or to 48 cf Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 13. 49 With the notable exception of France. See Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 20. 50 cf Musger, ‘The Impact of Costs on Cross Border Cases’, above (n 36) 82; Turner, ‘Costs and the Equality of Arms in Cross Border Cases’, above (n 36) 88. 51 Council Regulation (EC) 861/2007 of 11 July 2007 establishing a European Small Claims Procedure [2007] L199/1. 52 See section III.B below. 53 cf Musger, ‘The Impact of Costs on Cross Border Cases’, above (n 36) 82; see also for England and Wales: Turner, ‘Costs and the Equality of Arms in Cross Border Cases’, above (n 36) 88f. 54 Jacobs, ADR en consument, above (n 4) 27.

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write off the costs as part of the price for other contracts—from taking legal action by filing a claim themselves or by opposing a claim from the trader, or from attempting to provide evidence of certain positions. Hondius rightly notes that the risk of having to compensate the other party’s costs therefore stands in the way of consumers asserting their claims.55 In this respect, it should be recognised that the outcome of a procedure cannot always be predicted. For example, a consumer, who argues that a refrigerator that has broken down did not conform to the contract, bears the burden of proving that the non-conformity was caused by a defect which was already latently present at the time of delivery.56 The risk that, even after an expert has examined the refrigerator, it remains unclear whether a hidden defect existed at the time of delivery is therefore borne by the consumer. That means that the seller will not be required to repair or replace the refrigerator and the consumer will have to pay for the repair or replacement. Moreover, the costs the consumer has incurred in going to court cannot be reclaimed from the seller either, and on top of this all he will have to compensate the seller for the costs the seller encountered during the procedure. Under such conditions, the consumer would be wise not to run these risks and immediately order a new refrigerator or have the old one repaired at his own expense, even if he might have a valid claim against the seller. The risk of having to compensate the costs of the procedure will therefore lead to under-enforcement of consumer law.57 Moreover, it provides rogue sellers with an additional argument not to meet their customers’ demands, as they will hardly ever be able to enforce their rights. If, from a policy point of view, the private enforcement of consumer law is valued by the European and national legislators, it seems worthwhile to introduce a system of ‘one way’ cost shifting, where consumers may shift their costs, but their professional counterpart may not, or to exclude the application of the ‘loser pays’ principle altogether in small claims procedures.58

F

Problems in International Cases

A consumer who has contracted with a foreign trader may encounter even larger problems in enforcing his rights. When a consumer is forced to take legal action in a country different from the one in which he lives, he will often incur considerable travel and accommodation costs in order to submit and defend his claim. In addition, the case may be heard in a language different from the consumer’s, which may cause problems as even those consumers who are sufficiently proficient in the other language to conclude a contract in it, may not be comfortable appearing in 55

Hondius, ‘Naar een Nederlandse Small Claims Procedure?’, above (n 20) 197. Unless the non-conformity manifests within six months after the delivery, cf Art 5 para (3) of the Consumer Sales Directive (1999/44/EC [1999] OJ L171/12). 57 This fear evidently even applies in commercial cases, as the example of the effect of Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ L157/32, L195/16) in the Netherlands shows; cf Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 21. 58 cp Hodges, Vogenauer and Tulibacka, ‘Costs and Funding of Civil Litigation: A Comparative Study’, above (n 35) 23, 45. 56

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court. In many cases, a consumer who is forced to bring proceedings in a foreign country will not enforce his rights. The risk that the consumer will have to go to court in another country typically exists in three different situations. In the first place, the consumer may have gone to another country in person, for example, in the context of a holiday or a business trip, and have concluded the contract there. In this situation, the consumer will or should have been aware of the fact that in case of problems with the goods or services purchased he might have to go to court to the country where the contract was concluded. That fact may be taken into account by the consumer when deciding whether or not to conclude the contract. That is to a much lesser extent the case when it is not the consumer, but the trader who has crossed the border to offer his goods or services in the country of the consumer. In such cases, the consumer need not always be aware of the fact that he has concluded an ‘international’ contract, in particular not when the trader speaks the same language as the consumer (and does not have a clearly foreign accent). With regard to the competence of the consumer’s own national court, this situation is not particularly problematic either due to the rules of private international law, as will be explained below. Most problematic is the third category, which consists of contracts concluded online. In some cases, it should be clear to the consumer that he is concluding an international contract, in particular when he visits a foreign website and concludes the contract in a language other than his own. It becomes much less clear, however, when the consumer visits a foreign website but is given the possibility of clicking on a flag representing his own country and subsequently of concluding the contract in his own language. Where the website makes use of the extension .com, .org, .int or .eu, the ‘nationality’ of the trader in many cases is not disclosed to the consumer. In this context, it must be noted that a trader is not required to mention his geographical location before the contract is concluded, unless the trader demands (partial) payment of the contract price before the goods or services are delivered to the consumer.59 In these cases, the question of the international jurisdiction of courts is of major importance for a consumer who wants to maintain his rights. The international jurisdiction—at least as far as the contract falls within its scope—is determined on the basis of the Brussels I Regulation.60 In such cases, it is decisive whether the consumer’s counterpart pursues commercial or professional activities in the country where the consumer lives, or directs such activities (also) to that country,61 regardless of whether the consumer or the trader has taken the initiative for the conclusion of the contract. If that is the case, the consumer may choose whether to submit his claim before the competent court in his own country or the competent court in the trader’s country, whereas the trader may only summon the consumer to 59 cf Art 4 para 1(a) of the Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (Distance Selling Directive) [1997] OJ L144/19. 60 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation) [2001] OJ L12/1. 61 cf Art 15 para (1) Brussels I Regulation. According to para (3), the first paragraph does not apply to a contract of transportation that does not also include accommodation for an inclusive price.

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appear before the consumer’s own court.62 Moreover, in such cases the law of the country where the consumer has his habitual residence applies to the contract between the parties, as provided by Article 6, paragraph (1) of the Rome I Regulation.63 However, the provisions on consumer contracts in Articles 15–17 of the Brussels I Regulation do not apply to all contracts concluded by consumers.64 An important exception is made for disputes concerning the ownership, sale, or rent of immovable property: for such disputes only the court where the immovable property is situated has jurisdiction, according to Article 22, paragraph (1) of the Brussels I Regulation.65 For timeshare contracts, the international character depends on whether the economic importance of the services that are rendered along with the use of the immovable property itself (such as the right to make use of a swimming pool on the premises) is subordinate to the sales price: if that is the case, the exclusive jurisdiction of Article 22, paragraph (1) of the Brussels I Regulation applies, whereas if the economic value of the services outweighs the sales price, the specific provisions for consumer contracts apply.66 However, in all cases where the requirements of Article 6, paragraph (1) of the Rome I Regulation are met, a dispute over a timeshare contract will be assessed on the basis of the habitual residence of the consumer.67 This means that if the economic importance of the services to be supplied is subordinate to the sales price, the foreign court is competent to hear the case, but is required to apply the law of the country where the consumer lives. Obviously, the costs involved in such a procedure will be considerably higher than when the consumer may go to court in his own country and the court applies its own law. Fortunately, the provisions of the Brussels I and Rome I Regulations will in most cases lead to the case being heard in the country where the consumer lives and the law of that country being applied. The rationale for this is that consumers may thus take legal action in their own country and will not have to investigate what the contents of another legal system on a certain subject are, therefore ensuring that the costs involved in filing or opposing a claim are minimised. However, the fact that the regulations allow the consumer to go to court in his own country, does imply that the trader must make extra costs in order to lodge his own claim or oppose the consumer’s claim, for example, by engaging additional legal assistance.68 Moreover, translation costs will often be incurred and these can be considerable.69 These costs will mostly have to be made by the trader. However, if the trader wins the procedure, under the ‘loser pays’ principle these costs are ultimately shifted to the

62

cf Art 16 paras (1) and (2) Brussels I Regulation. Council Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I Regulation) [2008] OJ L177/6. 64 Nor does Art 6 of the Rome I Regulation lead to the application of the consumer’s own law in all contracts; in fact, the number of exceptions is larger than the exceptions of the Brussels I Regulation. 65 In that situation, the law of the country where the immovable property is located, is applicable to the contract: Art 4, para (1)(c) of the Rome I Regulation states. 66 JM Milo, ‘Timeshare in het Nederlandse recht’ in AS Hartkamp and CH Sieburgh (eds), De invloed van het Europese recht op het Nederlands privaatrecht, deel II (Alphen, Kluwer, 2007) 200f. 67 See Art 6, para (4) (c) Rome I Regulation. 68 cf Musger, ‘The Impact of Costs on Cross Border Cases’, above (n 36) 82–83. 69 ibid, 83. 63

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consumer.70 These costs will then be even higher than in a domestic case and may therefore deter the consumer from taking legal action even more than in a domestic case. IV

THE EUROPEAN PAYMENT ORDER AND THE EUROPEAN SMALL CLAIMS PROCEDURE

From the above, it follows that filing a claim and thus enforcing contractual rights in a consumer case is a costly and, given the application of the ‘loser pays’ principle, financially risky matter—particularly for consumers. The European legislator has tried to intervene in order to simplify the enforcement of consumer law and the recovery of damages. Two European regulations will be discussed in this section. First, I will deal with the European order for payment procedure (subsection IV.A). Secondly, I will discuss the European Small Claims Procedure (subsection IV.B). In the third subsection (IV.C) I will discuss whether—if the European procedures were also applied for domestic cases—the problems consumers encounter when taking legal action, as identified in section III of this paper, would be solved or at least decreased. A

The European Payment Order Procedure

The European Parliament and the Council of Ministers established on 12 December 2006 the Regulation on the creation of a European order for payment procedure.71 The regulation aims to simplify, speed up and reduce the costs of litigation in cross-border cases concerning uncontested pecuniary claims.72 The procedure may be useful if the consumer has a claim that is difficult to contest—for example, a claim for repayment of the sales price where the consumer has properly withdrawn from a distance contract73—but the trader appears unwilling to comply with his demand while not actually contesting the consumer’s right to withdraw. In most cases, the consumer would be able to lodge the claim in his own country on the basis of Articles 15–17 of the Brussels I Regulation. The European payment order would then be enforceable in all Member States of the European Union without the consumer having to obtain a declaration of enforceability (exequatur) in another Member State and without the trader having the possibility of opposing the recognition of the payment order.74 However, in most cases, this procedure will not benefit consumers. In so far as the consumer acts as the plaintiff, he will normally be faced with a trader who denies liability and, therefore, opposes the consumer’s claim. In that case, the proceedings shall be continued before the competent court 70

cf Case C-289/02 AMOK Verlags GmbH v A & R Gastronomie GmbH [2003] ECR I-15059. Council Regulation (EC) 1896/2006 of 12 December 2006 creating a European order for payment procedure (Payment Order Procedure Regulation) [2006] OJ L399/1. 72 cf Art 1 Payment Order Procedure Regulation and recitals nos (6) and (9) of the preamble to the regulation. 73 cp Art 6, para (2) Distance Selling Directive (97/7/EC, [1997] OJ L144/19), above (n 59). 74 cf Art 19 Payment Order Procedure Regulation (EC) 1896/2006, [2006] OJ L399/1), above (n 71). 71

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in accordance with the normal rules of civil procedure, unless the consumer had explicitly requested that the proceedings be terminated in that case.75 When the consumer is the defendant, the procedure may only take place in the country where the consumer lives.76 In so far as the consumer simply refuses to pay without contesting the claim on its merits, the order will, of course, be given. The European Payment Order Procedure in that case provides the trader with a simple and fast procedure to obtain a payment order, which may be enforced throughout the European Union. This situation, however, is outside the scope of this chapter, as no consumer rights are enforced in this case. When, on the other hand, the consumer contests the claim by arguing that the goods or services rendered did not conform to the contract, he will oppose the claim by lodging a statement of opposition in accordance with Article 16 of the Regulation. Article 17 of the Regulation then, again, provides that the case is referred to the normal procedure before the competent court, unless in turn the trader had requested explicitly that the proceedings be terminated in that case. Where the consumer wishes to enforce his rights, the European Payment Order Procedure is therefore no longer applicable. The European Payment Order Procedure, therefore, may make it easier in cross-border cases for both consumers and traders to collect an undisputed claim. However, when the other party contests the claim, the proceedings are referred to the ordinary procedure before the court. In such cases, the regulation does not offer solace for consumers wishing to enforce their rights. One would think that in such cases, the procedure would automatically be redirected towards the European Small Claims Procedure as regulated by the Small Claims Procedure Regulation.77 Unfortunately, neither regulation provides for such a transfer, which implies that the claim will be dealt with under the normal rules of civil procedure of a country.

B

The European Small Claims Procedure

The Small Claims Procedure Regulation was established on 11 July 2007.78 It deals with cross-border disputes where the other party opposes the claim, ie, precisely those disputes where the European Payment Order Procedure Regulation does not apply. It is not relevant whether the claim is based on a consumer contract, on a contract between two professional parties, or on tortuous liability.79 The procedure 75 Art 17 of the Payment Order Procedure Regulation. The consumer need not indicate why he would then want to terminate the proceedings, but it is likely that he would do so if he were afraid the costs would become too high, given also the application of the ‘loser pay’ principle. 76 cf Art 6, para (2) Payment Order Procedure Regulation and Art 16, para (2) Brussels I Regulation. 77 Council Regulation (EC) No 861/2007 of 11 July 2007 establishing a European Small Claims Procedure (European Small Claims Regulation) [2007] OJ L199/1. 78 ibid. 79 Albeit that state liability for acts and omissions in the exercise of state authority is excluded from the scope of the regulation, see Art 2, para (1) Small Claims Procedure Regulation in fine. Moreover, para (2) adds that the regulation does not apply, among other things, to claims based on maintenance obligations, wills and succession, bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, claims based on social security or arising from employment law;

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applies only if the monetary value of the claim (or of the other party’s counter claim) does not exceed a maximum of €2000.80 Similar to the European Payment Order Procedure Regulation, the European Small Claims Procedure is intended to simplify and speed up litigation and to reduce costs in cross-border (consumer) disputes and thus help to eliminate obstacles to the free movement of goods, persons, services and capital.81 When the plaintiff wins the procedure and thus obtains a favourable judgment from the court, that judgment may again be executed without the need for an exequatur in all EU Member States, with the exception of Denmark.82 The enforcement of the judgment is further governed by the national procedural rules of the Member State in which the judgment is executed.83 For cross-border disputes, the procedure is available parallel to national procedural schemes,84 which implies that the plaintiff may choose whether to submit his claim on the basis of the European Small Claims Procedure or to use the ordinary national procedure after having weighed the pros and cons of both. The procedure is, however, not available in purely domestic cases, implying that for all domestic contracts—which still constitute the vast majority of contracts—the plaintiff is required to make use of domestic procedures.85 The Small Claims Procedure is initiated by the plaintiff filling in the standard form introduced by Annex I to the Regulation and submitting that form together with the necessary written evidence (such as invoices and earlier complaint letters) to the competent court.86 He must do so in the language of the court.87 The written evidence need, however, only be translated if the document is in a language that is not an official language of the European Union or is not understood by the other party or the competent court.88 The party that introduces the document in question

tenancies of immovable property (with the exception of actions on monetary claims), claims based on violations of privacy and of rights relating to personality, including defamation and claims arising from arbitration. 80 Kramer, ‘European Small Claims Procedure’, above (n 29) 6 indicates that some Member States argued in favour of a higher limit, whereas other Member States—including many of the newer Member States—argued in favour of a lower limit. 81 cf Kramer, ‘European Small Claims Procedure’, above (n 29) 5. 82 cf Art 1 Small Claims Procedure Regulation, above (n 7) Art 2, para (3) of the regulation provides that the regulation is not applicable to the Kingdom of Denmark. See also Kramer, ‘European Small Claims Procedure’, above (n 29) 3f. 83 cf European Consumer Consultative Group, ‘Minutes of the meeting of 6–7 October 2009’ 2, available at: ec.europa.eu/consumers/empowerment/minutes/minutes0607102009_en.pdf. 84 cf Art 1 Small Claims Procedure Regulation, above (n 77). 85 According to S Saastamoinen, Directorate-General Justice, Freedom and Security of the European Commission, during a meeting of the European Consumer Consultative Group on 6 and 7 October 2009, the suggested application of the European Small Claims Procedure to purely domestic claims met with opposition from the Member States of the European Union, cf European Consumer Consultative Group, ‘Minutes’, above (n 83) 2; cf also Kramer, ‘European Small Claims Procedure’, above (n 29) 4, 7; see also, critical, Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 9f, who argues that for countries where no domestic Small Claims Procedure exists, use of the European Small Claims Procedure should become mandatory. 86 The jurisdiction of the Court is again to be evaluated on the basis of the Brussels I Regulation. 87 Art, 6 para (1) Small Claims Procedure Regulation, above (n 77). 88 See, ibid, Art 6, paras (2) and (3).

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in the proceedings is required to provide the translation if needed, and will also have to bear the costs thereof.89 The claim may be lodged with the court directly or sent to the court by post or by any other means of communication90 that is recognised in the Member State in which the claim is lodged.91 Member States may allow appeal from the first court’s decision,92 but appeal does not render the judgment unenforceable.93 When it deems the information provided by the claimant to be inadequate or insufficiently clear, or the form not to have been completed properly, the court must allow the claimant the opportunity to complete or rectify the form, to supply supplementary information or documents, or simply to withdraw the claim within a period to be specified by the court. To this extent, the court makes use of another standard form, which is included in Annex II to the Regulation. If the application is manifestly unfounded, the application is deemed inadmissible or the claimant fails to complete or rectify the form within the period determined by the court, the court is required to dismiss the claim.94 When the claim is outside the scope of the regulation, the court informs the claimant thereof. Unless the claimant subsequently withdraws the claim, the procedure will be continued in accordance with the ordinary rules of national civil procedure.95 When the form—after having been completed or rectified if necessary—is duly filled in, the court must forward it to the other party, using a third standard form, which is included in Annex III to the regulation. With that form, the court informs the other party that a claim has been lodged against that party on the basis of the European Small Claims Procedure Regulation. The court must send a copy of the claim form and of any supporting documents along with this third standard form, in principle by registered post.96 The other party is then given the opportunity to indicate, within 30 days of the receipt of that standard form and the supporting document and in the language of the court,97 whether it accepts or opposes the claim either by filling in the second part of the third standard form or by any other appropriate means. It is also required to send any relevant documents supporting its position at that time.98 Within a further 14 days, the court must forward a copy of all documents received to the claimant.99 Where the other party argues that the amount of a non-monetary claim exceeds the maximum of €2000, the court shall—within 30 days of forwarding the response to the claimant—decide whether the claim is within the scope of the regulation.100 If it determines this is not the case, the claimant may withdraw his claim in accordance with the provisions of Article 4, paragraph (4) of the regulation. The defendant may also lodge a 89 90 91 92 93 94 95 96 97 98 99 100

cf also European Consumer Consultative Group, ‘Minutes’, above (n 83) 2. eg, by fax or email. Art, 4 para (1) Small Claims Procedure Regulation, above (n 77). cf ibid, Art 17, para (1). cf Art 15, para (1) Small Claims Procedure Regulation, above (n 77). cf ibid, Art 4, para (4). cf Art 4, para (3) Small Claims Procedure Regulation, above (n 77). Art 5, para (2) and Art 13 Small Claims Procedure Regulation, above (n 77). cf ibid, Art 6, para (1). Art 5, para (3) Small Claims Procedure Regulation, above (n 77). ibid, Art 5, para (4). ibid, Art 5, para (5).

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counterclaim. Such a counterclaim is submitted in the same way as the original claim. However, if the counterclaim exceeds the maximum amount of €2000, both claims will be dealt with in accordance with the normal rules of civil procedure.101 In principle, the whole procedure is in writing.102 Parties are free to submit further documents at a later stage of the procedure in so far as the court allows them to do so.103 An oral hearing shall be carried out if the court considers this necessary, or if one of the parties so requests. The court may, however, refuse the request for an oral hearing if, in light of the circumstances of the case, it considers that an oral hearing ‘is obviously not necessary for the fair conduct of the proceedings’. The court is required to state its reasons if it refuses the request for an oral hearing. The refusal—and most likely also the award of the request—may not be appealed from separately.104 The court may, in so far as the necessary technical resources are available, hold the oral hearing by means of a video conference or by other means of distance communication,105 thus limiting the costs for the party that resides in the other Member State for travelling and accommodation, as well the costs of hearing witnesses located in another country. In accordance with Article 9 of the Small Claims Procedure Regulation, the court determines the means of taking evidence. The court may make use of written statements of witnesses, experts and the parties themselves, as well as all written evidence produced by the parties. The court may order a party to produce further evidence,106 but should exercise restraint in so far as it concerns expert opinions or an oral hearing of witnesses: expert evidence or oral testimony of witnesses is allowed only ‘if it is necessary for giving the judgment’; in deciding, the court is also required to take into account the costs of gathering evidence by such means.107 More generally, the regulation requires the court to opt for the simplest and least onerous way of gathering evidence.108 In particular, requests for oral testimony of witnesses will have to be assessed with reservation when the Small Claims Procedure is applied: courts should consider whether the evidence that is already available in writing—if necessary supplemented by an ordinary, written statement of the witness—is not already sufficient for the court to decide on the claim. The parties are not required to have legal representation.109 The claimant may fill in the first standard form himself. The Member States are required to provide practical assistance in completing the forms and to provide information about procedural questions.110 Moreover, the procedure need not be started by a formal

101 cf ibid, Art 5, para (7); see critical on this Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 11, who argues that the low limit may be an incentive for a defendant in bad faith to lodge a frivolous counter claim above the limit and thus to frustrate the use of the Small Claims Procedure. See also Kramer, ‘European Small Claims Procedure’, above (n 29) 6f. 102 cf Art 5, para (1) Small Claims Procedure Regulation, above (n 77). 103 cf ibid, recital (12) in the preamble. 104 cf Art 5, para (1) Small Claims Procedure Regulation, above (n 77). 105 ibid, Art 8. 106 cf Art 7, para (1)(b) Small Claims Procedure Regulation, above (n 77). 107 cf ibid, Art 9, paras (1) and (2). 108 ibid, Art 9, para (3). 109 cf ibid, Art 10. 110 cf Art 11 and recitals 21–22 of the preamble to Small Claims Procedure Regulation, above (n 77); cf also Kramer, ‘European Small Claims Procedure’, above (n 29) 8.

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summons, which implies that the plaintiff is not required to invoke the assistance of a bailiff either. Both aspects may help in keeping the costs of the procedure low. The parties are, nevertheless, allowed to invoke legal assistance from lawyers or, for instance, from consumer organisations or legal insurance companies.111 In the original proposal for a European Small Claims Procedure it was proposed that the whole procedure—subject to appeal, if allowed under national law— should be finished with a final judgment from the court to be rendered within six months following the registration of the claim form.112 Although keeping the procedure within such time restraints is certainly something to be aspired to—and in ordinary cases where no witnesses are heard it should be feasible to do so—it seems wise not to impose an obligation to that extent on the court, in particular if the court deems an oral hearing or a witness hearing necessary. For that reason, I agree with the decision by the European legislator not to include such time limits in the final text of the regulation.113 Regrettably, the possibility of time-consuming appeals has not been excluded altogether. The current option for the Member States will effectively mean that the Small Claims Procedure will have a rather different impact in Member States where an appeal is possible than in Member States where it is excluded. That is difficult to reconcile with the intention to harmonise and speed up proceedings with crossborder elements.114 In the original proposal for a European Small Claims Procedure it was proposed that consumers—whether acting as plaintiff or as defendant—would not have to compensate the other party’s costs for legal representation in case they had lost the procedure and were not represented by a lawyer or another legal professional.115 Obviously, such a provision could ease the consumer’s fear for additional costs that he cannot influence himself. Moreover, the consumer’s counterpart would think twice when engaging legal representation if it knows the costs thereof will not be compensated, thus preventing the unnecessary use of legal representation. The provision would therefore definitely have led to a reduction of costs, as was its aim.116 However, in the final text of the regulation, this consumer-friendly provision was dropped on the grounds that the successful party should not be disadvantaged as a consequence of having taken legal representation.117 As a consequence, Article 16 of the Small Claims Procedure Regulation provides that the ‘loser pays’ principle applies also when the unsuccessful party is a consumer. As

111

cf Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 10. See Art 10, para (1) of the ‘Proposal for a Regulation of the European Parliament and of the Council establishing a European Small Claims Procedure’ (Proposal) COM (2005) 87 final (15 March 2005). In exceptional circumstances the court would be allowed to disregard the time limit if respecting would jeopardise the proper conduct of proceedings, but it would then be required to take the necessary steps as soon as possible; cf Art 12, para (2) of the Proposal. 113 cp, Kramer, ‘European Small Claims Procedure’, above (n 29) 11. 114 Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 13; Kramer, ‘European Small Claims Procedure’, above (n 29) 10. 115 cf Art 14, para (2) of the ‘Proposal for a Regulation of the European Parliament and of the Council establishing a European Small Claims Procedure’ (Proposal) COM (2005) 87 final (15 March 2005); cf also Kramer, ‘European Small Claims Procedure’, above (n 29) 11. 116 See explicitly recital no (14) of the preamble to the Proposal, above (n 112). 117 Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 12. 112

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stated in the Article, an exception is made, however, ‘to the extent that costs were unnecessarily incurred or are disproportionate to the claim’. When costs are incurred ‘unnecessarily’ or when they are ‘disproportionate to the claim’ is, of course, to be determined by the court. In doing so, the court is likely to take into account its national standard. It should be noted that what is seen as necessary or reasonable in one legal system, may be seen as grossly excessive in others,118 which implies that the party which is required to go to court, or defend himself in a court in another country, could be in for a nasty surprise from that court. The European regulation does give some guidance to the courts, though: it indicates that the court should pay specific attention to the costs resulting from the fact that the other party was represented by a lawyer or another legal professional,119 and to any costs arising from the service or translation of documents.120 Moreover, as already indicated, the court is also required to make use of the cheapest and simplest manner for gathering evidence,121 which indicates that the unnecessary use of costly proceedings—such as witness hearings and expert opinions—could justify the court deciding not to shift these costs to the losing party. Nevertheless, the point of departure is that all the winning party’s costs are to be compensated by the unsuccessful party, even if that is a natural person who was not represented, and the other party is a professional party that had legal representation. This means that the regulation does not solve the problem of the consumer not only running the risk of having to bear his own costs, but having to compensate the costs incurred by the trader, which was identified in section III.E.iv above as one of the main reasons for the under-enforcement of consumer rights. An additional potential advantage of the Small Claims Procedure is the seemingly informal procedure, which is signified by the use of standard forms (and the absence of the requirement of legal representation). Whether the use of standard forms is indeed advantageous for the parties depends on the extent to which the forms are user-friendly and whether courts are able to handle the completed forms.122 The costs involved in the procedure will in any case decrease as the costs for a formal summons and legal representation may be avoided and the costs for expert opinions and witness testimony are to be controlled by the court. Both the plaintiff and the defendant must, however, make their claim and defence in the language of the court. In many cases, this will mean that either the consumer or the trader will have to incur translation costs.123 The extent of such costs, however, seems limited as there is no need to invoke the assistance of a qualified interpreter or translator, as the help may be provided by both family and acquaintances of the parties and by providers of legal advice.124

118 119 120 121 122 123 124

cf Musger, ‘The Impact of Costs on Cross Border Cases’, above (n 36) 82. This particular statement in the recitals is therefore only reminiscent of the original proposal. cf recital 29 of the preamble to the Small Claims Procedure Regulation, above (n 77). ibid, Art 9, para (3). See also Kramer, ‘European Small Claims Procedure’, above (n 29) 12. Cortés, ‘Proposed European Small Claims Procedure’, above (n 29) 12. See doubtful in this respect Kramer, ‘European Small Claims Procedure’, above (n 29) 12.

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Individual Enforcement of Consumer Rights V

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CONCLUDING REMARKS—THE WAY FORWARD?

In sections II and III, several obstacles to the proper enforcement of consumer rights by individual consumers were identified. A first problem is that consumers (as well as traders) are not aware of consumer rights. The development of easy-to-use and easily accessible websites with information on consumer rights may help in empowering consumers. This is a necessary condition for the individual maintenance of consumer rights—consumers will only take legal action if they know of their existence and if there is a high probability that taking legal action will be successful. However, this barrier to the enforcement of consumer rights may be taken away only to a limited extent: in practice, consumers will only invest time and energy in becoming informed when they believe they should be entitled to protection and when the interests at stake are serious enough to them. Where consumers believe they are not entitled to a remedy, or where, already from the outset, the monetary value of a potential claim does not outweigh the assumed cost and effort in obtaining that remedy, consumers will simply take their losses. Where consumers want to enforce their rights by taking legal action, they encounter several more obstacles. The first of these problems—the fact that consumers may not be aware of the possibility of having the dispute settled by a court, can be overcome in two ways. First, when consumers seek information as to their rights, they are most likely also willing and able to find information as to who may actually decide that dispute. Secondly, in most consumer cases, consumers are in fact not plaintiffs, but defendants and as such they have already become familiar with the existence of the court as the instance deciding the matter. When they are willing to enforce their rights and have acquainted themselves with the court as the instance deciding the claim, they are faced with the formalities of a court procedure. Court proceedings are formal and the language used is difficult to understand for lay persons and almost impossible to copy. However, both the formalities and the jargon used tend to be less in courts that usually deal with consumer cases, for example, small claims courts or before JPs. Nevertheless, problems are caused due to the procedural requirements, for instance with regard to the content of a summons. An informal procedure that is started by way of an electronic form and in which standard forms are used by both the parties and the courts, will diminish this particular obstacle. In this sense, both the European Payment Order Procedure and the European Small Claims Procedure show the way for developments in national procedural law. The next obstacles are related to the practicalities of communication between the parties: the consumer may need written evidence of his complaint, or may have to notify his complaint within a fixed or a reasonable period after its (presumed) discovery. The first of these obstacles relates to the requirement that a party— before being allowed to go to court—in some legal systems must be able to prove that prior communication has taken place between the parties. In consumer cases, that prior communication has typically taken the form of an oral complaint at the retail shop, of which no recorded evidence exists. In such countries, before going to court, the consumer then in fact must state his complaint again in writing. In practice, however, this hardly constitutes an extra burden as such a (second) written complaint is rather common anyway. More problematic is that the consumer may

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run into evidentiary problems if a Member State requires a timely notification of the complaint—the second of these types of obstacles. Here, the absence of proof is even more pertinent, as a later notification that can be proven does not absolve the absence of proof of the earlier oral complaint. Hence, the consumer runs the risk of not being able to prove the timeliness of his complaint, and thus faces losing his claim altogether. The former of these obstacles need not necessarily be tackled; the second should be dealt with. If the duty is not abolished altogether for consumer contracts—as is suggested in the DCFR—at least the consequences of a breach thereof should be mitigated, for instance by only taking away the consumer’s rights to termination or specific performance of the contract, but leaving the right to claim a price reduction or damages intact. Another obstacle is the fact that the consumer must persevere. A court procedure takes a long time, in particular if the court orders the hearing of witnesses or requires an expert opinion. Where such means of gathering evidence are used, in many countries the procedure is likely to take over a year. Moreover, where the parties are given the possibility to appeal against the judgment, the length of the procedure is more than doubled. These problems would certainly diminish if the European Small Claims Procedure—including a restrictive approach to costly and time-consuming evidence gathering procedure—were also to be applied to domestic cases, and the possibility of appealing excluded altogether. However, the most important burden involved in submitting a claim to the court in a consumer case is undoubtedly the fact that the consumer’s claim is often of a relatively low financial value, which does not justify bringing the claim in the first place. Costs for travelling and accommodation, in particular in international cases, may be higher than the value of the dispute. The same holds true if the consumer is in need of legal assistance or when costs are incurred during the hearing of witnesses and expert opinions. These costs may largely be avoided by the parties. This is not true for court fees and the costs of a summons and, in particular, in international cases, for the costs of translating documents written in a language other than that of the court. Most problematic for consumers, however, is the fact that the losing party is required to pay the other party’s legal fees. These costs cannot be controlled by the consumer other than by refraining from the procedure altogether. In practice, the risk of potentially having to reimburse these expenses may deter consumers from enforcing their rights, in particular in claims of a relatively low monetary value. The (rational) fear of having to cover these costs will therefore restrict the number of consumers enforcing their rights and thus lead to under-enforcement of consumer law. The problem of the low monetary value of the initial claim in relation to the potential costs of the procedure can, of course, not be taken away completely. Application of the European Small Claims Procedure, with its simple option for starting a procedure, the restrictive application of the hearing of witnesses and the absence of a legal advice obligation will certainly help diminish the problem125 The problem of the application of the ‘loser pays’ principle is, however, not resolved by the European Small Claims Procedure.

125

In this sense, see also Kramer, ‘European Small Claims Procedure’, above (n 29) 12.

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In international cases, the Brussels I Regulation ensures that in most cases consumers may sue their counterpart in their own country, whereas they may be sued by their counterpart only in their home country. For most consumer cases this minimum requirement for the maintenance of individual consumer rights is therefore met. Cases pertaining to the ownership or use of immovable property— with the possible exclusion of timeshare contracts—are an important exception. In most cases, the costs involved in going to court in another country would deter both the consumer and the trader from maintaining their rights were it not for the European Payment Order Procedure and the European Small Claims Procedure. The two European regulations contain an important caveat, however: where a consumer or a trader disputes the substance of a claim in the European Payment Order Procedure, the proceedings are referred to the regular national procedure instead of to the European Small Claims Procedure. In conclusion, the European regulations—in particular the European Small Claims Procedure—provide a clear improvement regarding the possibility of consumers to enforce their rights in front of a court. Where no domestic equivalent of a Small Claims Procedure exists, it is likely that the consumer is even better off if he happens to have concluded a contract with a foreign trader, as both the European Payment Order Procedure and the European Small Claims Procedure lead to fewer formalities and fewer costs than the domestic procedures would. In this respect, it would be advisable if Member States were also to apply the essence of these European regulations to purely domestic cases. The chances of consumers actually enforcing their rights would certainly increase if they did not face the risk of having to bear the costs of—in particular—the other party’s legal representation should lose their case. Both national and European legislation would need to be amended in this respect in order to facilitate the proper enforcement of consumer law by consumers themselves. Alternatively, ADR schemes which in some countries, such as the Netherlands, already deal with the bulk of consumer disputes, should be set up or improved. Yet, for some claims, the monetary value will be too insignificant for any court or ADR procedure to be worth the effort and costs. For such claims, only collective procedures may ensure that (national and European) consumer law is properly enforced.

