TOWARDS A GENERAL PART OF THE EU CONSUMER CONTRACT LAW

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1 TOWARDS A GENERAL PART OF THE EU CONSUMER CONTRACT LAW by dr. sc. Zlatan Meškić, Assistant professor at the University of Zenica, Faculty of Law Abstract The need for a general part of EU consumer contract law has been continuously increasing with the adoption of every new consumer directive for more than the last two decades. The Commission responded with the initiative for a horizontal directive in the Green Paper on the Review of the Consumer Acquis. The Commission suggested in its proposal that the structure of the new horizontal instrument should have one general part containing provisions on all types of contracts. Since the scope of application as well as the content of the adopted Directive on Consumer Rights of 2011 are more modest than originally announced, the development of the general part is still at an early stage. However, the new Directive provides a good basis for further development of the general part of EU consumer contract law. Thereby, the parallel development of general provisions of EU consumer contract law in other new legal instruments, namely the Draft Common Frame of Reference, the Proposal for a Regulation on a Common European Sales Law and the Rome I Regulation, needs to be examined for coherence, considering that coherence on an EU level is the main goal these instruments seek to achieve. Key words: Consumer Rights Directive; Common Frame of Reference; optional instrument; Directive 2011/83/EU; Rome I Regulation; consumer contract. Author: Zlatan Meškić worked as a scientific assistant at the Ludwig Boltzmann Institut für Europarecht in Vienna from He completed his doctoral studies in the field of European and Private International Law at the University of Vienna in He defended his dissertation on the topic Europäisches Verbraucherrecht unter besonderer Berücksichtigung des Grünbuchs 2007, which was publiched by Manz (Vienna) in the same year. Dr. Zlatan Meškić is assistant professor of European Union Law, European Private Law and Private International Law at the Departments for Civil Law and State and International Law at the University of Zenica, Bosnia and Herzegovina. He is the vice dean for scientific research at the Faculty of Law, University of Zenica and the chief editor of the Journal Annals of the Law Faculty University of Zenica. He is a scolarship holder from the Max-Planck Institute for Foreign and Private International Law (Hamburg, 2011). Contact at: , zmeskic@prf.unze.ba. 176

2 TOWARDS A GENERAL PART OF THE EU CONSUMER CONTRACT LAW 1. Fragmentation of National Laws - Fragmentation of EU Directives- General Part of EU Consumer Contract Law The existing directives in the area of EU consumer law arose as a response to particular regulatory needs in specific fields of law, with independent values and characteristics. 1 After more than 25 years of legislative activity in the field of consumer contract law, consumer Directives represent the vast majority of the EU law on obligations. The question of necessity of a large number of consumer directives regarding the division of competences between the EU and its member states relies on compliance with the principles of subsidiarity and proportionality. Instead of on the argumentation for fulfillment of the criteria of subsidiarity and proportionality, the argumentation of the EU legislator for the adoption of consumer directives on the grounds of 114. TFEU (ex Art 95 or 100 EC) was based on the formula that the disparities between national legislations distort competition, and are likely to create barriers to free movement of goods and services. 2 This argumentation is rightly called a stereotype repetition of an empty formulation 3, because the harmonization of consumer directives reaches far beyond the orientation towards the internal market. 4 The ECJ decision Tabakwerbung I 5 of 5 October 2000 showed that this ground for legislative competence is not unlimited. Contrary to the extensive debate in the science, the later ECJ jurisprudence confirmed that the importance of Tabakwerbung I is not as wide as originally assumed. 6 In its decisions Swedish Match 7 and Arnold André 8 on the competence for the adoption of Tobacco Advertising Directive 9, ECJ regarded even the future disparities between national legislations as sufficient reasons for using Art 114. TFEU (ex Art 95 EC) as a legislative basis. Thereby the development of new trade barriers had to be probable, and it was necessary for the Tobacco Advertising Directive to have the aim to prevent them. Consequently, Tabakwerbung I has for the first time enlightened the limits of the Art 114 TFEU 1 Büßer, Janko, Das Widerrufsrecht des Verbrauchers - Das verbraucherschützende Vertragslösungsrecht im europäischen Vertragsrecht. Frankfurt: Peter Lang, 2001, p Lehmann, Friederike, Die Rezeption des europäischen Verbraucherschutzes im österreichischen Recht. Frankfurt: Peter Lang, 2002, p. 35; See e.g. first Recital of the previous Timeshare Directive: the disparities between national legislations on contracts relating to the purchase of the right to use one or more immovable properties on a timeshare basis are likely to create barriers to the proper operation of the internal market and distortions of competition and lead to the compartmentalization of national markets. 3 Taupitz, Jochen, Europäische Privatrechtsvereinheitlichung heute und morgen. Tübingen: Mohr, 1993, p Wallner, Martina, Die Angleichung der Gewährleistungsbestimmungen im europäischen Verbraucherschutzrecht. PhD diss., University of Vienna, 2002, p ECJ 5. October 2000, C-376/98 (Tabakwerbung I), ECR 2000, I On restricted importance of Tabakwerbung I also Reich, Norbert and Hans-W. Micklitz, Europäisches Verbraucherrecht. Baden-Baden: Nomos, 2003, p. 33; Kammerer, Christoph, Harmonisierung des Verbraucherrechts in Europa: Das verbraucherschützende Widerrufsrecht der 355 ff. BGB im Lichte der europarechtlichen Vorgaben und im Vergleich zum Code de la consommation. Hamburg: Kovač, 2004, p. 8; Ludwigs, Markus, Art 95 EG als allgemeine Kompetenz zur Regelung des Binnenmarkts oder als begrenzte Einzelermächtigung?. 14 EuZW (2006): ; Pauling, Rainhard, EuGH-Generalanwalt Léger in seinen Schlussanträgen vom C-380/03: Deutsche Klage gegen die EU-Tabakwerberichtlinie muss abgewiesen werden. 14 EuZW (2006), ECJ 14. December2004, C-210/03, (Swedish Match), ECR 2004, I ECJ 14. December 2004, C-434/02 (Arnold André), ECR 2004, I Directive 2001/37/EC, OJ L 194/

