Private International Law

Summary

CONCEPT OF AN EU REGULATION

Traditionally, EU legislative measures in the field of general private law are taken in the form of directives. Pursuant to Article 115 TFEU a directive is the required legal form for measures concerning the approximation of such national laws, regulations or administrative provisions of the member states as ‘directly affect the establishment or functioning of the internal market’. Some of the earliest private law directives (product liability, doorstep selling, credit agreements for consumers) are based on this article. Measures concerning the approximation of national laws and regulations of member states ‘which have as their object the establishment and functioning of the internal market’ may be taken by both directives and regulations, so Article 114 TFEU provides. Most of the directives in the field of consumer protection are based on this article; see Article 169(3) TFEU. This policy is based on paragraph 6 of the Protocol on the application of the principles of subsidiarity and proportionality, which provides that ‘other things being equal’, directives should be preferred to regulations. So it is conceivable that the Commission will in the future choose the legal form of a regulation. This would relegate to the past most of the problems of transposing EU law into national legislation and of harmonious interpretation: a regulation is a law, which is directly binding on citizens, the institutions of the EU and the member states. See also no. 162 above.

REGULATIONS IN THE FIELD OF PRIVATE LAW

There are EU regulations which, among other things, regulate matters belonging to general private law, for example the regulations in the field of payments. Regulation 1103/97 regulates the introduction of the euro and includes provisions for conversion in existing contracts. According to the ECJ (Verbraucher-Zentrale Hamburg, C-19/03, and Estager, C-359/05) this regulation gives expression to two general principles of law, namely the necessity of safeguarding legal certainty for citizens upon the transition to the euro and the related necessity of not affecting the continuity of contracts and other legal instruments by the introduction of a new currency. See also no. 136 above. On these grounds a provider of mobile telephony was refused permission to round off the price per minute to a whole eurocent upon the conversion of German marks into euros, since this would result in a significant cost increase for consumers.

Summary

INFLUENCE OF EU LAW ON NATIONAL PRIVATE LAW: INTRODUCTORY OBSERVATIONS

We have seen in Chapter 1 that EU law produces direct effect in the domestic legal systems of the member states and that it has precedence in these legal systems over conflicting domestic legislation. Insofar as the provisions of EU law are suitable for having direct effect, individuals can invoke them before their national courts and thus assert their right to the application of those provisions in cases in which national provisions laid down by law, regulation or administrative action conflict with EU law. A provision is suitable for having direct effect when it is unconditional and sufficiently precise, which means that it must be clearly worded and not conditional upon an implementing measure to be enacted by an institution of the EU or a member state with respect to which there is a margin of discretion. The fact that a provision is laid down in the form of a treaty obligation imposed on the member states does not in itself preclude direct effect.

Direct effect can be ‘vertical’ or ‘horizontal’. Direct horizontal effect of treaty provisions was the subject of an introductory explanation in no. 12 ff. above and will be discussed in greater detail in section 3 of this chapter (no. 42 ff.).

REVIEW OF LEGALITY OF NATIONAL PRIVATE LAW MEASURES

Before dealing with direct horizontal effect, I will first, in section 2 (no. 31 ff.), discuss to what extent individuals can rely on the TFEU provisions on the freedoms to argue that national private law legislation is contrary to those provisions. Usually, EU provisions are invoked in disputes between an individual and the state, but it may also happen in disputes between two individuals. Member states must act in accordance with EU law, which implies among other things that they cannot issue and maintain legislation in contravention of EU law. If there is a dispute over whether a domestic legislative act conflicts with a provision of EU law that has direct effect in the sense discussed in no. 9, individuals may submit the dispute to the courts for a decision.

Summary

INTRODUCTORY OBSERVATIONS

THE ECHR AND THE ECtHR

This chapter will first deal with the protection of fundamental rights provided by the European Convention on Human Rights and Fundamental Freedoms (ECHR)in particular its importance for private law. The development of the protection of fundamental rights within the European Union and its relevance for private law will be discussed in section 4 of the chapter (no. 231a below). In 1950, in Rome and under the auspices of the Council of Europe that was established in 1949, the ECHR was made. The contracting parties secure to everyone within their jurisdiction the rights and freedoms defined in the Convention and in the protocols that have subsequently been added. The ultimate review of compliance with this obligation is vested in the European Court of Human Rights (ECtHR), which is established in Strasbourg. On a relatively modest but increasing scale, the ECHR is also relevant in the field of general private law.