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31 Enforcement and Compliance: An EU Law Perspective JULES STUYCK

I

INTRODUCTION—THE TRANSFORMATION OF PRIVATE LAW THROUGH ENFORCEMENT RULES

I

N DEMOCRATIC SOCIETIES the state is responsible for enforcement of rights. In liberal democracies, the role of the state in the area of enforcement and compliance of private law can basically be confined to ensuring that a well functioning and impartial judicial system is put into place and/or that decisions of arbitrators freely chosen by the parties are enforced. Civil procedure law is basically of a public law nature since it has as its primary object to determine the competencies of the judiciary and to fix the rules that judges and parties have to observe in dealing through state bodies, ie, courts. Both in the Anglo-American and the continental European tradition, the role of the judge in civil litigation is basically passive. This is certainly the case in England and the United States with its ‘adversarial system’ where parties conduct proceedings. However, in England, the US and continental Europe legislative changes in recent decades have given more power to judges.1 Where private law rules aim at protecting the weaker party in a contractual relationship—minor, employee, tenant, consumer, investor—and are therefore mandatory, enforcement and compliance imply at least one additional role of the state: providing adequate remedies and guaranteeing effective access to justice. Effective access to justice has undoubtedly prompted a more active role of the judge than what was usual in both the Anglo-American and the continental European tradition. In addition, typical private law obligations (for example, of businesses vis-à-vis consumers or employers vis-à-vis employees) are increasingly enforced through criminal or administrative sanctions, adding another public law dimension to contract law.

1 This trend has already been observed more than 20 years ago by M Cappelletti and B Garth, ‘Introduction-Policies, Trends and Ideas in Civil procedure’ in M Cappelletti (ed), International Encyclopedia of Comparative Law Vol XVI, Civil Procedure (Tübingen, Mohr, 1987) 27. The change is even more noteworthy in Spain, with the introduction of a new Code of Civil Procedure in 2000: the judge has to take all measures required for ensuring a rapid procedure (see on this and for a comparative survey B Allemeersch, Taakverdeling in het Burgerlijk Proces (Antwerp, Intersentia, 2009) 49ff.

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There is another trend which transforms private law in general and contract law in particular (especially consumer contract law, labour law, landlord-tenant relations etc). Traditionally private law, both in the common law and in the continental European legal systems, is a question of individual relations: a tenant versus a landlord, spouses who want to divorce, a businessman who wants payment from a client, etc. However, private law has gradually transcended individual relations. The emergence of trade unions has led to the phenomenon of collective labour agreements granting employees rights they could not have bargained for individually. But in other areas the aggregation of rights has been developed for purely economic reasons. To give an example: the multiplication of identical or comparable private law claims, for example, in tort and insurance law, have led to standard solutions (like grids for the calculation of damages) and standard procedures, if not joint actions. In the non-contractual sphere, the existence of trade associations (for example, in the law of unfair competition) has led to a certain collectivisation of claims or legal actions—with an example here being the cease and desist orders sometimes brought by associations acting in the common interest of their members. More recently, the emergence of NGOs (Non Governmental Organisations) like environmental and consumer groups and of the information society, ie, a society in which much more is known about persons with similar legal problems, has boosted the trend of aggregating private law suits and has thus accentuated the ‘public’ aspect of private law. The end of the last millennium and the beginning of this one has seen the emergence of true multi-party litigation in Europe. Where NGOs representing collective interests act in court purely private law remedies are not appropriate; they call for another type of remedies: injunctions, penalty payments, skimming off, punitive damages and so on. However, there also seems to be an opposite movement. Private enforcement is seen as a tool for the effective application of public law rules: see the European Commission’s White Paper of 2008 on claims for damages for violations of antitrust law (including in contractual situations).2 Finally, recent non-discrimination laws (EC directives)3 impose on private contract parties (employers, suppliers) obligations akin to state obligations under public law. In the Member States these obligations are enforced both through public and private law. It is not the ambition of this chapter to explore—let alone to describe in detail—the general trends observed in the preceding paragraphs. Nor is it possible to discuss in depth the consequences of these changes for European contract law. Taking an EU law4 perspective this chapter will focus on the role of the Court of Justice and secondary European Union law in the enforcement of private law.

2 Commission, ‘White Paper on Damages Actions for Breach of the EC Antitrust Rules’ COM (2008) 165 (2 April 2008). 3 Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation [2000] OJ L303/16; Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services [2004] OJ L373/37. 4 With the entry into force on 1 December 2009 of the Treaty of Lisbon (signed on 13 December 2007 and published in the Official Journal (OJ) on 17 December 2007 (C306/62), the EC Treaty has

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A first part of this chapter will contain a brief overview of the basic principles of European Union law that relate to the enforcement of private law: the principle of procedural autonomy of the Member States and the limited legal bases in the Treaty for EU action in this respect. In a second part, I will briefly look at the role which the European Court of Justice (ECJ) plays in shaping private law enforcement, while in a third part I will look at the impact of EU non discrimination law on the enforcement of private law. A fourth part will be devoted to the possibilities of EU action in the field of collective redress and a fifth one will discuss the latest proposals of the Commission on collective consumer redress. I will conclude that EU law increasingly sets the parameters for the enforcement of private law originating in EU law through collective enforcement and that the EU has the powers to adopt enforcement rules not only for cross-border litigation, but for domestic litigation.

II

A i

BASIC PRINCIPLES OF EUROPEAN UNION LAW REGARDING THE ENFORCEMENT OF PRIVATE LAW

The Competence of the EU in the Field of Private Law Article 114 TFEU (ex Article 95 EC)

Pursuant to Article 114 of the Treaty on the Functioning of the European Union (TFEU; ex Article 95 EC), the EU legislature shall adopt measures for the approximation of 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. In a series of judgments, the ECJ has drawn some important limits to the use of Article 114 TFEU. In its famous Tobacco Advertising I judgment5 the Court held that the measures referred to in Article 95 EC (now Article 114 TFEU) are intended to improve the conditions for the establishment and functioning of the internal market. To construe that Article as meaning that it vests in the Union legislature a general power to regulate the internal market would not only be contrary to the express wording of the provisions of the Treaty on the internal market, but would also be incompatible with the principle of Article 5(2) TFEU (ex Article 5 EC) that the powers of the Union are limited to those specifically conferred on it. In Tobacco Advertising II 6 the Court however accepted that recourse to Article 95 EC as a legal basis does not presuppose the existence of an actual link with free movement between the Member States in every situation covered by the measure founded on that basis. As the Court has previously pointed out, to justify recourse to Article 114 TFEU as the legal basis what matters is that the measure adopted on that basis been replaced by the Treaty on the Functioning of the European Union (TFEU) and ‘Community Law’ is now ‘European Union law’. 5 6

Case C-376/98 Germany v EP and Council [2000] ECR I-8419. Case C-380/03 Germany v EP and Council [2006] ECR I-11573.

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must actually be intended to improve the conditions for the establishment and functioning of the internal market.7 Article 114 TFEU can therefore serve as a legal basis for private law in general, and private law remedies in particular, insofar as they are intended to improve the conditions for the establishment and functioning of the internal market. With regard to the method of legislation at the EU level, the case law of the Court suggests another possible limit of Article 114 TFEU: minimum harmonisation might not sufficiently serve the objective of Article 114 TFEU in that Member States are free to maintain measures that would prevent the realisation of a genuine internal market.8 ii

Article 81 TFEU (ex Article 65 EC)

Title V, Chapter 3 of the TFEU relates to judicial cooperation in civil matters. Article 81(1) TFEU states that the Union shall develop judicial cooperation in civil matters having cross-border implications, based on the principle of mutual recognition of judgments and of decisions in extrajudicial cases. Such cooperation may include the adoption of measures for the approximation of the laws and regulations of the Member States. Pursuant to Article 81(2)(i)(a) the following measures can be adopted by the Union legislature: (e) effective access to justice and (f) the elimination of obstacles to the proper functioning of civil proceedings, if necessary by promoting the compatibility of the rules on civil procedure applicable in the Member States. Article 81 TFEU is broader than Article 65 EC in the following respects: (i) the express reference to the possibility of approximation of the laws and regulations of the Member States in certain areas; (ii) the inclusion of ‘effective access to justice’ in the list of areas in which measures can be taken. By contrast Article 81 TFEU maintains the limitation to matters having cross-border implications. With regard to the enforcement of private law, Article 81 is more limited in scope than Article 114, as it only applies to judicial procedures. On the other hand, to the extent that Article 81 would also allow for the adoption of procedural rules with purely domestic effect it is uncertain to what extent these rules could be minimum rules leaving the Member States the possibility to adopt domestically more far reaching or more detailed rules. iii

Article 169 TFEU (ex Article 153 EC)

In the field of consumer law another Article should be mentioned in this respect: Article 169(2)(b) TFEU (ex Article 153(3)(b) EC) allowing the European Parliament and the Council to adopt measures which support, complement and monitor a policy pursued by the Member Sates. 7 See, to this effect, Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others [2003] ECR I-4989, paras 41–42; and Case C-101/01 Lindqvist [2003] ECR I-12971, paras 40–41. 8 See S Weatherill, ‘The Constitutional Competence of the EU to Deliver Social Justice’ (2006) 2 European Review of Contract Law 136ff.

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This provision has hardly ever been used. Indeed only Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers has been adopted on this basis, all other consumer law directives having been adopted on the basis of Article 114 TFEU. In contrast to, for example, Article 168 TFEU (ex Article 152 EC) on health protection which expressly excludes harmonisation in that field, Article 169 TFEU allows EU legislation that has a substantive impact on national law. The words ‘supporting, complementing and monitoring’ do, however, seem to exclude full harmonisation of national law, leaving Member States a certain policy margin. Indeed, pursuant to Article 169(4) TFEU (ex Article 153(5)) measures adopted pursuant to paragraph 3 (ie, 169(2)(b)) shall not prevent any Member State from maintaining or introducing more stringent protective measures, provided such measures are compatible with the Treaty. Some authors have advocated a more intensive use of Article 153(3)(b). They argue that the condition in Article 169(2)(b) that the Union measures ‘support, supplement and monitor’ a policy pursued by Member States will easily be fulfilled since today all Member States each have a body of domestic consumer law.9 EU legislation on collective actions would certainly support and supplement measures of substantive and procedural law existing in the Member States to protect consumers and therefore Article 169(2)(b) would seem to be a proper legal basis for such legislation.

B The Autonomy of the Member States in the Field of Remedies and its Limits10 According to a well-established case law of the ECJ ‘it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which the citizens have from the direct effect of Community law’.11 This principle has always been subject to two conditions, known as the condition of equivalence and the condition of effectiveness: the enforcement of Union law shall not be more difficult than the enforcement of equivalent national laws and national rules should not make it impossible in practice to exercise the rights conferred by Community law (principles of equivalence and effectiveness).12

9 N Reich, ‘A European Contract Law or an EU Contract law Regulation for Consumers?’ (2005) Journal of Consumer Policy 383; H-W Micklitz, ‘The Relationship between National and European Consumer Policy—Challenges and Perspectives’ (2008) Yearbook of Consumer Law 60–61; N Reich and H-W Micklitz, The Basics of European Consumer Law (Macaou, SAR, 2007) 42. 10 This part is largely based on J Stuyck, ‘Enforcement of Consumer Rights and Legal Redress for Consumers in the EU: An Institutional Model’ in F Cafaggi and H-W Micklitz (eds) New Frontiers of Consumer Protection. The Interplay between Private and Public Enforcement, (Antwerp, Intersentia, 2009) 70ff. 11 Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043, para 13. 12 See P Craig and G De Bùrca, EU Law. Text, Cases and Materials 4th edn (Oxford, Oxford University Press, 2008) 313–28.

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Undoubtedly, this principle of procedural autonomy only applies when there are no procedural rules at the EU level. It is obvious that Member States are bound, for example, by the Brussels I Regulation13 and the new Regulation on Cross-border Small Claims.14 Both regulations, however, are limited to cross-border disputes (see above). Interestingly, EU legislation (directives, regulations), including legislation in the consumer field, goes halfway in prescribing national procedural rules for the enforcement of the substantive provisions they set. Three examples can be given. The first is the so called ‘remedies’ directive in the field of public procurement, which is probably the most far-reaching set of EU rules on national procedures. The second one is Regulation 1/2003 implementing the antitrust rules of Articles 101 and 102 TFEU (ex Articles 81 and 82 EC). The third and last example is the invariable enforcement formula used in EU consumer directives.15 Article 1 of the Remedies Directive16 provides that the Member States shall take the measures necessary to ensure that, as regards the contract awarding procedures falling within the scope of the relevant substantive directives, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in that directive and, especially, on the grounds that such decisions have infringed Community law in the field of public procurement or national rules implementing that law. Article 2 states Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for powers to: (a) Take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority. (b) Either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure. (c) Award damages to persons harmed by an infringement.

13 Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2001] OJ L12/1. 14 Regulation (EC) 861/2007/EC establishing a European Small Claims Procedure [2007] OJ L199/1. 15 I refer only to judicial enforcement. Beyond that the Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees (Consumer Sales Directive) [1999] OJ L171/12, harmonises, eg, substantive remedies in case of a lack of conformity in consumer sales contracts. See also Art 6(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (Unfair Contract Terms Directive) [1993] L95/29, according to which Member States have to provide in their national law that unfair terms shall not be binding on the consumer. 16 Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts [1989] OJ L395/33, as amended by Directive 2007/66/EC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31.

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When a body of first instance, which is independent of the contracting authority, reviews a contract award decision, Member States shall ensure that the contracting authority cannot conclude the contract before the review body has made a decision on the application either for interim measures or for review. Member States may provide that the body responsible for review procedures may take into account the probable consequences of interim measures for all interests likely to be harmed, as well as the public interest, and may decide not to grant such measures when their negative consequences could exceed their benefits. A decision not to grant interim measures shall not prejudice any other claim of the person seeking such measures. Member States may provide that where damages are claimed on the grounds that a decision was taken unlawfully, the contested decision must first be set aside by a body having the necessary powers. As a matter of principle, the effects of the exercise of the powers referred to in paragraph 1 of Article 2 on a contract concluded subsequent to its award shall be determined by national law. Directive 2007/6617 has added a stand still provision (Article 2a): the contract shall not be concluded before the expiry of 10 calendar days (15 calendar days when surface mail is used) from the award in order to give unsuccessful tenderers a real chance to challenge the award decision before the contract is concluded. The second example is the basic procedural regulation for the application of the antitrust provisions of Articles 81 and 82 (now Articles 101 and 102 TFEU), ie, Regulation 1/2003/EC18 implementing Articles 81 and 82 EC. This regulation decentralised the application of the EU antitrust rules. Not only the Commission, but also the national competition authorities and the national courts can and do apply these provisions (under the old Regulation 17/62 the Commission had the exclusive power to apply Article 81(3) (now Article 101(3) TFEU), by granting exemptions). The regulation details the powers of the Commission and indicates what kinds of decisions the National Competitions Authorities (NCAs) can take. The NCAs shall however apply Articles 101 and 102 TFEU according to their national procedural rules and apply sanctions provided for under national law. With regard to national courts, the regulation merely states that they shall have the power to apply Articles 101 and 102 TFEU (Article 6). Article 16(1) adds a rule to secure the uniform application of EU competition law by stating that when national courts rule on agreements, decisions or practices under Article 101 and 102 TFEU which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions that would conflict with a decision contemplated by the Commission in proceedings it has initiated. To that effect, the national court may assess whether it is necessary to stay its proceedings. This obligation is without prejudice to the rights and obligations under Article 267 TFEU (ex Article 234 EC) to refer preliminary questions to the ECJ.

17 Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31. 18 Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/25.

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My third example is the Unfair Commercial Practices Directive 2005/29/EC,19 which illustrates the approach in this field of the law (see several other consumer law directives). Pursuant to Article 11 (enforcement) Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provisions of this directive in the interest of consumers. Such means shall include legal provisions under which persons or organisations regarded under national law as having a legitimate interest in combating unfair commercial practices, including competitors, may: (a) take legal action against such unfair commercial practices; and/or (b) bring such unfair commercial practices before an administrative authority competent either to decide on complaints or to initiate appropriate legal proceedings. It shall be for each Member State to decide which of these facilities shall be available and whether to enable the courts or administrative authorities to require prior recourse to other established means of dealing with complaints, including those referred to in Article 10. These facilities shall be available regardless of whether the consumers affected are in the territory of the Member State where the trader is located or in another Member State. It shall be for each Member State to decide: (a) whether these legal facilities may be directed separately or jointly against a number of traders from the same economic sector; and (b) whether these legal facilities may be directed against a code owner where the relevant code promotes non-compliance with legal requirements. 2. Under the legal provisions referred to in paragraph 1, Member States shall confer upon the courts or administrative authorities powers enabling them, in cases where they deem such measures to be necessary taking into account all the interests involved and in particular the public interest: (a) to order the cessation of, or to institute appropriate legal proceedings for an order for the cessation of, unfair commercial practices; or (b) if the unfair commercial practice has not yet been carried out but is imminent, to order the prohibition of the practice, or to institute appropriate legal proceedings for an order for the prohibition of the practice, even without proof of actual loss or damage or of intention or negligence on the part of the trader. Member States shall also make provision for the measures referred to in the first subparagraph to be taken under an accelerated procedure: — either with interim effect,

or 19 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (Unfair Commercial Practices Directive) [2005] OJ L149/22.

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— with definitive effect

on the understanding that it is for each Member State to decide which of the two options to select. The right of consumer organisations to bring an action for a cease and desist order in case of infringements of national rules implementing EU consumer directives has been guaranteed more widely by the so-called ‘Injunctions’ Directive 98/27.20 This right of action is not expressly limited to cross-border actions or infringements. Article 4 provides that each Member State shall take the measures necessary to ensure that—in the event of an infringement originating in that Member State—any qualified entity from another Member State where the interests protected by that qualified entity are affected by the infringement, may apply to the court or administrative authority (ie, a cross-border situation). Articles 2 and 3 of the directive, meanwhile, oblige the Member States to designate the courts or administrative authorities competent to rule on proceedings commenced by qualified entities to be recognised by them. These obligations are not and could not be limited to cross-border situations. These courts or authorities shall be competent to take: (a) an order with all due expediency, where appropriate by way of summary procedure, requiring the cessation or prohibition of any infringement; (b) where appropriate, measures such as the publication of the decision, in full or in part, in such form as deemed adequate and/or the publication of a corrective statement with a view to eliminating the continuing effects of the infringement; (c) insofar as the legal system of the Member State concerned so permits, an order against the losing defendant for payments into the public purse or to any beneficiary designated in or under national legislation, in the event of failure to comply with the decision within a time-limit specified by the courts or administrative authorities, of a fixed amount for each day’s delay or any other amount provided for in national legislation, with a view to ensuring compliance with the decisions.21

The different instruments mentioned show differences in respect of the procedural autonomy of the Member States. Procedures in themselves have to be defined at the national level. But, in addition to the negative impact of fundamental EU principles (developed by the ECJ) on the Member State’s autonomy in this respect, EU legislation increasingly defines the minimum standards of judicial remedies that must be available for the effective enforcement of rights conferred on individuals by EU law. In antitrust law, the legislature has not (yet) set minimum standards, but precisely in this field the Treaty itself contains a remedy (the nullity sanction of Article 101(2) EU) which in turn is one of the bases for the case law of the ECJ that has set minimum standards for actions for damages to the benefit of victims of antitrust violations.22 In consumer law, the obligation for Member States to provide 20 Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers’ interests [1998] OJ L166/51; repealed but not substantially changed by Directive 2009/22/EC on injunctions for the protection of consumers’ interests (Codified version) [2009] OJ L 110/3. 21 ibid, Arts 2, 3. 22 Case C-453/99 Courage [2001] ECR I-6297; Case C-295/04 Manfredi [2006] ECR I-6619.

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for effective ways of enforcement of EU consumer rights has been concretised in particular with regard to injunctions, but not yet with regard to claims for damages (see part V below).

III

THE ROLE OF THE COURT OF JUSTICE IN SHAPING PRIVATE LAW ENFORCEMENT

European Union law is still mainly public law. However, more and more directives (and regulations) relate to private law. This is particularly the case in consumer law.23 The ECJ is the master of the interpretation of Union law concepts in these directives. However directives do not (yet) have horizontal direct effect,24 which limits the role of the ECJ. The ECJ is also reluctant to interpret general clauses because it cannot substitute itself in the role of the national judge to decide on the basis of the circumstances of the case. That is now the case with unfair contract terms.25 It may be the case in the future with unfair commercial practices.26 Furthermore, national contract law is largely carved out in the case law on free movement.27 There are, however, two fields where the impact of the Court of Justice on private law is remarkable and growing: the application of the fundamental (personal) freedoms to actions of private organisations and the recognition of rights to damages for individuals in case of violations by other individuals of rules of EU law, ie, the competition rules of Articles 101 and 102 TFEU (ex Articles 81 and 82 EC).28 In the field of unfair contract terms the Court has ruled that it is for the national court to decide whether a contractual term satisfies the requirements for it to be regarded as unfair under Article 3(1) of the directive. In contrast to this reserved attitude of the ECJ in interpreting the substantive provisions of the Unfair Contract Terms Directive, there is a line of judgments of the Court stressing the necessity of effective judicial protection against unfair contract terms: Océano Grupo,29 Cofidis,30 Mostaza Claro,31 Pannon 32 Asturcom.33

23 See J Stuyck, ‘Politique européenne de la consommation’ (2008) 4 JurisClasseur Europe Traité (examples Regulation (EC) 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights [2004] OJ L46/1; Regulation (EC) 717/2007 on roaming on public mobile telephone networks within the Community [2007] OJ L171/32; Regulation (EC) 1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights and obligations [2007] OJ L315/14). 24 Case C-91/92 Faccini Dori [1994] ECR I-3325. 25 Case C-237/02 Freiburger Kommunalbauten [2004] ECR I-3403. 26 See Unfair Commercial Practices Directive, above (n 19). 27 Case C-339/89 Alsthom Atlantique v Sulzer [1991] ECR I-107; Case C-93/92 CMC Motorradcenter v Pelin Baskiciogullari [1993] ECR I-5009. 28 See J Stuyck, ‘The Court of Justice as a Motor to the Development of Private Law’ in C Twigg-Flesner (ed), The Cambridge Companion to European Union Private Law (Cambridge, Cambridge University Press, 2010). 29 Joined Cases C-240 to 244/98 Océano Grupo [2000] ECR I-4941. 30 Case C-473/00 Cofidis [2002] ECR I-10875. 31 Case C-168/05 Mostaza Claro [2006] ECR I-10421. 32 Case C-243/08 Pannon, Judgment of 4 June 2009, not yet reported. 33 Case C-40/08 Asturcom, Judgment of 6 October 2009, not yet reported.

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In one of the most recent of these judgments, Pannon, the Court first recalls34 that the system of protection introduced by the directive is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge. This leads to the consumer agreeing to terms drawn up in advance by the seller or supplier without being able to influence the content of these terms.35 Building further on Océano Grupo the Court recalls that the aim of Article 6 of the directive would not be achieved if the consumer were himself obliged to raise the unfairness of contractual terms, and that effective protection of the consumer may be attained only if the national court acknowledges that it has power to evaluate terms of this kind of its own motion. In paragraph 24 of Pannon, the ECJ adds that Article 6(1) of the directive36 cannot be interpreted as meaning that it is only in the event that the consumer has brought a specific application in relation to it, that an unfair contract term is not binding on that consumer. Such an interpretation would rule out the possibility of the national court assessing, of its own motion, in the context of examining the admissibility of the action which is before it, and without a specific application from the consumer to that effect, the unfairness of a contractual term. The Court also recalls that in Mostaza Claro, it has insisted that Article 6(1) is a mandatory provision which— having taken into account the weaker position of one of the parties to the contract—aims to replace the formal balance which the latter established between the rights and obligations of the parties with an effective balance which re-establishes equality between them. Eventually the Court rules, more clearly than it has done in its former judgments, that the judge has to examine the fairness of the contractual term of its own motion, where it has available to it the legal and factual elements necessary for that task, including when it is assessing whether it has territorial jurisdiction.37 Whether that also applies to contract terms that define the substantive rights and obligations of the parties (rather than access to justice) is doubtful.38 In Asturcom, the Court puts certain limits on the protection of consumers on the basis of the res iudicata principle (in particular when an arbitration award has become definitive).39 In Pannon, the ECJ also confirms Freiburger Kommunalbauten. 40 The Court reminds us that its assessment of the unfair character of a jurisdiction clause in Océano Grupo (and now in Pannon) does not mean that by interpreting the general criteria used in the directive, the Court could rule on the application of these

34

Pannon, above (n 32) para 22. ibid, para 35 (with reference to Océano Grupo, above (n 29)). 36 ‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms’. Article 6 of the Unfair Contract Terms Directive, above (n 15). 37 Pannon, above (n 32) para 32. The Court adds that in carrying out that obligation, the national court is not, however, required under the directive to exclude the possibility that the term in question may be applicable, if the consumer, after having been informed of it by that court, does not intend to ascertain its unfair or non-binding status (Pannon, above (n 32) para 33). 38 See J Stuyck, annotation of the judgments in Asturcom, above (n 33) and Pannon, above (n 32) in (2010) 47 Common Market Law Review 879–98. 39 ibid. 40 Case C-237/02 Freiburger Kommunalbauten [2004] ECR I-3403, para19. 35

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general criteria to a particular term, which must be considered in light of the particular circumstances. With regard to remedies for the violation of rules of an EU law origin, including private law remedies, one should reiterate the principles of equivalence and effectiveness developed by the ECJ.41 In the area of private law these principles have been developed by the ECJ in its case law on the liability of businesses (undertakings) that have infringed the EC antitrust provisions to pay compensation to the victims of those violations.42 In this seminal Francovich 43 judgment the ECJ developed a completely new doctrine (on the basis of the nature of EU law and the duty of loyal cooperation in Article 10 EC): Member States shall be liable to compensate the harm resulting for individuals from their failure to comply with Community law, for example, by failing to transpose timely or correctly directives or by adopting or maintaining national laws that violate the free movement provisions of the Treaty.44 More recently, the Court extended that jurisprudence to violations of EU law by private parties. In Courage,45 the ECJ recognised that any individual—including a party to a restrictive contract—can claim compensation for loss caused by a violation of Articles 101 and 102 TFEU (ex Articles 81 and 82 EC). Courage does not expressly state that the right, for an individual, to claim damages in case of antitrust violations, has an EU law basis. Be that as it may, the right is also vested in an individual who suffers from an antitrust violation by the conclusion of a contract to which he or she is a party. The Court was acting here in response to just such a limitation that existed under English contract law. In Courage, the Court also recalled the procedural autonomy of the Member States, ie, the right to lay down the procedural rules for bringing such actions, subject to the respect of the principles of equivalence (ie, these rules should not be less favourable than those governing similar domestic actions) and effectiveness (ie, these rules should not render impossible or excessively difficult the exercise of the rights conferred by EU law) as well as the right for Member States not to allow unjust enrichment and the right to deny a party who has significant responsibility for the distortion of competition the right to obtain damages from the other contracting party. Manfredi clarifies that it follows from the principle of effectiveness and the right for individuals to seek compensation for loss caused by a contract or by conduct liable to restrict or distort competition that injured persons must be able to seek compensation not only for actual loss (damnum emergens) but also for loss of profit (lucrum cessans) plus interest. To conclude this part it may be remembered that while directives increasingly shape the rights of individuals in contractual relations, they do not (yet) have horizontal direct effect, which limits the role of the ECJ. The ECJ is also reluctant to interpret general clauses because it cannot substitute itself into the role of the

41 42 43 44 45

See the introductory paragraphs to part II.B above. Courage, above (n 22) and Manfredi, above (n 22). Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR I-535. Joined Cases C-46 and C-48/93 Brasserie du Pêcheur [1996] ECR I-1029. See Courage, above (n 22).

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national judge to decide on the basis of the circumstances of the case. The Court is also careful in bringing contract law and contract law remedies under the scope of the free movement provisions of the Treaty. However, the Court has recognised the right to damages for individuals in case of violations by other individuals of rules of Community law, ie, the competition rules: Articles 101 and 102 TFEU (ex Articles 81 and 82 EC), even in contractual situations.

IV THE IMPACT OF EU NON-DISCRIMINATION LAW ON THE ENFORCEMENT OF PRIVATE LAW—SOME PRELIMINARY CONSIDERATIONS

While, over the years, contractual freedom (in Europe) has been gradually limited for the protection of the weaker party in a contractual relationship—tenant, consumer, employee; etc—in more recent years this freedom has also been affected by non discrimination provisions. Starting with equal treatment between men and women regarding working conditions,46 more recent EC directives also prohibit other forms of discrimination47 and sex discrimination in other areas such as the supply of goods and services,48 which has an enormous impact on insurance contracts. Now non-discrimination has become a major issue for contract law and this is certainly fertile ground for legal research. I have not even started research in this field, but intuitively a certain number of questions arise, including questions concerning the enforcement of private law. Various types of equality bodies have been set up within the EU for the enforcement of equality norms. They function in many different ways.49 Article 8 of Directive 2004/13/EC (sex discrimination in the supply of goods and services) contains the following provisions on ‘defence of rights’. Defence of rights 1. Member States shall ensure that judicial and/or administrative procedures, including where they deem it appropriate conciliation procedures, for the enforcement of the obligations under this Directive are available to all persons who consider themselves

46 Now Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation [2000] OJ L303/16; Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast) [2006] OJ L204/23. 47 Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin [2000] OJ L180/22; see also ‘Proposal for a Council Directive of 2 July 2008 on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation’ COM (2008) 426 final (2 July 2008). (See Case C-54/07 Feryn v Centrum voor Gelijkheid van Kansen [2008] ECR I-05187. Sanctions must be effective, proportionate and dissuasive, even when there is no identifiable victim, in other words collective enforcement in the name of an abstract class of victims). 48 Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services [2004] OJ L373/37. 49 See G Moon, ‘Non-Discrimination Law’ in D Schiek, L Waddington and M Bell (eds), Materials and Text on National, Supranational and International Non-Discrimination Law (Oxford, Hart Publishing, 2007).

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wronged by a failure to apply the principle of equal treatment to them, even after the relationship in which the discrimination is alleged to have occurred has ended. 2. Member States shall introduce into their national legal systems such measures as are necessary to ensure real and effective compensation or reparation, as the Member States so determine, for the loss and damage sustained by a person injured as a result of discrimination within the meaning of this Directive, in a way which is dissuasive and proportionate to the damage suffered. The fixing of a prior upper limit shall not restrict such compensation or reparation. 3. Member States shall ensure that associations, organisations or other legal entities, which have, in accordance with the criteria laid down by their national law, a legitimate interest in ensuring that the provisions of this Directive are complied with, may engage, on behalf or in support of the complainant, with his or her approval, in any judicial and/or administrative procedure provided for the enforcement of obligations under this Directive. 4. Paragraphs 1 and 3 shall be without prejudice to national rules on time limits for bringing actions relating to the principle of equal treatment.

Directive 2006/54/EC (Sex Discrimination Employment)50 contains provisions that correspond in essence to this Article.51 As is usual in EU law, it is left to the Member States to choose the means to achieve the objectives of effective enforcement and defence of rights. It may however be noted that, like in consumer law, the right to bring legal actions is also vested on NGOs. The means of action that the Member States have to provide comprise not only injunctions, but actions for effective compensation or reparation. Member States are even precluded from setting a cap on compensation. Member States do not have to provide for group actions for damages though. While these directives accentuate a general trend towards the collectivisation of legal actions in EU law, claims for damages however remain individual.52 The trend may, in the longer run, lead to a transformation of substantive contract law.

V

EU COMPETENCE IN THE FIELD OF COLLECTIVE REDRESS

It can be argued that harmonisation of existing national laws on collective actions for damages to the benefit of consumers or victims of antitrust violations is actually intended to improve the conditions for the establishment and functioning of the internal market. Indeed, one of the problems with mass (consumer) damages is that very often consumers (victims) in several Member States are affected while existing 50 Directive 2006/54/EC of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast) [2006] OJ L204/23. 51 See Arts 17 and 18 of Council Directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin [2000] OJ L180/22, which contains less elaborated provisions on the ‘defence of rights’. 52 See also in this respect, Case C-199/08 Eschig v Uniqa Judgment of 10 September 2009, (2009) ECR I-8295, saying that Art 4(1)(a) of Directive 87/344/EEC relating to legal expenses insurance must be interpreted as not permitting the legal expenses insurer to reserve the right, where a large number of insured persons suffer loss as a result of the same event, itself to select the legal representative of all the insured persons concerned.

