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Party autonomy is at the heart of contract law. Freedom of contract is, however, not unlimited. Very often, the law will provide protection for weaker parties, such as consumers, employees and tenants. Small and medium-sized enterprises (SMEs) are typically excluded from weaker party protection. However, when the European Commission published its Proposal for a Regulation on a Common European Sales Law (hereafter referred to as the Regulation on CESL), a new distinction was introduced between SMEs and other enterprises. The Regulation on CESL defines an SME in Article 7 as ‘a trader which (a) employs fewer than 250 persons; and (b) has an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million’. This paper aims to discuss this distinction and its rationale. The definition of an SME in the proposed Regulation will be compared to those provisions of private law in the Netherlands which also contain quantitative criteria to determine whether an enterprise may be qualified as a small or a large enterprise. After an introduction to the background of the Regulation on CESL (section 2), this paper will introduce the definition of an SME in the Regulation on CESL (section 3). Secondly, the distinctions used in the private law of the Netherlands will be illustrated (section 4). Finally, a conclusion will be drawn concerning the feasibility of the definition of an SME in the Regulation on CESL.
Background of the Regulation on CESL
In 2001, the European Commission expressed its clear interest in European contract law and published a Communication on European Contract Law. This was the start of a process of extensive public consultation on the potential problems arising from the differences between the Member States’ contract laws. Between 2005 and 2009, a network of European contract law experts developed a Draft Common Frame of Reference on the basis of comparative law research. The European Commission examined several options as to how to ease cross-border transactions by making contract law more coherent within the European Union. In 2010, the European Commission decided to set up an Expert Group in the area of European contract law. The task of this group was to assist the Commission by means of a feasibility study and in making further progress in the development of a possible future European contract law instrument.