Law Making in the European Union: On Globalization and Contract Law in Divergent Legal Cultures

Author:Jan M. Smits
Position:Professor of European Private Law, Maastricht University, Netherlands

I. Introduction II. Contract Law In The European Union And For The European Union A. Contract Law in the European Union: National Jurisdictions B. Contract Law for the European Union: Directives C. The Vienna Convention on the International Sale of Goods ("CISG") D. Divergence Within One Country E. Legal Diversity and Globalization III. The Need For Harmonization: No Clear Answer IV. The... (see full summary)


Professor of European Private Law, Maastricht University, Netherlands.

I Introduction

One of the most salient problems of law making in a global world is how to deal with diverging national legal cultures. Ever since the emergence of the nation-state, law making has primarily been a task for the national legislatures and courts. They "make" law for relatively homogeneous societies that are usually characterized by a common language and culture. This law can be enforced by the State. As a result of increasing globalization, this classic picture is now rapidly changing.1 If the law is to retain its role of regulating society (be it no longer a national, but a global one), we have to find new ways of making law and enforcing this law. In doing so, several fundamental questions have to be answered. One is whether law makers should really aim for one uniform (private) law-as in the nation-state-or rather allow diversity of jurisdictions. Another is-even if there is a need to harmonize the law-whether this uniformity is at all possible in view of diverging legal cultures.

This article offers an account of how to deal with these questions. This account is not a general and a theoretical one, but one that is based on the experience of the European Union ("EU") in the field of contract law. European contract law is thus used as paradigmatic of globalization and private law as a whole. There is every reason to do so: the European Union has wide experience with making law for diverging jurisdictions. In addition to this, contract law can be considered one of the most important vehicles for globalization as it facilitates economic transactions. Therefore, the European debate about contract law may be viewed as a microcosm of global developments.

The next section is devoted to an overview of the present situation in European contract law. Parts III and IV address two main questions in the debate about harmonization of contract law: Page 1182 whether there is a real need for harmonization and whether harmonization is at all possible. Part V tries to identify the most effective way of dealing with diverse jurisdictions within the European Union and suggests that use of an optional code may be the most viable option. Finally, Part VI offers some more general thoughts about globalization and private law.

II Contract Law In The European Union And For The European Union

Contract law in Europe is characterized by its diversity. Within the European Union, there are at least four different types of contract law regimes.2 First, every Member State has its own national contract law, which implies that there are now twenty- seven such jurisdictions within the European Union. In addition to these national regimes, there is a set of rules on contract law of European origin. This set consists of a rapidly increasing amount of directives issued by the European Union. Third, there is the international regime created by the Convention on the International Sale of Goods ("CISG"). Even though this regime is not specifically European, it does play an important role within the European Union. Finally, there are-within several countries- regional variations of the national model or even (like in the United Kingdom) several fully-fledged legal systems in coexistence. These four types of regimes are explored below.

A Contract Law in the European Union: National Jurisdictions

The twenty-seven Member States of the European Union all have their own contract law regime. This implies that each national legislator is competent to draft contract law rules and that each country has its own national courts to deal with contract cases. There is at present no highest European authority to provide binding contract law rules outside of the (rather limited) competence of the European Union. This implies that, of all the political, economic, and monetary unions in the world,3 the European Union is the most diverse as to the law. Although in the United States, contract law is not a matter for the federal Page 1183 government, one cannot say that American contract law is diverse. In fact, the regimes on sale of goods and commercial transactions are very comparable, not only because of the example set by the Uniform Commercial Code ("UCC"), now adopted in almost all American states,4 but also because of the presence of one American legal education, one language, and all those other elements that make a legal culture.5

It is possible to distinguish several groups of private law jurisdictions within the European Union on the basis of their common history, their sources of law, and their predominant mode of legal thought.6 The first group consists of the common law systems of England and Ireland with their emphasis on judge-made law and the central authority of the English House of Lords and the Irish Supreme Court respectively. The common law system of Cyprus (Cyprus was a British colony until 1960) also belongs to this group. The second group consists of the traditional civil law countries, characterized not only by a central role for a national civil code,7 but also by a highest court whose decisions are in practice often just as important as the code provisions. Among these countries, one can distinguish between those that have a code that is to a greater or lesser extent based on the Code Napoleon (France, Belgium, Luxemburg, Spain, Portugal, Italy, and Malta) and those that have a code based on the German model (Germany, Austria,8 Greece, and the Netherlands). A third group consists of the Scandinavian Member States (Denmark, Sweden, and Finland). They are not only characterized by a common legal history but also by the existence of several common statutes. Among these are a statute on the sale of movables and a common contract law act.9 Finally, there is the large group of countries that have entered the European Union in 2004 and 2007 and that often have a new or at least recently revised civil code (Poland, the Czech Republic, Slovakia, Hungary, Estonia, Lithuania, Latvia, Slovenia, Romania, Page 1184 and Bulgaria).10 The way in which these new or revised codes are applied and interpreted by the courts of these countries cannot be compared to the way in which this is done in the traditional civil law countries. Generally speaking, the mode of interpretation is much more literal.

Diversity among these twenty-seven contract law regimes does not mean that it is impossible to draft principles that these legal systems have in common. A well-known set of such principles is formed by the Principles of European Contract Law ("PECL").11 They do not, however, represent the individual national contract law regimes. One can only say that they try to provide a common structure (a common denominator) to Europe's legal systems, leaving out essential details as to substance and the divergent ways of dealing with this substance by the courts.12 Despite a common history among most of the legal systems mentioned (most of them are to a greater or lesser extent based on the Roman law of the ius commune),13 these systems have developed separately over the last 200 years. To look at this as a mere historical accident, or as something one could get rid of easily, does not do justice to the vigor of the differences or to the difficulties in overcoming this diversity.

B Contract Law for the European Union: Directives

In addition to the national contract law regimes, the European Union has until now issued twelve directives in the field of contract law.14 This so-called acquis provides several types of rules that are all based on the internal market provision of the EC Treaty (Article 95): the justification for European intervention is that the subjects covered by the directives are of such importance Page 1185 that divergences in national legislation of the Member States distort the internal market. Thus, the formation of some contracts is governed by rules on formalities,15 representation,16 the time of formation,17 evidence of a declaration,18 and information to be provided to the consumer before and after the conclusion of the contract.19 The content of the contract is partly determined by European provisions on interpretation,20 unfair terms,21 and general conditions.22 Most European rules, however, refer to performance of the contract: the European Union provides rules on conformity in consumer sales,23 remedies of the consumer in the case of non- performance,24 commercial guarantees vis-‡-vis the consumer,25 time of performance, and the interest due in cases of breach of contract.26

The acquis is usually not met with enthusiasm. It was characterized as being fragmentary, arbitrary, inconsistent, and ineffective.27

It is fragmentary because it only covers certain topics, a "Brussels brick here and there."28 For example, in the field of contract law, only some specific contracts are covered, and of these Page 1186 contracts only specific aspects are addressed. This is troublesome for Continental lawyers as their ideal of a comprehensive and consistent civil code is being disrupted by law of European origin.

The acquis is also quite arbitrary in the sense that it remains unclear why some types of contracts are being covered and others are not. Why is it that package travel and consumer sales are addressed, but not the regular insurance contract? If the European legislator...

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