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national laws—if they allow for collective actions in the first place—do not usually permit a collective action to be brought on behalf of consumers from other Member States. Furthermore, even where this is possible, disparities in the law governing such actions are liable to deter consumers from buying certain goods in other Member States. Thus, the paradigm of the ‘confident consumer’ underlying Union initiatives in the field of substantive consumer law could also form a justification for harmonisation in the procedural field—at least to the benefit of consumers. In that respect it can be mentioned that Directives 98/27/EC and 2009/22 on injunctions for the protection of consumers’ interests ares also based on Article 114 TFEU (ex Article 95 EC). For all these reasons Article 114 TFEU would seem to be a possible legal basis for a directive introducing rules on collective redress including awards of compensation, at least where there is a cross-border element. A strong argument pleads for EU competence, under Article 114 TFEU, to enact legislation on collective consumer redress which is not limited to cross-border actions. In the field of collective consumer redress, actions which are prima facie ‘national’ will often have a cross-border dimension because consumers from other Member States may also have suffered damage. Therefore, in contrast to what is possible under individual consumer claims (see, for example, Article 3(1) of Regulation 861/2006 on small claims procedures: ‘For the purposes of this Regulation, a cross-border case is one in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court or tribunal seised’), a strict limitation to cross-border cases might prove impossible (especially in class actions where the plaintiff acts for a class of consumers) or totally inefficient (a cross-border action would be limited to consumers residing in other Member States than the Member State where the action is brought, while the majority of the victims will typically be consumers from the forum). Eventually a directive limited to cross-border situations (for example, as defined in the Small Claims Regulation) would probably not secure the useful effect of the principle of proper consumer redress as confirmed by the ECJ, in Océano Grupo,53 Mostaza Claro 54 and Manfredi.55 It can be noted that Regulation 861/2007 establishing a European Small Claims Procedure56 which refers to Article 67 EC as its legal basis, is limited to cross-border cases, although the initial Commission proposal covered both crossborder and domestic small claims procedures. However, it is submitted that ‘matters having cross-border implications’ in Article 81 TFEU should be interpreted broadly. The aim of the Article is to ensure that citizens would not suffer any inconvenience from the fact that a civil litigation is not restricted to his Member State of residence. In that sense a cross-border case is one where there is a legal issue relating to goods or persons outside the borders of

53

Océano Grupo, above (n 29). Mostaza Claro, above (n 31). 55 Manfredi, above (n 22). 56 Regulation (EC) 861/2007 of 11 July 2007 establishing a European Small Claims Procedure [2007] OJ L199/1. 54

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that Member State.57 The reference to ‘in so far as necessary for the proper functioning of the internal market’ is another limitation of the scope of Article 81 TFEU. The adjective ‘proper’ does not appear in Article 114 TFEU. However, that difference should not lead to a stricter scope of application of Article 81 than Article 114. It has even been submitted that the scope of Article 81 is broader than that of Article 114, since Article 81 requires not only measures to ensure the functioning of the internal market, but measures ensuring that the internal market functions properly. The EU would therefore be competent under Article 81 where there is an involvement of goods or persons that are present in another Member State.58 In other words, the reference to the internal market in Article 81 does not add to the ‘cross-border’ requirement. With regard to the limitation of Article 81 TFEU to matters having cross-border implications, what has been said above concerning Article 114 TFEU applies here as well. Cross-border situations in the field of collective redress cannot be effectively isolated. For all these reasons, it would seem that Article 81 could also be a legal basis for EU measures on the domestic enforcement of private rights such as the collective enforcement of consumer claims for damages. Finally, as indicated above, in the field of consumer protection Article 169(2)(b) TFEU could also be a possible basis for legislation in this area, including redress mechanisms.

VI

THE GREEN PAPER ON COLLECTIVE REDRESS FOR CONSUMERS AND ITS FOLLOW UP—THE FIFTH OPTION

In this final part, I would like to address the new ‘fifth’ and furthest reaching option in the Commission’s Consultation Paper for the hearing on 29 May 2009 following the Green Paper On Consumer Collective Redress,59 ie, an EU-wide judicial collective redress mechanism including collective ADR. This option foresees a binding instrument establishing a detailed harmonised EU-wide judicial collective redress mechanism including collective ADR. The binding instrument would create an obligation for Member States to set up a collective ADR system that deals with all claims (all sectors and covering the entire territory), is open to consumers from all Member States and respects the existing ADR Recommendations. The use of ADR would remain voluntary. The binding instrument would ensure that all Member States set up a judicial collective redress mechanism with harmonised features. The mechanism chosen would be a test case procedure with the following main features: (a) Financing: the test case procedure constitutes the alternative which mitigates the funding problems which other types of procedures face. This is due to the 57 C Callies and M Ruffert, EUV/EGV: Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta 3rd edn (München, Beck, 2007) Comments to Art 67/7 and further references. 58 ibid. 59 Commission, ‘Green Paper on Consumer Collective Redress’ COM (2008) 794 final (27 November 2008).

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(c)

(d)

(e)

(f)

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fact that costs arise only for one case, ie, the test case, and follow-up procedures for individual consumers for claiming the compensation should be less costly.60 Plaintiffs should be able to secure compensation for court and lawyers’ fees as well as indispensable preparatory costs, but not more. The threshold for the number of litigants to launch such a procedure should be low (for example, 10). Standing: the test case procedure could be introduced by a consumer, a consumer organisation or a competent authority like an ombudsman on behalf of a number of harmed consumers. In order to balance the right of access with the risk of excessive litigation, consumer organisations should only be able to represent consumers if they fulfil certain certification criteria. Such organisations are mutually recognised by Member States. Avoid unmeritorious claims: in addition to the certification criteria for consumer associations, the court would be granted broad discretion over the admissibility of such a case and therefore would play the role of gatekeeper by deciding whether a case is suitable for such a procedure. Effect of the judgment: the effect of the judgment could be extended to all other consumers in the EU which have been harmed by the same practice and who have identified themselves after the judgment. This means, in practice, that the issue of establishing the illegal practice would be decided in the test case procedure. Consumers would only have to undertake, in a second step, individual follow-up procedures dealing with issues particular to their case, for example establishing that they have been armed by this illegal practice (causal link), verifying the application of prescription rules and to calculate the individual compensation. Distribution of compensation: the court would have the power to order the trader to inform all possible victims known to the trader and/or advertise the court decision, as well as to organise the way in which the compensation of consumers is determined and distributed, if needed via ADR. In order to achieve this, effective, dissuasive and proportionate sanctions for noncompliance would be needed. The consumer would always have the possibility to begin a follow-up procedure for individual compensation. Competent court: in order to facilitate the handling of the case, the competent court should be the court of the Member State where the defendant is domiciled or the court of the Member State where the market is most affected by the illegal practice for the test case and the court of the Member State where the consumer is domiciled for the follow-up procedure. An adaptation of the Brussels I Regulation would be necessary.

60 According to a well-established case law of the ECJ ‘it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which the citizens have from the direct effect of Community law’. This principle has always been subject to two conditions, known as the condition of equivalence and the condition of effectiveness: the enforcement of Community law shall not be more difficult than the enforcement of equivalent national laws and national rules should not make it impossible in practice to exercise the rights conferred by Community law. (Principles of equivalence and effectiveness.) To this effect see Craig and de Bùrca, EU Law, above (n 12) 313–28.

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(g) Applicable law: in order to facilitate the handling of the case, the applicable law should be the law of the Member State where the market is most affected for the test case, and the law of the Member State, where the consumers have their habitual residence, for the follow-up procedure. An adaptation of EU instruments of private international law would be necessary. The Consultation Paper rightly addresses the key issues to be dealt with if a binding instrument on collective consumer address was to be adopted at the EU level. This is indeed an ambitious option. Oddly, however, the paper does not say whether the binding instrument would relate to cross-border procedures only or to domestic procedures alike. I refer to the arguments developed above in favour of a system that includes domestic litigation. In both hypotheses— an EU scheme for purely cross border litigation or for both cross-border and domestic litigation—the exercise will be very difficult—not only politically but also legally speaking. Any legislation at the EU level that does not sufficiently take into account the (great variety in) national procedural traditions is doomed to fail.

VII

CONCLUSION

This chapter has shown that EU law is increasingly taking stock of the collectivisation of legal actions in the sphere of contract law. First, the ECJ has seen, so far, its role in shaping contract law as rather modest, with the exception of its insistence on the necessity of effective compensation for the victims of violations of EU law, not only by the Member States, but by private operators (such as in competition law). In this respect, the case law of the Court of Justice has a real impact on remedies and enforcement. Secondly, secondary EU law, notably directives in the fields of public procurement law, consumer law and non-discrimination law, contain systematic duties on Member States to provide for effective judicial or administrative procedures, including actions for injunctions and for compensation. There is a gradual evolution, in EU law, towards a more collective approach to enforcement of private law in general and contract law in particular, but this has not yet led to legislative initiatives in the field of collective redress (for consumers or victims of antitrust violation). Many questions remain in this respect. One of the questions is whether the Union has the necessary powers to take legislative actions in this field. This chapter argues that it has.

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32 From ‘Toolbox’ to Academic Standard: The Current and Future Status of the Draft Common Frame of Reference EWOUD HONDIUS

I

INTRODUCTION

I

N OCTOBER 2009, the ‘Full Edition’ of the ‘Draft Common Frame of Reference’ (‘DCFR’) was published.1 Just a month before, in September 2009, the European University Institute organised a two-day conference on the DCFR, the proceedings of which have been assembled in this volume. This chapter will argue, on the basis of papers read at the conference and other materials, that the DCFR is of the utmost importance for the developing discourse on a pan-European or even global contract law or private law. Before arriving at this conclusion, a peu d’histoire should be given, including a survey of the various possible purposes of the DCFR and an assessment of its quality. This introductory paragraph will also list some of the shortcomings of this chapter.

A

Un peu d’histoire

Officially, from the point of view of the European bureaucracy, the DCFR is the outcome of a process which started with a Communication on Contract Law2 and culminated in the foundation of a multi-party research group, the CoPECL Network of Excellence, which produced the present text under the Sixth Framework Programme for Research and Technological Development. The text may be elaborated by the European Commission into a Common Frame of Reference (CFR) or it may simply end up in a Brussels drawer. In the former case, the CFR may take the form of a ‘toolbox’ of terminology, principles and models to be used in the drafting of future rules, or—at the most—even of an opt-in twenty-eighth legal system of contract law for the European Union.

1 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009). 2 Commission, ‘Communication of the Commission on European Contract Law’ COM (2001) 398 final (11 July 2001).

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The gradual watering down of the initially far-reaching proposals3 made many academics sceptical about the DCFR’s prospects. However, at a conference organised in Paris in 2008 to mark the French presidency of the European Union, the attitude of the European Commission and the European Parliament, as well as that of Member States, were remarkably positive.4 The positive tone is evident in a statement by Viviane Reding, at that time the new Commissioner for Justice, Fundamental Rights and Citizenship. Asked about her three main priorities, Ms Reding mentioned as the first priority, to help put contractual relations in our internal market, notably in business-to-consumer relations, on a more secure and coherent footing to facilitate cross-border transactions. I therefore intend to work on the three first building blocks of a coherent European contract law, namely standard terms and conditions, consumer rights and common principles of contract law, with the purpose of paving the way for one day developing a European Civil Code (which could take the form either of a voluntary tool to improve coherence, or of an optional 28th contract law regime or of a more ambitious project.

She added: During the first part of my mandate (2010–2012), I intend to dedicate my time and energy in particular to the following initiatives: I want to make substantial progress in the work towards a European contract law in order to facilitate cross-border transactions, especially in a business-to-consumer context. I therefore intend to complete—with the help of academic expertise from across Europe—the work on the common frame of reference in the course of 2010, and to include it thereafter into a well-publicised legal instrument.5

In her work programme she also mentioned the formation of standard form contracts, the completion of the Directive on Consumer Rights, Rome III Regulation, collective actions and the anti-discrimination directive. The future of the DCFR suddenly looked much brighter.

3 See, for the history of the DCFR: C Twigg-Flesner, The Europeanisation of Contract Law (London, Routledge-Cavendish, 2008) 144–62. 4 See JHM van Erp, ‘Komt er dan toch een Europees BW?’ (2009) Weekblad voor Privaatrecht, Notariaat en Registratie 6784, 101–04; V Geraldes Ferreira, ‘Quel droit européen des contrats pour l’Union européenne’ (2009) European Review of Private Law 265–70, who concludes that ‘nicht nur den DCFR, sondern der (künftige) CFR selbst umstritten sind ( . . .) Der Inhalt und die Form, die der CFR haben soll, wurden in Frage gestellt, ebenso wie seine Funktion. Jedoch gab es nicht nur Pessimismus über ein europäisches Vertragsrecht: Hingegen haben viele Teilnehmer sich für ein einheitliches europäisches Vertragsrecht sowie für das CFR-Projekt geäußert. Der DCFR ist ohne Zweifel ein bedeutungsvoller Beitrag zu dieser Diskussion, obwohl sie sich nur im Anfang befinden kann’. (‘Not only the DCFR but the CFR itself is contested. The content and the form which the CFR should have were questioned, as was its function. And still there was not only pessimism about a European contract law: instead many participants came out in favour of a uniform European contract law as well as of the CFR project. The DCFR is, without doubt, a major contribution to this discussion, although it is only in its infancy’). 5 Written answers sent by Viviane Reding to the European Parliament (7 January 2010) available at www.europarl.europa.eu/hearings/static/commissioners/answers/reding_replies_en.pdf.

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Other Functions of the DCFR

This chapter will conclude that whatever may be the political fate of the project, what will really count will be its acceptance or non-acceptance in legal writing.6 Before arriving at this conclusion, some other (cumulative) options will be set out. Will the DCFR serve as a model for the European7 or national legislators?8 Or, will it be used by courts and arbitrators9 or practitioners?10

C

Quality Assessment

One admittedly weak point in this analysis is the assessment of the quality of the DCFR. Whether or not the project suffers from insufficient preparatory work, sloppy drafting or irrelevant Comments and Notes, cannot be answered in depth in this chapter; I can only offer a glimpse of some of the—already many—doctrinal commentaries of the DCFR’s various chapters. What are some of the main criticisms? In this chapter, I will focus on comments by research groups rather than individual researchers. This means that critical remarks are not grouped together theme by theme, but by the group they emanate from. I have opted for the criticism by the Hamburg group,11 from the social justice perspective,12 the economic perspective13 and the specialised law reviews which ran DCFR issues.14 I will then turn to the defence by the DCFR draftspersons.15 This will result in the conclusions already alluded to,16 before a final word is said.17

D

National Bias

Another weak point of this chapter is that examples will mainly be taken from my own experience which is basically national (Dutch), with some comparative (Commission on European Contract Law, Study Group for a European Civil Code, Common Core of European Private Law) and European additions. I do concede that a Dutch starting point is slightly different from the median EU Member State on at least three points. First, the Netherlands being a small jurisdiction there has always been a need to borrow legal concepts from other jurisdictions, most often from Germany. In the large legal systems, such as England, France, Germany and Italy, this is different: until recently there were no compelling reasons to study the 6 7 8 9 10 11 12 13 14 15 16 17

See See See See See See See See See See See See

below, below, below, below, below, below, below, below, below, below, below, below,

part part part part part part part part part part part part

XI. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII.

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legal developments outside one’s own jurisdiction. Secondly, the linguistic possibilities for Dutch authors—although not as perfect as outsiders sometimes think—are adequate in the sense that a passive knowledge of English, French and German is still quite common. Thirdly, the Dutch have some experience with a legislative text which although not (yet) in force did exercise considerable influence in practice.18 Prior to its entry into force in 1992, the ‘Draft Dutch Civil Code’ had been the focus of legal research for at least a decade. More than other lawyers in Europe, the Dutch may therefore be accustomed to the use of draft legislation as the basis for their research.

II

THE DCFR AS MODEL FOR BRUSSELS—THE BAD EXAMPLE OF CONSUMER RIGHTS 19

The most obvious function of the CFR is to serve as inspiration for future European regulations and directives. What may be expected from this function? It is not necessary to look far into the future: a recent example is at hand. At approximately the same time as the DCFR was formulated, another Brussels document was being prepared: the draft Proposal for a Directive on consumer rights.20 What strikes the reader of this proposal is the almost total absence of references to the DCFR.21 It is true that the final text of the DCFR was only published in 2009, but an interim outline had been presented to the Commission by the end of 200722 and thus could easily have at least been referred to in the proposal, especially since the two manuscripts were initially dealt with by the same Directorate General for Health and Consumers (DG SANCO). The overlap of the two texts is obvious.23 The DCFR entails various provisions which may be of relevance for consumer transactions.24 Book I (‘General provisions’) already makes some of the notice rules of Article I.-1:109 mandatory for business to consumer transactions.25 The majority of the provisions on consumers may be found in Book II on ‘Contracts and other juridical acts’. Book II, Chapter 3 on marketing and pre-contractual duties contains 18 See E Hondius, ‘Les bases doctrinales du nouveau code néer-lan-dais’ in C Ophèle and P Remy (eds), Traditions savantes et codifications (Paris, LGDJ, 2007) 257–72. 19 Parts of this paragraph were published earlier in the European Review of Private Law: E Hondius, ‘The Proposal for a European Directive on Consumer Rights: A Step Forward’ (2010) European Review of Private Law 103–27. 20 Commission, ‘Proposal for a Directive on consumer rights’ (Consumer Rights Directive) COM (2008) 614 final (8 October 2008). 21 See, on the cryptic relation between the two: G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009) 29–46; see further C Wendehorst, ‘CFR and the Review of Acquis Communitaire’ in M Schmidt-Kessel (ed), Der Gemeinsame Referenzrahmen: Entstehung, Inhalte, Anwendung (München, Sellier, 2009). 22 C von Bar, E Clive and H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edtion (Munich, Sellier, 2008). 23 See E Terryn, ‘The Green Paper on the Review of the Consumer Acquis’ (2007) Tijdschrift voor Consumentenrecht en Handelspraktijken 105–10. 24 See MBM Loos, Review of the European Consumer Acquis (Munich, Sellier, 2008) 97; JW Rutgers and R Sefton-Green, ‘Revising the Consumer Acquis: (Half) Opening the Doors of the Trojan Horse’ (2008) European Review of Private Law 427–42. 25 Art II.-1:109, s 7.

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provisions on the duty to provide information,26 especially in case of transactions with a consumer who is at a particular disadvantage27 and in real time distance communication,28 the written and electronic confirmation thereof29 and the remedies for breach.30 Book II, Chapter 5 on the right of withdrawal also contains a number of provisions which relate to consumers: the provisions on linked contracts,31 contracts negotiated away from business premises32 and timeshares.33 Finally, Book II, Chapter 9 introduces special rules for the content and consequences of consumer transactions: on transparency,34 the unfairness notion,35 factors to be taken into account thereby,36 and the ‘black list’.37 Book III on ‘Obligations and corresponding rights’ encompasses a single provision which mentions the consumer: the obligation to notify non-conformity within a reasonable time does not apply where the creditor is a consumer.38 The part on sales contains a large number of provisions referring to consumers, which owing to the Consumer Sales Directive is not unexpected. These concern the definition of consumer sales39 and provisions as to place and time of delivery,40 the fitness for purpose, qualities, packaging,41 incorrect installation,42 the buyer’s knowledge of lack of conformity,43 the relevant time for establishing conformity,44 limitations,45 termination,46 examination of the goods,47 the passing of risk48 and the consumer goods guarantees.49 Title IV B on ‘Lease of goods’50 also contains provisions which refer to the consumer: the definition of consumer lease,51 tacit 26

Art II.-3:102 ‘Specific duties for businesses marketing to consumers’. Art II.-3:103. See also Art II.-3:108, s 2. 28 Art II.-3:104. 29 Art II.-3:106 ‘Clarity and form of information’. 30 Art II.-3:109 ‘Remedies for breach of information duties’. 31 Art II.-5:106. 32 Art II.-5:201. 33 Art II.-5:202. 34 Art II.-9:402 ‘Duty of transparency in terms not individually negotiated’. 35 Art II.-9:404 ‘Meaning of ‘unfair’ in contracts between non-business parties. 36 Art II.-9:407. 37 Art II.-9:410 ‘Terms which are presumed to be unfair in contracts between a business and a consumer’. 38 Art II.-3:106 ‘Clarity and form of information’. 39 Art IV.A.-1:204 ‘Consumer contract for sale’. 40 Art IV.A.-2:202. 41 Art IV.A.-2:202. 42 Art IV.A.-2:304. 43 Art IV.A.-2:307. 44 Art IV.A.-2:308. 45 Art IV.A.-2:309 ‘Limits on derogation from conformity rights in a consumer contract for sale’ and Art IV.A.-4:101 ‘Limits on derogation from remedies for non-conformity in a consumer contract for sale’. 46 Art IV.A.-4:201 ‘Termination by consumer for lack of conformity’. 47 Art IV.A.-4:301. 48 Art IV.A.-5:103. 49 Art IV.A.-6:101/108. 50 See S Cámara Lapuente, El arrendamiento de bienes muebles (Cizur Menor, Aranzadi, 2008) 531; K Lilleholt, ‘A European Law of Lease?’ in A Vaquer Aloy (ed), European Private Law beyond the Common Frame of Reference: Essays in Honour of Reinhard Zimmermann (Groningen, Europa Law Publishing, 2008) 57–64. 51 Art IV.B.-1–102 ‘Consumer contract for the lease of goods’. 27

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prolongation,52 incorrect installation53 and reduction of liability.54 Chapter IV.D on ‘Mandate’ only imposes some conditions as to self-contracting,55 whereas the provision on ‘Loan’ seems to presuppose that two consumers may conclude a contract.56 The provisions on tort law remind us that under the Courage case,57 a consumer may be entitled to compensation of damages resulting from unfair competition.58 Finally, the Annex defines the ‘consumer’ as ‘any natural person who is acting primarily for purposes which are not related to his or her trade, business or profession’. I have only mentioned the provisions which explicitly refer to the consumer. The Comments do contain additional references. The General provisions may also be relevant for consumers.59 On many points, the proposed Consumer Rights Directive derogates from the DCFR. Some clarification on this point is much needed. III

A MODEL FOR NATIONAL LEGISLATORS

Not only may the DCFR serve the needs of the European legislator, national legislatures may also profit therefrom. Why would a legislature be inclined to look into the DCFR? Is the DCFR useful because it is apolitical? During the conference in Fiesole for which this chapter was written, some discussants suggested (a) that law is always political and (b) that this is usually denied by the draftspersons of the DCFR, Principles of European Contract Law (‘PECL’), UNIDROIT Principles for International Commercial Contracts (‘PICC’) and the like. As for the political nature of law, it seems that this can barely be denied. Choices will always have to be made, balances sought and black letter rules must be adopted by parliaments. Yet it will also be clear that the political nature will vary, with on the one hand some areas of contract law, which seem so neutral that the designation ‘political’ is merely theoretical and on the other, some specific contracts such as landlord and tenant and the employment contract are so overwhelmingly political that they will always attract the interest of professional politicians. A

The DCFR as a Tool of Comparative Law

There is a better reason for which national legislators would be well advised to take the DCFR into consideration. In the past, some legislatures went to great lengths to collect comparative law data so as to be able to make as good a choice as possible between various options. Although one cannot say that the DCFR dispenses 52

Art IV.B.-2:103. Art IV.B.-3:105. 54 Art IV.B.-6:102 ‘Reduction of liability in consumer contracts for the lease of goods’. 55 Art IV.D.-5:101. 56 Art IV.F.-1:104, para 2. 57 Case C-453/99 Courage Ltd v Bernard Crehan and Others [2001] ECR I-6297. 58 Art VI.-2:208 ‘Loss upon unlawful impairment of business’. 59 MBM Loos, ‘The Influence of European Consumer Law on General Contract Law’ (2007) European Review of Private Law 515–31. 53

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national legislatures from this exercise, it does greatly facilitate their task. What I have in mind is that the Notes to the DCFR give national legislatures a first overview of the various solutions adopted in Europe. It makes it possible to single out those options which are relevant for use in their own jurisdiction. Occasionally, the impact of the DCFR will go even further. A whole chapter may even by copied, as may be demonstrated by the use which the former socialist states such as Lithuania made of the PICC. Even in the case of a jurisdiction with a modern legislation such as the Netherlands, Principles such as the PECL may serve as a default text and government proposals to derogate therefrom may be the subject of parliamentary scrutiny. Will national governments be inclined to look at the DCFR for inspiration? Several governments have in recent years commissioned research reports as to the question whether they should support the adoption of a CFR on the European level. The resulting reports may give an idea as to their willingness to use this text for their own national purposes. By way of example60 I mention (b) the UK and (c) the Dutch reports.

B

DCFR.gb

In the United Kingdom, Simon Whittaker was invited to advise the Minister of Justice on the DCFR.61 Whittaker begins his report with a—seldom heard— compliment: ‘Anyone reading the DCFR and its Comments will be struck by the enormous amount of thought and work which has gone into its provisions, and care in its drafting’.62 In England, such a compliment is usually found as an introduction to the sharpest possible criticism and Whittaker does not disappoint on this score. He analyses the principles which lie at the basis of the DCFR: freedom of contract, informality, pacta sunt servanda, which are moderately clear. But on good faith the DCFR is ambivalent and the relativity of contract is missing altogether.63 Whittaker also is not content with the definitions of ‘consumer’ and ‘trader’.64 He is very concerned about that famous ‘legal irritant’: good faith.65 He therefore concludes that the DCFR is neither useful as a toolbox nor as an optional text.66 Should the DCFR be rejected as totally irrelevant? That is not Whittaker’s opinion. Books II and III do contain a fair number of useful provisions on the consumer acquis. But the rules on commercial contracts are not in line with English law.

60 Some of the articles to be referred to below also recommend national governments to make use of the DCFR. By way of example I mention the paper by Benoît Kohl, referred to in Nr 10 under (b) below. 61 S Whittaker, ‘The Draft Common Frame of Reference; An Assessment’ (Oxford, St John’s College, 2008) available at: www.justice.gov.uk/publications/docs/Draft_Common_Frame_of_ Reference __an_assessment.pdf. 62 ibid, 2. 63 ibid, 7–8. 64 ibid, 9. 65 ibid, 150. 66 ibid, 11.

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In the Netherlands, the Ministry of Justice published a report on the possibilities and the usefulness of a DCFR in 2009.67 Three questions were commissioned to various groups: an interdepartmental commission, HIIL and the Universities of Maastricht and Rotterdam. The question as to the competence of the European Union was entrusted to the Interdepartementale commissie voor Europees recht (ICER), which after consultation with Martijn Hesselink from Amsterdam concluded that Article 65 EC is not a good basis for the Community’s intervening in substantive private law. Nor does Article 95 offer a basis for an optional code, although it does so for consumer law. Article 308 may only serve as a supplementary basis.68 A field survey of limited size was conducted by the Hague Institute for the Internationalisation of Law (HIIL).69 HIIL held a survey of 12 enterprises or organisations of enterprises. None of these saw differences in legal systems as a major obstacle to cross-border trade.70 And yet, 75 per cent thought a uniform contract law would be useful for trade,71 as long as freedom of contract is not limited.72 A third question was left to be answered by the universities of Maastricht and Rotterdam. Actually the work which the Ministry commissioned was about the proposed Consumer Rights Directive, but the research team decided to include the DCFR in its report.73 Caroline Cauffman, Michael Faure and Ton Hartlief repeat their previous criticism of the ongoing harmonisation: Eenmaking van recht is met het oog op het verbete-ren van het grensover-schrijdend verkeer in consumentengoederen niet noodzakelijk en wellicht zelfs zonder effect, omdat niet zozeer verschillen in rechtsre-gels, maar juist andere factoren het grensoverschrijdend verkeer belemme-ren.74 (Unification of law with the aim of promoting cross-border trade in consumer products is not necessary and is possibly without effect, because it is not the differences between legal rules but other elements which hinder cross-border traffic.)

What are the Ministry’s conclusions? These are remarkably positive. The DCFR may contribute to more consistency of European law. The DCFR should not only deal with definitions and principles of contract law, but with those of property law and tort law. There should be an efficient tuning of the DCFR and the Consumer Rights Directive. A binding European civil code is not necessary.

67 Ministerie van Justitie, ‘Rapport van het onderzoek naar de mogelijkheden en de wenselijkheid van een Gemeenschappelijk referentiekader voor Europees contractenrecht’ (2009). 68 Interdepartementale commissie Europees recht, ‘Common Frame of Reference European Contract Law: rechtsgrondslagen voor en eventuele consequenties van communautair optreden’ (2008). 69 Hague Institute for the Internationalisation of Law, Bestaat er behoefte aan een gemeenschappelijk referentiekader voor Europees contractenrecht?/Een quick scan van het Nederlandse bedrijfsleven (‘HIIL Report’) (The Hague, HIIL, 2009). 70 ibid, 6. 71 ibid, 11. 72 ibid, 7. 73 C Cauffman, M Faure and T Hartlief, Harmonisatie van het consumentencontractenrecht in Europa: consequenties voor Nederland (The Hague, WODC, 2009). 74 ibid, 308.

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COURTS AND ARBITRATORS

An avowed aim of texts such as the various Principles and the DCFR is that they may facilitate rendering decisions in international cases, especially when there are doubts as to the governing law. Does this indeed happen? Yes, it does. Perhaps the best known example are the PICC. Whenever arbitrators are at a loss as to the law to be applied, reference to the PICC is an easy way out. As the chairman of the Unidroit working group which prepared the PICC, Joachim Bonell does not fail to underscore whenever a court or an arbitration tribunal in the world at large refers to ‘his’ Principles, which happens with increasing frequency.75 The need for this bail out is demonstrated by the English Channel Tunnel cases, some of which referred to the principles common to English and French law, which of course amounted either to an invitation to engage in years of comparative research or to find the easy way out just described. On the highest domestic and European judicial levels, references to texts such as the PECL and the PICC are increasingly frequent. This is not obvious to every reader, because there references are often to be found in the Conclusions of the Advocates General. Thus, the Conclusions of Advocate General at the European Court of Justice Verica Trstenjak often mention the PECL (Ms Trstenjak was a member of the Co-ordinating commission of the Study group for a European civil code).76 Likewise, many Conclusions of the Advocate General of the Dutch Hoge Raad, Jaap Spier, refer to the ‘Principles of European Tort Law’. How come? Yes, Mr Spier was a member—and indeed the founder—of the European group on tort law.

V

PRACTITIONERS

The DCFR has been submitted to the criticism of European stakeholders. Much as this effort by the European Commission should be applauded, the outcome of the exercise is doubtful. One cannot deny that interest in commercial circles for the DCFR, Principles and even texts such as the Convention on the International Sale of Goods (‘CISG’) is very limited. CISG is a good example, because on many counts this is a success story. Adopted 30 years ago, the Convention has been adopted by some 70 states, which represent some 75 per cent of world trade. After the ratification by Japan, the United Kingdom is the only major trading nation which has not adhered to the CISG (although it was a party to CISG’s predecessors LUF and LUVI). The text has also been used by domestic legislatures, such as those of Germany and the Netherlands, and by supranational ones such as the European Union in its Consumer Sales Directive. And yet, the more business traders become knowledgeable about CISG, the more they tend to opt out—as they are entitled to do. Vogenauer and Weatherill have detected an increasing willingness among business circles to embrace 75 See also S Vogenauer and J Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC-Commentary) (Oxford, Oxford University Press, 2009). 76 See V Trstenjak, ‘Der Gemeinsame Referenzrahmen und der Europäische Gerichtshof’ in Schmidt-Kessel (ed), Der Gemeinsame, above (n 21).

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European harmonisation efforts, but it is doubtful whether this will extend to a venture which as yet is not certain to be succesful. The present mood in trade and industry may be summarised by a Dutch business lawyer who referred to the DCFR as ‘legal Esperanto which is not useful for legal practice’.77 VI

THE DCFR AND THE GERMANS

We now turn to the viewpoint of academics. One influential commentary has been that of a group of German lawyers.78 Internal inconsistencies, too much good faith, too much mandatory law, unnecessary deviations from the PECL, a conservative sales law as against innovative but unconvincing services provisions—these are some of the objections which this group has raised against the DCFR, objections which seem to be supported by a majority of the rank and file of German lawyers. VII

THE DCFR AND SOCIAL JUSTICE

Ever since the publication of Van den Berg’s thesis, we know that drafting a civil code—witness Napoleon and Bismarck—is never a non-political venture. A book with the title The Politics of the Draft Common Frame of Reference 79 therefore seems highly apposite. In this case, however, the title is slightly misleading, because the book does not deal with the political background of the DCFR; it rather bundles the comments of members of the Social Justice Group as to the DCFR, which however is precisely what we are looking for in this paragraph. What are their findings? In Part I on ‘The shaping of a European private law’, Colombi Ciacchi pleads for an ‘Optional Instrument’ for consumer contracts in the European Union and not for ‘The Thing’, which the European Parliament once dared to call ‘Code’.80 Grundmann raises a similar question: should we opt for a ‘Grand European Code Napoléon or concise uniform contract law?’ He is very critical of the DCFR, ‘a structure which is mainly a comparative law synthesis of traditional Codes, with a certain German bias, supplemented by the rules taken from the acquis (and generalized)’.81 Sefton-Green raises the question whether the DCFR is a technical or political toolbox. Her conclusion is clear: ‘if the DCFR is truly technical, it cannot help achieve its declared aims of transparency, simplification, and coherence of European contract law, as these are democratic/political, not academic ideals’.82 The editor of the book, Somma, analyses the role of soft law in the development of a European contract law.83 77

BJ Schoordijk, ‘10 jaar contracteren—een praktijkvisie’ (2009) Contracteren. H Eidenmüller, F Faust, H Grigoleit, N Jansen, G Wagner and R Zimmermann, ‘The Common Frame of Reference for European Private Law—Policy Choices and Codification Problems’ (2008) 28 Oxford Journal of Legal Studies; see also W Ernst, ‘Der Common Frame of Reference aus juristischer Sicht’ (2008) Archiv für die civilistische Praxis. 79 A Somma, The Politics of the Draft Common Frame of Reference (Alphen, Kluwer Law International, 2009). 80 ibid. 81 ibid. 82 ibid, 39–50. 83 ibid, 51–68. 78

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Part II, under the heading ‘Freedom of contract and social justice’, encompasses three papers. Alpa, in his paper on party autonomy and freedom of contract, is not happy with the many references to fundamental principles, which in his eyes diminish legal certainty.84 Hesselink highlights the social side of the DCFR. He repeats his earlier conclusion that the DCFR is ‘fairly balanced’. However, there is still room for improvement: The concept of juridical acts should be removed. The list of underlying values, which may play an important role in the interpretation and further development of the CFR by the courts, must be made more balanced. The protection of consumers should be extended to SMEs at least in certain cases (notably unfair terms). The classical role of good faith as a basis for new judge-made obligations should be restored.85

Rutgers writes on ‘The DCFR, public policy, mandatory rules, and the welfare state’. She foresees problems: Given that contract law plays a role within the Welfare State, this raises the question as to what extent contract law should be harmonised on a European level without having a European social order or Welfare State, or at least it raises more thoughts about such a model.86

Part III on ‘Consumer protection’ also consists of three papers. Lurger does not recognise much of the consumer acquis in the DCFR.87 Meli analyses the rules on unfair contract terms in B2B contracts.88 Rott looks into termination and cancellation of contracts in the DCFR. Although he is positive on the uniformity of the cancellation regulation, he opposes the fact that ‘the DCFR largely focuses on a technical form of harmonization or streamlining of rules that neglects the variety of situations and needs of protection addressed by the different rights of withdrawal’.89 Part four consists of papers by Brüggemeier on tort90 and Salomons on property law in the DCFR.91 Brüggemeier belatedly joins Legrand in his vision that convergence of European systems of tort law is inconceivable: Legrand got it right. The harmonisation of liability law in Europe should take place through a convergence in substance on parallel paths within the respective legal form and legal culture: through judges and statutes in common law countries and by reform of the code in civil law systems.