3 PART FOUR Consumer Law and E-Commerce as a legislative basis and created an obligation for more detailed explanation on the adoption of the measure in question, but nothing more than that. Foremost, in Tabakwerbung the ECJ avoided the discussion on the fulfillment of the subsidiarity criteria. 10 Although disparities in national provisions on consumer protection justified the adoption of Directives, with every new consumer directive differences in legislative systems and definitions in individual directives become more distinct. Reason for that cannot be found in the particularities of separate fields of European consumer law, but in the fragmentary approach of the EU legislator towards the adoption of consumer directives for over 25 years. 11 The lack of coherency in the EU legislation in the field of EU consumer law has had its impact on the national transpositions. For the national legislator it is almost impossible to systemize its national provisions which implement the directives, because it is not predictable if it is going to be possible to incorporate the future demands of the directives into the previously created system. 12 Additionally, the process of implementation of the Directives into the national laws offers multiple opportunities to deviate from the formulation provided by the Directives, which have been extensively used by the member states. 13 The comparative analysis of the EU consumer law compendium shows differing implementations in national legal systems on many occasions, which cause or could potentially cause barriers in the EU internal market. 14 Even such a fundamental term, like the definition of consumer, does not have a unified application in the member states. 15 Thus the need for a horizontal approach has grown in the EU legislation, and the Commission answered this need with the Green Paper on the Review of the Consumer Acquis. 16 The horizontal approach has found great support in legal science: demands for the systematization of consumer law 17, for a general part of consumer law 18 or even its codification 19, were expressed long 10 Perišin, Tamara Razgraničenje ovlasti Europske unije i država članica. In Reforma Europske unije-lisabonski ugovor, edited by Siniša Rodin and Tamara Ćapeta and Iris Goldner Lang, Zagreb: Narodne novine, Meškić, Zlatan, Europäisches Verbraucherrecht - Gemeinschaftsrechtliche Vorgaben und europäische Perpektiven. Vienna: Manz, 2008, p Büßer, Janko, p. 59 (fn. 1). 13 Kammerer, Christoph, p. 246 (fn. 6). 14 Schulte-Nölke, Hans and Christian Twigg-Flesner and Martin Ebers, EC Consumer Law Compendium. Munich: Sellier, E.g. with regards to different national transpositions of information duties pursuant to the Distance Selling Directive, p Herwig, André, Der Gestaltungsraum des nationalen Gesetzgebers bei der Umsetzung von europäischen Richtlinien zum Verbrauchervertragsrecht - Wechselwirkung zwischen Rechtsharmonisierung und Keck-Rechtsprechung des Europäischen Gerichtshofs. Frankfurt: Peter Lang, 2002, p OJ 2007, C 61/1. 17 Lurger, Brigitta, Grundfragen der Vereinheitlichung des Vertragsrechts in der Europäischen Union. In Auf dem Wege zu einem Europäischen Zivilgesetzbuch, edited by Dieter Martiny and Normann Witzleb, 241. Frankfurt: Springer, 1999; Heiss, Helmut, Formvorschriften als Instrument des europäischen Verbraucherschutzes. In Internationales Verbraucherschutzrecht, edited by Anton K. Schnyder, Helmut Heiss and Bernhard Rudisch, Tübingen: Mohr, 1995, p. 92; Martinek, Michael, Unsystematische Überregulierung und kontraintentionale Effekte im Europäischen Verbraucherschutzrecht oder: Weniger wäre mehr. In Systembildung und Systemlücken in Kerngebieten der Europäischen Privatrechts, edited by Stefan Grundmann, Tübingen: Mohr, Micklitz, Hans-W, Ein einheitliches Kaufrecht für Verbraucher in der EG?. 8 EuZW (1997): Schlechtriem, Peter, Wandlungen des Schuldrechts in Europa - wozu und wohin?. 10 ZEuP (2002): , p. 216; Lurger, Brigitta, Grundfragen der Vereinheitlichung des Vertragsrechts in der Europäischen Union. Vienna: Springer, 2002, p. 304; Remien, Oliver, Zwingendes Vertragsrecht und Grundfreiheiten des EG-Vertrages. Tübingen: Mohr Siebeck, 2003, p. 138; Vogel von, Alexander, Verbrauchervertragsrecht im Privatrechtssystem - Zur systematischen Stellung verbraucherrechtlichen Vorschriften im Recht der Europäischen Gemeinschaft und ihrer Mitgliedstaaten. 2 GPR (2005): , p

4 Zlatan Meškić Towards a General Part of The EU Consumer Contract Law before the green paper of the Commission. 20 Howells/Wilhelmsson already in 1997 mentioned three reasons for codification of consumer law 21, which are now appropriate as arguments in favor of the horizontal approach: 1. the codification would ensure unified use of terms of consumer law, enhance the coherence of this legal field and in general offer opportunity to review the existing legislation; 2. EU consumer law would become more clear and accessible, which would increase its reputation; 3. legal gaps in existing legislation would be discovered and create a cause for posing some new legal questions. The initiative of the Commission resulted in the adoption of the Directive 2011/83/EU on consumer rights 22 in October 2011, which contains first evidence of the formation of the general part of EU consumer contract law. 23 This legislative process may be regarded as pioneering for other fields of private law. However, such method of creation of EU private law can be criticized for creation of the regulation of particular needs, adopted with deficiencies that create further obstacles for the free movement between member states. Thus it creates itself an opportunity to use the legal basis for a full harmonization in one field of private law, and thereby avoids the subsidiarity test. Namely, a full harmonization for a particular field of private law as the first EU measure in that field would certainly not be justified. At the same time it is not the intention to deny that a gradual creation of a common level of consumer protection, particularly in combination with the minimum harmonization clause, beside other effects, treats the sovereignty of the member states with most respect. 