The rights which the ECHR ensures will be respected by the authorities are a number of traditional human rights, e.g. the right to life, the right to be protected from torture and slavery, the right to liberty and security, the right to a fair trial, the right to respect for private life, and the right to freedom of religion, expression and assembly. In practice, most of the rights are relevant to criminal law: approximately two-thirds of the cases decided in Strasbourg relate to criminal law. With regard to private law cases the ECHR is mainly relevant to the law of persons and family law, and the law of civil procedure. However, some of the rights protected by the Convention are indirectly also relevant to general private law (the law of property, contract and unlawful acts), for example Article 6 ECHR (right to a fair trial) and Article 8 ECHR (right to respect for private life). More important, because directly relevant, is Article 1, Protocol No. 1, which pertains to the right to own property. In the following I will mention examples from the case law of the European Court of Human Rights relating to these articles.

The observance of the engagements undertaken by the contracting states is ensured by the European Court for Human Rights in Strasbourg (ECtHR).

Summary

INTRODUCTION

A great deal of European (private) law is embodied in secondary European legislation, that is, in directives and regulations. A regulation ‘shall be binding in its entirety and directly applicable in all Member States’ (Art. 288(2) TFEU). So it has direct effect with respect to anyone to whom it is addressed, regardless of whether it is a public body or an individual. In the wording of the ECJ (Prosciutto di Parma, C-108/01, paragraphs 87–89):

‘a regulation (…) creates not only rights but also obligations for individuals, on which they may rely against other individuals before national courts. Nevertheless, the requirement of legal certainty means that Community rules must enable those concerned to know precisely the extent of the obligations which they impose on them’.

A directive, on the other hand,

‘shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods’ (Art. 288(3) TFEU).

Regulations will be discussed in the next chapter.

This chapter is devoted to directives in the area of general private law (excluding family law and the law of succession). I will deal in turn with the operation of directives in private law (section 2), with the general aspects of the directives that are relevant to private law (section 3) and with some interpretation issues (section 4). The substance of the directives referred to here is briefly summarised in Chapter 7 (no. 235 ff.).

I will not discuss the possible legal bases for directives in the TFEU. I have only one observation on the subject.

Practically all directives in the area of general private law are based on Article 95 EC (formerly Art. 100A EC, currently Art. 114 TFEU); some older directives (product liability, doorstep selling, commercial agency and consumer credit) are based on Article 94 EC (formerly Art. 100 EC, currently Art. 115 TFEU). These treaty provisions regulate the approximation of such laws, regulations or administrative provisions of the member states ‘as directly affect the establishment or functioning of the internal market’ (Art. 115 TFEU) or as ‘have as their object the establishment and functioning of the internal market’ (Art. 114 TFEU), respectively.

Summary

GENERAL PRINCIPLES OF EU LAW

In its case law, the Court of Justice has developed a large number of general principles of Community law, currently EU law. These are fundamental principles of justice of the EU and its member states (cf. AG Trstenjak, opinion in Audiolux, C-101/08, point 70), ‘deeply rooted principles without which a civilised society would not exist’. They have a general, comprehensive character that is inherent in general principles of law. According to recent case law of the ECJ they have a constitutional nature or constitutional status (Audiolux, paragraph 63; NCC, C-174/08, paragraph 42). They belong to primary law, which means they are on an equal footing with the treaties.

In Audiolux the ECJ gave an insight into the considerations that play a role when recognising a general principle of EU law. The ECJ was dealing with the question whether EU law includes a general principle of equal treatment of shareholders, which in the case under consideration would have meant that if one of the large shareholders acquired the company, a small number of minority shareholders would be entitled vis- à-vis this large shareholder to receive the same price for their shares as was received by other large shareholders. The ECJ answered the question in the negative, because secondary EU legislation contained insufficient grounds for such a rule protecting shareholders and because it was an issue regarding which various means were available for ensuring such protection which the legislature was in a better position to weigh than the courts – also in the light of the principle of legal certainty. The ECJ further held that the proposed principle was characterised by a degree of detail that required further legislation.