Salomons considers the DCFR-regime for the protection of bona fide purchasers of embezzled property correct, but he questions the propriety of the regime for stolen property.

84 85 86 87 88 89 90 91

ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid,

71–93. 95–113. 115–28. 131–50. 151–61. 163–75. 179–98. 199–216.

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THE DCFR AND THE ECONOMIC PERSPECTIVE

Two research groups have analysed the economic impact of the DCFR. They are (a) an informal group of lawyers and economist who convened in Bonn (Germany) and (b) a group which was commissioned by the European Commission. A

A View from Law and Economics

On 21–22 November 2008, the University of Bonn organised a two-day workshop. The proceedings of the workshop were published in 2009.92 Experts in law and economics usually don’t appreciate harmonisation, which in their view disturbs competition of legal systems. This volume is in line with that view. The one exception is Schmidt-Kessel—but he was affiliated with that German stronghold of European harmonisation which is Osnabruck—who is very positive about the rules on specific performance.93 Schweizer94 as well as Faust95 and Ackermann,96 however, are very critical. Faust criticises the contradiction between the right to cure in consumer sales and in the general part. Unberath is of the opinion that the proposed regulation of long-term contracts leaves too many openings for the court to intervene.97 Herresthal argues that the DCFR is overprotecting consumers and therefore is not fit as a blueprint for a European private law.98 Thüsing and Horler consider the proposed rules on anti-discrimination to have already been obsolete on their introduction, because they were not adapted to the Proposal99 for an anti-discrimination directive.100 Wagner finally argues that the German regulation on tort law clearly is insufficient, but that the DCFR goes too far in the opposite direction. He also criticises the proposed rules on the medical contract for failing to deal with cumulation of actions.101 B

The Economic Impact Group

A second research group which has analysed the DCFR from an economic point of view is the Economic Impact Group, chaired by Larouche.102 This research was commissioned by the European Commission under the CoPECL agreement. The 92 G Wagner (ed), The Common Frame of Reference: A View from Law and Economics (Munich, Sellier, 2009). 93 ibid, 69–86 ‘The rules on specific performance (…) provide (…) a very good basis for a further development of dogmatics of European private law’. 94 Wagner, The Common Frame of Reference, above (n 92) 1–18. 95 ibid, 19–34. 96 ibid, 35–68. 97 ibid, 87–161. 98 ibid, 163–205. 99 Commission, ‘Proposal for a Council Directive on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation’ COM (2008) 426 final (2 July 2008). 100 Wagner, The Common Frame of Reference, above (n 92) 207–23. 101 ibid, 225–72. 102 P Larouche and F Chirico, Economic Analysis of the DCFR: The Work of the Economic Impact Group within the CoPECL Network of Excellence (Munich, Sellier, 2009).

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report consists of six parts. In the General part, Chirico wrote two chapters. The first is an economic analysis of the function of European Contract Law. Four elements in her view are of the essence: cross-border externalities, cross-border transaction costs, economies of scale and advantages of diversity.103 She then sets out to study the economic function of good faith. Her conclusion is that ‘a compelling case for harmonising at the European level a duty of good faith cannot be made’.104 Vandenberghe writes about non-discrimination from an economic perspective. She has doubts as to whether private law rules will be sufficient: Because the rules of contract law are in general not designed to change the subjective preferences that contract parties wish to satisfy through the exchange or refusal thereof, and general contract law remedies do not primarily aim at stopping particular behavior but rather aim at pricing it, it is worth investigating alternative policies, like moral education, to change discriminatory preferences, instead of, or in addition to, private law remedies.105

Part two of this volume also consists of three papers: De Geest and Kovac write about the formation of contracts. They make the observation that the Comments attached to the DCFR are often more clear than the text.106 Hesen and Hardy argue against the default rule which the DCFR -has opted for regarding interpretation of contracts: ‘A contract is to be interpreted according to the common intention of the parties even if this differs from the literal meaning of the words’. In their view, it will mainly be traders who will opt for the DCFR’s applicability and traders have more of an interest in the literal interpretation of contracts.107 The judicial control of unfair contract terms is analysed by Schäfer and Leyens. After a British suggestion, and in line with Dutch law (Article 6:235, para 1, Civil Code), the authors plead for abolishing control of contracts with a value of less than £500,000.108 Performance is the subject of three papers. De Geest concludes that basically the DCFR is in line with economic theory. He makes an exception for the obligation to renegotiate in case of unforeseen circumstances.109 Ogus considers that the measurement of damages should not be harmonised.110 Schweizer sharply criticises the provision on non-performance: in his view there are too few incentives for the debtor to perform and the proposed rules are insufficiently clear.111 The part on termination encompasses two papers. Gomez also sharply criticises the proposed rules on termination of long-term contracts.112 Kovacˇ is more content with the rules on ‘Variation and unilateral termination of an agreement in the Draft Common Frame of Reference’.113 The volume has two papers on specific parts of contract

103 104 105 106 107 108 109 110 111 112 113

ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid,

9–30. 31–44. 45–63. 67–82. 83–95. 97–119. 123–32. 133–45. 147–67. 171–201. 203–23.

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law. Kontautas is quite satisfied with the ‘Principles of European Insurance Contract Law’.114 Luth and Cseres, however, criticise consumer protection in the DCFR.115 Part six of the volume deals with tort law. Cristas and Garoupa analyse the demarcation line between tort and contract.116 Larouche sharply criticises the notion of ‘legally relevant damage’, which in his opinion is more complicated than any national legal system.117 In their concluding chapter, Chirico, Van Damme and Larouche have three points of criticism. In the first place, reflecting the ideas of De Geest, they would like to see more of the Comments in the text of the DCFR. Secondly, economic arguments should have more emphasis in the Comments. In the third place, the draftspersons of the DCFR have been insufficiently aware of the preventative function of their text.118

IX

THE DCFR AND THE LAW REVIEWS

It will be quite evident that the DCFR is a godsend for law reviews and organisers of conferences. Conferences often result in conference reports. Due to the fact that the six-volume DCFR set including the Notes was only published in October 2009, conference reports at the time of writing—with some exceptions—were not yet available in abundance. Law reviews, however, have abundantly embraced the DCFR. In order not to surpass the number of pages allotted for this chapter, it will focus on special issues of law reviews, most notably (a) the European Review of Contract Law; (b) the European Review of Private Law; (c) Juridica International; and (d) Zeitschrift für Europäisches Privatrecht and leave separate articles apart, once again with one or two exceptions. The Zeitschrift für das gesamte Europäisches Privatrecht will be dealt with in part X.D (below).

A

European Review of Contract Law

The European Review of Contract Law was the first to publish a special issue in 2007 with seven papers, which are more of a descriptive than of a critical nature. Lando sets out the structure of the CFR.119 Beale considers the future of the CFR.120 Letowska and Wiewiórowska highlight the perspective from a new Member State (Poland).121 Monti considers the relation between consumer acquis and competition law.122 Oderkerk criticises the comparative method used in the

114

ibid, 227–34. ibid, 235–73. 116 ibid, 277–94. 117 ibid, 295–318. 118 ibid, 319–32. 119 Special Issue on the Draft Common Frame of Reference 2007 (October 2007) European Review of Private Law 245–56 120 ibid, 257–76. 121 ibid, 277–94. 122 ibid, 295–314. 115

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elaboration of the DCFR.123 Schulte-Nölke introduces the by now famous ‘Blue Button’124 while von Bar finally deals with the scope and structure of the DCFR.125 A year later, the European Review of Contract Law published a second, more critical special issue on the DCFR, this time with 11 papers. The DCFR’s point of departure to regulate all contracts is accepted by Grundmann.126 This author does, however, criticise the elaboration, which should have been awarded in an open competition instead of to one consortium. Grundmann is sceptical about a European Law Institute which has recently (2011) been founded under the presidency of Sir Francis Jacobs. Hesselink does not share the negative reactions of Wilhelmsson on the one hand (Wilhelmsson laments the fact that the DCFR offers too little protection to consumers) and the Zimmermann group (too large an infringement of party autonomy) on the other.127 Hesselink is even positive: ‘Overall, from the point of view of social justice the DCFR is fairly balanced’. Although he sees room for improvement: The concept of juridical acts should be removed. The list of underlying values, which may play an important role in the interpretation and further delevlopment of the CFR by the courts, must be made more balanced. The protection of consumers should be extended to SMEs at least in certain cases (notably unfair terms). The classical role of good faith as a basis for new judge-made obliga-tions should be restored.

Smits first wants to know the nature of the proposed rules before they can be established.128 In her essay, ‘Sense and sensibilities’ Sefton-Green signals a paradox: on the one hand the DCFR does contribute to English becoming Europe’s default lingua franca, yet on the other the result is ‘a text which looks distinctly like a Code, to which common lawyers are, for the most part, inherently hostile’.129 Fages thinks the provisions on precontractual obligations not well devised to deal with commercial contracts.130 Beale considers the rule on mistake partly as a codification of a European consensus and partly as a compromise between diverging national rules.131 Mekki and Kloepfer-Pelèse plead for more influence of the French on the DCFR.132 Langenbucher proposes to change the provisions on agency.133 Carrasco writes about surety and guarantees.134 Whittaker points our attention to the supposedly simple distinction between fact and law.135 Facts must be proven, whereas the law is established by the court. Whittaker proposes a more subtle distinction, where ‘pure law’ and ‘raw facts’ are the extremes. In between are the application of simple legal notions such as ‘consumer’ and ‘commerce’, the 123

ibid, 315–31. ibid, 332–49. 125 ibid, 350–61. 126 Special Issue on the Draft Common Frame of Reference 2008 (October 2008) European Review of Private Law 225–47. 127 ibid, 248–69. 128 ibid, 270–80. 129 ibid, 281–303. 130 ibid, 304–16. 131 ibid, 317–37. 132 ibid, 338–74. 133 ibid, 375–88. 134 ibid, 389–410. 135 ibid, 411–44. 124

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application of ‘evaluative legal concepts’ and the legal qualification ‘beyond raw facts’. Sirena finally criticises the terminology and the content of the chapter on unjust enrichment.136 B

European Review of Private Law

The DCFR Special issue of the European Review of Private Law 137 begins with an analysis of the legal terminology in the DCFR by Vaquer Aloy under the heading ‘Farewell to Windscheid’.138 Mak analyses the DCFR from the perspective of fundamental rights.139 The DCFR was drafted with the classical two-party situation in mind. Storme demonstrates that the proposals also form a coherent basis for more party relations.140 Castronovo sets out how the information obligations build on the PECL and the Acquis Principles (‘ACQP’).141 Lilleholt and Mikelsen deal with the proposals as to ‘obligations de résultat’ and ‘obligations de moyen’.142 De Vries143 and Van Kogelenberg144 both deal with specific performance: the distinction between common law and continental law no longer is as sharp as used to be taken for granted. Lando analyses English, French, German and Nordic law on foreseeability.145 Twigg-Flesner criticises the detailed character of the proposed rules on commercial guarantees.146 Fötschl compares the rules on leases with the Unidroit Convention on International Fiancial Leasing.147 The provisions on contracts of construction could well serve as a model for a future Belgian statute according to Kohl.148 Palao Moreno analyses the provisions on tort law from the perspective of Rome II.149 Salomons questions the wisdom of some of the provisions on property law.150 Håstad finally rejects the integrated approach of the proposed property law: he prefers an issue-by-issue approach.151 C

Juridica International

In November 2007, the University of Tartu (Estonia) hosted a conference on the DCFR. The proceedings were published in the October 2008 issue of Juridica 136

ibid, 445–54. Special issue on the Draft Common Frame of Reference 2009 (April 2009) European Review of Private Law 483–744. 138 ibid, 487–512. 139 ibid, 513–29. 140 ibid, 531–57. 141 ibid, 559–71. 142 ibid, 573–80. 143 ibid, 581–97. 144 ibid, 599–617. 145 ibid, 619–39. 146 ibid, 641–57. 147 ibid, 659–73. 148 ibid, 675–702. 149 ibid, 703–10. 150 ibid, 711–24. 151 ibid, 725–41. 137

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International.152 This issue begins with papers by von Bar on ‘The Launch of the Draft Common Frame of Reference’; Clive on ‘Differences between the Draft Common Frame of Reference and the Principles of European Contract Law’ and Schulte-Nölke on ‘From the Acquis Communautaire to the Common Frame of Reference: The Contribution of the Acquis Group to the DCFR’ as well as Beale on ‘The Nature and Purposes of the Common Frame of Reference’. Also published in this issue are papers by van Gerven on ‘The Open Method of Convergence’; Beale on ‘Pre-contractual Obligations; The General Contract Law Background’; Wilhelmsson on ‘Various Approaches to Unfair Terms and their Background Philosophies’; Reich and Micklitz on ‘Unfair Terms in the Draft Common Frame of Reference’; Fryderik Zoll on ‘The Unfair Terms in the Acquis Principles and the Draft Common Frame of Reference: A Study on the Differences between the Two Closest Members’; Veneziano on ‘A Secured Transactions Regime for Europe: Treatment of Acquisition Finance Devices and Creditors’ Enforcement Rights’; the conference host, Varul, on ‘Performance and Remedies for Non-performance: Compara-tive Analysis of the PECL and DCFR’; Lilleholt on ‘The Draft Common Frame of Reference and Cancellation of Contracts’ and Storme on ‘The Structure of the Law of Multi-party Situations in the Draft Common Frame of Reference’.

D

Zeitschrift für Europäisches Privatrecht

In the Zeitschrift für Europäisches Privatrecht six authors produced highly critical comments of the DCFR.153 Basedow has an ‘sehr gemischter Gesamteindruck des DCFR’ (very mixed overall opinion of the DCFR’). According to this author, the ‘zentrale Ungereimtheit des DCFR liegt in der unklaren und zum Teil widersprüchlichen Behandlung der Vertragsfreiheit’ (‘the central absurdity of the DCFR lies in the partially contradictory treatment of freedom of contract’). In his view, only Books I, II and III may be useful.154 Pfeiffer does see some future for the DCFR, provided it is considerably shortened.155 The next two authors have very little positive to say about the DCFR. Huber is highly critical of the proposed sales law: Die Bestimmungen, die sich speziell auf den Kauf beziehen (…), machen insgesamt einen unausgereiften Eindruck. Das betrifft nicht nur (…) die unzulängliche Definitionen des Sachmangels, die missglückte Regelung des Gefahrübergangs und die ausufernden Bestimmungen über die Verbrauchergarantie. Die Regeln müssten insgesamt von Grund auf neu formuliert warden.

152 Conference Proceedings, ‘European Initiatives (CFR) and Reform of Civil Law in New Member States’ (Tartu, Juridica International, 2008). 153 See also the introductory remarks by G Wagner, ‘Vom akademischen zum politischen DCFR’ (2008) 16 Zeitschrift für Europäisches Privatrecht 677–78. 154 J Basedow, ‘Kodifikationsrausch und kollidierende Konzepte—Notizen zu Marktbezug, Freiheit und System im Draft Common Frame of Reference’ (2008) 16 Zeitschrift für Europäisches Privatrecht 673–76. 155 T Pfeiffer, ‘Von den PECL zum DCFR’ (2008) 16 Zeitschrift für Europäisches Privatrecht 679–707.

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(The provisions on sale of goods do make in general an unripe impression. This concerns not only the insufficient definitions of defects of the goods, the ill conceived transfer of the risk and the overly detailed rules on consumer guarantees. The provisions should be redrafted altogether.)

Huber also criticises the DCFR’s General Part, but that at least is ‘eine imponierende wissenschaftliche Leistung’ (‘an imposing scientific achievement’).156 Just as critical of the service contracts is Unberath: Der Abschnitt Services im DCFR verfehlt das hochgesteckte Ziel. Der Versuch, der Vielfalt der Erscheinungsformen des Dienstleistungsvertrages mit Hilfe von nur sechs besonderen Abschnitten Herr zu werden und zugleich dem Rechtsverkehr detaillierte, konkrete und komplexe Handlungsanweisungen anzubieten, musste scheitern.157 (The Part on Services in the DCFR does not live up to expectations. The attempt to cover a multitude of specific contracts with only six Chapters and at the same time to offer practitioners details, concrete and complex guidelines was bound to fail.)

The only chapter which receives a positive comment is a part which actually is not a formal part of the DCFR: the ‘Principles of European Insurance Contract Law’ (‘PEICL’) are well received by Armbrüster, who is happy with the provisions on anti-discrimination, the collective action and pre-contractual information requirements.158

E

Miscellaneous

Hardly a week passes without a law review article on the DCFR. By way of example, a review which frequently deals with the DCFR is the Catalonian electronic law review Revista Para El Análisis del Derecho (InDret). Recent issues contain articles on prescription,159 damages in case of fundamental breach,160 assignment161 and illegal contracts. The established law reviews offer the same picture. Once again, by way of example, I would point to RabelsZeitschrift where Kieninger expresses doubts as to the DCFR text on unfair contract terms because of the absence of legitimacy and its too frequent reference to good faith and therefore incertainty.162 There is also a growing number of books on the DCFR. An individual venture is that of Hesselink, who is remarkably positive, although he

156 U Huber, ‘Modellregeln für ein Europäisches Kauf-recht’ 16 (2008) Zeitschrift für Europäisches Privatrecht 708–44. 157 H Unberath, ‘Der Dienstleistungs-ver-trag im Entwurf des Gemeinsamen Referenzrahmens’ (2008) 16 Zeitschrift für Europäisches Privatrecht 745–74. 158 C Armbrüster, ‘Das Versicherungsrecht im Common Frame of Reference’ (2008) 16 Zeitschrift für Europäisches Privatrecht 775–812. 159 A Domínguez Luelmo and H Álvarez Álvarez, ‘The Prescription according to the PECL and DCFR’ (2009) 3 Revista Para El Análisis del Derecho (InDret). 160 A Soler Presas, ‘Damages for Fundamental Breach of Contract in PECL/DCFR’ (2009) 3 Revista Para El Análisis del Derecho (InDret). 161 P Represa Polo, ‘Eficacia de la cession frente al deudor cedido: las condiciones del pago liberatorio’ (2009) 3 Revista Para El Análisis del Derecho (InDret). 162 E-M Kieninger, ‘The Full Harmonisation of Standard Contract Terms—A Utopia?’ (2009) 4 Rabels Zeitschrift.

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would prefer more protection for small and medium enterprises.163 Another volume, this time a group exercise is a book which contains the papers for a conference held in Spain in honour of Reinhard Zimmermann.164 X

DCFR—THE CRITICS CRITICISED

Right from the outset, the draftspersons of the DCFR, being academics themselves, have actively participated in the discussion. By way of example, I will mention one individual response and one group effort. A

Dispensing with the Myths

In a paper in the Neue juristische Wochenschrift, Schulte-Nölke tries to dispense with the German fear that their trusted Bürgerliches Gesetzbuch will follow the fate of the Deutsche Mark and soon be swallowed by a European Civil Code. No way, according to Schulte-Nölke the DCFR is a: Versuch, den fehlenden gemeinsamen Ausgangspunkt für rechtsvergleichende Arbeiten zu den europäischen Rechtsordnungen zu schaffen (…), die auf diese Weise generierten fiktiven Regeln ebenfalls den Ausgangspunkt für eine europäische Debatte über die materielle Richtigkeit und gelungene Präsentation derartiger Regeln bilden können. (An attempt to supply the lacking point of departure for comparative work on European regulation (…), the fictitious provisions of which may also be the point of departure for a European discourse on substantive equity and a transparent presentation thereof.)

The author wishes to do away with some—as he calls them—other myths. The DCFR does not threathen freedom of contract: it is ‘ein Regelwerk, das freiheitliche und interventionistische einschliesslich sozialer Linien aufweist, deren Gleichgewicht stets fragil bleibt und immer wieder neu auszutarieren ist’ (‘a regulation which indicates freedom and interventionist including social strands, the balance of which will always have to be meted out’). The open norms in the DCFR are not a licence for judicial discretion, but ‘ein von den Verfassern des DCFR häufig durchaus bewusst gesetzter Marker, dass an dieser Stelle möglicherweise Ausfüllungs- und Konkretisierungsbedarf besteht’165 (‘markers which the draftspersons have introduced with the express purpose of indicating where further gap-filling and concretising may be carried out’). B

Osnabrück

It is not generally known that the negotiations for the Treaty of Münster of 1648 were equally held in nearby Osnabrück. On 17–19 April 2008, Osnabrück—now 163

MW Hesselink, CFR and Social Justice (Munich, Sellier, 2008). Vaquer Aloy (ed), European Private Law beyond the Common Frame of Reference, above (n 50). 165 H Schulte-Nölke, ‘Arbeiten an einem europäischen Vertragsrecht: Fakten und populäre Irrtümer’ (2009) Neue Juristische Wochenschrift 2161–67. 164

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the headquarters of von Bar and his team—again was the venue of a conference, this time on the DCFR.166 Von Bar is the epitomy of modesty itself: ‘Wir Entwurfsverfasser wissen natürlich, dass mehr als ein Anfang noch nicht gemacht ist’ (‘we draftspersons do of course know that no more than a beginning has been made’); but he does point out that in the preparation of the DCFR some 200 lawyers were involved and that the text was 25 years in the making.167 Beale reveals how the discussion in the editing Group of the DCFR took place. He explains why the team declined the European Commission’s idea to include a number of fundamental principles in the DCFR.168 The by now famous ‘Blue Button’ approach is explained by Schulte-Nölke, that, noch vor dem Ende des nächsten Jahrzehnts jeder E-Shop-Besitzer seinen Kunden die Option anbieten kann, auf einem Button mit der blauen Europaf-lagge und der Inschrift ‘Sale under EU law’ zu klicken und auf diese Weise ein europäi-sches Recht für den Vertrag zu wählen. ( . . .) Der DCFR ist ein wichtiger Meilenstein auf dem Weg dahin, da nun erstmals ein Entwurf vorliegt, aus dem sich ein derartiges Optionales Instrument schaffen ließe’.169 (before the end of the next decade every e-shop may offer its clients the option to click on a button with the blue European flag and the inscription ‘Sale under EU law’ and in this way to choose for European law to govern the contract (…). The DCFR is an important milestone on the way thereto, because now for the first time a draft lies before us, from which such an optional instrument could be created).

The second part deals with the content of the DCFR. First, Ernst finds there to be a remarkable resemblance between the text of the DCFR and the German BGB which, according to him, will not enhance its political feasibility.170 Jud contradicts the widely accepted view—shared by myself—that the DCFR builds on PECL, and demonstrates as many differences as conformities between the two.171 The DCFR’s provisions on extra-contractual liability—both liability in tort, benevolent intervention and unjustified enrichment—are heavily criticised by Koziol. This author is content with the fact that the fundamental differences between the Study Group proposals and those of the Koziol/Spier Group are now less pronounced. What remains is that the Study Group text is open, whereas Koziol/Spier wish to provide courts with more assistance.172 Zaccaria considers the DCFR insufficiently appropriate for the brokers’ contract.173 Veneziano hopes the DCFR will contribute to the harmonisation of securities law in Europe.174 The third part is devoted to the communitarian elements of the DCFR. Hänchen looks for a basis for the CFR in the EC Treaty. Only an opt-in solution would in her view fit in the Treaty. A tool box would not fit with the aim of harmonisation. A Consumer Code or a Contract Code as well as an opt-out text would only be 166 167 168 169 170 171 172 173 174

Schmidt-Kessel (ed), Der Gemeinsame, above (n 21). ibid, 23–33. ibid, 35–47. ibid, 9–22. ibid, 55–70. ibid, 71–92. ibid, 93–112. ibid, 113–23. ibid, 125–37.

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possible by a separate Treaty.175 Riesenhuber analyses whether or not anticipation on the DCFR is possible.176 Leible predicts that the DCFR may be used by the courts, like the PECL have been used as well.177 What that role may be is explained by Trstenjak, whose conclusions as Advocate General of the European Court of Justice have often been inspired by the PECL.178 Jung looks for the option of a geographically partial introduction of the CFR.179 The fourth part bears on soft law, or ‘weiches Gemeinschaftsrecht’ in German. Röthel points out that the scientific (or learned) nature of the DCFR may result in its political weight being smaller. However, she prefers this to the reverse where the political weight would be large and the dogmatic basis weak.180 Gebauer analyses the possibilities for national legislatures and courts to make use of the DCFR.181 Wendehorst points to the Proposal for a Directive on consumer rights to illustrate her pessimism about the use which Brussels is bound to make of the DCFR, which too much resembles a classical European civil code and insufficiently distinguishes between acquis and innovation. The author considers the notion of ‘toolbox of the legislator’ ‘the ugliest phrase of the year’.182 Huegenin writes about the impact of the DCFR on non-EU Member States such as Switzerland.183 The fifth part deals with the application of the DCFR. Mankowski analyses the relation between the DCFR and Rome I and II Regulations.184 Lehmann sketches the possibility of the DCFR in arbitration.185 Remien notices the importance of the DCFR for legal education.186 In this context McGuire signals the option of moot courts in legal education.187

XI

THE DCFR AS A BASIS FOR LEGAL DISCOURSE

Having analysed the possible functions of the DCFR and the criticism of its proposals, we now arrive at a focal point of this chapter. The main contention of the chapter lies in the argument that even if all the possible ways of using the DCFR were to fail, its mere existence will still be highly useful because of its impact on legal writing. Put very bluntly, whereas legal writing in Europe used to be focused on domestic (national) developments, the DCFR will force authors to look more often to the European context. This, it is submitted, will enhance the quality of legal research. It will also make it easier for authors from other nations to follow or even take part in the discourse. Three possible objections may be raised. The first is

175 176 177 178 179 180 181 182 183 184 185 186 187

ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid, ibid,

147–71. 173–216. 217–33. 235–53. 255–83. 287–309. 311–22. 323–64. 365–86. 389–432. 433–55. 457–76. 477–96.

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about the DCFR’s quality, the second about other options for inciting comparative law and the third is about the territorial and functional scope.

A

The Quality of the DCFR

In the past paragraphs, we have noticed that the DCFR texts have given rise to considerable criticism. Does this mean that the DCFR is not fit to serve as a focal point for the European private law discourse? I do not conclude so from this criticism. There are no doubt some critics who would rather bury the whole project. But there also quite some who, when their recommendations are adopted, might consider the DCFR acceptable as a basis for discussion. Also, one should take into consideration that no true academic would ever say ‘this text is perfect; I have no comments’. My conclusion, therefore, is that the present text is sufficiently serious to serve as a basis for discussion. That this is not a moot question will be clear from a personal experience of this author. As editor-in-chief of a Dutch looseleaf service on contract law he has indicated that every section should include a brief indication of the relevant articles in the PECL. The question now arises whether the DCFR should be included as well.

B

Other Points of Reference

Why is the DCFR so useful as a focal point, rather than, for example, Zimmermann’s Law of Obligations or Ranieri’s Europäisches Obligationenrecht? This is because draft legislation has to focus on the exact wording of a proposed rule. Draft texts of or for the European Union are therefore highly useful as starting points for academic discussions. By way of example, I quote Hommelhoff’s ‘interim conclusion’ as to the Draft Regulation on the European Private Company,188 even though it has met with strong criticism.189 ‘The draft regulation will provide company lawyers in the Union and beyond with a unique chance to engage with each other in an intense discussion on many stimulating questions of company law in a constructive search for EU-wide acceptable solutions.190

C

Scope—From European to Global Law

Some years ago, a PhD candidate at the University of Utrecht began his defence with an apology. I am sorry—he told his audience—that my research only deals 188 Commission, ‘Proposal for a Council Regulation on the Statute for a European private company’ COM (2008) 396 final (25 June 2008). 189 See, eg, S van der Braak, ‘The European Private Company, its Shareholders and its Creditors’ (2010) 1 Utrecht Law Review. 190 P Hommelhoff, ‘The European Private Company before its Pending Legislative Birth’ in J McCahery, L Timmerman and E Vermeulen (eds), Private Company Law Reform/International and European Perspectives (The Hague, Asser Press, 2009) 321, 324.

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with Europe. At a time when many PhD manuscripts only touched on Dutch law, this was obviously a pleasantry. But there is also something earnest about it. The enormous interest in the Europeanisation of law has perhaps somewhat reduced the interest in what is happening in other parts of the world. This chapter submits that although the harmonisation discourse is by no means over, it has become time to look beyond Europe.

D

Scope—Contract Law or Private Law?

Right from the outset, there has been some controversy over the scope of the European plans. In this volume, Bénédicte Fauvarque-Cosson (chapter five in this volume) pleads for a more concise text and her ideas are shared by many others. Why should property law be included? Why should unjustified enrichment be dealt with? From the point of view of harmonisation, there may well be something in this argument. Something, but not very much: because even if these two subjects may not be the subject of all-inclusive regulations or directives in the near future, it is relevant to see the other parts in context. When one deals with bank guarantees, it is of some importance to know how the terminology of guarantees is dealt with in consumer sales. But then we are still discussing future legislation. And as I explained earlier, the main impact of the DCFR will rather be on legal writing. Legal writing will generally be interested in including more rather than fewer subjects in texts.

XII

CONCLUSIONS

The DCFR is an important text. It is useful for various purposes. Its main purported aim—to serve as toolbox for the European Commission—has so far proved unsuccessful; witness the proposed Directive on consumer rights, which has no trace of any DCFR influence whatsoever. This may change in the future, but the outlook at present is bleak. National legislators may also find the DCFR of interest. This will especially be so, because the Notes—not yet published at the time of the conference—will be highly useful by way of comparative law. A limited use of the DCFR may be made by courts and arbitrators. This has become an occasional practice with regard to the PECL and the PICC, so it seems the DCFR could easily be added to this basket. A group of stakeholders—who might well profit from the DCFR but most probably will not witness the failure of the CISG to attact their attention—are the practitioners. Academics, however, will be the main group to profit from the DCFR. If legal science is to be worthy of the name ‘science’, it is essential that legal discourse is not limited to the confines of the domestic state. The DCFR makes it possible to enter into such a discourse. The quality of parts of the DCFR may be not entirely sufficient, but for academic discussions this is not a major criticism. There are other means to raise the level of transnational discourse, but it is submitted that quasi-legislative texts, such as restatements and principles do have the advantage of making the debate more precise. Europe will in the future be seen as only a temporary phase. The future obviously is in a global legal science.

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Limitations to functional areas, such as contract law, may be useful for practical reasons, but once again this will only prove to be a temporary solution ‘reculer pour mieux sauter’.

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33 A Need for a New Structure for European Private Law FRYDRYK ZOLL

I

INTRODUCTION—THREE DIFFERENT APPROACHES

T

HE CURRENT EVOLUTION of European Private Law refreshes the old discussions concerning the mode of the desired structure of the body of law. The recent development and the Proposal for the Directive on consumer rights have proved that, since the fourth option for the development of European Contract Law has been presented1 we have not achieved significant progress in conceptualising the prospective outlook of European Private Law or even of Contract Law. Recent times have, however, brought a number of projects, which despite their substantive content, provide a different structure of legal organisation.2 In this chapter I wish to discuss three texts with quite different functions, legal status and even structures. These are the ‘Draft Common Frame of Reference’ (‘DCFR’),3 the proposed Directive on consumer rights4 and the Acquis Principles on European Consumer Contract Law (Acquis Principles)5. These three drafts, despite their differences, have in common that they envisage—or should at least envisage—a certain concept of the structuring of private law. The DCFR has the widest scope of all these drafts. It covers not only contract law, but it shows an aspiration to cover large areas of private law in general. Of these drafts, only the DCFR has features of a codification, although even in this case, a full programme of a traditional codification has not been realised. 1 Commission, ‘Communication from the Commission to the Council and the European Parliament on European Contract Law’ COM (2001) 398 final (11 July 2001). 2 Such as the Lando Commission’s Principles of European Contract Law (‘PECL’); Code européen des contrats—Avant-projet (G Gandolfi); Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR) (C von Bar, E Clive, H Schulte-Nölke); Principes contractuels communs (B Fauvarque-Cosson and D Mazeaud) or The Research Group on the Existing EC Private Law (Acquis Group), Principles of the Existing EC Contract Law (Acquis Principles). 3 C von Bar, E Clive and H Schulte-Nölke et al (eds), Principles, Definitions and Model Rules of European Contract Law, Draft Common Frame of Reference (DCFR), Outline Edition (Munich, Sellier, 2009) and C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (Munich, Sellier, 2009). 4 Commission, ‘Proposal for a Directive on consumer rights’ COM (2008) 614 final (8 October 2008). 5 Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services (Munich, Sellier, 2009).