2. A General Part in the Directive on Consumer Rights? Regarding the structure of the new horizontal instrument in its Green Paper of 2007, the Commission proposed that one general part should contain provisions on all types of contracts. The general part should consist of definitions, general provisions, and provisions on information duties, withdrawal rights and unfair terms. For the purposes of the analysis on the level of development of the general part which has already been achieved with the new Directive on consumer rights (CRD), it is necessary to establish criteria by which it may be determined which provisions should be regarded as belonging to a general part of a particular legal field. The question is, whether we consider the provisions to belong to the general part only if they are applicable to all provisions of the special part, or whether it suffices that they are relevant for some groups of provisions within the special part, but not for all its parts. 24 The special part of the consumer law is built by the provisions of con- 20 Further supporters of systematization in EU Consumer Contract Law: Kammerer, Christoph, p. 249 (fn. 6); Drobnig, Ulrich, Neue rechtliche Konzepte für den europäischen Verbraucherschutz. In Neues europäisches Vertragsrecht und Verbraucherschutz, edited by Wolfgang Heusel, Köln: Bundesanzeiger, 1999; Micklitz, Hans-W., (Selbst-)Reflektionen über die wissenschaftlichen Ansätze zur Vorbereitung einer europäischen Vertragsrechtskodifikation. 4 GPR (2007): 2-15, p. 6; Alpa, Guido, New Perspectives in the Protection of Consumers: A General Overview and some Criticism on Financial Services. 16 EBLR (2005): , p. 733; Lehmann, Friederike, p. 115 (fn. 2); Pöttler, Gerhard, Vergleichende Verbraucherschutzrichtlinienumsetzung in europäischen Mitgliedstaaten: Anhand ausgewählter Beispiele der Pauschalreise-, Timesharing- und Produkthaftungsrichtlinie. Frankfurt: Peter Lang, 2001, 275; Gool van, Roeland, Die Problematik des Rechts der missbräuchlichen Klauseln und die EG-Richtlinie über missbräuchliche Klauseln in Verbraucherverträgen. Frankfurt: Peter Lang, 2002, p. 57; Against such initiative Krejci, Heinz, Ist das Verbraucherrecht ein Rechtsgebiet?. In Verbraucherschutz in Europa - FS für Mayrhofer, edited by Bernhard Eccher/Christin Nemeth/Astrid Tangl, Vienna: Verlag Österreich, 2002, p. 136; Aye, Lutz, Verbraucherschutz im Internet nach französischem und deutschem Recht - eine Studie im Lichte der europäischen Rechtsangleichung. Frankfurt: Peter Lang, 2005, p Howells, Geraint G. and Thomas Wilhelmsson, EC Consumer Law. Aldershot and Brookfield: Ashgate/Dartmouth, 1997, p Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/ EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ L 304/ Meškić, Zlatan, Direktiva 2011/83/EU o pravima potrošača od 25. oktobra godine, Sl. list EU 2011, L 304/64. 3 Nova Pravna Revija (2012): Kreuzer, Karl Was gehört in den allgemeinen Teil des Europäischen Kollisionsrechts?. In Kollisionsrecht in der Europäischen Union, edited by Brigitta Jud and Walter H. Rechberger and Gerte Reichelt, Wien: Jan Sramek, 2008, p

5 PART FOUR Consumer Law and E-Commerce sumer directives which directly or indirectly regulate contract law. Right at the beginning it should be noted that the Green Paper of 2007 initiated the review of 8 consumer directives, namely the Doorstep Selling Directive, 25 Package Travel Directive 26, Unfair Contract Terms Directive 27, Timesharing Directive 28, Distance Selling Directive 29, Indication of Prices Directive 30, the Injunctions Directive 31 and Consumer Sales Directive 32. Thereby the Indication of Prices Directive and the Injunctions Directive are not a part of contract law. The Consumer Credit Directive 33, which is a core part of EU contract law 34, is left out of the analysis. 35 Further on, it is important that the Directive, in its adopted form, fully amends only two out of the eight reviewed Directives (Doorstep Selling and Distance Selling Directives), and partially amends the Unfair Contract Terms Directive and Consumer Sales Directive. It is obvious that the CRD does not contain any provisions applicable to all regulations of the special part of consumer contract law. They are simply not included into the scope of application of the new Directive. Solutions which existed in the Proposal for the Directive, such as Art 3 (3) stating that fully harmonized provisions on unfair contract terms shall apply to the Package Travel Directive as well as the Timeshare Directive, are left out of the final text of the Directive. Nevertheless, some provisions are applicable to all or groups of provisions within the scope of the application of the CRD, which could, by inclusion of further Directives in the special part of the CRD, evolve to provisions on the general part. Namely, the structure of the CRD is formed in such a way that reviewed provisions from other Directives can be included without further difficulties. 36 This process has already started with the provisions on Doorstep Selling and Distance Selling, because this subject matter is not regulated one after the other, but the common aspects of both Directives are regulated uniformly. In particular the two most important rights of consumers are covered by uniform rules, the right to information and the right to withdrawal. Including the provisions from other Directives in the horizontal Directive, foremost the provisions on consumer credit, Timesharing and Package Travel, the proportion within the CRD would move in favor of the horizontal approach, while vertical harmonization would be restricted to questions characteristic of a particular subject matter. Such a process has already been announced by Recital 62 of the CRD with regards to unfair contract terms and consumer sales. Both fields were included in the Proposal for CRD, but could not be preserved during the legislative process and were left out of the final text of the CRD, with the exception of a few provisions on consumer sales Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises, OJ L 372/ Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours, OJ L 158/ Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ L 095/ Directive 94/47/EC of the European Parliament and 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, OJ L 280/ 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, OJ L 144/ 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, OJ L 80/ Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers interests, OJ L 166/ 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, OJ L 171/ 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, OJ L 42/ Čikara, Emilia, Gegenwart und Zukunft der Verbraucherkreditverträge in der EU und in Kroatien. Vienna: LIT, Meškić, Zlatan, p. 19 (fn. 11). 