FUNCTIONS OF THE GENERAL PRINCIPLES OF EU LAW

The ECJ has held itself competent to develop general principles of EU law pursuant to Article 220(1) EC (currently the second sentence of Art. 19(1) TEU), which imposes a duty on the ECJ to ensure that in the interpretation and application of the treaties ‘the law is observed’. The principles have a largely public law bias, which is not surprising given the socio-economic and administrative background of European cooperation.

General principles of Union law are held to possess three or four functions. They play a role in interpreting provisions of written law, in supplementing gaps in the law and in assessing the legality of legislative or administrative acts.

Summary

This volume aims to present a concise introduction to the interaction of European law and national private law. The various sources of European law are discussed in sequence: the TFEU, the general principles of Union law, directives, regulations, the EU Charter and the ECHR. For each source I indicate the nature and form of its significance for national private law. Particular attention is devoted to the review of national private law legislation against European legislation that has direct effect, to direct effect of European law on legal relationships between individuals, to indirect effect of European law on the same legal relationships via the open standards of national law, and to interpretation issues arising as a result of the interaction between European law and national law.

Since the first edition of this book (2012), which was reviewed by Norbert Reich in ZEuP 2014, pp. 446–448, academic discussion on European private law has increased in volume and in depth. The bibliography at the end of this book mentions five collections of essays which bear testimony to that development: General Principles of EU Law and European Private Law; The Involvement of EU Law in Private Law Relationships; Constitutionalization of European Private Law; Pluralism and European Private Law; and The Influence of EU Law on National Private Law. Some other books worth mentioning are Norbert Reich, General Principles of EU Civil Law, and Norbert Reich, Hans-W. Micklitz, Peter Rott and Klaus Tonner, European Consumer Law. This survey is limited to books in the English language.

As these titles show, one of the reasons for the lively academic discourse is the fact that the general principles of EU law and the EU Charter of Fundamental Rights, the latter of which entered into force in 2009, have rapidly gained in importance for private law, even if the contours of that influence are by no means clear as yet. The relevance of fundamental rights for EU private law is discussed in Chapters 3 and 6 of this volume.

The ECJ case law on subjects relevant for private law flows lavishly. In this edition nearly fifty new judgments are reported. Moreover, there are several new directives and regulations on private law related subjects.

Summary

INTRODUCTION

This chapter presents a brief summary of the directives in the field of general private law. The directives are classified based on the area of law to which each directive primarily relates. However, this does not preclude their relevance to other fields of law (for example, there is a property law provision in the late payment directive).

Contract law:

Summary

INTRODUCTION

JURISPRUDENCE AND A EUROPEAN CIVIL CODE

Since 1980 European scholars of civil and comparative law have been working on laying the foundations of a European Civil Code, or at any rate a European Code of Contract Law.

In 1989 the European Parliament called for the first time on the Commission to start work on drafting a common private law code. The Parliament stated that the harmonisation of certain sectors of private law was vital to the completion of the internal market and that the unification of large parts of private law in the form of a European private law code was the most effective harmonisation method for meeting the legal needs of the Union within a large frontier-free market. The repeated resolutions eventually resulted in an initiative of the Commission, which mentions the various academic projects aimed at the objective proposed by the Parliament, the most important being the Principles of European Contract Law; work on this project had started around 1980 and the first version was published in 1995. A European code in any form is indeed not conceivable without extensive preliminary academic work. In the following I will briefly discuss the various academic activities carried out in Europe, partly in response to resolutions of the Parliament.

ACADEMIC PREPARATION

A first precondition for the development of a European private law is the existence of academic literature describing trends and elements that are common to the various major European legal systems, including their legal history backgrounds. An impressive representative of the ‘ius commune’ approach based on legal history is Reinhard Zimmermann's monumental The Law of Obligations. Roman Foundations of the Civilian Tradition (1990), which, taking Roman law as the starting point, describes the development of Roman legal institutions in modern legal systems.

Among the literature which directly addresses current law, three standard works are particularly worth mentioning: Hein Kötz, Europäisches Vertragsrecht (2. Auflage, 2015); Christian von Bar, Gemeineuropäisches Deliktsrecht, Band I and II (1996 and 1999) (The Common European Law of Torts, Vols. I and II, 1998 and 2000); and Peter Schlechtriem, Restitution und Bereicherungsrecht, Band I and II (2000 and 2001).