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The Acquis Principles confine themselves to contract law. In the field of contract law they provide a structure, which aspires to a relatively high level of complexity. They try, however, to provide an open system, combining the coherency of the text with the possibility of upgrading and developing the text without infringing on its structure.6 The Proposal for the Directive on consumer rights in its final version is confined only to selected issues of consumer contract law. The drafters have abandoned any aspiration to provide a systematic structure for European Contract Law. The Proposal compiles only the four existing directives on consumer contract law—the initial plan to establish a framework directive has failed.7 These three drafts represent very different approaches to the vision of the organisation of private law at the European level. The DCFR presents here the most conservative tradition in the ordering of a legal text. It belongs to the stream of the ‘pandectistic’ way of building up a legal system.8 The Acquis Principles, also using the pandectistic approach of generalisation of legal concepts, do not create a closed system. Here, there is more of a platform—‘a frame’—for the systematisation of contract law.9 The Proposal for the Directive confines itself solely to compilation: it does not use any kind of codification methodology (or if it does, then it uses it in a very limited scope). In my chapter, I wish to discuss these three approaches to the idea of systematisation. Before these three different approaches can be discussed, it should be considered whether systematisation on the level of European Private Law is desirable at all?

II

COHERENCY OF THE EUROPEAN PRIVATE LAW VERSUS COHERENCY OF THE NATIONAL SYSTEMS—NO INTERCONNECTION?

In this chapter I would like to discuss the position of Howells, who tells us that the consistency of the Community law is not the highest value;10 much more important is the consistency of the national legal system. I will try to prove that coherence at European level is interconnected with coherency at a national level. Therefore a search for the optimal structure of European Private Law is desirable.

6 On the new structure of the Acquis-Principles, see H Schulte-Nölke and F Zoll, ‘Structure and Values of the Acquis Principles: New Features and their possible use for Political Purposes’ in Acquis Principles, Contract II, above (n 5) 23–33. 7 The idea of the framework directive has been announced by the European Commission in the ‘Green Paper on the Review of the Consumer Acquis’ (COM (2006) 744 final (2 August 2007) 8). On its failure, see Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 29–30. See also, Acquis Group (G Dannemann, J Rochfeld, H Schulte-Nölke, R Schulze, E Terryn, C Twigg-Flesner and F Zoll), ‘Position Paper on the Proposal for a Directive on Consumer Rights’ (2009) Oxford University Comparative Law Forum 3a, available at: ouclf.iuscomp.org. Also in BJ Ch Wendehorst, Neuordnung des Verbraucherprivatrechts in Europa (Wien, Universitat Wien, 2009) 189. 8 On this issue, see R Schulze, ‘DCFR—Funktionen, Methoden und Struktur’ in R Schulze, C von Bar and H Schulte-Nölke (eds), Der akademische Entwurf für einen Gemeinsamen Referenzrahmen: Kontroversen und Perspektiven (Tübingen, Mohr, 2008) 22–28. 9 Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 26. 10 G Howells, ‘Consumer Protection and European Contract Law Harmonization’ (2006) Scripta Iuris Europei, Special Issue 47.

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For Howells, the most important goal is to achieve a coherent result of the process of implementation of European law into national legal systems. From this perspective it does not matter whether European law itself is coherent. The incoherency of European law does not necessarily lead (according to Howells) to the incoherency of national legal systems. The accuracy of this response depends on the features of the national system in question and of the expectations concerning the level of European integration to be achieved. Existing European Private Law consists of unsystematic legal acts governing several particular situations. This is an approach which is not so far removed from that of the common law, a system which is also characterised by the sectoral approach. Such thinking through the ‘problem perspective’ understands some advantages and disadvantages, which I do not wish to discuss here.11 The ‘problem approach’ of European Private Law very often ignores the holistic and complex structure of these systems. Directives are not built on the lines of this system, and do not start from the practical problem, but rather try to encompass all possible future facts under the aegis of coherent concepts and notions. In such cases, it is extremely difficult to incorporate a directive without infringing the consistency of the system. If certain directives are not coherent with the other directives, and do not take into consideration the internal and external elements of those systems, the implementation into the codified system must inevitably lead to the disintegration of the national legal system. From the perspective of these systems, the coherency of European Private Law becomes a vital question for the ‘correctness’ of the national private law legislation. The question of the coherency of the national legal systems is, however, not the only desirable aim. The single market of the European Union (EU) also requires a coherent system for the supranational level. The implementation of the directives into the very different legal environments of the respective national systems serves the approximation of legal systems. If the directives are implemented into completely different legal contexts, the approximation does not occur, even if the consistency of the national system is not infringed.

III

THE CONSERVATIVE STRUCTURE OF THE DCFR—ADVANTAGES AND DISADVANTAGES

The structure of the codification, which—at least to some extent—has been used (although with different consequences) in the DCFR should be examined, to evaluate whether it fits into the challenges of our time. Consistent law requires consistent terminology. The directives in the current stage of development do not contain a coherent language because they are not arising from the common context—the underlying law. The DCFR, with its ‘conservative’ structure, provides such a context. Nonetheless, it is not open enough for the changes of the law in the age of permanent change.

11 I aim only to indicate that from the perspective of the continental, mostly codified legal systems. See also Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 25.

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The DCFR is based on an attempt to provide a consistent legal environment on the level of the Union. It brings its own terminology, it provides an elaborated structure and organisation of the legal contents. The DCFR resembles the traditional continental codifications. Although there is still an important part of the private law which is not covered by the DCFR—for instance succession law, family law and vast areas of property law—the DCFR is constructed with the clear goal of providing a codification which is capable of governing the whole complexity of civil law relationships. This large claim is also a big problem for the DCFR. It may serve—and serves already—as an important source for inspiration for national legislators. The major addressee—the EU authorities—may, however, experience difficulties in the use of such a complex work. It requires a very far-reaching decision in strengthening the level of unification or harmonisation of private law. So far, the EU would not gain a competence to codify private law. The usage of the DCFR as a toolbox, in limited areas of the already existing European legislation, is not easy. It provides an additional ‘system’ but its complexity makes it difficult to co-exist with other European systems.12 It may play perfectly the part of a function of the ‘restatement’ of the European law (apart from some areas, where the DCFR does not restate but tries to innovate the existing laws—like in law of secured transactions in movable goods), but it takes over the existing political level of European development.13 The DCFR may be an especially useful device for the drafting of an ‘Optional Instrument’.11a It is not, however, the structure of the DCFR which should be used for the drafting of such an instrument, but rather its content. An overly-complex structure would make the usage of the Optional Instruments too difficult if its scope of application would be confined only to certain narrow fields, like the operation of an e-shop. But it is quite possible to imagine a complex Optional Instrument looking like a code. In such case even the structure of the DCFR would be appropriate.

IV

THE DIRECTIVE ON CONSUMER RIGHTS 11b INSTEAD OF THE ‘HORIZONTAL DIRECTIVE’—A MISSED OPPORTUNITY?

The Proposal for the Directive on consumer rights does not provide a feasible structure for the future development of the European Private Law. It is accurate that the description of the ‘horizontal directive’ is not in use any more. It is merely a compilation, and does not provide a secure basis for further development. In the ‘Green Book on consumer law’ the Commission has declared a need for a 11a Meanwhile the first draft of the OJ has been published and it may not be dismissed the DCFR actually served as a useful device (see p 5 of the feasibility study on http://ec.europa.eu/justice/contract/ files/feasibility-study-en.pdf) 11b By now the idea of a framework directive for a unitary consumer law was given up. It is rather contemplated to elaborate a directive confined to off premises contracts. However, the question concerning a unitary consumer law is still up to date (see the issues raised above, p 557). Hence, there is still a need for the framework directive in question. 12 Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 28–31. 13 See, however, critical remarks on its possible function as ‘restatemen’ N Jansen and R Zimmermann, ‘Was ist und wozu der DCFR?’(2009) 47 Neue Juristische Wochenschrift 3402–04.

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framework directive on consumer law. The Commission purported to envisage a directive which could provide a basis for the future development of European Consumer Law. This objective has not been reached in the Proposal for the Directive on consumer rights. This directive is merely a compilation of the four existing consumer directives. Only in the field of the contracts negotiated in the field of business premises some further unification has been achieved.14 But even in such a limited field, no platform has been created in order to accumulate possible future development. The idea of the framework directive, seriously taken, seems to be a very important and desirable device to bring order into the existing chaotic environment of European private law14a. The framework directive should be, however, a very different instrument from the proposal presented by the Commission. The aim should be a platform consisting of a coherent package of rules, which would secure a common background for European Private Law. This system should be constructed in a different way. It cannot be a ‘closed structure’, encompassing whole areas of the private law, but rather a set of general rules—common for all contracts, or it may take the form of private law directives. The framework directive should be a sort of general factotum for European Private Law. This directive should have generally (despite perhaps a few exceptions) indirect applicability. The general part should be activated only with a specific directive (for example on consumer sales) and only in the field of application of this particular directive. In this manner, all directives would get a common background, containing common terminology and concepts. The use of the ‘real’ framework directive would be a major factor of internal standardisation of European Private Law, without creating a fear of codification at European level.15

V

THE ‘MIRROR STRUCTURE’ OF THE ACQUIS PRINCIPLES—A BASIS FOR THE ‘REAL FRAMEWORK DIRECTIVE’

I would like also to discuss in detail the new structure of the Acquis Principles—the so-called ‘mirror structure’. This may represent an alternative to organising a horizontal instrument of European Private Law. I would like to prove that it does not lose the benefits of the ‘problem approach’ of the current acquis communautaire, but rather also builds up a coherent system, which is open for innovation. In the second volume of the Acquis Principles, the Acquis Group presented an entirely new structure. In an introductory chapter, Schulte-Nölke and I suggest that the new 14 MBM Loos, ‘Rights of Withdrawal’ in G Howells and R Schulze (eds), Modernising and Harmonising Consumer Contract Law (Munich, Sellier, 2009) 238; H Schulte-Nölke, ‘Scope and Role of the Horizontal Directive and its Relationship to the CFR’ in Howells and Schulze, Modernising and Harmonising Consumer Contract Law, ibid, 39; H Schulte-Nölke and F Zoll, ‘Structure and Values’, above (n 6) 30; M Lukas, ‘Außerhalb von Geschäftsräumen geschlossene Verträge’ in B Jud and C Wendehorst (eds), Neuordnung des Verbraucherprivatrechts in Europa? (Vienna, Manz, 2009) 82; M Schauer, ‘Fernabsatzverträge’ in Jud and Wendehorst (eds), Neuordnung des Verbraucherprivatrechts in Europa?, ibid, 118. 14a See further: F Zoll, ‘Vorschlag einer Richtlinie über Verbraucherrechte—Herausforderungen für den polsnischen Gesetzgeber’ in R Welser (ed), Konsumentenschutz in Zentral- under Osteuropa (Wien, Manz, 2010) 245–249. 15 Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 28–31.

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structure of the Acquis Principles may serve as a model for the new systematisation of European Contract Law and could be used as a model for the framework directive. We dub it the Paris structure or the mirror structure. This structure was adopted at the plenary meeting of the Acquis Group in Paris. It attempts to combine the problem approach of the existing European Private Law, with the more ‘Pandectistic’ organisation of the legal text. In Volume I of the Acquis Principles, we proposed a sort of synthesis of the existing European Contract Law, by the way of generalisation of the rules existing in the acquis communautaire, which are capable of being used not only in their narrow ‘sectoral’ field of application, but which may also serve as general rules with a broader scope.16 In the second volume, we have added the ‘specific rules’. These specific rules have, however, not been appended to the end of the text and cater to specific types of contracts. We have assumed that the acquis communautaire, despite some limited exceptions, does not contain types of contracts.17 There are, most of all, different groups of situations with comparable interests and needs for protection of specific parties. Therefore, we have segregated our specific rules and grouped them according to their subject matter. To the general provisions on pre-contractual duties we have appended the specific pre-contractual duties which are not feasible for generalisation but which are linked to the specific situations, such as distance contracts, or package holiday deals etc. This method has been applied throughout the entire text. Thus, the general provisions on the right to withdrawal are accompanied by specific modifications emerging from particular types of legal relationships. They also apply regarding the law of performance and nonperformance of obligations. Someone examining the problem of non-performance in the context of a package holiday contract will find the whole set of rules on non-performance in one place—the general rules accompanied by their particular package travel modifications. The new scheme of the Acquis Principles allows for the permanent development of the law, by adding the new directive, distributed throughout the entire text. It is easy to add new rules without infringing the structure and without modifying the general rules. It would mean that the general parts of the Acquis Principles may serve as a model for the framework directive, while the specific parts show how the specific rules concerning the problem—which is to be solved by the means of European legislation—may be added to the general rules. This model would probably secure the consistency of European Private Law without having a claim to provide a holistic European codification.18 VI

WHY WOULD THE REAL ‘FRAMEWORK DIRECTIVE’ MEAN A STEP FORWARD?

The idea of the framework directive with the structure as presented above required justification. The question put by Howells as to whether the consistency of the law 16 Research Group on the Existing EC Private Law (Acquis Group) (eds), Principles of the Existing EC Contract Law (Acquis Principles), Contract I: Pre-contractual Obligations, Conclusion of Contract, Unfair Terms (Munich, Sellier, 2007). 17 Schulte-Nölke and Zoll, ‘Structure and Values’, above (n 6) 25. 18 ibid, 30.

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at the EU level really matters for the coherency of the national systems is important. The above presented idea for the framework directive may have also a differentiated impact on the national legal systems. If this idea was to be fulfilled at the European level and consequently used by the European legislator, we would probably develop a better systematised European Contract Law. What, however, would it mean for the national legislator? Acquiring a coherent system on the European level would create difficulties for the national legislator. These difficulties could be more visible if the system at European level was to differentiate seriously from the national system. What kinds of options would a national legislator have, willing to implement such a concept of the framework directive? One possibility would be a different national legislation, reflecting the framework directive and the attached specific directives by using this same method, which has been adopted on the national level. To some extent, a new kind of codification might be required. The rational legislator would, in such circumstances, use the content of the framework directive not only in the field of the implemented European law, but in the other—purely national—fields of European law. It would certainly accelerate the process of ‘Europeanisation’ of national contract laws. This development— albeit probably desirable—is not politically realistic at the moment. Hence, the European legislator would need to envisage very different means of national implementation. Certainly, the coherent European legislation, with its own systematisation, would bring with it a danger of a form of implementation which does not integrate the system with the national legal order, but keeps the implemented law separately on the margin of the national system. This is the worst way to develop harmonised law, and does not bring the legal systems closer to each other. Therefore the framework directive with the above-mentioned structure cannot require the maximum harmonisation. The minimum harmonisation would allow for a more flexible integration of European law into national systems, enhancing the effect of the Europeanisation of national law. Such integration would, however, in all configurations require the adjustment of that portion of the law not directly affected by the requirement of harmonisation. The reorganisation of European law and the quest for a higher level of coherency requires the cooperation of the national legislators and the European law-making bodies. The successful creation of a coherent European law cannot be imposed only by Europe on the Member States; they have to participate at very early stages in the elaboration of a vision for European Private Law. The idea of the framework directive shows one of the possibilities for implementing a device for a more coherent contract law. However, without the willingness of the Member States to achieve a higher level of coherency, every such project would necessarily fail. Maybe at this level of development, the time is simply not ripe for the adoption of hard legislative methods of implementation, but rather for more gentle means to be applied. The idea of the Optional Instrument is a good example of this.

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34 Administrative Enforcement of European Private Law HANS-W MICKLITZ 1

I

THE INSTITUTIONAL FRAMEWORK OF EUROPEAN PRIVATE LAW ENFORCEMENT

F

ROM A CONVENTIONAL perspective, there is a deep link between private law matters and individual judicial enforcement, perhaps depending on the Member States’ culture and tradition relating to Alternative Dispute Settlement Procedures (ADR). Enforcement may thus be equated with the key role of the individual who has to invoke her rights and the competent courts which have to decide on the legality of such a claim. This is by and large the world in which the ideology of the ‘Common Frame of Reference’ is operating. This might explain why the Acquis Group and the Study Group have set aside the enforcement dimension. Private law in such an understanding boils down to substantive rules on contract and tort. Contract is in essence the result of a bilateral engagement, based on a voluntary decision of two equally empowered parties. Tort law complies to such an understanding as it deals with the individual responsibility and liability of the wrongdoer outside voluntary contractual engagements. The existing body of European private law rules, as enshrined in EU directives and EU regulations looks different. European private law is regulatory private law; it does not start from party autonomy or freedom of contract, but is designed for the achieving, fostering or managing of particular markets or particular policy objectives. Individual freedoms of private parties or even deeper ‘the individual person’ be it a natural person or a legal entity has a role to play only in a pre-designed context. The individual is instrumentalised for particular policy purposes.2 Private autonomy turns into regulated autonomy. European private law shifts the focus from autonomy to regulation and competition. This is the European private law I have in mind when it comes to enforcement and compliance. In such a

1 I would like to thank L Azoulai, K Cseres, C Hodges and A Ottow for their comments on earlier versions of this chapter. 2 H-W Micklitz, ‘The Visible Hand of European Private Law’ in P Eeckhout and T Tridimas (eds), Yearbook of European Law 2009 28 (Oxford, Oxford University Press 2010) 3–60. Translated into Italian: G Alpa and R Mazzei (eds), Seminari del Consiglio Nazionale Forense: Collana ‘Studi storici e guiridici’ (Rome, Italian Ministry of Justice, 2010) 125–92. Translated into Finnish: Lakimies (The Journal of the Finnish Bar Association) (2010) 330–56. Translated into Japanese: forthcoming.

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perspective, the ‘Europeanisation’ of private law shifts the focus from judicial enforcement to administrative enforcement, from individual to collective enforcement.

A

From Judicial to Administrative Enforcement

Let me start with the role and function of administrative enforcement in private law matters. The EU has developed a well-established policy under which it is for the EU to create European-wide markets where they did not exist before—for example, financial services, electricity, gas, telecommunication, postal services, transport by air, by ship, by bus, by rail. Most of the rules aim at opening up markets and defining a set of rules which guarantee access for new competitors and which establish a common platform for competition. The EU pushed the Member States hard to set up regulatory agencies or, where they already existed, to transform them into ‘European’ regulators—just as national courts are also European courts in that they have to implement European law. What matters in our context is that private law rules slip into the regulatory design, although private law rules are not at the forefront of the regulatory purpose. Regulatory agencies, designed for securing the functioning of the respective market, are confronted with the need to either instrumentalise private law rules for public enforcement and/or to delegate the enforcement of private law rules in regulated markets to the parties concerned, and thus to the judiciary as the traditional form of conflict resolution. Whether or not private law rules in regulated markets can—or even should—be enforced by public authorities, ie, administrative regulators, very much depends on whether these agencies are bound solely to guarantee the functioning of the markets or whether, on top of this, they are also obliged to take the individual interests of market participants who suffer from illegal or anti-competitive market practices into account. The message from the EU rules is becoming ever clearer.3 Public authorities have a two-fold role in securing the workability of the market and protecting the interests of the market participants. It is exactly in this perspective where administrative enforcement intrudes more and more into private law matters. A visible sign of such a shift in focus is the increasing role of ADR among the avenues pursued by national administrative enforcement authorities.4 Such a development is not without conflicts, as Member States start from different institutional preconceptions on what administrative agencies should or should not do, what should be left for the parties and what should be the role of the judiciary and/or ADR mechanisms.

3 eg, Directive 2004/39/EC of 21 April 2004 on markets in financial instruments (Financial Markets Directive) [2004] OJ L145/1; Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity (Electricity Market Directive) [2009] OJ L211/55; Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas (Gas Market Directive) [2009] OJ L211/94; Directive 2009/136/EC of 25 November 2009 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive) [2009] OJ L377/11. 4 See the contribution of M Loos (ch 30 in this volume).

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From Individual to Collective Enforcement

The second major challenge for a traditional understanding of private law enforcement results from the shift from individual to collective enforcement. The deeper reason might be found in the rise of mass production and mass consumption in the second half of the twentieth century which equally triggers mass damages. Seen through the lenses of private law, the borderline between regulatory private law and traditional contract and tort law cases becomes blurred in collective enforcement. Collective enforcement cuts across the distinction between traditional private and regulatory private law, although regulatory private law tends to enhance the level of protection of private parties and thereby favours—at least indirectly—the development of means of collective redress. The relationship between individual and collective is a complicated one. Member States differ considerably in the degree to which they are ready to introduce collective remedies. Actions for injunctions could be regarded as the minimum standard, and in a way they could be regarded as the counterpart to the much debated and heavily criticised US class action. Even an action for injunction, however, so prominent in the field of unfair terms and unfair commercial practices, is not conceptually linked to individual redress means. Res judicata functions as a barrier between individual and collective litigation. In the last decade, the Member States have introduced various forms of collective redress means. With the exception of the Netherlands and Portugal they reject the so-called ‘American conditions’ thereby referring to opt-out systems, contingency fees, jury trials, exorbitant compensation sums and punitive (treble) damages. At most some Member States advocate for opt-in group actions,5 in an attempt to find the perfect regulatory model, which avoids American conditions but allows for organised law enforcement through joining forces via private action. The blueprint they have in mind is judicial litigation, a model where the two parties contest the conflict and a judge has to ‘decide’ the case. In such a perspective there is not much leeway for rethinking the link between individual and collective enforcement. The overall assumption seems to be that in a first stage, individual and collective litigation may be combined, as the parties to the conflict have to individually decide whether to join the conflict, but that once the ‘common factual and legal issues’ are decided, the two procedures can be split again. It does not come as a surprise that collective litigation does not play a role in the Member States, with the exception of the Netherlands.6 Administrative and judicial collective enforcement are interlinked. Crucial in our context is the question of standing. The decision over standing is bound to two features: the role and function of collective litigation in the respective society and the institutional framework of enforcement in which the collective action is to be embedded. Most of the European academic debate focuses on suggested societal

5

See the contribution of J Stuyck (ch 31 in this volume). W van Boom, ‘Collective Settlements of Mass Claims in The Netherlands’ in M Casper, A Janssen, P Pohlmann and R Schulze (eds), Auf dem Wege zu einer europäischen Sammelklage (Muchen, Sellier, 2009) 171; C Hodges, The Reform of Class and Representative Actions in European Legal Systems: A New Framework of Collective Redress in Europe (Oxford, Hart Publishing, 2008). 6

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differences between the US and Europe, a debate where Europe is all too often regarded as different from the US but homogeneous in itself, with the US class action omniscient as a benchmark, as a yardstick, a dream or a nightmare. The US system is characterised as adversarial, where lawyers as entrepreneurs fight out political conflicts through legal means in the courtroom,7 or as co-ordinate where the balance between the different constitutional powers guarantee effective enforcement.8 The European legal system is regarded as non-adversarial and a-political, in the sense that societal and political conflicts are not fought out in the courtroom. Legal conflicts and litigation are said to be put into a quasi neutral a-political environment, enshrined in a hierarchical structure of conflict resolution. The societal differences are equally reflected in the institutional design of law enforcement. A standard explanation for the key role of (collective) litigation in the US goes back to the distinction between the European emphasis on regulatory agencies exercising strong hierarchial pre-market control, which does not leave much room for adversarial post-market control via collective litigation, whereas in the US the situation is reversed.9 A similarly clichéd perspective governs the role and function of the lawyer in collective litigation. The US lawyer is regarded as an entrepreneur who finances the class action, who bears the risk of failure but might reap 20–30 per cent of the compensation as contingency fee in case of success. In Europe, the legal profession is subject to strict regulation which tends, however, to leave more discretion for professional entrepreneurship. Standing in collective redress is put into the hands of regulatory agencies and/or NGOs, with considerable differences in detail resulting from national historical and cultural patterns. One might therefore assume a strong link between the design of pre-market product regulation and the shaping of collective action. Strictly speaking, the shaping of collective action would have to vary according to the degree to which products are submitted to pre-market control. Regulatory control standards targeting products and/or services are shaped at the European level. For example, pharmaceuticals, chemicals, pesticides and genetically modified products are all subject to some sort of prior approval process. This is not the case in the vast area of technical consumer products. A similar logic applies to market-related services standards for telecommunication and postal services, energy and transport and all those services to which, in contrast, a particular market design cannot be attributed. Collective action, it has been argued, should be given more leeway in unregulated areas or, more precisely, in areas where there are no European pre-market control standards.10 7 R Kagan, Adversarial Legalism, The American Way of Law (Cambridge, Mass, Harvard University Press, 2003). 8 MR Damaska, Faces of the Justice and State Authority (New Haven, Yale University Press, 1986); MR Damaska, Evidence Law Adrift (New Haven, Yale University Press, 1997). 9 See most recently, F Valguarnera, Legal Tradition as an Obstacle: Europe’s Difficult Journey to Class Action 2010 (10) Global Jurist 1 in the widely respected Hauser programme of NYU; M Reimann, ‘Präventiv-Administrative Regulierung oder Private Law Enforcement’ in Bitburger Gespräche Jahrbuch 2008/1 (München, CH Beck, 2009) 105–46. 10 See more generally on the link between product regulation and private law, F Cafaggi, ‘A Coordinated Approach to Regulation and Civil Liability in European Law: Rethinking Institutional Complementarities’ in F Cafaggi (ed), The Institutional Framework of European Private Law (Oxford, Oxford University Press, 2006) 191.

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Against such a complicated and variable set of preconceptions governing the institutional design of collective enforcement of private law matters it becomes clear that even trying to lay down Europeans standards on collective action is like stirring up a hornet’s nest. That is why it is not surprising that the EU is rather cautious in promoting European standards on collective redress. The European Commission is trying to foster collective enforcement in competition law in the aftermath of Courage 11 and Manfredi,12 but so far has met with little success. Developments in the field of consumer law are even more underwhelming. Here the European Commission seems to favour a genuine European solution which combines administrative and collective enforcement through dispute settlement. Collective litigation in court shall take a back stage role. Public agencies, instead, are regarded as the potential actors who can more efficiently settle mass conflicts outside courts.13 While such a policy might be in line with those Member States who rely on public agencies even in the field of consumer protection, ie, in the field of consumer private law, thinking of agencies as potential agents in settling mass conflicts creates concern in Member States where enforcement of consumer law lies in the hands of NGOs. For our understanding of administrative enforcement in the area of private law, this bifurcation is of crucial importance. It shifts the emphasis from judicial to administrative enforcement and therewith from powers of the Member States to those of the European Commission. Collective judicial competence has by and large been retained in the Member States. In adopting judicial collective redress schemes the Member States indirectly support the policy of the European Commission, at least in all areas where either the European Commission or EU regulatory agencies are entrusted with market surveillance and market monitoring. In these areas administrative regulatory powers have to be balanced with judicial powers. The trend in administrative enforcement since the Single European Act points generally towards the centralisation of powers in the hands of the European Commission, even if these powers cannot be equated with direct regulatory powers. Very subtly, administrative collective enforcement gives the European Commission a much more robust position even in the enforcement of private law matters. This argument will have to be developed throughout the piece. C

The Neglected Administrative Private Law Enforcement

Over the last number of years I have devoted much of my research to the role and function of the European judiciary in the enforcement not only of private law matters. More recently, I have argued that the European legal order is biased, as 11

Case C-453/99 Courage [2001] ECR I-6297. Joined Cases C-295/04–298/04 Manfredi [2006] ECR I-6619. 13 See Commission, ‘Report from the Commission concerning the application of Directive 98/27/EC of the European Parliament and of the Council on injunctions for the protection of consumers’ interests’ COM (2008) yyy final, available at: ec.europa.eu/consumers/enforcement/docs/report_inj_en.pdf. For an understanding of what is behind, see K Viitanen, ‘Nordic Experiences on Group Actions for Compensation’ in Casper, Janssen, Pohlmann and Schulze (eds), Auf dem Wege zu einer europäischen Sammelklage, above (n 6) and Hodges, The Reform of Class and Representative Actions in European Legal Systems, above (n 6), who is the most prominent representative for such a regulatory model. 12

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judicial enforcement via rights, remedies and procedures is quite developed in the field of the European economic order but rather underdeveloped with regard to the enforcement of the European social order.14 Regulatory private law is strongly intertwined with the particular design of the social outlook of the European dimension. I even go so far as calling for judicial activism to strengthen the position of private actors, individually and collectively, by applying and developing the acquis communautaire in the field of social judicial enforcement. This need not be reiterated here. That is why this chapter is focusing on the administrative enforcement of private law matters, an area which escapes so far the attention of legal scholarship, thereby complementing my previous research in judicial enforcement. More concretely I will defend the hypothesis that the starting point for getting to grips with administrative enforcement of European regulatory private law is the distinction between serious infringements reserved for enforcement at the EU level and less serious infringements where the Member States remain competent. Thereby the European Commission and/or the different EU agencies govern the enforcement of regulatory private law even beyond individual and/or collective compensation. The general understanding is that such forms of administrative enforcement have no direct impact on private enforcement—be it individual and/or collective. This implies a distinction between the public, the collective and the private interest. The public interest—or the interests of the society at large—are put into the hands of the executive while the enforcement of private interests remains in the hands of private individuals. It is the collective interest which raises concern as it cuts across the distinction between individuals in their private and public sense. It points in two directions, as the collective interest might affect an identifiable group of individuals; however, if the group is not identifiable, then the boundaries between the collective and the public interest are swept away. This is one of the issues at the heart of the debate about the feasibility of introducing collective actions or collective remedies to the benefit of private parties. My point is somewhat different. Through sector specific or problem specific market regulation, EU law contributes to an ever larger diversification of the public interest, which is in turn broken down to sector or problem specific interests governed by regulatory agencies promoted by EU. In doing so, it is not only the private–public and collective–public distinction that become blurred but also the distinction between public law and private law.15 I try to show how the new forms of administrative enforcement reach more and more into the realms of private individual and/or collective enforcement, thereby developing a new institutional design of regulatory private law enforcement. On the surface it looks like individual and/or collective enforcement remains in the hands

14 H-W Micklitz, ‘The ECJ between the Individual Citizen and the Member States—A Plea for a Judge-made European Law on Remedies’ in B de Witte and H-W Micklitz (eds) The ECJ and the Autonomy of the Member States (forthcoming, Intersentia, 2011. 15 N Reich, ‘The Interrelationship between Rights and Duties in EU Law: Reflections on the State of Liability Law in the Multilevel Governance System of the EU: Is there a Need for a More Coherent Approach in European Private Law?’ in P Eeckhout and T Tridimas (eds), Yearbook of European Law 2009, above (n 2) 112; L Azoulai, ‘Sur un sens de la distinction public/privé dans le droit de l’union européenne’ (2010) 4 Revue Trimestrielle de Droit Europeen 853.

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of Member States’ authorities and/or qualified entities,16 to use EU language, whereas the administrative powers shift gradually towards the European Commission. Underneath, however, the changes in the institutional design are much more dramatic. The key to understanding the evolving institutional design is the distinction between serious and non-serious infringements. Thus we have a structural bias between EU administrative enforcement of serious infringements without individual and/or collective compensation and Member States’ administrative enforcement of less-serious infringements linked or unlinked to individual and/or collective administrative and/or judicial compensation. Member States

EU

Serious infringments/less serious infringements

Less serious

Serious

Individual/collective enforcement

Administrative and/or individual/collective judicial

No schemes

Administrative enforcement

EU induced national regulators

EU Commission and EU agencies

In order to build my argument I will have to go back to the origins of the distinction between serious and non-serious or less serious infringements which was first developed in the field of product safety. Competition law is the area where the European Commission transformed the distinction into a generally applicable policy, a development which was very much facilitated by the fact that the European Commission enjoys genuine enforcement powers in that field. Environmental law stands at the other end of the spectrum. Here the European Commission does not possess enforcement powers. Nevertheless, with the support of the ECJ, it has transformed the infringement procedure into an enforcement tool which compensates for the lack of proper enforcement powers. In the field of regulatory private law, the three strains of development are coming together—the basic distinction between serious and non-serious derived from product safety, the design of true EU policy grounded in competition law and the innovative tools developed in environmental protection.

II

THE RECONSTRUCTION OF THE EUROPEAN ADMINISTRATIVE ENFORCEMENT POLICY AND THE IMPACT ON PRIVATE LAW

The distinction between serious and less serious infringements is crucial for understanding the effects of the competence divide between the European Commission—focusing on serious infringements—and the Member States—dealing with less serious infringements. It requires us to look deeper into the institutional framework which governs the enforcement of European regulatory private law, such as the degree to which the European Commission enjoys genuine enforcement 16 This terminology has been introduced in Directive 98/27/EC of 19 May 1998 on injunctions for the protection of consumers’ interests (Injunctions Directive) [1998] OJ L166/51.

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powers, as well as the presence of European regulatory agencies which coordinate the activities of national regulators and are granted genuine regulatory powers to take action concerning European citizens. Each of the different areas will be analysed with a view to its potential impact on administrative enforcement of private law matters. However, before doing so, I will try to clarify the relationship between substance and procedural private law matters, as today’s administrative enforcement patterns are closely interlinked with the substance of the respective rules at stake in the respective fields of law.

A

Administrative Enforcement and Private Law—An Oxymoron?