36 Meškić, Zlatan, p. 46 (fn. 23). 37 The Directive regulates the delivery (Art 18), fees for the use of means of payment (Art 19), passing of risk (Art 20), communication by telephone (Art 21) and additional payments (Art 22). 180

6 Zlatan Meškić Towards a General Part of The EU Consumer Contract Law Further, it needs to be taken into consideration that the goal of the provisions on the general part of consumer contract law is to create more coherence in consumer contract law by making it possible for the provisions of the special part to be applied uniformly. Increasing the coherence in EU contract law is the common goal of all three projects evolved from the initiative of the Parliament and the Commission on EU Civil Code 38, namely the Draft Common Frame of Reference (DCFR) 39, the optional instrument in the form of a Proposal for a Regulation on a Common European Sales Law (CESL) 40 and the adopted CRD. Coherency shall be achieved by the removal of varying scopes of instruments with the introduction of a unified scope of application, unification of concepts used in different meanings, elimination of norms with different content for similar situations and conflicting basic principles and values applied in that branch of law, removal of concrete contradictory norms and with the correction of the wrong placement of the norm within the instrument. 41 The general part aims to achieve most of the mentioned aspects of increased coherency. Such an approach was also taken by the CRD which, in addition to the unified scope of application (Art 3 CRD), contains definitions (Art 2 CRD), unified degree of harmonization (Art 4 CRD) and pre-contractual information duties (Art 5 CRD) as provisions which generally apply to all provisions within the scope of application of the CRD. Additionally, provision on the general part applicable only to certain groups of provisions are foremost the provision on information duties and the right to withdrawal, for now applicable only to Doorstep Selling and Distance Selling Contracts. As already stated, it is expected that with time, the scope of application will be extended to other types of contracts regulated by consumer directives not incorporated into the CRD. 3. Maximum Harmonization as a Necessity of a General Part? The principle of minimum harmonization, which allows member states to retain existing or adopt new provisions which provide for a higher level of consumer protection, for more than two decades was a precondition for the member states to agree on the adoption of provisions in the area of private law. 42 The EU legislator already introduced the principle of maximum harmonization in four consumer directives of newer date. 43 The CRD also follows the principle of maximum harmonization. In its Art. 4. CRD provides that member states shall not maintain or introduce, in their national law, provisions diverging from those laid down in this Directive, including more or less strin- 38 Vogel von, Alexander, Verbrauchervertragsrecht und allgemeines Vertragsrecht. Fragen der Kohärenz in Europa: Fragen Der Koharenz in Europa. De Gruyter: Berlin, 2006, p. 186; Grundmann, Stefan, Harmonisierung, Europäischer Kodex, Europäisches System der Vertragsrechte. 55 NJW (2002): ; Von Bar, Christian, Die Mitteilung der Europäischen Kommission zum Europäischen Vertragsrecht. 9 ZEuP (2001): ; Leible, Stefan, Die Mitteilung der Kommission zum europäischen Vertragsrecht - Startschuss für die Schaffung eines Europäischen Vertragsgesetzbuchs?, 12 EWS (2001): ; Staudenmayer, Dirk, Perspektiven des Europäischen Vertragsrechts. In Die Schuldrechtsreform vor dem Hintergrund des Gemeinschaftsrechts, edited by Reiner Schulte and Hans Schulte-Nölke, Tübingen: Mohr Siebeck, 2001; Kötz, Hein Savigny v. Thibaut und das gemeineuropäische Zivilrecht. 10 ZEuP (2002): Principles, Definitions and Model Rules of European Private Law-Draft Common Frame of Reference (DCFR). Edited by Christian von Bar, Eric Clive and Hans Schulte-Nölke. München: Sellier, COM (2011) 635 final; Povlakić, Meliha, Prijedlog Uredbe Evropskog Parlamenta i Savjeta o Zajedničkom evropskom pravu prodaje KOM (2011) 635 final od Nova Pravna Revija (2011): Wihelmsson, Thomas The Contract Law Acquis: Towards More Coherence Through Generalisation?. 4 th European Jurists Forum, (2008): , p Kammerer, Christoph, p. 16 (fn. 6). 43 Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services, OJ L 271/16; 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, OJ L 149/22; Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers, OJ L 133/66; 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, OJ L 33/