Updated and expanded for the second edition, this volume provides attorneys, academics and students with a detailed yet accessible overview of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Adopted by more than eighty nations and governing a significant portion of international sales, the CISG regulates contract formation, performance, risk of loss, conformity to contractual requirements and remedies for breach. This volume explains the CISG doctrines and their ambiguities, and appraises the extent to which the doctrines reduce transaction costs for commercial actors. Its topic-based approach will be ideal for those pursuing academic analysis or subject-specific research.

Summary

CONSEQUENCES OF PASSING THE RISK OF LOSS

International sales governed by the CISG are likely to involve transport of goods over substantial geographical distances, and frequently involve transportation through multiple carriers and types of carriage, or multimodal transport. Shipping goods from a landlocked seller across water to a distant buyer is likely to comprise on-loading and off-loading from trucks, ships, and railways, each operated by a different entity. The consequences include both increased likelihood of damage or loss for the goods and increased difficulties in identifying the point at which any damage occurred. As a result, the default rules allocating the financial responsibility for loss or damage to the goods take on additional importance in these transactions. They inform buyers and sellers of the effects of damage or loss on their underlying obligations to pay or to deliver conforming goods and determine which of them is entitled to pursue remedies against the carriers involved in the transaction.

Legal systems differ in their default rules allocating risk of loss. They tend to allocate risk in three different ways. Some national law based on Roman law passes risk from the seller to the buyer at the conclusion of the contract. A second group of legal systems passes risk with respect to the goods sold when title (property) to them passes. The third group of national laws passes risk of loss on delivery of the goods to the buyer. The CISG's risk of loss rules are closest to the third group. They do not and cannot pass risk based on passage of title, because the CISG does not determine title in the goods, and with a single exception do not pass risk to the buyer at the conclusion of the contract. Instead, under the CISG's basic risk of loss rule risk generally passes when the buyer takes over the goods or is in a position to do so. The details of the CISG's risks of loss rules are described and evaluated in the sections that follow.

The CISG's treatment of risk of loss begins with a statement of the consequences of the passage of that risk. The primary consequence results from a negative implication.

Summary

INTRODUCTION: LEGAL CONSEQUENCES OF CHANGED CIRCUMSTANCES

Virtually all legal systems provide some basis for allowing parties to deviate from contractual performance with impunity when circumstances substantially change between the time the contract was concluded and the time that it is to be performed. The relevant changes usually implicate a significant unanticipated increase in one party's costs of performance or the occurrence of some unanticipated physical or regulatory obstacle that destroys the subject matter of the contract or the rationale for performing it. Legal doctrine recognizes that commercial parties enter into contracts that each believes will be personally profitable to perform, and that those beliefs are based on assumptions made at the time of the conclusion of the contract about the conditions that will exist at the time performance is due. Sellers, for instance, assume that they can procure the goods necessary for performance at a price lower than the contract price, while buyers assume that they can profitably use the goods for which they have contracted. Both parties assume that they will be physically able to perform the contract. Less certain, at least where the contract is silent, is how parties intend to allocate the risk that those assumptions prove incorrect. Different legal systems apply very different default rules that allocate that risk by defining the range of conditions under which nonperformance does not constitute a breach. Some legal systems permit adjustments when the equilibrium of the contract has been disturbed or when performance is possible but unexpectedly burdensome, while others essentially prohibit deviations from the contract unless performance is virtually impossible. These doctrines reflect the attitudes that different legal systems have towards the propriety of enforcing the literal terms of a contract, attitudes that are often summarized as embracing one of two Latin maxims. Doctrines that restrict the adjustment of contractual obligations are often associated with the principle of pacta sunt servanda, or “promises ought to be kept,” while doctrines that permit more liberal adjustment are associated with the principle of rebus sic stantibus, roughly translated to condition performance on circumstances remaining the same over the contractual term. American lawyers will think in terms of Uniform Commercial Code (“UCC”) § 2–615, which excuses the seller from a contract when performance has been rendered “impracticable” by the occurrence of a contingency that the parties assumed would not materialize and the risk of which was not assumed by the seller.