The spontaneous answer might be administrative enforcement deals with market access through public economic law, whereas private law deals with private law transactions mainly via contracts. My starting point is not contract or tort, however, but regulatory contract or regulatory tort.17 When it comes to the enforcement of regulatory private law, the seemingly clear distinction between the substance of private law—autonomy of the parties—and the procedure under which regulatory private law is enforced becomes blurred. Enforcement of regulatory private law necessarily implies a twofold dimension: on the one hand, there is the regulation of private law relationships via the introduction of mandatory or default rules, while on the other there is the impact of regulatory private law on the market per se. The first level may be associated with the individual dimension of regulatory private law, the second with the public dimension. However, this distinction seems incomplete as both dimensions are in themselves interconnected via the collective interests or the market related interests of the parties affected. The individual dimension creates a particular status for all those who come under the respective rules. Thus, there is also a collective dimension qua status. The market surveillance enshrined in the public dimension might directly affect certain market participants, as the state liability cases demonstrate. This is again the collective dimension. I would like to distinguish between the following scenarios: — The gateway to the mix-up is the transfer of enforcement powers from private parties to public authorities in regulated markets or regulated fields of law. — These public authorities are entrusted with field specific, sector or statusrelated tasks. Their scope of competence is directly related to the substance of the law they have to survey and monitor. Because of the link between substance and enforcement mechanism, public authorities get more and more involved, not only to guarantee the workability of the regulated market, but in order to look after the collective interests of particular addressees in the respective markets. This is less visible in competition law, where the battle is still pending whether and to what extent the enforcement of competition law affects private 17 I would speak of regulatory tort, whenever the EU intervenes in specific areas to set tort law standards, like in food law: Regulation (EC) 183/2005 laying down requirements for feed hygiene [2005] OJ L35/1; Regulation (EC) 882/2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules [2004] OJ L165/1; Commission Regulation (EC) 172/2002 [2002] OJ L30/30.

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law relations, and in environmental law, where the impact of environmental law enforcement on private law remains obscure.18 The most obvious development can be observed in the field of regulated markets, such as telecommunication, postal services, energy and transport. How can it be said that a decision of a financial authority, which has to enforce the MIFID Directive with the aim of minimising the risk resulting from particular financial products, does not affect the relationship between private parties? — The link between the collective dimension—that enshrines the surveillance of the interests of private parties—and the individual private dimension is the potential binding effect of regulatory actions on private individual relations. This topic has been most openly addressed in competition law where it formed part of the—subsequently withdrawn—2009 proposal of collective remedies against antitrust injuries.19 Less visible and less discussed is the link between collective (private) public remedies and private law relations. The action for injunction is an example of such an opportunity. In the following I will neither analyse the interplay between public and private enforcement, nor that between collective judicial and collective administrative enforcement. I would like to demonstrate the impact of the emerging European enforcement policy strategy on private law. At a first glance, such a task seems to loosen the ties between administrative enforcement and private law as my focus is not on regulatory action, taken by whomever, but on policy making at the forefront of decision-making. My research question implies a need to find out who is shaping the policy strategy, who is participating, what is its content and how can I distinguish policy-making strategies from mere administrative discretion. Private law is not at the forefront of the development. Administrative enforcement of private law as well as the suggested development of administrative enforcement strategies rest on the shoulders of product safety, competition and environmental law, which are the driving forces behind the new institutional design. However, private law enforcement is affected and shaped through the experience gained in these areas. B

Product Safety—The Insertion of the Distinction

In the early 1990s, the European Commission mandated the Centre for European Legal Policy at the University of Bremen to execute a study on the management of emergency situations in the field of product safety.20 Our research design was based on the idea of contrasting the set of rules available in handling the risk—the national product safety laws in the books—with the actual way in which they were 18 With the exception of Art 2(4) of Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (Consumer Sales Directive) [1999] OJ L171/12, which allows taking environmental advertising into account in order to define the notion of ‘defect’. 19 J Basedow, ‘Recognition of Competition within the European Competition Network’ in J Basedow, Terhechte and L Tichy (eds), Private Enforcement of Competition Law, (Baden-Baden, Nomos, forthcoming 2011). 20 Published under H-W Micklitz, T Roethe and S Weatherill (eds), Federalism and Responsibility (Graham & Trotman/Martinus Nijhoff, 1996).

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applied—the national product safety laws in action. The findings left us rather puzzled. The national law in the books turned out to be rather useless in cases of emergency management since creative and new means needed to be—and were— found to eliminate the risk. Public enforcement in product safety revolved around emergency risks, whereas the day-to-day risks, below the threshold of emergency, were pursued only within the limits of available resources and were focused on particular places where the competent authorities were convinced that they would find dangerous products before they were brought onto the market, such as screening of fares. Outside these focused market surveillance activities, measures were taken only once the risk had realised itself in concrete injuries. The somewhat polemic question then was how many serious (fatal!) accidents must occur before a public agency is ready to intervene. Less polemically speaking, the competent authorities were concentrating their scarce resources on the serious cases and left the day-to-day risks to measures of post-market control, either by administrative action in the form of injunction orders or by compensation claims, thereby relying on private parties concerned to file a product liability claim in the courts. i

The Serious/Non-serious Infringements21

The Directive 92/59 on product safety as amended through Directive 2001/95/EC established a European emergency management procedure (= serious infringements), codifying already existing administrative practice. The key actor in the monitoring and surveillance of serious infringements in the area of product safety has become the European Commission. Contrary to the US, the EU never considered establishing a European Product Safety Agency, empowered to take regulatory action. What remains to be pinpointed is that it is here that the bifurcation between serious/non serious infringements originates. Likewise it is here that we find for the first time the attribution of enforcement competences linked to the degree of the infringement—with serious infringements moved to the EU level and less serious infringements remaining in the hands of the Member States. It remains true, however, that the EU has no genuine monitoring and surveying capacities. It is dependent on the preparedness of the Member States authorities to notify serious risks to the European Commission. All this has been laid down in the Product Safety Directive. What matters is the shift in competences far beyond the few rules enshrined in the European product safety regulation. Until today there has not been any attempt to develop a concept that unites administrative enforcement and private compensation claims nor, more generally, the interplay of administrative and private enforcement in the field of product safety. Even prior to the adoption of the directive, Member States were already discussing whether to grant private individuals or consumer organisations the right to file claims or take actions for injunction in order to stop the marketing of unsafe products. The respective EU product safety regulations did not grant NGOs standing. The action of injunction, which found general recognition in Directive 21

Directive 2001/95EC on general product safety [2001] OJ L11/4.

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98/27/EC and is so deeply anchored in unfair terms and unfair commercial practices, has not been extended to product safety matters.22 The parallel nature of the institutional framework of administrative enforcement via Directives 92/59/EEC and 2001/95/EC and collective judicial enforcement via Directive 98/27/EC is characteristic for the division of labour in the field of product safety. Public enforcement is bound to managing risks either prior to the marketing or, if needed, after the marketing of the dangerous products. Private actors remain as excluded from the monitoring process as public actors are from governing compensation claims. This domain is left to private actors and private enforcement means. Public and private enforcement remain distinct and separated from each other. Private enforcement of injury claims is covered by the provisions of Directive 85/374/EEC on product liability, though only to the benefit of private individuals who suffered injuries from—or damage to—their consumer goods. Collective compensation claims as a form of post-market control were never discussed. This might change, if the European Commission manages to come up with a proposal on collective redress which also covers matters of product safety and product liability. ii

Lessons for Administrative Private Law Enforcement

The regulation of product safety in the EU is regarded as a success story.23 This is largely due to the fact that the emergency management allows for the withdrawal of dangerous products from the market. There is not much pressure to develop and enhance private collective redress in post-market control. This positive experience might have inspired the European Commission to test the enforcement design in other areas of EU law.

C

Competition—Turning the Distinction into an Overall Policy

The next, and perhaps decisive step towards generalisation took place in the field of competition law. Here the distinction between serious/non-serious infringement reappears but in a more generalised form—and it is for the first time linked to private enforcement, be it individual or collective. It is equally bound to a—relatively—clear separation of powers between the EU and the Member States. i

The Serious/Non-serious Infringements in Competition Law

My hypothesis is that Regulation 2003/1 has introduced a new bifurcation into the enforcement of European competition law. The European Commission is looking after the serious infringements—those which affect the internal market as a whole. The daily work, the prosecution of the ‘non-serious’ infringements remains in the hands of the competition authorities of the Member States. Contrary to under 22 As, eg, in Italy; see F Cafaggi, ‘Product Safety, Private Standard Setting and Information Networks’ EUI Working Paper LAW No 2008/17. This does not mean that some Member States have not introduced such a regulatory device in the aftermath of implementation of the Injunctions Directive, but evidence on the practical importance of such a regulatory device is largely absent. 23 C Hodges, European Product Safety Regulation (Oxford, Oxford University Press, 2005).

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product safety legislation, the distinction is laid down in an inter-institutional agreement between the European Commission and the national competition authorities.24 The driving force behind this relationship is the European Commission which—this has to be recalled—holds the key enforcement powers in competition law. The European Commission was therefore able to dictate the terms of cooperation or the division of tasks between itself and the National Competition Authorities (NCAs). The inter-institutional agreement spells out that Brussels may at any time take a case from an NCA if it considers that enforcement at its hands is in the Community interest or it is within the specific priorities of the European Commission. Therefore, the European Commission enjoys some sort of last resort competence. Member States are only tentatively entrusted with the enforcement, as long as the European Commission does not decide to make use of its right to declare the problem at stake as a serious one for the EU. The role of the European Commission is crucial for my approach, as I assume that all serious infringements will sooner or later end up in the hands of the European Commission. For these purposes, the qualification ‘serious’ consequently signifies the internal market, whereas ‘non-serious’ might be equated with infringements limited to the territory of the respective Member State. In this sense, the parallel between product safety law and competition law seems fair, although it might be more difficult to decide what kind of infringements are regarded as being ‘serious’ in competition law. The allocation of competences along the line of cartels and abuse of dominant position is certainly overtly simplistic. Contrary to product safety, where it is relatively easy to decide between the daily routine of market surveillance and the emergency situations, in competition law the distinction between serious and nonserious is much more bound to the theoretical concept of what should be understood and achieved by ‘competition’ policy. Currently the European Commission uses the new economic approach as a means to reshape enforcement strategies.25 Regulation 2003/1 is embedded in a broader policy change, one which gives way to private enforcement. Since Courage, decided 200126 and confirmed in 2006 in Manfredi,27 there is a growing debate in Europe on how to link the de-centralisation of law enforcement in Regulation 2003/1 to the increasing importance of private law enforcement in antitrust injuries. In June 2009 a Proposal for a Directive on rules governing damages actions for infringements of Articles 81 and 82 was leaked to the press, in which the terms of the 2005 Green and the 2008 White Paper were transposed into a coherent concept on collective actions, but this has since been withdrawn. It provided for an opt-out representative action and an opt-in group action which seems to reflect some kind of minimum consensus in the academic debate.28 In September 2010, the European Commission announced the publication

24

See: internationalcompetitionnetwork.org/uploads/library/doc376.pdf. . It is not possible to go into details here. But there is definitely a conflict between ordo-liberalism as the model which guided the German, and to some extent the European, competition policy in the early phase of the European integration process and the more recent US guided initiatives of challenging the role and rule of law via economic considerations. 26 Case C-453/99 Courage [2001] ECR I-6297. 27 Joined Cases C-295/04–298/04 Manfredi [2006] ECR I-6619. 28 See, in particular, the contributions of G Wagner, ‘Kollektiver Rechtsschutz-Regelungsbedarf bei Massen- und Streuschäden’ (41); G Howells, ‘Comments on the Prospects for EU Action in the Field of 25

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of a revised draft in the spring of 2011. This policy debate has served to raise the awareness of private law enforcement mechanisms at the Member States level, be it through litigation in court or through settlement via national competition authorities. When translated into the bipolar distinction of serious/non-serious infringements—as linked to administrative/judicial enforcement—the enforcement structure looks quite complex in view of the need to draw a distinction between stand-alone and follow-on actions. Stand-alone actions are those which private parties initiate themselves. Follow-on actions are launched by private parties on the basis of a regulatory action taken by the competent authority. If my hypothesis is correct, national authorities will focus on less serious, and the EU Commission on more serious infringments. In theory private parties may file follow-on actions in either case, provided they get access to the relevant information. In practive relevant information must often be obtained from the files of the European Commission, even if the compensation claims are limited to the national territory.29 Stand-alone actions in my approach are per definitionem those concerning less serious infringements as otherwise the European Commission would take the lead. One aspect deserves further investigation. I would suggest that there is an overall trend in EU law to involve public authorities in the settlement of individual and/or collective compensation claims. However, the European Commission has no power whatsoever to settle compensation claims which are directly or indirectly tied to an infringement of competition law. In the Member States the situation differs considerably depending on the degree to which NCAs are either directly empowered or are indirectly involved in settling compensation claims.30 In practice, Member State authorities, as well as the European Commission, might put pressure on the company infringing the competition law to settle the conflict with interested parties, in which case the competent authority might then be willing to reduce the penalty. ii

Discretion or Policy Making?

From the outset there seems a structural bias flowing from the distinction between the EU level and the national level, ie, the internal market and the national market. This structural bias should not be confused with the well-recognised principle that competition authorities—in fact all enforcement authorities—enjoy a large degree of discretion in setting their priorities. The ECJ held in Masterfoods Ltd:31 The Commission, entrusted by (Article 85 (1) EC), with the task of ensuring application of the principles laid down in Articles 81 and 82 of the Treaty, is responsible for defining and implementing the orientation of Community competition policy. It is for the Commission to adopt, subject to review by the Court of First Instance and the Court of Justice, Collective Consumer Redress’ (97) and WH Roth, ‘Sammelklagen im Bereich des Kartellrechts’ (109) in Casper, Janssen, Pohlmann and Schulze (eds), Auf dem Wege zu einer europäischen Sammelklage, above (n 6). 29 Case T-2/03 Verein für Konsumenteninformation v European Commission [2005] ECR II-1121. 30 There is no complete overview available; instructive Hodges, The Reform of Class and Representative Actions in European Legal Systems, above (n 6) with various case studies. 31 Case C-344/98 Masterfoods Ltd [2000] ECR I-11369.

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individual decisions in accordance with the procedural rules in force and to adopt exemption regulations. In order effectively to perform that task, which necessarily entails complex economic assessments, it is entitled to give differing degrees of priority to the complaints brought before it (paragraph 46). (emphasis added)

This is very much in line with Automec I and II 32 and—last but not least—with Articles 7 and 27 of Regulation 1/2003.33 Quite necessarily discretion entails an element of policy making which could only partly be overcome by putting pressure on competent authorities to provide reasons why they have prioritised certain complaints over others.34 So the question then is whether it is possible at all to draw a distinction between legitimate discretion and building a whole enforcement strategy on discretion. I argue that there is such a difference and that there is urgent need to focus on the long term implications of an EU enforcement policy which prioritises serious infringements at the EU level. It seems as if the European Commission is ready to go beyond a mere use of discretion and is trying to turn discretion into a whole policy. Evidence in support of my hypothesis can be found in the 2009 Communication, which provides guidance on the enforcement priorities in applying Article 82 of the Treaty to abusive exclusionary conduct by dominant undertakings.35 In our context, two references might suffice in indicating where the wind blows: (6) The emphasis is on safeguarding the competitive process in the internal market and ensuring that undertakings which hold a dominant position do not exclude their competitors by other means than competing on the merits of the products or services. (7) Conduct that is directly exploitative of consumers, for example, charging excessively high prices or certain behaviour that undermines the efforts towards achieving an integrated internal market, is also liable to infringe Article 82.

My intention is not to comment on whether the European Commission has made the right choices in competition law or in any other field, rather I am concerned by the simple fact that the European Commission is overtly directing its enforcement capacities into a particular direction, which means that other possible infringements are not prosecuted, at least not at the European level, because they are not regarded as being sufficiently serious. I will come back to this point later on in a more systematic perspective. The 2009 Communication on enforcement priorities of DG COMP must be seen in the wider context. The tone was already set in the 2007 Communication ‘A Europe of Results—Applying Community law’:36

32

Case T-64/89 Automec I [1990] ECR II-367; Case T-24/90 Automec II [1992] ECR II-2223. See KJ Cseres, ‘Towards a European Model of Economic Justice: The Role of Competition Law’ in H-W Micklitz (ed), The Many Faces of Social Justice in Private Law (Cheltenham, Elgar Alan Publishing, forthcoming 2011). 34 This is the case, eg, in the Netherlands, where the highest administrative court confirmed the right of the Dutch Competition Authority to prioritise, but equally insisted on the need to provide sufficient reasons for not taking further actions. 35 COM (2009) 864 final (9 February 2009). 36 Commission, ‘Communication from the Commission: A Europe of Results—Applying Community Law’ COM (2007) 502 final. 33

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SEEKING A MORE EFFICIENT MANAGEMENT OF INFRINGEMENTS The infringement process plays an essential role in guaranteeing the correct application of Community law. The need for recourse to infringement proceedings should be reduced by the problem solving and preventive measures described above. This in turn will lead to the more efficient management and resolution of infringement cases. The correct application of the law can also be improved by prioritising in the management of cases [Judgment of 10 April 2003, Commission v Germany (C-20/01 and C-28/01, Rec. p. I.-3609 (cf points 29–30) Community and Case C-471/98 Commission v Belgium (2002) ECR I-9681, paragraph 39] All complaints and infringements will be dealt with. Prioritisation means that some cases will be dealt with by the Commission more immediately and more intensively than others. (emphasis added)

Priority should be attached to those infringements which present the greatest risks, widespread impact for citizens and businesses and the most persistent infringements confirmed by the Court. These categories cover: non-communication of national measures transposing directives or other notification obligations; breaches of Community law, including non-conformity cases, raising issues of principle or having particularly far-reaching negative impact for citizens, such as those concerning the application of treaty principles and main elements of framework regulations and directives; respect for Court judgments declaring the existence of infringements (Article 228 EC Treaty). What the European Commission is doing here is developing out of the discretion left to it by the ECJ a genuine enforcement policy based on the prosecution of the most serious infringements. The references in the 2009 Communication are telling. They are not related to competition law, but to either infringements of procedural requirements under public procurement rules or the co-operation duties of Member States not to engage in international agreements where the EU holds the competence. So far, however, the European Commission does not discuss the degree to which its enforcement policy can be addressed to private law matters in the field of regulated markets. This, if at all, is done more implicitly, as I will try to demonstrate later on. iii

Lessons for Administrative Private Law Enforcement

Competition law is the only area—outside agriculture—where the European Commission enjoys genuine competence. Therefore, competition law may also serve as a testing ground for other policy areas. What makes the recent developments in competition law so interesting is the openly addressed re-division of competences. Centralisation and de-centralisation are proceeding hand in hand. The Member States’ NCAs are downgraded to mere executors of rules developed and shaped at the EU level. The reconfiguration of the enforcement structure affects also the way in which the European Commission applies the EU competition law. That is why it is not surprising that the academic attention is very much concentrated on the use of soft enforcement mechanisms like settlements and the degree to which the rule of

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law still governs the application and the enforcement of EU competition law.37 This is where the wind blows also in other areas of European law, as will have to be shown. D Environmental Protection—Enforcement in the Shadow of the Infringement Procedure Similar developments, though much less outspoken, may be reported from the area of environmental protection, although contrary to product safety and competition law the European Commission does not enjoy any particular enforcement competences beyond the infringement procedures. The European Environmental Agency also lacks competences to ensure compliance with the EU rules on environmental protection. i

The ‘Most Important Problems’

Just like in competition law the European Commisson is defining enforcement priorities, however, not under the banner of ‘enforcement’ but of ‘implementation’. Implementation can be equated with using the ‘infringement’ procedure as a mechanism to set priorities while controlling the transposition process of EU environmental regulation in the Member States. This is the approach the European Commission chose in the 2008 Communication.38 Instead of defining priorities, the European Commission identifies the following ‘most important problems’, thereby focusing on ‘significant risks’, ‘systemic breaches’, ‘core obligations’ and ‘cofunding’: (a) Non-conformity of key legislation viewed as presenting a significant risk for correct implementation of environmental rules and hence their overall effectiveness. This criterion is intended to be limited to those directives and directive provisions that set the main framework for environmental protection. It covers defective or incomplete national legislation that significantly limits the scope of application of a directive’s requirements or otherwise significantly compromises the results to be achieved. (b) Systemic breaches of environmental quality or other environmental protection requirements presenting serious adverse consequences or risks for human health and wellbeing or for aspects of nature that have high ecological value. This criterion covers situations where there is contravention repeatedly or on a significant scale of, firstly, important state-of-theenvironment obligations, such as those requiring maximum pollutant levels … or, secondly, key procedural or activity-related obligations. (c) Breaches of core, strategic obligations on which fulfilment of other obligations depends. This criterion covers failures to meet designation, plan and programme-making, reporting and similar obligations which go to the heart of particular environmental laws and which are intended to set a strategic framework for other obligations. 37 Editorial, W Weiss, ‘Eine unerledigte Agenda: Lissabon und der Vollzug des EUWettbewerbsrechts’ (2011) 1 Europäisches Wirtschafts- und Steuerrecht. The whole issue is dealing with the administrative practice of the EU Commission in competititon law matters. 38 Commission ‘Communication from the Commission on Implementing European Community Environmental Law’ COM (2008) 773 final.

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(d) Breaches concerning big infrastructure projects or interventions involving EU funding or significant adverse impacts. In the light of the Aarhus Convention, the most appropriate level for addressing many such breaches may be that of the national courts. However, the Commission may also need to act, eg, where Community co-financing is involved. The Commission will take into account such considerations as irreversible ecological damage, and, where appropriate, seek interim measures from the ECJ. (emphasis added)

The European Commission does not see any problem with bringing these four most important problems under the scope of the infringement procedure. One might easily recognise that the European Commission avoids the word ‘enforcement’ and uses instead ‘implementation’ and, tentatively, ‘application’. The European Commission intends to use the infringement procedure not only to make sure that EU environmental law is properly implemented but that the respective European rules have been properly applied. Where is the borderline between ‘application of EU law’ and its ‘enforcement’? I would read into the 2008 Communication of the European Commission an attempt to claim quasi-enforcement competences through priority setting. The European Commission can certainly not turn the infringment procedure into a general instrument of monitoring and surveying of EU environmental law in order to ensure compliance with EU rules. This would end up in a creeping shift of quasi-enforcement powers to the European Commission which runs counter to the Treaty. Enforcement of EU rules, according to the clear message coming from the Treaty, lies in the hands of the Member States, unless otherwise foreseen in secondary Community law rules. On the other hand, the question remains of where to draw the line between the application which is within the Treaty and enforcement which is outside? ii

Quasi-enforcement

Environmental protection might serve as a prominent example of where the European Commission is using the infringement procedure as a particular device to enhance enforcement and compliance.39 I will demonstrate my concern in looking more closely into the potential addressees of the infringement procedure as well as into the available remedies. The saga goes that only national authorities may address the infringer directly and that only national authorities may avail of a set of sanctions to ensure compliance. Neither option is open to the European Commission. The primary addressees of the infringement procedure are the Member States themselves and not the sub-entities responsible for the enforcement, such as national environmental protection agencies or national ministries. From an EU perspective, however, the ‘state’ is regarded as a whole. This explains why the European Commission may use the infringement procedure to bring Member States to court where the competent national institutions have not met EU law requirements.to take actions. As long as the violation of formal procedural rules setting out the implementation and application are at stake, the borderline between implementation and application might not constitute problems within the legal 39 P Wennerås, The Enforcement of EC Environmental Law (Oxford, Oxford University Press, 2007); reviewed by H Somsen (2009) Common Market Law Review 334.

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framework of the EU. However, the issue becomes complicated once the European Commission starts investigating whether there is a violation of substantive environmental law rules. The background to such an undertaking is the assumption that the Member States, ie, the national authorities have to ensure the uniform application of EU law and in not doing so, they violate their obligations imposed on them via secondary Community law rules. At least indirectly, the European Commission is effectively investigating the behaviour of private parties responsible for the violation. The Member States are nothing more than mere catalysts. The powers enshrined in supervising the implementation and securing the application of EU law, lead to a quasi-enforcement by the European Commission via the national authorities. Germany v Commission 40 offers prospects for more far reaching and direct type of intervention. Here the ECJ used ex-Article 228 to impose an obligation on Germany to cancel a contract, what is called in French administrative law an ‘injunction’. This judgment allows for the argument that the European Commission may even exceptionally ask the ECJ to oblige the respective Member States to annul a contract which ties the infringer to a third party, for example, an agreement on illegal waste disposal, or to take preliminary measures to set an end to environmental infringements, such as discussed in Commission v Austria.41 Such an ‘enforcement policy’ can only work in case of serious infringements. Otherwise there would be too much resistance from the Member States. The Treaty allows only for sanctions against Member States who do not take any action in implementing EU law, albeit in a ‘systemic way’. Such a mechanism is much too heavy to serve as a tool for speeding up and effecting implementation. The most prominent means is certainly state liability, but in environmental protection we are lacking plaintiffs who may claim compensation for the violation of environmental rules. Even if they had standing, liability for environmental damage can only be the last resort. The same is true with regard to criminal sanctions which can be imposed by EU law against criminal penalties in case of ‘particularly serious environmental offences’.42 Precautionary measures or, to use the language of product regulation, pre-market control standards constitute a much better and more efficient means of protection against environmental harm. Janecek 43 can be read so as to grant standing to individuals claiming the adoption of an action plan that brings national pollution standards into compliance with EU rules. With regard to NGOs the ECJ has set rather narrow standards under ex-Article 230(4) to ask for the annulment of EU rules. The recent amendments, introduced in the Lisbon Treaty, pave the way for a reconsideration of standing granted to NGOs under Article 263(4) TFEU. Last, but not least, Directive 2004/35/EC deals with the environmental liability of private parties. The way it has been conceived under pressure from the Member States demonstrates the reluctance to colonize traditional private law matters. The directive establishes a mechanism of 40

Case C-503/04 Commission v Germany [2007] ECR I-6153. ECJ, Order 30 July 2003; 2 October 2003; 27 April 2004; C-320/03 Commission v Austria [2007] ECR I-7929/11665/3593; but see also ECJ judgment 15 July 1960, Case 20/59 Republic of Italy v High Authority of the European Coal and Steal Community [1960] ECR 325 at 326, where the ECJ took a much more legalistic stand. 42 C-176/03 Commission v Council of the European Union [2007] ECR I-7879. 43 ECJ (25 July 2008); Case C-237/07 Janecek [2008] ECR I-6221. 41

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quasi-administrative liability, leaving the national tort regimes intact and setting a frame for ‘regulated tort’. iii

Lessons for Administrative Private Law Enforcement

The most exciting element in environmental law is the way in which the European Commission is using the infringement procedure, above and beyond any genuine enforcement competences. The partial transformation of the infringement procedure into a quasi enforcement tool would not have been possible without the strong involvement of the ECJ. Thus environmental law serves as a perfect example to demonstrate that administrative enforcement cannot stand alone and that it has to be read together with the case law in the field. However, environmental law remains unsatisfactory when it comes to analysing the links between administrative and private/collective enforcement. Here in particular consumer law is much more advanced.

E

European Regulatory Private Law—The Lessons Applied

The question is whether and to what extent the developments in product safety, competition and environmental law affect enforcement strategies in European regulatory private law. At least in the field of consumer protection, which belongs to the core of European regulatory private law, the European Commission is shifting the focus to administrative enforcement and the workload is being divided by way of the distinction between serious/non-serious infringements. i

Consumer Protection

For more than two decades the European Commission relied on private enforcement bodies, in particular consumer organisations, to take the lead in enforcing European consumer law rules. The adoption of Regulation 2006/2004 constitutes the watershed, from which point the European Commission has been promoting the establishment of national consumer enforcement authorities, not only in trans-border consumer litigation, but in the national context. This does not mean that the European Commission has received, or is going to receive, enforcement powers in the field of consumer protection. The European Commission looks more like the spider in the web, coordinating all the activities but which has no powers to take regulatory action or to impose action on Member States. However, Regulation 2006/2004 paves the way for using the tools developed in areas such as competition and environmental protection law in order to put pressure on Member States to increase compliance of national consumer law rules with EU consumer law rules. So far DG SANCO has not used the infringement procedure to enhance the enforcement of private law matters. If the European Commission refers to the infringement procedure, it is concerned with the non or insufficient implementation of consumer contract law directives. The reason seems to be that private law rules apply inter partes and that the European Commission cannot address private parties directly, unless so empowered by EU law. However, Regulation 2006/2004

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has changed the scenario dramatically. Member States are now obliged to establish competent national entities, which are responsible for the enforcement of EU consumer rules in trans-border litigation and who are entitled to issue an action for injunction. In this regard, the European Commission is in a similar position as in the field of environmental protection. The European Commission could put pressure on the Member States for not establishing competent and sufficiently equipped authorities44 and for not taking action to implement the EU rules enlisted in the Annex of the Directive in trans-border litigation. Germany v Commission 45 deals with a public contract, concluded by a municipality. But does the nature of the contract set boundaries on the application of EU law? Could the European Commission sue a Member State for not having adopted an action of injunction to set an end to unfair commercial practices or to the use of unfair contract terms in consumer contracts? One might wonder whether such a scenario would be possible provided the infringement is serious in nature. It is already the case that the established platform of national consumer agencies/entities has served the European Commission as a starter to develop European-wide enforcement priorities. The key instrument in the EU’s policy is the so-called ‘Consumer Scoreboard’46 through which the European Commission identifies the main problem areas of consumer concern where priority action is said to be needed. The ‘discretion’ the European Commission enjoys in areas where it has genuine enforcement powers, such as competition law, is objectivised in consumer protection by way of inquiries executed on behalf of the European Commission through private consultancy firms. The thereby defined ‘enforcement priorities’ become the target of an EU wide coordinated enforcement programme where Member States are free to join in.47 So far the European Commission has not made any attempt to link the Consumer Scoreboard to private enforcement means, be they collective or individual. The current state of development is still too much in flux. At the Member States’ level, however, we may observe similar strategies as in competition law. National enforcement authorities, insofar as they exist, are ready to combine market screening techniques such as foreseen in the Consumer Scoreboard with concrete enforcement measures, not necessarily at a collective level, but at the very least in handling individual consumer complaints through appropriate ADR mechanisms, even beyond their concrete competences.48

44

Case C-494/01 Commission v Ireland [2005] ECR I-331 (Opinion of AG Geelhold) 26. Case C-503/04 Commission v Germany [2007] ECR I-6153 46 See: ec.europa.eu/consumers/strategy/facts_en.htm. 47 Commission, ‘Enforcement Memo’ MEMO/09/312; europa.eu/rapid/pressReleasesAction.do? reference=MEMO/09/312&format=HTML&aged=0&language=EN&guiLanguage=en and Commission, ‘Communication on the Enforcement of the Consumer Acquis’ COM (2009) 330 final. 48 See, eg, the German BaFin which deals with consumer complaints although it has no mandate under the respective laws or the British OFCOM which has settled a mass conflict to the benefit of individual consumers; see also Hodges, The Reform of Class and Representative Actions in European Legal Systems, above (n 6). 45

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Regulated Markets

The enforcement of private law matters in regulated markets remains much less developed. The major reason is that the national regulatory agencies in the field of telecommunications, postal services, electricity, gas, transport and financial services still focus their activities on guaranteeing the workability of the respective markets. While there is growing pressure from secondary EU law on the Member States to integrate customer—not necessarily end consumer—protection into the core field of national regulatory agencies, the European Commission cannot yet rely on a network of regulatory agencies willing and prepared to take the enforcement of private law matters in their respective fields seriously. The development is thus still in the offing. More recently, the EU adopted the third generation of directives in the field of telecommunications, electricity and gas, all tilting the balance towards the integration of customer protection into administrative enforcement. The Member States still have time to take the necessary implementation measures. So we are in an intermediary stage of development. Two different options have to be clearly distinguished: the coordination of enforcement strategies in areas where the national regulators have already competences to intervene into private law matters, and those where such a competence is less developed or not yet in the offing. The role and function of the European Commission depends on the degree to which regulatory powers have been granted to obliging national regulators to take regulatory actions, here in the field of private law. Over time, the EU has transformed committees or networks of national regulatory agencies into veritable European agencies. However, these agencies differ considerably in their institutional framework, their competence structure, their degree of independence49 and in particular in the degree to which the respective European agency is empowered to take regulatory action directed either at European citizens or national regulatory agencies which then have to implement the EU measures into national measures.50 The broad variety of approaches in the respective regulated markets cannot hide the overall tendency towards the enforcement of private law matters through public agencies. It is precisely this trend that allows the European Commission to gradually develop European-wide enforcement strategies, at the very least on a voluntary basis like in the field of consumer protection. iii

An Outlook

Considering these findings and the respective experiences in the field of consumer safety, competition and environmental protection law, it appears highly probable that the European Commission and/or the European agencies are developing enforcement strategies in which they prioritise their activities in the binary code of serious/non-serious infringements. There is clearly some overlap with the findings 49 See S Lavrijssen and A Ottow, ‘The Legality of Independent Regulatory Authorities’ in L Besselink, F Pennings and S Prechal, The Eclipse of the Legality Principle in the European Union (Leiden, Kluwer, 2011) 97. 50 Overview on the differences between the agencies: A Ottow, ‘Europeanisation of Market Supervision’ (forthcoming, 2011) European Public Law.