7 PART FOUR Consumer Law and E-Commerce gent provisions to ensure a different level of consumer protection, unless otherwise provided for in this Directive. The provision on full harmonization principles, applicable to all provisions of the CRD, deviates from the outcome of the Green Paper of 2007, where the majority of the respondents opted for targeted full harmonization. 44 As Howells/Schulze rightly argue, the CRD is targeting at full harmonization rather than aiming at targeted full harmonization. 45 Nevertheless, the CRD allows the member states in several provisions to narrow down the scope of application (Art 3 (4) CRD), to provide a higher degree of protection (Art 5 (4) CRD) or that the transposition of some provisions is optional (Art 7 (4) CRD). Consequently, the CRD combines the mostly applied principle of maximum harmonization with individual provisions on minimum or optional harmonization. 46 The provisions which have been previously recognized as the foundation of the future general part of consumer contract law fall under the principle of maximum harmonization. Taking into consideration that their aim is to increase coherency on an EU level as well as the coherency at the level of the member states, the principle of maximum harmonization may seem as a necessary requirement for the establishment of a general part of the consumer contract law. Insofar, the exception to the principle of maximum harmonization in Art 5 (4) DCR is surprising, because it allows the member states to introduce more stringent pre-contractual information obligations for the traders. Firstly, the provisions on pre-contractual obligations are the only ones which regulate consumer rights and are applicable to all types of consumer contracts. 47 Secondly, the matter on information duties is pointed out as particularly unsystematic, because of the use of the principle of minimum harmonization. Consequently, the only uniformly regulated field on consumer rights within the CRD, pursuant to Art 5 (4) CRD, in effect does not follow the principle of maximum harmonization, but the principle of minimum harmonization. Therefore the answer to the question, whether maximum harmonization is a necessity of a general part, from the view of the EU legislator seems to be negative either because of political or legal reasons. The arguments in favor of the principle of minimum harmonization are that the legal tradition is taken into consideration to a great extent 48, and at the same time a common minimum degree of protection for consumers is created independently of their domicile. 49 The disadvantage is that national legislators have used the opportunities given by minimum harmonization too often, whereby the degree of consumer protection was increased, but also greater differences between national laws were developed. Therefore, traders had to adjust their cross border business practice to different national laws, despite the harmonization by EU Directives. 50 On the other hand, maximum harmonization also causes some disadvantages, which should not be neglected. Firstly, member states have so far, by using the minimum harmonization clauses, provided for a higher degree of consumer protection and will now have to lower that level, because maintenance of diverging laws is not allowed. Secondly, the Directive which unifies the existing consumer contract law and at the same time does not allow national legislators to deviate from its provisions, in fact requires the transposition into a new national law. Thus the provisions of the CRD cannot, except with great effort, be transposed into national civil codes or acts on obligation. The consumer contract law is moved further away from general provisions on obligation, which is not 44 Micklitz, Hans-W., The Targeted Full Harmonisation Approach: Looking Behind the Curtain. In Modernising and Harmonising Consumer Contract Law, edited by Geraint G. Howells and Reiner Schulze, Munich: Sellier, 2009, p Howells, Geraint G. and Reiner Schulze, Overview of the Proposed Consumer Rights Directive. In Modernising and Harmonising Consumer Contract Law, edited by Geraint G. Howells and Reiner Schulze, Munich: Sellier, 2009, p Misita, Nevenko, Osnovi Prava Evropske unije. Sarajevo: Pravni fakultet Univerziteta u Sarajevu, 2008, p. 524; Vukadinović, Radovan, Uvod u Institucije i pravo Evropskih zajednica. Kragujevac: Pravni fakultet u Kragujevcu, 2008, p This does not apply to contracts concluded away from business premises and distance selling contracts, which are subject to vertical harmonization. 48 Herwig, André, 66 (fn. 15). 49 Lehmann, Friederike, p. 61 (fn. 2). 50 Kammerer, Christoph, p. 17 (fn. 6). 182

8 Zlatan Meškić Towards a General Part of The EU Consumer Contract Law desirable for its use in practice, especially not in the region of the Western Balkans. 51 Finally, maximum harmonization decreases the willingness of the member states to adopt contract law at an EU level. This is already proven by the fact that out of eight Directives reviewed by the Green Paper 2007, and out of four which made it into the Proposal, only two are fully regulated by the CRD. 52 In the discussion on advantages and disadvantages of the maximum harmonization for EU consumer law, it is often neglected that maximum harmonization causes pre-emption. 53 Namely, according to Art 4 CRD, it is not only prohibited to provide for a higher or lower degree of consumer protection, but also to maintain or introduce new provisions which depart from the CRD. A field of law where full harmonization is achieved, according to the principle of pre-emption, prohibits the activity of member states, because they have given away their right to regulate the subject matter within that field of law. With regards to the general part of EU consumer contract law, the question of pre-emption as a consequence of the principle of full harmonization will be shown on the example of the consumer definition. The ticket to the protection offered by the Directive is the fulfillment of the criteria set by the consumer definition, which corresponds to the definition of consumer provided by most consumer Directives. According to Art 2 (1) CRD, consumer means any natural person who is acting for purposes which are outside his trade, business, craft or profession. 54 The definition is criticized because the ECJ has continuously given it a narrow interpretation, excluding from its scope of application, e.g., start-up contracts 55, mixed-contracts 56 or atypical contracts concluded by small enterprises 57. On the contrary, some member states such as Austria and France approve a broader concept. 