Summary

THE CISG AS A SET OF COMMERCIAL DEFAULT RULES

The United Nations Convention on Contracts for the International Sale of Goods (“the CISG”) is one of the most successful international commercial law treaties ever devised. It has been ratified by most of the world's important trading countries and become a template for the manner in which commercial law treaties are drafted. As of this writing, the CISG has been adopted by eighty-three countries. These nations are referred to as “Contracting States.” Every major trading nation except India, South Africa, and the United Kingdom has ratified the CISG. Cases interpreting it currently number in the low thousands, and more than 135 United States cases have referred to the CISG. With unreported arbitration awards added, this number must be considerably higher. The effect of the CISG within a Contracting State may vary with domestic law. For example, within the United States, which ratified the CISG in 1986 and where it entered into force in 1988, the CISG is considered a self-executing treaty. The CISG therefore creates a private right of action in federal court under federal law. The CISG provides the default set of rules that govern contracts for the sale of goods between parties located in different Contracting States, and, in some cases, where only one of the parties is located in a Contracting State. Where applicable the CISG preempts contrary provisions of domestic sales law, such as Article 2 of the Uniform Commercial Code (“UCC”) and other state contract law in the United States, and conflicting provisions of the German Civil Code (“BGB”) or the French Civil Code.

The CISG is relatively well known and researched in Europe. The academic literature on uniform sales law is dominated by European scholars, and some of the methodological developments in legal analysis that have prevailed in the United States have been applied only sparingly to CISG scholarship. As a result, at least in the United States, the CISG remains an understudied, largely misunderstood, and somewhat esoteric body of law, unfamiliar to many American commercial lawyers. Many of its provisions are reminiscent of the Uniform Commercial Code, and many American attorneys and courts improperly infer that those similarities mean that the UCC and the CISG have identical scope and meaning.

Summary

STATUTE OF FRAUDS AND ARTICLE 12

The CISG affirmatively rejects any statute of frauds or other formality for the creation of a contract. Article 11 recites that “[a] contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.” In this sense, the CISG recognizes commercial practices in which parties enter binding agreements through handshakes, conduct, or simply oral understandings. Article 11 eliminates any domestic requirements not only that the contract be in writing, but also that it be evidenced by seals, notarization, or other formalities. The assertion that a contract may be proven by any means implies the absence of any parol evidence rule, a subject that we discuss in the next chapter. Of course, in accordance with the “party autonomy” principle of Article 6, parties may deviate from these rules. An offer may, for instance, require that any acceptance be in writing, and a completed contract may be governed by a “no oral modification” clause. The effectiveness of such restrictions raises issues of validity, and thus, to the extent that they are not addressed by the CISG, Article 4(a) dictates that they be governed by domestic law.

The absence of formal requirements for contract formation is a common phenomenon of civil law. But it is less frequent in common law and Scandinavian jurisdictions, and in the countries formerly within the Soviet Union. As a consequence, Article 11 was quite controversial during the drafting of the CISG. The ultimate compromise was to permit (in Article 96) Contracting States that had domestic requirements for contracts of sale to be concluded or evidenced in writing to declare that the CISG articles rendering writings unnecessary are inapplicable where any party to the contract has its place of business in one of those States. The declaration nullifies the effect of Article 11 (and of Article 29, dealing with modification or Part II of the CISG). Article 12 makes such a declaration effective by stating that Article 11 is inapplicable where any party has its place of business in a Contracting State that has made an Article 96 declaration. To date, Argentina, Armenia, Belarus, Chile, Paraguay, Russian Federation, and Ukraine have made Article 96 reservations.

Private International Law

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Part I - Sources of European Law and Their Influence on National Private Law

List of Abbreviations

Chapter 5 - Regulations and Private Law

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Chapter 2 - The Tfeu and Private Law

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Chapter 6 - Fundamental Rights and Private Law

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Table of Legislation

Chapter 4 - Directives and Private Law

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Bibliography

Chapter 3 - General Principles of EU Law and Private Law

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Preface

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Chapter 7 - A Summary of the Private Law Directives

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Chapter 8 - An Overview of the ‘Principles’ and Other Academic Projects

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Frontmatter

9 - Remedies

The UN Convention on Contracts for the International Sale of Goods

7 - Risk of loss

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8 - Exemption from performance

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1 - The CISG: history, methodology, and construction

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Subject matter index

3 - Contract formation

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The UN Convention on Contracts for the International Sale of Goods

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