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of the Consumer Scoreboard which ranks financial services and energy issues on top of the agenda. These are areas which reach deeply into the competences of the national regulatory agencies, hence the future European agencies in both fields. As yet it is hard to predict in what way the European Commission might want to link administrative enforcement to private and/or collective enforcement. Nevertheless, it again seems as if the overall direction is clear—at least in terms of a policy perspective. F

The Search for Common Denominators

i

The Serious/Non-serious Distinction in a Horizontal Perspective

The standard argument against a classification of risks along the lines of the serious/non-serious distinction derives from the different design of the risks, whether they are health and safety related, whether they affect economic interests as well as the particularities of the market and the different institutional design which governs the respective markets.51 With regard to health risks, there is growing interest going beyond the research to systematise risk regulation. The 2008/2009 financial risks raised the public and the regulatory awareness sufficiently to see specific means of risk regulation adopted in the field of financial markets. So I would argue that there is a certain trend to take risk regulation as a horizontal regulatory device where the different fields of risk regulation can benefit from each other,52 although such a horizontal cross-fertilisation cannot resolve the differences between health and economic risks, and/or the differences between various health and/or economic risks. The serious/non or less-serious distinction is meant to serve as a rough policy rather than a legal-doctrinal category which starts from the premise that it is possible to draw a line between, on one hand, risks that affect the life or standard of living of citizens so seriously so that an immediate action is necessary and, on the other hand, those rather minor risks that citizens might be able to handle at least for an intermediate period themselves, societally and economically. My claim is that this distinction governs the current administrative practice and is given shape by the European Commission in its various documents. There is a link between legaldoctrinal or theoretical conceptions and mere policy considerations in that the latter have to reflect, and remain within the ambit of, the law.53 A deeper insight into the possible sources of friction would require the contrasting of the ideal rules as they stand with an as-it-is analysis, meaning the way the rules are applied in practice. Implicit in the distinction between serious/non or less-serious is the division between risks that affect the national market and risks that affect the European 51 Ottow, ‘Europeanisation of Market Supervision’, above (n 50) stresses the differences between the various subject matters. 52 H-W Micklitz and T Tridimas (eds) Risk and Law, conference organised in December 2010, conference papers to be published in 2011. 53 Weiss, ‘Eine unerledigte Agenda: Lissabon und der Vollzug des EU-Wettbewerbsrechts’, above (n 37).

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market. This might not necessarily be true in a given case, but generally speaking the gravity of a risk grows the more widespread it is. Trans-border risks, or risks that emerge in one Member State but can potentially affect other Member States, might be classified as serious risks. This does not exclude the possibility that serious risks may be limited to a regional or even local environment. However, a local risk might easily take a much larger dimension when viewed from a more comprehensive perspective, for example, poisoned water which is used for feeding animals and so reaches the food chain or equally financial derivates which first appear nationally but are then sold on a cross-border basis. For our purposes it might suffice to attribute to the distinction serious/non-serious the presumption that serious risks are related to the EU level, whereas less serious risks remain in the hands of the national authorities. From an administrative perspective on enforcing private law, the same logic can principally be applied to the distinction between individual and collective litigation. Some adjustments are, however, necessary. Serious infringements often—though not always—bear a stronger collective dimension as those potentially concerned by the risk are not to be found in one single Member State. However, neither the European Commission nor the European agencies have any competence, even in the slightest form, to settle damages collectively at the European level. Thus, the only way of Europeanising collective compensation would be to take the ‘decision’ to grant compensation at the European level, but to see the decision ‘enforced’ via the national authorities. Such a solution—which is hard to imagine right now—might gain more pace once the EU has adopted a collective redress scheme—at least in the areas where it would be applicable. A European private collective compensation scheme would enhance the pressure on administrative authorities to balance the envisaged sanction in case of serious infringements of the respective law against the potential collective compensation. Collective damages may in practice often be limited to one Member State, although any territorial restriction of a collective action might easily lead to the exclusion of non-residents, if not non-nationals.54 Individual litigation can only be conducted at the national level, as long as private individuals are not the direct addressee of a regulatory action by the European Commission or the EU regulatory authorities. The only available avenue for the individuals concerned may often be to file an action against his or her national regulator, even though the ‘decision’ has been taken at the EU level, through a soft coordination mechanism. All in all, the serious/non-serious distinction allows us to explain why there is a link between ‘Europeanisation’ and ‘publicisation’ of private law matters. The EU only has competence with regard to market and social regulation. It has no genuine competences in contract and tort law, at least outside cross-border issues. Whenever the EU adopts rules, it intervenes into traditional private law matters via public law means. Hence, the publicisation of enforcement is a necessary consequence of Europeanisation. The serious/non-serious distinction also renders the implied shift of competences in the area of enforcement more visible.

54

Under Danish law, the opt-out class action is only open to nationals.

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Rules and Standards

I believe that there is a deeper dimension embedded into the distinction between serious/non-serious, namely the one between rules and standards.55 Non-serious infringements, according to my hypothesis, can often be equated with assessing infringements against the yardstick of rules, while serious infringements, on the contrary, can be equated with assessing infringements against the yardstick of standards. Rule-guided enforcement might only be manageable if the inquiry as to whether there has been an infringement or not is relatively easy to make. Clear-cut legal requirements and blatant violations of these rules are thus needed. Member States are the ones enforcing mere rules whereas the European Commission is focusing on the enforcement of standards. Again, this might sound overstated but I contend that it indicates the direction in which we are moving. We shall not forget that Member States are far from homogenous due to differences in skills and resources. There may well be Member States who will appreciate ‘guidance’ from the European Commission or from EU regulatory agencies, as guidance could be understood as support in the daily work. The contrary might, however, be true for countries with strong competences and good resources. They may perceive ‘guidance’ from Brussels as ‘patronage’. However, such a distinction does not paint the full picture. Quite often the EU is doing both, defining the rules and the standards. Member States regularly enforce rules that the European Commission or the European regulatory agencies have adopted in order to guide and direct the Member States and to establish a ‘uniform’ level of application of EU law. The standards are not only defined at the European level, they are also enforced by the competent European institutions, whatever form they take. In this way the rules versus standards distinction shall help us to better understand the policy behind the European enforcement strategy. The recent Regulation 765/2008 on market surveillance56 could be understood as transformation of a policy that had been developed in product safety, competition and environmental law into a piece of binding regulation. Rule guided enforcement is put into the hands of the Member States. Standard guided enforcement is bound to complex investigations and complex decision-making at the EU level. Therefore, the implications on the institutional architecture of enforcement, on the division of tasks between the EU and the Member States, as well as on the interaction between the two levels are far-reaching. The new enforcement design, however, also affects the role and function of lawyers. All fields are united, in the shift of competences away from lawyers towards technical experts, social scientists and economists. This again allows for a silent move of competence to the EU level. Rules can be, and indeed already are, easily enforced by non-lawyers today. Standards need external expertise to assess the potential risk and to take measures 55 L Kaplov, ‘Rules vs standards: An Economic Analysis’ (1992) 42 Duke Law Journal 557; W Kerber, ‘“Rules vs Standards” or Standards as Delegation of Authority for Making (Optimally Differentiated) Rules’, in Eger, Thomas et al (eds), Internalization of the Law and its Economic Analysis (Wiesbaden, Gabler, 2008) 489–98. 56 Regulation (EC) 765/2008 of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) 339/93 [1993] OJ L218/30.

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that are appropriate and adequate. In the realm of product safety and environmental law, these criteria are taken from empirical findings, from technical evaluations, in competition law and financial services from economics and in consumer law and regulatory private law from social sciences and economics. All fields share the fact that enforcers need competences beyond traditional legal interpretation; competences that are much less present and much less required in rule guided enforcement. In the field of standards, however, lawyers still have to accept the role as decision-makers and being held responsible for their decisions. Iii

Member States and EU in Administrative Enforcement

Taking all the findings together, the division of labour between the Member States and the European Commission proposed below seems to be on the agenda: Rules on non- serious risks = Member State/national agencies

Standards on serious risks = European Commission/European agencies

Individual vs collective

Safety.

Compliance with technical standards and/or product safety regulation Administrative competence enshrined in ministries or consumer safety agencies

Genuine competence of the European Commission in emergency management. Technical and scientific expertise on risk assessment.

Individual only.

Competition.

eg Art 81 national cartels and vertical restrictions (per se verdicts)57 eg Art 82 dominant position (rule or standard guided).58 Predominantly legal expertise required in national competition authorities.

European Commission Art 81 European Cartels (rule or standard guided) eg Art 82 abusive exclusionary conduct (shift to standard guided control). Predominantly economic expertise.

Underdevelopment at Member States and EU level.

57 See US Supreme Court which lifted, in a path-breaking judgment, the per se verdict of vertical resale price maintenance, Leegin Creative Leather Products, Inc. v PSKS 127 S.Ct. 2705 (2007). See B Karsten, ‘Die Leegin-Entscheidung des US Supreme Court. Aufgabe des Per-se-Verbotes für Mindestpreisbindungen im US. Bundeskartellrecht (2007) Recht der Internationalen Wirtschaft 649. It remains to be seen whether the European Commission will move in the same direction. 58 See H Schweitzer, ‘Wettbewerbsrecht und das Problem privater Macht’ presented in the Framework of Research Network on Private Power—2nd meeting at the LMU Munich, 13 and 14 November 2009).

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Hans-W Micklitz Rules on non- serious risks = Member State/national agencies

Standards on serious risks = European Commission/European agencies

Individual vs collective

Environmental Compliance with protection. technical standards eg pollution standards. Technical and legal expertise. Implementation of EU soft strategies through national environmental protection agencies.

No European Commission powers. Serious infringements, Art 228 in areas where no clear cut rules exist. Soft strategies of co-ordination of Member States action through the European Commission.

Underdeveloped.

Consumer protection (consumer contract law).

Compliance with EU consumer law. Expertise in social science. Implementation of EU soft strategies through the network of national consumer agencies.

No European Commission powers. Serious infringements, Art 228, where no clear cut rules exist (no evidence). Priority setting via consumer scoreboard, Eurobarometer. Soft strategies of co-ordination of Member States action.

Underdevelopment at Member States and EU level

Private law in regulated markets.

Legal, economic and social science expertise. Implementation of EU enforcement priorities through the network of national regulatory agencies.

No European Commission powers, but EU agencies ? Serious infringements, Art. 228, where no clear cut rules exist Priority setting via consumer scoreboard, Eurobarometer Strategies of co-ordination of Member States action

Sector-specific considerations, if at all

This broadening of perspective seems to confirm that the European Commission has developed a particular enforcement policy which is based on a distinction between ‘serious’ or ‘more important’ and ‘less serious’ and ‘less important’ problem areas—to use a cautious language—independent of whether the European Commission enjoys regulatory competences directly or via the competent EU agencies. The legal and the political questions that arise, however, differ considerably.

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Deficits, Access and Participation Discretion, Strategy and Competence

In areas where the European Commission has regulatory competences, such as in competition law, one may wonder whether the European Commission is overstepping the boundaries of its executive power, ie, whether and to what extent the shaping of an enforcement policy, which ends up leaving certain rules unenforced and certain infringements undetected, should not become subject of an open public debate, if not a European parliamentary debate. There is a difference between mere discretion and building, even publishing, a fully fledged enforcement strategy. Discretion leaves the infringer in a state of uncertainty. He, the infringer, never knows whether the authorities will direct their attention to his particular type of activity. If, however, the authorities publish what they intend to do, they implicitly announce what they do not intend to do. Therefore, a publicised enforcement strategy affects the substantive law. Minor infringements are, at least temporarily, not regarded as violating the law. The executive will always reserve the right to take action in case it discovers that it has chosen the wrong priorities or if the minor infringements turn into more important ones. This brings us back to our findings on the management of emergency procedures. How serious must an infringement be, one which is not on the priority agenda, before the competent authorities are ready to step in? The European Commission is obviously in search of a new agenda. One might even go as far as arguing that the European Commission is ready to tilt the balance in favour of standard guided enforcement, certainly with regard to competition and product safety. This allows for a more focused enforcement, independent of whether the European Commission enjoys formal competences derived from the Treaty or from secondary Community law. The situation is different in all areas where the European Commission does not benefit from genuine enforcement powers. This is, by and large, the rule in the area of consumer protection and regulated markets. The European agencies have residual competences which vary considerably according to the market concerned and, if anything, tend to focus on some type of emergency management, in overcoming differences between Member States authorities or in cases where EU law has not been implemented.59 The question is not where to draw the demarcation line between legitimate discretion and potentially illegitimate policy building, but the much more fundamental one of whether the European Commission may take ‘action’, however soft it might look, in areas where it has no enforcement powers at all. There is a long standing debate whether and to what extent the EU needs to base soft law measures on explicit or implied competences granted under the Treaty; or whether soft law measures should be kept distinct from legal measures, need not be based on competences and are therefore within the overall ‘political discretion’ of the European Commission.60 There is an equally grey legal 59

See again Ottow, ‘Europeanisation of Market Supervision’, above (n 50). It will be revitalised when it comes to decide what the appropriate legal basis for the option of the so-called optional instrument See Commission, ‘Green Paper on policy options for progress towards a European Contract Law for consumers and businesses’ (COM (2010) 348 final. 60

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area between the infringement procedures of the European Commission and the enforcement powers which belong, provided there are no explicit exceptions foreseen in the Treaty or secondary EU law (EU agencies), to the Member States. Or to put it the other way around—what kind of measures can the European Commission take under the auspices of an infringement procedure and, complementarily, how far can the EU agencies stretch their competences foreseen under the respective directives and regulations so as to enter into setting enforcement priorities? From the above analysis it comes clear that the European Commission is ready to extend its ‘powers’ into areas where it has no or limited competences. So the overall tendency is obvious. ii

Access and Participation

The development of policy-geared administrative enforcement begs the question whether priority setting within the European Commission or European agencies should not become accessible to the parties affected by the decision-building process. The parties affected would then need to get access to all relevant information and they should be heard. Generally speaking access to information stored in the EU institutions is difficult, although Regulation (EC) 1049/2001 governs the rights and duties of the authorities and the parties involved.61 The regulatory design of this particular regulation, however, aims at situations in which EU institutions have already taken action and where the parties want to get access to the files in order to ascertain the facts and legal arguments upon which the EU institutions have based their views. Here the situation is different. Access implies access to policy considerations in the forefront of decision-making. Participation rights of the parties concerned in administrative enforcement vary from legal field to legal field and from sector to sector. All in all it is underdeveloped. The European Commission has neither an open-access policy nor a liberal-participation policy. One has to distinguish. Whenever the European Commission is planning to take legislative measures it initiates a consultation process via Green and White Papers as well as public hearings. Such a model would fit in the field of competition law, where the European Commission holds the power under the Treaty and with regard to an infringement procedure which cuts across all areas of EU law. However, the situation is different in areas where EU regulatory agencies have been set up, which is the case in most legal fields where private law really matters. A consultation process would need to guarantee access not only to the EU regulatory agency, but to the European Commission and the national regulatory agencies involved, on top of the parties concerned. There are at least two further complications to consider. When it comes to defining policy priorities and the potential addressees of the policy consideration, we must distinguish between those concerned in a given field and the public at large, which in principle means every European citizen. The former might be associated with organised sector-related interests, while the later brings into 61 See K Hüttner, ‘Die Rechtslage zur Verbraucherinformation in der EU und in der Aarhus Konvention’ in H-W Micklitz (ed), Informationszugang für Verbraucher in Europa und den USA—Recht und Praxis (VIEW Schriftenreihe, Band 30, 2010) 453.

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question to what extent NGOs defending horizontal and/or environmental interests can legitimately speak on behalf of ‘us’. To entrust NGOs of whatever ilk and origin with the representation of the public interest would raise legitimacy concerns. Seen this way, the correct addressee for the development of a general policy strategy could be the European Parliament— assuming it represents these horizontal interests. This does not necessarily mean that policy strategies should be transformed into regulations or directives, but rather that the European Parliament should also be involved in the executive decision-making. At the very least one might borrow from the rules elaborated under the ‘Comitology’ procedure, where the role and function of the European Parliament has been strengthened over time.62 The restriction on discretion is the flipside of enhancing public participation in policy making. The more the ‘public’ intervenes into the inner world of the executive, the more the executive loses its autonomy.

62 See the way from 1999/468/EC over 2006/512/EC to Art 290 and 291 TFEU; N Beer, ‘Die Zukunft der Komitolgie: Weniger Komitees—mehr Kommission?’ (2010) 6 Europäische Zeitschrift für Wirtschaftsrecht. Of quite some practical importance has been the veto right of the Parliament.

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Index Introductory Note References such as ‘178–9’ indicate (not necessarily continuous) discussion of a topic across a range of pages. Wherever possible in the case of topics with many references, these have either been divided into sub-topics or only the most significant discussions of the topic are listed. Because the entire work is about ‘private law’, the use of this term (and certain others which occur constantly throughout the book) as an entry point has been minimised. Information will be found under the corresponding detailed topics. abuse of bargaining power 260, 263 abuse of deduction 181, 188, 194–5, 201, 205 abuse of right 205–6, 213 academic research and politics 272–3 accountability 64, 348, 388 acquis 28, 32, 43–4, 48, 90, 255–7, 270 consumer 6, 8, 90–2, 94, 140, 158–9, 534 acquis commun 43–4, 302–3 acquis communautaire 42–4, 85–6, 95–6, 141, 259, 296–7, 303 Acquis Group 32–3, 90–1, 94, 140–1, 287, 298–9, 555–6 Acquis Principles (ACQP) 32–3, 42–3, 91–4, 297–9, 418, 555–6, 559–60 mirror structure 559–60 adaptation 49–50, 130–1, 183, 312, 529–30 adjudication 131, 189, 195, 202, 208, 247–8, 367 adjudicators 217–18, 455 administrability 190, 193–4, 197, 209 administrative authorities 103, 105, 108, 520–1, 585 administrative enforcement 347, 415, 418, 437, 563–91 common denominators 584–8 competition 573–8 consumer protection 581–2 deficits, access and participation 589–91 environmental protection 578–81 European regulatory private law 581–4 institutional framework of enforcement 563–9 and judicial enforcement 564 Member States and EU 587–8 neglect 567–9

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outlook 583–4 oxymoron 570–1 product safety 571–3 quasi-enforcement 579–81 reconstruction of European policy and impact 569–91 regulated markets 564, 570–1, 577, 583, 588–9 rules and standards 586–7 serious/non-serious infringements 418, 568–9, 572–6, 580–1, 583–6, 588 administrative procedures 525–6, 530 ADR see Alternative Dispute Resolution agents 163, 231, 386 consenting 163–4 economic 124, 133–4 third-party 163 AHC-SLC Group 6, 74, 80–3, 85–6 Alexy, R 213, 220 ALI see American Law Institute Alternative Dispute Resolution (ADR) 416, 425, 433, 487–9, 497–8, 528–9, 563–4 American Law Institute (ALI) 3, 11, 13–18, 20–2, 26–7, 30–1, 33–5 antitrust law 92, 98, 104–5, 193, 514, 521 approximation 120, 134, 139, 196, 215, 515–16, 557 process of 117, 270, 280 soft methods 342–4 arbitrators 36, 418, 513, 533, 539, 553 Argentina 364–5 assets 47, 128, 227–8, 261, 291, 331, 402 association, freedom of 246, 390 attribution of competences 338–42, 380, 572 Austria 97, 235, 243, 350, 364, 370, 580 law 48–9 autonomous action 173–4

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Index

autonomous legal orders 339–40 autonomy 8–9, 80, 245–6, 338, 349, 385, 447 contractual 79, 142, 280 national 385–6, 416, 421–3, 431, 434–5, 466 national procedural 472–5, 479, 481, 484 party 43, 91, 94–5, 97, 99–100, 102–4, 107 private 186, 204, 228–31, 234–6, 238–40, 385–6, 390–1 average consumer 42, 47, 105–6, 154 informed 105–6 average uniformity scores 374–5 avoidance 49–50, 209, 232, 455 right of 54–6 axiology, common 179, 267, 273, 276 Ayres, I 145, 443–4 bailiffs 492, 495–6, 507 balancing 180–3, 185–95, 204–10, 213–27, 235–43, 309–12, 314–16 see also proportionality after World War II 206–17 analysis 197, 209 approach 217, 222, 235, 239 before World War II 191–206 communication gaps between European and German courts 230–5 completion of ideal type in US 206–11 conclusion 247–8 and critique of classical legal thought 194–5 disappearance and re-emergence in Europe 211–15 in emergence of classical legal thought 191–4 Germany, conflicts in civil litigation 227–30 and hermeneutic realism 225–7 ideal type of 189–91 and Interessenjurisprudenz 222–5 jurisdictional see jurisdictional balancing limits of private autonomy 235–40 methodology 204, 206 and multi-level structure of private law 379–92 as new kind of legal theory 195–206 and public interest 221–48

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relationship between private law balancing and public law proportionality 217–20 retreat in US after 1980 215–17 in social conflicts 241–7 Tarasoff v Regents of the University of California 209–11 techniques 309–10 tests 202, 242, 245 transnational dialogue 221–2 United States 206–11, 215–17 bank charges 236, 238 banks 90, 102–5, 109, 112, 148, 227–35, 237–8 bargaining power 95, 147, 240, 260, 263, 523 abuse of 260, 263 basic long-term contracts 110–11 Begriffsjurisprudenz 222, 224–5, 247 behavioural standards 116, 134–5 Belgium 320, 337–8, 340, 364, 370, 398, 476 law 25, 340–1 benevolent intervention 19, 40, 99, 249, 297, 550 Bentham, J 151, 181, 188, 191–2 best rules approach 23–5, 30 black letter rules 18–20, 23, 26, 91, 536 bonus payments 102–3 bottom-up unification 363–77 and coordinated state action 369–71 and international norms 373 and legal education and transboundary practice 371–2 limited contributions 369–73 and non-state actor projects 371 Braithwaite, J 443–4 Bulgaria 285–6, 398 business premises 87, 90, 231, 258, 299, 402, 459 business-to-business transactions 170–1 Canada 364, 367–8, 370 cancellation 233–4, 310, 312–13, 401, 522, 541 right of 234, 310, 312–14 causation 53, 55, 235 cease and desist orders 514, 521 central adjudication 320, 367–8 Central and Eastern Europe 285–7, 291, 441

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Index central legislation 365–6, 371, 373, 375–7 and top-down unification 365–6 central power 358, 364, 377 centralisation of power 357, 365, 377, 567 structural 320, 365, 368–9, 377 centralised legislation 321–2 Charter of Fundamental Rights 254–5, 480 child labour 101, 108–9 children 148, 246, 430 citizens 38, 75–6, 97–8, 101–2, 109–13, 328–9, 332–3 citizenship 97, 404, 532 good 349, 351 civil codes 27–8, 75–7, 131, 260–1, 277–9, 286–7, 354–5 civil justice systems 416, 437, 448, 450 civil law 61, 75, 98, 129–30, 254, 278–80, 295 reform in the new Member States 285–92 systems 17, 129, 367, 541 civil liability 249, 350, 402 civil procedure 112–13, 422–7, 434–5, 448–50, 470, 484, 513 normal rules of 417, 487, 495, 503, 506 purpose 423–6 civil society 6, 66, 76–7, 159, 162, 190, 424 class actions 422–3, 439–40, 451, 527, 565–6, 585 Classical Legal Thought (CLT) 142, 147, 149, 188, 201, 221–2, 247 balancing and critique of 194–5 balancing in emergence of 191–4 close relatives 227, 229 closed systems 63–6, 418, 556 CLT see Classical Legal Thought co-funding 578 co-regulation 167, 171 codes need for 74–80 optional 169, 415, 538 codes-in-waiting 315, 319 codification 33, 74–6, 129–30, 151–3, 277–8, 398, 557–9 see also recodification methodology 418, 556 non-legislative codifications 4–5, 31–57 private codifications 32, 73 codified guiding principles 73–87

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coherence 139, 144, 214–15, 298–9, 332–4, 346, 561 general principle 344–6 national systems and European private law 556–7 coherent systems 48, 326, 334–5, 557, 559, 561 collective actions 242–3, 245–6, 451, 517, 526–7, 532, 565–8 collective compensation 568–9, 573, 575, 585 collective consumer redress 418, 440, 515, 527, 575 collective enforcement 112, 415, 418–19, 460–1, 515, 564–5, 567–8 and individual enforcement 565–7 collective litigation 565–7, 585 collective redress 417–18, 422, 434–5, 439–40, 444, 451, 565–7 EU competence 526–30 Green Paper 528–30 mechanisms 462–3, 528 collective remedies 565, 568, 571 comity 411–12 common axiology 179, 267, 273, 276 common European axiology 179, 267, 276 common European identity 6, 66, 171 common law 21–2, 129–30, 142–3, 150–1, 153, 191–3, 251–2 countries/jurisdictions 75, 141, 151, 227, 367, 376, 541 systems 75, 151, 153, 280, 457 common principles 76–7, 82, 111, 178, 302–4, 306, 389 commutative justice 144, 216, 219 companies 92, 101–3, 105, 107–8, 402, 444, 451 company law 98, 290, 297, 299–300, 344, 552 comparative research 35, 85, 274, 304, 423, 435, 539 compensation 256–7, 426, 444–5, 460–3, 524, 526–7, 529–30 claims 572–3, 575 effective 526, 530 compensatory remedies 458–9, 461–2 competences 103–4, 208–9, 310, 338–41, 468–70, 577–8, 583–7 distribution of 321, 328, 339 exclusive 154, 329, 472 regulatory 468, 588–9

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residual 347, 589 transfers of 340–1 competition 117–18, 126–7, 145–6, 240, 330, 338, 442–3 administrative enforcement 573–8 and convergence 118–19 law 145, 165, 297, 569–71, 573–8, 582, 589–90 regulatory 126–8, 241 unfair 44, 89, 92, 99, 109, 145, 430 competitiveness 394, 442 compliance 83, 177, 286, 309, 349, 366, 415–591 costs 442, 460 and effectiveness 459–63 EU law perspective 513–30 hybrid quality of European private law 453–63 introduction 415–19 proceduralist view on the DCFR 421–35 securing of 165, 416, 455, 459–60 conceptual jurisprudence see Begriffsjurisprudenz confidence 6, 104–5, 113, 260 mutual 405–7 conflict of laws 22, 270, 381, 385, 410–11, 470 rules 268, 384–6, 390, 396–8, 404–5, 408–12 conflicts of interests 193, 198, 203, 223 consent 44, 159, 162–4, 167, 169, 269, 386 consenting agents 163–4 constitutional law 97–8, 183, 188, 206, 217, 219–21, 226 constitutional norms 226, 320, 365–8 and top-down unification 366–7 constitutional pluralism 326, 334, 338–42 constitutionalisation 94, 97, 158, 213, 349–50 constitutionalism, societal 218 constitutions 95, 97–8, 148, 178, 213, 254–6, 340–1 federal 366–7 consumer acquis 6, 8, 90–2, 94, 140, 158–9, 534 consumer associations see consumer organisations consumer cases 112, 491–2, 494–7, 502, 509–11, 528

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consumer contracts 90–1, 113, 236, 259, 301, 469, 535–6 consumer credit 93, 110–11, 113, 231, 233, 259, 355–6 consumer law 86, 111–12, 147–8, 249, 253–6, 297–8, 487–9 under-enforcement 499, 510 consumer organisations 108, 258, 440, 489–90, 497, 507, 529 consumer protection 147–9, 166, 172, 234, 237, 239–40, 581–3 administrative enforcement 581–2 and global economic crisis 89–113 laws 89–90, 92, 99, 112–13, 147, 446 consumer protection enforcement network (CPEN) 348 consumer redress 305, 527 collective 418, 440, 515, 527, 575 consumer rights 92–4, 257–9, 299–300, 311–12, 355–6, 532, 534, 555–6 conclusions 509–11 enforcement 417, 487, 491, 495, 509 European Payment Order Procedure 417, 487, 502–4, 509, 511 European Small Claims Procedure 417, 449, 470–1, 487, 492, 503–11, 527 individual private enforcement 487–511 problems in international cases 499–502 problems when taking legal action in court 491–502 proposed directive 154, 157–8, 172, 299–300, 534–6, 538, 558–9 and maximum harmonisation 93–4 willingness of consumers to take action and knowledge of rights 487–91 consumer sales 239, 493–4, 518, 535, 542, 553, 559 Consumer Scoreboard 582, 584, 588 consumer transactions 164, 171, 534–5 regulation of 160, 166, 172–3 consumers 89–95, 103–13, 231–5, 255–62, 487–504, 507–11, 525–30 definition 257, 535 contingency fees 438, 440, 496, 565–6 contract law 89–92, 94–100, 129–31, 155–9, 164–70, 290–2, 297–301 code 80–7, 90, 157, 169–70 need for codified guiding principles and model rules 73–87 and theoretical foundations of private law 166–9

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Index contract terms 258–9, 279, 522–3 unfair see unfair terms contracts consumer 90–1, 113, 236, 259, 301, 469, 535–6 insurance 279, 358, 525 long-term 92, 106, 109–11, 113, 130, 542–3 service 19, 40, 106, 302, 548 contractual autonomy 79, 142, 280 see also freedom of contract contractual fairness 84–5 contractual freedom see freedom of contract contractual liability 262 contractual obligations 84, 228, 257, 325, 450, 470, 501 contractual terms see contract terms convergence 116–18, 120–1, 123, 319–20, 343–4, 483, 541 and competition 118–19 harmonisation through 116–20 and multi-layerism 342–4 spontaneous 7, 117, 120–2 cooperation 6, 167, 186, 343, 348, 361, 449 legislative 358 mutual 405–6 coordinated action, harmonisation through 120–1 coordination 7, 123, 126–7, 139, 301–2, 332, 405–6 and bottom-up unification 369–71 versus unification or harmonisation 357–61 core terms 235–40 core values 59–71 cost functions 7, 133, 135 costs 101, 117–18, 123–8, 133–4, 433, 459–60, 501–11 of civil procedure 495–9 expert opinions 497–8 legal aid 496–7 of legal diversity 124–5 of legal representation 458, 497–8 of legal uncertainty 115, 126 loser pays principle 498–9, 501–2, 507, 510 social 213, 314 translation 501, 508 witness hearings 497–8

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country of origin principle 390–1, 407–8 court fees 495–6, 498, 510 Court of Justice 142, 155–6, 342, 367–8, 472–3, 476, 522–5 CPEN (consumer protection enforcement network) 348 credit cards 209, 238 credit contracts 92, 106, 111, 231–2, 356 credit transactions 229, 231–3 creditors 105, 199, 223–4, 227, 229, 267, 494 cross-border disputes 402, 418, 460, 470–1, 483, 502–4, 527 cross-border trade 95, 124–5, 353, 538 cross-border transactions 124, 356, 390, 532 culpa in contrahendo 44, 49–50, 232, 235 cultures 76–7, 153–4, 250, 253, 280, 337, 343 damages 49, 62, 108–10, 238, 262, 518–22, 524–6 collective 439, 585 contractual 168, 262 punitive 439–40, 514 recovery of 49, 210, 437–8 reputational 489–90 dangerous products 164, 456, 572–3 Davies, W.H. 159–60, 166–7, 173, 241 DCFR (Draft Common Frame of Reference) 3–9, 22–30, 63–9, 286–92, 465–8, 477–85, 531–53 as basis for legal discourse 551–3 as comparative law tool 536–7 conclusions 553 conservative structure 557–8 and courts/arbitrators 539 critics criticised 549–51 drafters’ choices 259–63 and economic perspective 542–4 enforcement 465–85 frame 249–52 and fundamental rights 255–7 and Germans 540 history 531–2 and law reviews 544–9 and maximum harmonisation 89–94 as model for Brussels 534–6 as model for national legislators 536–8 national bias 533–4 and national procedural law 465–85

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and Netherlands 538 political meaning 290–1 and practitioners 539–40 proceduralist view 421–35 quality 533, 552 scope 552–3 and social justice 540–1 status 531–54 and United Kingdom 537 debtors 64, 109, 199, 227–9, 407, 450, 543 deduction, abuse of 181, 188, 194–5, 201, 205 defaults 166, 170–1, 173 defective products 279, 402, 456, 469, 489 defects 44, 52–3, 104, 193, 456, 493, 497 delivery 42, 47, 259, 299, 497–9, 535 democracy 64, 71, 148, 171–2, 287–8, 382, 386 democratic legitimacy 12, 35, 148, 156, 341, 384–5, 388 Demogue, R 181, 195–203, 206, 215 denkender Gehorsam 223, 225, 229, 232, 236, 238–9 Denmark 358, 451, 496, 504 dignity, human 62, 64, 66, 256, 342–3, 349, 388 discretion 152, 207–8, 240, 246, 566, 575–7, 589 legitimate 576, 589 discrimination 64, 246, 293, 397, 404, 469, 525–6 dispute resolution processes 427–8, 433 distance contracts 87, 90, 258, 402, 500, 502, 560 distortions of competition 75, 267 distribution of powers 218, 380–1, 384–5, 387–8 actual situation 386–7 horizontal 381–3 Kompetenz-kompetenz 386 proposal for a European Civil Code 389–90 territorial 384–6 vertical 384–6 principles for 387–9 rules 429–30, 433–4 of wealth 102–3, 107, 112 distribution of competences 321, 328, 339 distributive fairness 432–3

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distributive justice 103, 144, 166, 426–7, 429–35 lessons from 432 research agenda 433–4 theories 428–31 diversity 76, 126, 321, 337, 379–80, 385, 388–90 legal 123–5, 328, 330, 333–4, 372 doorstep selling 87, 90, 93, 148, 231–3, 235, 239 Draft Common Frame of Reference see DCFR in dubio pro consumatore 240 Durchgriff 226, 234–5, 239, 247 Dworkin, R 5, 60, 63, 182, 207–8, 226, 247 dynamic security 195, 197 East-West division 265–74, 284 common problems 283–4 conclusions 284 definition of East and West 273 East’s contribution to the West 288–9 evolution of discussion 273–4 and political union 276 real division lines 276–82 recodifications of East and Central Europe 282–3 value 275–6 ECN (European Competition Network) 348, 403, 571 economic agents 124, 133–4 economic analysis 94–5, 115–16, 118, 542–3, 586 economic crisis 6, 89, 99, 102–4, 107, 112, 166 economic efficiency 95–6, 104 economic growth 100–1, 104, 112, 130 Economic Impact Group 542–4 economic welfare 66, 95, 115, 133 economics of harmonisation 115–35 effective enforcement 417, 438–9, 465–8, 473, 475–9, 484–5, 491–2 effective judicial protection 473, 480, 522 effective regulation 447 and theoretical foundations of private law 171–3 effectiveness 165–6, 416, 421–3, 434–5, 473, 481–4, 524 condition 517, 529 principle of 482–3