58 In the CRD only the extension with regards to mixed contracts is adopted. According to Recital 17 of the Directive in the case of dual purpose contracts, where the contract is concluded for purposes partly within and partly outside the person s trade and the trade purpose is so limited as not to be predominant in the overall context of the contract, that person should also be considered as a consumer. This explanation provided in Recital 17 brings a broader interpretation in comparison to the jurisprudence of the ECJ, which in case of mixed purpose contracts provided protection only if the link between the contract and the profession is so slight as to be marginal, and therefore has a negligible role. 59 With regards to other cases, the question remains whether they are covered by the principle of full harmonization and pre-emption or not. On the one hand, it could be argued that by introducing a broader definition of consumer into their national laws, the member states simply protect non-consumers in the sense of the CRD definition, which are not covered by the Directive and therefore not prohibited by the principle of pre-emption. 60 For example, the ECJ confirmed that the extension of consumer protection by national law to small enterprises is allowed, because it does not fall within the scope of application of the consumer directives. Although the de- 51 Meškić, Zlatan. In Potrošačko ugovorno pravo Evropske unije, edited by Čađenović, Zvjezdan et. al., Beograd: Forum za građansko pravo za jugoistočnu Evropu, Meškić, Zlatan, p. 45 (fn. 23). 53 Micklitz Hans-W. and Norbert Reich, Crónica de una muerte anunciada: The Commission Proposal for a Directive on Consumer Rights. 46 CMLR (2009): , p The expressly mentioned craft is a novelty, but it was already included by the terms business or profession. 55 ECJ 03. July 1997, C-269/95 (Benincasa), ECR 1997, I ECJ 20. January 2005, C-464/01 (Gruber), ECR 2005, I ECJ 14. March 1991, C-361/89 (Di Pinto), ECR 1991, I E.g. the Austrian Konsumentenschutzgesetz extends the definition of consumers in its Article 1 (3) to business starters, but restricted to natural persons (OGH 6 Ob 219/97t, ecolex 1998, 691); Cour de Cassation extends the notion of consumer to small enterprises which conclude contracts without a direct reference (en rapport direct) to their business (Cass. Civ. 1re , Rec. Dalloz 1995, jur. p. 327 comments by Pizzio); Meškić, Zlatan, Harmonizacija evropskog potrošačkog prava-zelena knjiga godine i Nacrt Zajedničkog referentnog okvira. 46 Zbornik radova Pravnog fakulteta Sveučilišta u Splitu (2009): , p ECJ 20. January 2005, C-464/01 (Gruber), ECR 2005, I-439, Schulte-Nölke, Hans Scope and Role of the Horizontal Directive and its Relationship to the CFR. In Modernising and Harmonising Consumer Contract Law, edited by Geraint G. Howells and Reiner Schulze, Munich: Sellier, 2009, p

9 PART FOUR Consumer Law and E-Commerce cision was adopted on the basis of a minimum harmonization directive, the ECJ explicitly stated that the extension of the consumer definition to traders is not covered by the minimum harmonization clause, because it falls out of the personal scope of application of the Directive. 61 The full harmonization principle therefore leads to a paradox situation where the member states could set mandatory contract law standards outside a narrow scope of personal application of the Directive, and consequently non consumers would enjoy a higher level of protection than consumers. 62 The consumer organizations could now argue in favor of less consumer law at the EU level, if national provisions in that area provide for a higher level of consumer protection. 63 Directly connected to the question of maximum harmonization of the general part of consumer contract law is the choice of the form of legal act appropriate for the harmonization. It needs to be put into question, whether the Directive is a proper solution for the establishment of maximum harmonization in private law. 64 Namely, if the consumer contract law had been harmonized by a Regulation instead of the Directive, there would be no need for transposition in 27 national laws, with all the modifications that the transposition inevitably causes. Thereby a truly uniform consumer contract law, directly applicable in the member states, would be created. 4. The relation of the general part of consumer contract law to other initiatives of unification of contract law The work on the horizontal Directive occurred parallel to other projects on unification of substantive contract law, DCFR and the CESL. The first, so called interim DCFR was adopted in 2008, while the first Proposal for a CRD was adopted a year later. Considering that one of the major goals of the CFR is to be used during the review of EU consumer law, it was expected that the adopted Proposal for the CRD had taken the DCFR as its first reference. The opposite is the case. In the Proposal for the CRD hardly any influence of the DCFR could be found. 65 In the adopted version of the CRD it may at least be stated that some provisions of the CRD were created as a result of criticism over the lack of influence of the DCFR. Thus, as already presented above, following the model of DCFR, the problem of mixed contracts is expressly regulated in the CRD. Nevertheless, there are more conflicting examples. With regards to pre-contractual obligations, whose regulation is of key importance for the exercise of consumer rights, the EU legislator did not respond to the critique on the solutions in the CRD, as well as to suggestions of taking over the provisions from DCFR. In Art 5 CRD the unsystematic listing of information obligations of the trader was kept, while the decisive question of sanctions in case of non-compliance with his obligations is left to the national legislators. The DCFR has taken a more systematic approach, and has introduced a general clause on pre-contractual obligations before listing particular information duties (Art II-3:101), and later on also the sanctions in case of noncompliance (Art II-3:109). 66 Sporadically it is possible to find individual similar solutions, such as the delay of the withdrawal period in case the trader violated provisions on obligatory information or 61 ECJ 14. March 1991, C-361/89 (Di Pinto), ECR 1991, I-1189, Micklitz Hans-W. and Norbert Reich, p. 484 (fn. 53). 63 Micklitz Hans-W., p. 60 (fn. 44). 64 Micklitz Hans-W. and Norbert Reich, p. 477 (fn. 53); Ch. Twigg-Flesner/D. Metcalfe, The proposed Consumer Rights Directive less haste, more thought?, European Review of Contract Law 2009, dostupno na id= (posljednja posjeta 1. aprila 2012.), 4; Micklitz Hans-W., p. 55 (fn. 44). 65 Hesselink, Martijn W. The Consumer Rights Directive and the CFR: two worlds apart. 5 ERCL (2009): De Booys, Timothy Q., Martijn W. Hesselink and Chantal Mak, How the CFR can improve the Consumer Rights Directive?, Short Study for the European Parliament, last visited April, 1, 2012, 184

10 Zlatan Meškić Towards a General Part of The EU Consumer Contract Law the withdrawal period of one year of absolute character (Art. II-3:109 (1) DCRF and Art 10 CRD) 67. The same solution is introduced in the optional instrument, in Art 42 (2) CESL. Even if CESL in its name is restricted to sale contracts, it also regulates a great part of general contract law 68, and thus its provisions are also of indicative character for coherency of EU consumer contract law. CRD and CESL show more similarities regarding the novelties incorporated in them, such as the new definition of contracts concluded away from business premises, or identical withdrawal form, than the CRD and the DCFR. However, there is no common approach to coherent regulation of the questions relevant for the general part of consumer contract law in the CRD, DCFR and CESL. It is of particular interest that the DCRF, contrary to its basic function, has not achieved any remarkable influence in consumer law. The lack of a coherent approach to the reforms could be justified by the fact that all three documents were developed almost at the same time, but this could serve as a contra argument as well. Work on the horizontal directive stood additionally under the influence of the creation of uniform private international law of the EU, in particular the Rome I Regulation 69. Namely, with the introduction of conflict of laws rule in Art 6 (2) of the Unfair Contract Terms Directive, a model was created for the conflict of law rules in future consumer Directives. It provides that Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract if the latter has a close connection with the territory of (one or more) 70 Member States. These provisions follow the exclusive goal that EU Law, harmonized by the Directives, needs to be protected from the choice of law of a third country. 71 They share this goal with ordre public and give to the provisions of the Directive a character of international mandatory provisions (Engriffsnormen) in the sense of Art 7 (2) Rome Convention. 72 The difference from the mandatory provisions in the classic sense is that they do not possess an unconditional will to be applied, but only if the chosen law is less favorable to the consumer that the provisions of the Directive. Besides that, the conflict of laws rules of the consumer directive, with the exception of the Art 9 Timeshare Directive, do not contain provisions on objective connecting factors. Thus the consumer protection in case of absence of the choice of law, regardless of the strong connection with the EU, may fall behind the criteria of the Directives. 73 In legal science there is a justified doubt whether this was a conscious decision of the legislator. 74 Furthermore, this characteristic leads to the conclusion that they are not one-sided conflict of laws rules as mostly assumed in science, but provisions which intend to broaden their territorial scope of application and are therefore comparable to the scope rules of Dutch legislation Meškić, Zlatan, Pravo potrošača na raskid ugovora u evropskom i domaćem pravu. 2 Zbornik radova Pravnog fakulteta Univerziteta u Istočnom Sarajevu (2012): , p Povlakić, Meliha, 56 (fn. 40). 69 Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), OJ L 177, , p Art 12 (2) Distance Selling Directive. 71 Ehle, Bernd, Wege zu einer Kohärenz der Rechtsquellen im Europäischen Kollisionsrecht der Verbraucherverträge. Frankfurt: Peter Lang, 2002, p. 58; Kreuzer, Karl, describes them as conflict of laws rules which secure European Private Law, in Zu Stand und Perspektiven des Internationalen Privatrechts. 70 RabelsZ (2006):1-88, p Jayme, Erik, Klauselrichtlinie und Internationales Privatrecht - Eine Skizze. In Festschrift für Reinhold Trinker, edited by Friedrich Graf von Westphalen and Otto Sandrock, Heidelberg: Recht und Wirtschaft, 1995, p Art 5 Rome Convention provides protection in such cases only within its narrow scope of application; Leible, Stefan, Kollisionsrechtlicher Verbraucherschutz im EVÜ und in den verbraucherrechtlichen Richtlinien. In Europäische Rechtsangleichung und nationale Privatrechte, edited by Hans Schulte-Nölke and Reiner Schulze, Baden-Baden: Nomos, 1999, p Jayme, Erik (1995), p. 577; Leible, Stefan, p. 367 (fn. 73); Of contrary opinion Staudenmayer, Dirk, Aktuelle Probleme im Schnittbereich von Verbraucherschutz und Internationalem Privatrecht. In Angleichung des materiellen und des internationalen Privatrechts in der EU, edited by Ole Lando, Ulrich Magnus and Monika Novak-Stief, Tübingen: Peter Lang, 2004, p. 64; Sonnenberger, Hans Jürgen, Die Umsetzung kollisionsrechtlicher Regelungsgebote in EG-Richtlinien. 4 ZEuP (1996): , p Kuipers, Jan-Jaap, Bridging the Gap - The Impact of the EU on the Law Applicable to Contractual Obligations. 76 RabelsZ (2012): , p

11 PART FOUR Consumer Law and E-Commerce Conflict of laws rules formulated in this way were subject to strong criticism. 76 While the goal of the legislator to protect the EU as a state territory with its own national interests, and thereby create an independent legal category of harmonized EU law, may be understandable, 77 the legal technique used does not contribute to its fulfillment. With the introduction of conflict of laws rules in almost every consumer protection directive of newer date, and the 27 different transpositions into national legal systems, the unification of consumer protection by conflict of laws rules, previously achieved with the Rome Convention, was abolished 78. Thereby, only uniform conflict of laws legislation provides the advantage that in case of different provisions on substantive law, at least the effort involved in finding applicable law is reduced. 