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Index of review procedures 518–19 efficiency 5, 63–7, 69, 126–7, 129–30, 170–1, 450 economic 95–6, 104 market 95, 99, 148 emergency management 572–3, 587, 589 employees 98, 102–3, 107, 109, 113, 402, 513 employers 17, 474, 513–14 employment, contracts 102, 475, 536 enforceability 148, 341, 502 enforcement 8, 104, 177, 221, 310, 313–14, 415–591 administrative see administrative enforcement balance between public and private 437–41 collective see collective enforcement of consumer law/rights 417, 440, 487, 491, 495, 502, 509 effective 417, 438–9, 465–8, 473, 475–9, 484–5, 491–2 efficient and proportionate 458–9 EU law perspective 347, 466, 473–5, 477–8, 513–30 basic principles 515–22 collective redress 526–30 conclusion 530 Court of Justice role 522–5 non-discrimination law 525–6 hybrid quality of European private law 453–63 institutional framework 563–9 introduction 415–19 of judgments 401, 403, 449–50, 470, 500, 518 judicial see judicial enforcement mechanisms 442, 460–1, 463, 570 national procedural law as obstacle to 473–9 policies 437, 442–3, 445–8, 451–2, 577, 580, 589 powers 419, 438, 445, 569–70, 581–2, 589–90 private see private enforcement proceduralist view on the DCFR 421–35 public see public enforcement quasi-enforcement 579–81 rule guided 586–7 standard guided 586, 589 strategies 576, 581, 583

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techniques 416, 455, 459, 462–3 transformation of private law through enforcement rules 513–15 under-enforcement 417, 487, 499, 508, 510 enrichment, unjust(ified) 19, 22, 28, 34, 40, 77–8, 90–1 environmental law 212, 419, 569, 571, 579, 581, 586–7 environmental protection 97, 128, 569, 578–83, 588 equal treatment 110, 145, 334, 469, 514, 525–6 principle 469, 474, 514, 525–6, 542 equality 60, 64, 66, 71, 98, 385–6, 429–30 principle 400, 480 equity 429–30, 432, 434 equivalence 134, 236, 529 condition of 517, 529 principle of 421, 447, 473, 479, 481–3, 517, 524 Esser, J 181–2, 207, 222, 225–7, 229–30, 234–6, 248 Estonia 241, 282, 285, 287–9, 359, 546 ethical standards 104, 107, 112 ethnic origin 469, 525–6 EU law 111, 232, 296–9, 305–6, 417–18, 465–85, 580–2 compliance 513–30 enforcement 347, 466, 473–5, 477–8, 513–30 effective 466, 473, 475–8 and national procedural law/rules 468–73 European Civil Code 6, 27, 66, 74–7, 79–80, 354, 389–91 European Competition Network (ECN) 348, 403, 571 European conform interpretation 404–5 European contract code 87, 90, 157 European Enforcement Order 401, 449, 470 European integration, mass harmonisation of conflict of law and procedural rules 401 European integration process 145, 178, 293–4, 306, 342–3, 394, 400 development and effects 400–7 direct impact 404–7 European conform interpretation 404–5 mutual confidence and cooperation 405–7

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objectives and needs of the internal market 400 and recognition 407 retreat of the European element 402 role of private international and procedural law 393–412 answers to questions 412 hypothesis 411–12 and sovereignty 403–4 standard setting attempts 403 third states and EU law 402 unification and integration 400–2 European Judicial Network 348, 406, 412, 448 European Payment Order Procedure 417, 487, 502–4, 509, 511 European regulatory private law 418, 568–9, 581–4 European Small Claims Procedure 417, 449, 470–1, 487, 492, 503–11, 527 Europeanisation 12, 15, 149, 281–2, 309–10, 326, 585 objections to 252–4 tools 269–71 execution 407, 495 forced 228, 495 executive federalism 347–8 exequatur 502, 504 expectations 38, 51, 105, 113, 164, 232–3, 267 reasonable 167–9, 261 expenses 6, 96, 107, 198, 342, 495, 499 experimentation 125–7, 328, 332, 463 expert opinions 494, 497–8, 510 costs 497–8 experts 63, 78, 250, 289, 356, 457, 497–9 external effects 107–9 external interests 101, 103, 107–9, 112–13 externalities 165, 328, 351 extra-contractual liability 262, 550 extra-legal goals 142, 145–6

general clauses 42, 45, 186, 213, 223–6, 228–30, 234 general contract law 28, 64, 78–9, 87, 91, 93, 113 general principles 6, 43–4, 61–2, 85–6, 343, 345–6, 479–80 Germany 152–3, 197–8, 212–14, 217, 226–7, 396–8, 580 communication gaps between European and German courts 230–5

fair procedures 431–2 fair trade products 108–9 fairness 6, 79, 96–7, 100, 107, 109, 428–33 contractual 84–5 distributive 432–3 procedural 427–8 test 239, 312 family law 11, 77, 98, 209, 249, 260, 277

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federal perspective 309, 337–51 federal systems, unification in 363–77 federalism 310, 328, 338–42, 363, 376, 380, 384 executive 347–8 fees 474, 478, 481, 496, 529 contingency 438, 440, 496, 565–6 court 495–6, 498, 510 financial markets 100–1, 103–4, 112–13, 347, 584 financial services 89, 93, 98, 111, 113, 267, 583–4 Finland 66, 105, 241–3, 358–9, 563 flags of convenience 242, 244 forced execution 228, 495 foreseeability 210, 482, 546 fragmentation 116, 123–4, 158, 183, 311, 316, 328 internal 182, 214 legal 116, 121, 123–5, 311, 316 France 12, 46, 76, 198, 243, 246, 254–5 fraud 28, 44–7, 51, 192, 214, 231, 302 fraudulent non-disclosure 44–5, 47 fraudulent representations 44–5 free movement 97, 141, 241–6, 290, 400, 410, 524–5 of judgments 400, 411 freedom of association 246, 390 of contract 79, 83, 95–6, 212–13, 260, 537–8, 541 full harmonisation versus unification 354–7 Fuller, LL 189, 203–4, 207, 212, 214 fundamental freedoms 75, 95, 240–2, 245, 247–8, 341, 410 fundamental rights 94–5, 97, 226–30, 242–3, 245–7, 268, 342 and DCFR (Draft Common Frame of Reference) 255–7 and fundamental freedoms 241–7

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601

conflicts in civil litigation 227–30 courts 188, 220, 230–1, 312–13, 340, 342, 386 law 231–2, 238, 284 global economic crisis and consumer protection 89–113 globalisation 161, 321, 349–50, 396 good commercial practice 47, 261, 263 good faith 44, 47, 51, 61, 78–9, 83–4, 260–3 classical role of 541, 545 governance 160–1, 169, 184, 319–22, 328, 334, 343 multi-level 327–8, 334, 359 new modes of 343 self-governance 161, 166, 170–1, 173 Grzybowski, S 277–9 guarantors 149, 227–30, 312 personal 148–9 guiding principles 6, 74–5, 77–81, 83, 85, 87, 97–8

health 108, 160, 253, 256–7, 305, 324, 584 health protection 256, 324, 517 Heck, P 181–2, 188, 194–5, 197–200, 203, 222–7, 229 Heininger saga 230–5 hermeneutic realism 225–7 Hesselink, M 231 hierarchy 326, 346 of norms 384 of sources 199, 323 Hohfeld, WN 204–6 Holmes, OW 153, 188, 193, 195, 200–2 horizontal distribution of powers 381–3 horizontal effect 213, 226, 349, 397–8 human dignity 62, 64, 66, 256, 342–3, 349, 388 human rights 66, 112–13, 246, 254–5, 341, 348–9, 397–8 and private international law 398 Hungary 282, 285–6, 289, 398 hybrid regulation 456, 463

Habermas, J 64–5, 220 Hague Conference 396, 399 harmonisation 7, 77–9, 269–70, 290, 309–11, 353–5, 405–7 building of optimal harmonised standards 132–4 degree of 116, 121–2, 358 economics of 115–35 full 240, 257–8, 283, 355, 387, 403, 517 impact on civil law reform in the new Member States 285–92 maximum see maximum harmonisation mechanisms 122–3, 135 minimum see minimum harmonisation and political interests of Member States 291–2 procedural 483–4 processes 7, 116, 116–28, 135, 178, 253, 315 problems 123–8 scope and methods 290 through convergence 116–20 through coordinated action 120–1 through political fiat 121–2 versus unification or coordination 353–61 Hart and Sacks ‘Legal Process’ materials 208–9

ideologies 21, 142, 147, 154, 190, 224, 278 immovable properties 90, 402, 501, 504, 511 incoherence 320, 326, 330, 335 individual private enforcement 487–511 and collective enforcement 565–7 information 42–9, 51–2, 54–5, 104, 261–2, 490, 509 cascades 117–18 duties/obligations 41–6, 50, 52, 54–5, 96, 108–9, 261–2 misleading 46–7 non-disclosure of 44, 51, 55 informational cascades 117–18, 121 informed average consumer 105–6 infringement procedure 419, 569, 578–9, 581, 590 injunctions 90, 241, 460–1, 521–2, 526–7, 565, 571–2 insolvency proceedings 401, 405, 449 institutional competence 190, 208–9 instrumentalist law 7, 143, 147–8, 154–8 instrumentalist rationalities 7, 139–58 integration 86–7, 92, 140–1, 291–3, 296–8, 394–5, 403–4 economic 291–2 market 253, 266, 417, 454–5

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process 178, 395, 400–1, 411, 466 see also European integration process intellectual property 101, 112, 120, 296–7, 299, 324, 358 Interessenjurisprudenz 182, 222–5, 229, 232, 238–9, 247 interests external 101, 103, 107–9, 112–13 legitimate 84, 166, 243, 343, 520, 526 protected 217–18, 341 interference 157, 193, 338, 405 interim measures 411, 518–19, 579 intermediaries 109, 112, 231, 233, 235, 259, 438 internal market 75, 95, 402–3, 453–4, 515–16, 528, 573–6 objectives and needs 400 international norms 358, 364, 373 interpretation 65–6, 69, 206–8, 240, 344–6, 367–8, 383 European conform 404–5 uniform 367, 390, 409 investments 46, 102–3, 130, 231, 233 is-ought gap 379–80 Italy 85, 205, 211, 213, 227, 254–5, 364–5 ius commune 35–6, 140–2, 150–1, 157, 348 ius communitatis 140, 142, 157 ius particulare 384, 387, 390 Josserand, L 204–6 judgments enforcement of 401, 403, 449–50, 470, 500, 518 free movement of 400, 411 judicial activism 111, 216, 218, 568 judicial enforcement 313, 518, 568 and administrative enforcement 564 judicial interpretation and multi-layerism 344–6 judicial review 151, 219, 366–7 judiciary 130, 226, 281, 381, 388, 403, 564 juridical acts 65, 83, 86, 91, 534, 541, 545 juridical rationality 7, 139–58 jurisdictional balancing 183, 309–16 between balancing and proportionality 313–15 conclusion 315–16 illustrations 311–13 substantive approach 310–11

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knowledge 19, 101, 117, 165, 193, 359–61, 490–1 transfer 117, 119–21 Kompetenz-kompetenz 386 labelling 28, 30, 69, 108, 259, 381, 459 labour law 77, 98, 110, 145, 325, 417, 514 Lando Commission/Group 4, 13–14, 31, 49, 78, 86, 302–3 Latvia 241, 282, 285, 287 law-making 116, 119, 127, 129–32, 135, 274, 326–7 power 363, 365, 379–82, 384, 387 law market 118, 124, 325, 331, 333–5, 390–2 law of obligations 52, 73, 78, 85, 98, 223, 260 legal aid 402, 406, 492, 497 costs 496–7 legal diversity 123–5, 328, 330, 333–4, 372 legal education 78, 144, 189, 200, 358, 371–2, 551 legal fragmentation 116, 121, 123–5, 311, 316 legal harmonisation see harmonisation legal pluralism see pluralism legal realism see realism legal representation 492, 494, 496–7, 506–8, 511 costs of 458, 497–8 legal unification see unification legal uniformity see uniformity legal unity 76, 330, 425–6 Léger, Adv Gen 233 legislative cooperation among Nordic countries 358–60 legitimacy 162–3, 165, 321–2, 325–6, 382–4, 391–2, 432 democratic 12, 35, 148, 156, 341, 384–5, 388 political 20, 37, 382 legitimate interests 84, 166, 243, 343, 520, 526 less serious infringements 418, 568–9, 572, 575 see also serious/non-serious infringements liability 44, 103, 112, 203, 209–10, 402, 536 civil 249, 350, 402 contractual 262 extra-contractual 262, 550

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Index non-contractual 19, 40, 62, 355, 358 product 153–4, 161, 272, 310, 456, 469, 573 linked contracts 233, 535 linked transactions 233–4 Lithuania 282, 285, 287, 289, 496, 537 long-term contracts 92, 106, 109–11, 113, 130, 542–3 loser pays principle 498–9, 501–2, 507, 510 losses 49, 168, 259–60, 262, 456–8, 524, 526 loyalty 45, 66–7, 82, 100 Luxembourg 255, 475 Macrory, RM 443–4, 461 mandatory rules 61, 80, 83, 145–6, 149, 158, 221 market economies 44, 52, 100, 236, 285, 287–8 free 102, 236 social 241, 243, 247 market efficiency 95, 99, 148 market integration 253, 266, 417, 454–5 market law 6, 94, 97–9, 104, 112, 390–1 market participants 96–7, 102, 416, 453, 455, 463, 564 trust 105, 107 weaker 89, 95, 101 market regulation 99–100, 102, 364, 374–5, 454, 568 market surveillance 567, 570, 574, 586 markets 97–8, 100–2, 106–9, 111–13, 266–7, 281, 456 hybrid regulation 463 internal see internal market national 106, 124–5, 170, 271, 400, 575, 584 mass harmonisation of conflict of law and procedural rules 401 material interests 192, 196, 199 maximum harmonisation 93–4, 112, 159, 166, 172, 561 and consumer rights Directive proposal 93–4 and DCFR 89–94 mediation 425, 449, 451 methodology 3–4, 12, 179, 182–3, 193, 202, 265 European 271–2 minimum harmonisation 122, 172, 240, 257, 300, 355, 516

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principle 239–40 mirror structure 559–60 misrepresentation 28, 45, 50–1, 54–5, 235 mobility 127, 245, 302, 331 model laws 23, 26–8, 30, 120–1, 288–91 model rules 5, 18, 32, 59–60, 62, 179–80, 555 need for 73–87 morality 192, 204, 247 mortgages 108, 111, 223, 229, 231–5 ‘most important problems’ 578–9 multi-layerism 337–8 see also multi-level structure of private law and convergence 342–4 and executive federalism 347–8 and judicial interpretation 344–6 and private/public law divide 337–8 and social and human rights responsibilities 348–50 multi-level governance 327–8, 334, 359 multi-level structure of private law 319–412 see also multi-layerism and balancing 379–92 constitutional issues 379–92 federal perspective 309, 337–51 introduction 319–22 plurality of sources 319, 323–35 multiple sources see plurality, of sources mutual confidence and cooperation 405–7 mutual recognition 120, 447, 470, 516 nation states 103, 153, 157, 294, 319, 321, 324–6 national autonomy 385–6, 416, 421–3, 431, 434–5, 466 National Competition Authorities (NCAs) 348, 519, 574–5, 587 National Conference of Commissioners on Uniform State Laws (NCCUSL) 26, 369–70 national constitutions 218, 254, 256, 340–1, 390 national courts 243–4, 344–5, 370, 472–6, 481–3, 519, 522–3 national law 23–6, 268–70, 294–6, 300–6, 339–46, 475–6, 517–20 national markets 106, 124–5, 170, 271, 400, 575, 584 national procedural autonomy 472–5, 479, 481, 484

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national procedural law/rules 417, 422, 492, 496, 504, 509, 518–19 and DCFR 465–85 as enforcement obstacle 473–9 and EU law 468–73 solutions to problem 479–84 national regulators 348, 441, 447, 570, 583–5, 588, 590 national rules 25, 75, 111, 132, 255, 474, 517–18 natural law 48, 192, 201 naturalistic fallacy 379–80 NCAs see National Competition Authorities NCCUSL see National Conference of Commissioners on Uniform State Laws negligence 193, 202, 235, 456, 520 negotiations 84, 257, 261, 427, 549 negotiorum gestio 28, 40, 249, 297 neo-liberalism 94, 214–15 Netherlands 85, 227, 268, 364, 371, 537–9, 565 and DCFR (Draft Common Frame of Reference) 538 networks 14, 74, 92, 109, 282, 302, 583 European Competition Network (ECN) 348, 403, 571 European Judicial Network 348, 406, 412, 448 of regulators 347–8 Niglia, L 239 NGOs 514, 526, 566–7, 580 non-communicative behaviour 51–2, 55 non-compliance 432, 443–4, 520, 529 see also compliance non-consumer transactions 169–71 non-contractual liability 19, 40, 62, 355, 358 non-contractual obligations 82, 98, 259, 449, 470 non-disclosure 44, 51, 55 fraudulent 44–5, 47 non-discrimination 64–5, 141, 186, 221, 298, 410, 525 principle 242, 256 non-discrimination law 525–6 non-legislative codifications 4–5, 31–57 dogmatisation 37–9 legal point of view 39–56 non-legislative reference texts 31–57 non-mandatory rules 145–6

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non-performance 28, 86, 91, 256–7, 543, 547, 560 non-state actor projects 369, 371, 376 normal rules of civil procedure 417, 487, 495, 503, 506 Norway 355–8 nullity 262, 344, 348 obligations 42–3, 163, 259–61, 277–8, 345–7, 471–3, 521–3 contractual 84, 228, 257, 325, 450, 470, 501 law of 52, 73, 78, 85, 98, 223, 260 non-contractual 82, 98, 259, 449, 470 pre-contractual 32, 91, 262, 547, 560 official languages 359, 390, 492, 504 OMC see Open Method of Coordination Open Method of Coordination (OMC) 332, 343 opinions, expert 494, 497–8, 510 opt-in 297, 433, 531, 565, 574 opt-out 297, 433, 440, 550, 565, 574, 585 optional codes 169, 415, 538 optional instruments 79–80, 87, 169, 269, 291–2, 299–300, 558 oral hearings 506–7 ordering private 8–9, 159–62, 164, 169–71, 173–4 public 8, 160–2, 164, 171, 173, 415 ordo-liberalism 94, 212, 574 ordre public 160–2, 173, 404, 408–9 outsourcing 244–5 party autonomy 43, 91, 94–5, 97, 99–100, 102–4, 107 Payment Order Procedure, European 417, 487, 502–4, 509, 511 payment services 11, 32, 111, 237, 295, 555 performance 42, 47, 61, 84, 86, 91, 542–3 specific 256–7 personal guarantors 148–9 personal sureties 227–30 persuasive authority 16–17 piercing of the veil see Durchgriff pluralism 64, 77, 161, 295, 324–7, 330–4, 384–5 constitutional 326, 334, 338–42 plurality 64, 315, 320–1, 327, 331, 333, 411 of sources 319, 323–35

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Index conclusions 335 levels of regulation 327–30 strategies for dealing with 330–5 Poland 179, 265, 275–9, 281–3, 285–6, 289, 398 political choices 12, 99, 357, 360, 382–3, 385, 391–2 political fiat 121–3, 134 political foundations 175, 177–84 and current challenges 293–307 East-West division lines 265–74, 284 proportionality 185–220 political legitimacy 20, 37, 382 political processes 87, 116, 293, 355, 361 political union 275–6 politics 68, 79, 91–2, 94–6, 144–5, 152, 540 and academic research 272–3 politics of principle 66–8 Portugal 213, 398, 565 positive law 4, 189, 195, 197, 211, 229, 401 positivism 192, 207, 211, 396 post-market control 572–3 postal services 106, 110, 488, 564, 566, 571, 583 powers centralisation of 357, 365, 377, 567 distribution of 218, 380–1, 384–5, 387–8 pre-contractual duties/obligations 32, 44, 46, 91, 261–2, 298, 560 information 5, 28, 41, 44–5, 47–8, 53–4, 261–2 pre-formulated terms 236, 239 precedence 43, 211, 245, 338–42 see also primacy prescription 7, 23, 85, 186, 393, 548 rules 186, 529 price clauses 238–40 prices 42, 44, 47, 52, 204, 236, 238–9 primacy 187, 339, 341, 344–5 see also precedence principle, politics of 66–8 principles, Territoriality 384, 386, 396, 408 prior communications 493–4, 509 private actors 33, 194, 343, 364, 568, 573 private autonomy 186, 204, 228–31, 234–6, 238–40, 385–6, 390–1 limits 235–40 private codifications 32, 73

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private enforcement 415–16, 437–43, 445, 447, 449, 451–2, 571–4 balance between public and private enforcement 437–41 individual 487–511 need for coherent private enforcement 448–52 practical implications for policy architecture 437–52 private international law 124, 268, 290, 321, 325, 351, 393–412 see also Introductory Note bilateral conventions 399–400 changes in 20th century 395–9 changes in techniques 408–11 conflict of law rules 409–10 development of procedural rules 411 public policy 408–9 development in the EU 397–9 development in the USA 396–7 development outside the EU 399–400 growth of national codes 398–9 Hague Conference 396, 399 and human rights 398 private law see Introductory Note private ordering 8–9, 159–62, 164, 169–71, 173–4 private orders 8, 169, 171 private parties 324–5, 330, 344, 348–9, 570–2, 575, 580–1 private/public law divide 337–8 private regulation 325–6, 331 privilege 201, 218, 232, 291 procedural autonomy national 472–5, 479, 481, 484 principle of 417, 515, 518 procedural convergence, natural 483–4 procedural fairness 427–8 procedural harmonisation 483–4 procedural justice 416, 423, 426–9, 431–5 lessons from 431–2 research agenda 432–3 theories 427–8 procedural law 394–5, 398–400, 421–6, 433–5, 465–6, 468–72, 483–4 national 417, 422, 492, 496, 504, 509, 518–19 procedural rules 321, 401, 411–12, 415, 471–3, 475–9, 482 application of national 417, 465, 477, 479

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development 411 product liability 153–4, 161, 272, 310, 456, 469, 573 product safety 89, 259, 418, 569, 571–4, 578, 586–7 general 447, 572 products dangerous 164, 456, 572–3 defective 279, 402, 456, 469, 489 fair trade 108–9 professionals/professional parties 111, 252–3, 256, 258–9, 261, 494, 503 promises 203–4, 234, 300 proportionality 63, 67, 181–3, 241, 243–6, 309–11, 459 see also balancing and balancing after World War II 206, 217 and balancing before World War II 191, 206 and ideal type of balancing 189–91 and jurisdictional balancing 313–15 public law 215, 217 relationship between private law balancing and public law proportionality 217–20 in social conflicts 241–7 tests 215, 242, 313, 459 transnational genealogy 185–220 Prosser, W 210 protection of workers 97, 243–7 public enforcement 416, 437–9, 447, 462, 517, 564, 572–3 balance between public and private enforcement 437–41 policy 437, 452 need for 442–8 practical implications for policy architecture 437–52 public interest 6, 65, 97, 112–13, 210, 519–20, 568 and balancing 221–48 public law proportionality 215, 217 public order 160, 162, 351, 398 public ordering 8, 160–2, 164, 171, 173, 415 public policy 15, 149, 158, 210, 404, 408–9, 541 development 408–9 public procurement 141, 518 punitive damages 439–40, 514

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quasi-enforcement 579–81 rapprochement 403–5, 407, 409, 450, 483 rational herding 117–18 rationality 7, 66, 141–4, 146–9, 154, 157–8, 217 instrumentalist 7, 139–58 juridical 7, 139–58 realism 206, 222, 250, 253 hermeneutic 225–7 reasonable expectations 167–9, 261 reasonableness 39–40, 167–8, 193, 226–7, 236, 366 tests 193, 204–5 recodification harmonisation as 128–32 recodifications of East and Central Europe 282–3 recognition 35, 38–9, 385, 401, 407–10, 449, 470 and the European integration process 407 mutual 120, 447, 470, 516 recontractualisation 12, 74 redress 305, 451–2, 455–6, 461, 463 reference texts, non-legislative 31–57 reflexive obeying see denkender Gehorsam reforms 15, 24, 26, 75–6, 85, 370, 393 in the new Member States 285–92 regulated markets 564, 570–1, 577, 583, 588–9 regulatees 161, 165, 172, 442 regulations effective 447 hybrid 456, 463 regulators 127, 161, 163–5, 171, 173, 443–5, 462 economic 446 national 348, 441, 447, 570, 583–5, 588, 590 networks of 347–8 regulatory agencies 327, 417, 442, 487, 564, 566–8, 590 regulatory competences 468, 588–9 regulatory competition 126–8, 241 regulatory environments 8, 160–1, 172–3 regulatory failure 165, 171, 173 relocation 242–3 remedies 34–5, 256–7, 332–3, 426, 458–9, 493–4, 535 collective 565, 568, 571 compensatory 458–9, 461–2

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Index remuneration 103, 236–7, 497 reporters 16–18, 139, 210 notes 17–18 representations 52, 449, 495, 591 fraudulent 44–5 representativeness of restatements 14–15 reputational damage 489–90 residence 405, 410, 492, 527 habitual 501, 530 resources 169, 367, 441, 443, 448, 459–60, 586 responsive regulation 416, 443–4, 447 restatements 3–5, 11–30, 33–5, 38, 41, 304, 371 comparative lessons 11–30 conclusions 29–30 coverage and systematic macrostructure 21–3 European, notion 13–14 as finding aids 19 microstructure 18–19 practical motifs and role of practitioners and academics 15–18 as principles or model laws 23–8 representativeness 14–15 rules, comments and notes 18–19 United States 4, 11–31, 33–4, 38, 41, 185 restitution 22, 33, 40, 146, 205, 262, 416 restorative justice 443–4, 455, 461–3 review judicial 151, 219, 366–7 procedures 518–19 rule guided enforcement 586–7 rule of law 64, 68, 168, 183, 338, 380–1, 390–2 safety 104, 108, 210, 256, 438, 441–2, 445 product 89, 259, 418, 569, 571–4, 578, 586–7 standards 108, 459 Schulte-Nölke, H 3–5, 32–3, 39–40, 295–9, 304–6, 549–50, 555–60 self-governance 161, 166, 170–1, 173 self-interest 96, 424, 430 self-regulation 104, 108, 325, 446, 458 separation of powers 381–3, 385–6 serious/non-serious infringements 418, 568–9, 572–6, 580–1, 583–6, 588 service contracts 19, 40, 106, 302, 548

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services 42, 104–7, 109–11, 124–5, 236–8, 405–6, 487–90 postal 106, 110, 488, 564, 566, 571, 583 universal 106, 110–11, 564 services of general economic interest 92, 106, 113 shareholders 102–3, 107 single market 3, 267, 295, 448, 557 Slovakia 285–6, 289 Slovenia 282, 285–6 SLT see Social Legal Thought small claims 449, 470–1, 492, 497–9, 502–11, 518, 527 so lange doctrine 342 social conflicts balancing in 241–7 ECJ as arbiter 241–2 social justice 81, 94–6, 146–8, 158, 162, 186–7, 212–15 and DCFR (Draft Common Frame of Reference) 540–1 Social Justice Group 79, 156, 540 Social Legal Thought (SLT) 194, 197, 201–2, 206, 211–12 social life 97, 196–7, 204 social market economy 241, 243, 247 social purposes 206–7, 243, 245 social regulation 76, 455–9, 463, 585 social responsibility 59, 65–7, 79, 81, 351 social welfare 127–8, 132–3 socialisation 182, 197, 204, 212–13, 216 societal preferences 133–5 sociological jurisprudence 201–3, 206, 222 solidarity 59–60, 64–7, 79, 81, 100, 186–7, 196 action 242–5 sources 20–1, 26–9, 86, 124–6, 287–90, 319, 380–3 hierarchy of 199, 323 plurality of 319, 323–35 sovereignty 154, 179, 276, 294, 339–40, 343, 403 and the European integration process 403–4 Spain 21, 35, 85, 213, 254–5, 260, 370–1 specific performance 256–7 spontaneous convergence 7, 117, 120–2 stakeholders 14–15, 17, 29, 252, 418, 457, 553 standard forms 504–5, 508–9 standard guided enforcement 586, 589

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Date: 25/8

JOBNAME: Brownsword PAGE: 16 SESS: 4 OUTPUT: Fri Aug 26 12:52:44 2011

608

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standard setting 456–8 standards 42, 127–8, 132–5, 416, 455–8, 460–3, 586–8 technical 325, 402, 587–8 state citizenship, retreat as connecting factor 404 state monopoly 327–8 state subsidies 102–3 structural centralisation 320, 365, 368–9, 377 and top-down unification 368–9 structural imbalances 147, 229, 312 subsidiarity 63, 314–15, 329, 343, 384, 447 substantive law 410–11, 416–17, 421–4, 426–7, 434–5, 465–6, 477 suppliers 164, 166, 168, 171, 173, 240, 523 supranational law 178, 293–6, 298, 302, 304–6 supremacy 274, 341–2, 368 sureties 227–8, 545 third-party 229–30 Sweden 241, 358, 431, 496 Switzerland 85, 364, 376, 398, 551 systematisation 34, 140–1, 157, 193, 207, 418, 556 systemic breaches 578 technical standards 325, 402, 587–8 telecommunications 106, 110, 564, 566, 571, 583 teleological interpretation see Interessenjurisprudenz tenants 98, 213, 391, 417, 513–14, 525, 536 terminology 30, 32, 80–1, 85, 249, 334, 353 terms 106–7, 166–8, 178–80, 199–202, 251–2, 262–3, 523 core 235–40 pre-formulated 236, 239 standard 145, 262, 532 unfair 64–5, 90–1, 236–7, 260–2, 310–11, 522–3, 547–8 territorial distribution of powers 384–6 territorial(ity) principle 384, 386, 396, 408 retreat 403–4 theoretical foundations of private law 3, 9, 159–74 conclusion 173–4

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and contract law 166–9 and EC consumer law 164–6 and effective regulation 171–3 justified orders 161–4 private order, public order and ordre public 160–1 purposes, projects, policies, principles 170–1 third-party agents 163 third-party sureties 229–30 Tobriner, Justice 210 top-down forces 337, 363–6, 369, 373–6 top-down unification 363–77 and central adjudication 367–8 and central legislation 365–6 and constitutional norms 366–7 major drivers 365–9 and structural centralisation 368–9 torts 21–3, 32–3, 77–8, 112–13, 128–31, 209–10, 541–2 trade unions 241–2, 244, 497, 514 transaction costs 123–5, 133, 146, 233, 267 transactions business-to-business 170–1 commercial 171, 173, 402 cross-border 124, 356, 390, 532 financial 112, 227, 268 linked 233–4 non-consumer 169–71 private 338, 437 transboundary practice 369, 371–2 transparency 17, 30, 108–9, 236–7, 260–1, 449–50, 535 qualities 108–9 Trstenjak, V 240, 539, 551 trusts 19, 22, 51, 99–100, 104–5, 112–13, 403–4 UK see United Kingdom uncertainty 15, 34, 93, 177, 245, 312–15, 353 unconscionability 223, 228–9 under-enforcement 417, 487, 499, 508, 510 underlying principles 5, 59–71, 81–2, 95, 111, 171, 185 unfair commercial practices 98, 239, 259, 456–7, 520, 522, 565 unfair competition 44, 89, 92, 99, 109, 145, 430 unfair terms 64–5, 90–1, 236–7, 260–2, 310–11, 522–3, 547–8

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Date: 25/8

JOBNAME: Brownsword PAGE: 17 SESS: 4 OUTPUT: Fri Aug 26 12:52:44 2011

Index unfairness 213, 239, 262, 313, 455, 523 control 238–40 tests 235–40, 257, 313 unification 77–8, 121–2, 277, 319–22, 400–1, 409–10, 465 bottom-up 363–77 centralisation as price of uniformity 375–7 degrees of uniformity 373–5 in federal systems 363–77 projects 73, 78, 353, 363 top-down 363–77 versus full harmonisation 354–7 versus harmonisation or coordination 357–61 uniformity 134, 151, 364–77, 385, 388–9, 441, 541 centralisation as price of 375–7 degrees of 364–6, 369, 373–6 legal 365–74, 376–7 union precedence see precedence United Kingdom (UK) 236–7, 337–8, 366–7, 398, 442, 447–8, 461–3 and DCFR (Draft Common Frame of Reference) 537 United States 15–17, 19–25, 27–30, 188, 204–6, 366–8, 370–2 balancing 206–11, 215–17 class actions 422, 440, 565–6

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development of private international law 396–7 restatements 4, 11–31, 33–4, 38, 41, 185 Supreme Court 201, 206, 219, 367, 587 unjust(ified) enrichment 19, 22, 28, 34, 40, 77–8, 90–1 value judgements 223–4, 226, 239 vertical distribution of powers 384–6 principles for 387–9 Viking case 241–7 von Jhering, R 181, 191, 194 Vorverständnisse 182, 225–7, 229, 234, 236–7, 241, 247–8 vulnerable consumers 105–6, 110, 113 weaker parties 79–80, 95–6, 98, 213, 227–9, 268, 397–8 welfare 81, 93–4, 96, 100–2, 104, 107, 133 economic 66, 95, 115, 133 social 127–8, 132–3 wellbeing 101–2, 104, 107, 112, 246, 430, 578 withdrawal rights 42, 47, 54–5, 61, 231–2, 234–5, 258–9 witness hearings 495, 507–8, 510 costs 497–8 women 64, 469, 474, 514, 525–6 workers, protection of 97, 243–7

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Date: 25/8