79 This is the reason why state parties to the Rome Convention have signed a Joint Declaration 80 on prevention of differences and fragmentation of EU sources of conflict of laws rules. Additionally, considering the explicit goal of the conflict of laws rules to achieve international harmony of decisions, the Directives which contain minimum harmonization clauses represent the least appropriate instrument for the establishment of EU conflict of laws legislation. 81 The chaos in the conflict of laws legislation on consumer protection is completed by the imprecise formulation of close connection, which every member state transposed in a different way. 82 The relation between the conflict of laws rules of the directives, or more precisely of their national transpositions with the Art 5 Rome Convention, is regulated by the Art 20 Rome Convention, pursuant to which the conflict of laws rules of the Directives enjoy supremacy in application over the Rome Convention within their scope of application. Thus, Art 5 of the Rome Convention lost its most important material scope of application, namely the contracts on supply of goods, because of the conflict of laws rule contained in the Consumer Sales Directive The hope put into parallel works on the horizontal consumer directive and the Rome I Regulation was that the modernization of provisions on the applicable law to consumer contracts within the Rome I Regulation would bring the EU legislator to leave conflict of laws rules out of the horizontal directive, or provide for supremacy of the Rome I Regulation over the horizontal directive. With the adoption of the Rome I Regulation the second mentioned possibility has not been used, because its Art 23, despite a completely contrary provision in the Proposal for Rome I Regulation, provides that its provisions shall not prejudice the application of provisions of Community law, which lay down conflict-of-laws rules relating to contractual obligations. However, the EU legislator has recognized that the new Art 3 (4) together with 6 Rome I diminishes the need for the existence of one-sided conflict of laws rules in the CRD. Thereby, at least the conflict of laws rule contained 76 Meškić, Zlatan, Kolizione norme za zaštitu potrošača u direktivama Evropske zajednice i Uredbi Rim I-novi izazov za ZRSZ. 30 Zbornik radova Pravnog fakulteta Sveučilišta u Rijeci (2009): Basedow, Jürgen, Materielle Rechtsangleichung und Kollisionsrecht. In Internationales Verbraucherschutzrecht, edited by Anton Schnyder, Helmut Heiss and Bernhard Rudisch, Tübingen: Mohr, 1995, p. 31; Jayme, Erik, Europäisches Kollisionsrecht: Neue Aufgaben, neue Techniken. In Europäischer Binnenmarkt Internationales Privatrecht und Rechtsangleichung, edited by Peter Hommelhoff, Erik Jayme and Werner Mangold, Heidelberg: Müller, 1995, p. 38; Leible, Stefan, p. 382 (fn. 73). 78 Sonnenberger, Hans Jürgen, p. 386 (fn. 74). 79 Klauer, Stefan, Das europäische Kollisionsrecht der Verbraucherverträge zwischen Römer EVÜ und EG-Richtlinien. Tübingen: Mohr, 2002, OJ 1980 L 266/14; Consequently, it was held in legal science that conflict of laws rules of the Directives should be regarded as narrative provisions, which do not need to be transposed; Jayme, Erik and Christian Kohler, Das Internationale Privat- und Verfahrensrecht der EG Spannungen zwischen Staatsverträgen und Richtlinien. 13 IPRax (1993): , p Leible, Stefan, p. 379 (fn. 73). 82 See Jayme, Erik: The chaos we were afraid of has arrived. Every state transposed Art 6 (2) Unfair Terms Directive in a different way ; Zum Stand des IPR in Europa. 16 IPRax (1996): Jayme, Erik and Christian Kohler, Europäisches Kollisionsrecht 1997: Vergemeinschaftung durch Säulenwechsel?. 17 IPRax (1997): , Directive 2008/122/EC. 186

12 Zlatan Meškić Towards a General Part of The EU Consumer Contract Law in the Distance Selling Directive has been amended. Additionally, Recital 17 of the new Directive on Timeshare contracts 85 states that consumers should not be deprived of the protection granted by this Directive where the law applicable to the contract is that of a Member State, whereby the law applicable to a contract should be determined in accordance with the Rome I Regulation. This foresees a positive development that the conflict of laws rules slowly disappear from the consumer directive, and the determination of applicable law is left to the conflict of laws legislation of the EU. 5. Final remarks The development of a general part of consumer contract law is still at an early stage. The horizontal directive could not fulfill the expectations raised by the promising announcements of the Commission in the Green Paper of However, the CRD provides a solid basis for the incorporation of further provisions which naturally belong to a general part, whether they are applicable to the special part as a whole or only to certain groups of provisions within the special part. Additionally, some of the provisions already included in the CRD will automatically develop into provisions of the general part, when the special part incorporates other subject matter covered by existing consumer directives. This particularly refers to the provisions on information duties and right to withdrawal, now only applicable to doorstep selling and distance selling contracts. The parallel work on three projects for unification of EU contract law did not bring more coherence to the field of consumer contract law. The differing goals, scopes of application and legal nature of the CRD, DCFR and CESL cannot justify the divergence in regulation of legal fields, such as the information duties or the right to withdrawal, whose uniform regulation at EU level was one of the important arguments for the creation of these legal instruments in the first place. Leaving conflict of laws rules out of the CRD, a long expected coordination between the legislation on substantive and conflict of laws regulation in the field of consumer contract law is close at hand. The EU legislator seems to end the battle of methods between the Consumer Directives and EU Private international law rightly in favor of the latter. 85 Art. 12 of the new Timeshare-Directive does not represent an unilateral choice of law rule, but confirms the Directive as an overriding mandatory statute, regardless of the applicable law, when the immovable is situated within the EU; Kuipers, Jan-Jaap, p. 582 (fn. 75). 187