European level

TABLE OF CONTENTS

 

Introduction

European level: factors coded

National level: factors coded

Limitations

Coding method 

Example of coding

Visualisation

A. European level

a) Law v policy

Assumption: mandatory law leads to a higher level of harmonisation than policy.

The role of this factor is to determine whether the European contract law instrument is either mandatory or voluntary. One of the features of this distinction is based on the architecture of desired convergence. On the one hand, if an instrument is mandatory, taking the example of a Directive, the national implementation efforts reflect top-down harmonisation. On the other hand, if Member States take it upon themselves to draw inspiration from soft law, such as the Draft Common Frame of Reference, or the Open Method of Coordination, the harmonisation process is inversed, and it becomes a bottom-up approach. It might be stated that the Open Method of Coordination might lead to more convergence because it does not require political consensus in the Parliament and it does not have to undergo a long transition from policy to practice. The Open Method of Coordination was first defined by the European Council as ‘the means of spreading best practice and achieving greater convergence towards the main EU goals.’ This method is meant ‘to help Member States to progressively develop their own policies’, however, it is not designed to pursue harmonisation in the same manner indicated in Article 114 TFEU, the general legal basis of Directives on consumer contract law. Moreover, Radaelli states that the results of the Open-Method of Coordination have been rather modest since they do not fulfill the purpose of the method, namely to achieve bottom-up learning: ‘[…] the poor results in terms of learning reflect the lack of bottom-up participation, the underestimation of the peculiarities of learning in a political context, and the limitations in the current use of benchmarking.’ While the importance of this Method for legal convergence is acknowledged, it is not a policy applied to European private law. Similarly, it can be said that optional instruments may also fall under the ‘policy’ category, as they are not fully mandatory. The Common European Sales Law can be cited as an example: if the regulation establishing this instrument had passed, it would have been applicable in all Member States, but that does not mean it would have covered all consumer transactions in a given jurisdiction given its voluntary nature.

b) Type of European instrument

Assumption: some EU instruments envisioned by Article 288 TFEU (Regulations and decisions) lead to a higher level of harmonisation than others (directives, recommendations and opinions).

This factor focuses on types of legislative acts. When dealing with consumer sales law, the main legislative acts are directives (e.g. Unfair Contract Terms, Unfair Commercial Practices, etc.), but attention must be paid to the fact that in recent years the proposal for a Common European Sales Law (CESL) has been shaping the future existence of a consumer contract law regulation. However, the CESL has been to date withdrawn by the Commission. Out of the five different types of instruments, only regulations and directives will be taken into account for two reasons: (i) recommendations and opinions have no binding force and would not fall within the ambit of this variable; and (ii) decisions are legal acts undertaken by the Commission or the Council in areas other than contract law, so of little relevance for the Convergence Index. Going back to directives and regulations, regulations have a higher value for harmonisation for the reason that they achieve uniformity in the content of the obligations placed on Member States, as the text stays the same. Directives, however, require implementation through national legislation that must only follow the purpose of the instrument. As shown in the previous chapter, this mechanism is sometimes detrimental to harmonisation.

c) Nature of policy (minimum/maximum harmonisation)

Assumption: maximum harmonisation leads to more harmonisation than minimum harmonisation.

When it comes to consumer contract law, policy objectives set by the European legislator aim at a specific degree of harmonisation. While in the days of the Doorstep Selling Directive or even of the Unfair Contract Terms Directive this degree reflected a default standard, in other words only establishing a level playing field from which Member States could increase protection, recent years have seen a shift towards maximum harmonisation. This shift undoubtedly affects the way in which national jurisdictions accommodate European law. Moreover, this shift marks an assumption that by not being able to derogate from the common standards, national regimes are more similar. The Convergence Index surveys five directives. Out of those five, only one (the Unfair Commercial Practices Directive) is a maximum harmonisation directive, while the rest are minimum harmonisation instruments. The reason for this distribution reflects the nature of the topic chosen. The five selected directives are the most important instruments covering European consumer contract law. The only one directive left out of this study is the Consumer Rights Directive, replacing the Doorstep and Distance Selling Directives. The reasons why this Directive was not included deal with its much too recent entry into force, an argument elaborated on earlier in Chapter 1.

d) Reference to self-regulation

Assumption: explicit reference to forms of self-regulation in the Directive (e.g. codes of conduct) leads to more harmonisation.

This factor is designed to verify any self-regulation references in a given European instrument and whether that instrument promotes it. Simply because the European legislator enacts rules on contract law, it does not necessarily mean that private actors will not create their own standards (e.g. trustmarks, codes of conduct, etc.). Acknowledging the activity of the private sector may lead to the creation of public-private structures that can overview this activity and make sure it does not fall short of the European standards it is supposed to fulfil. This has been called the ‘carrot approach’, meant to grant public approval and endorsement to codes of conduct. For instance, this could be observed in the Consumer Codes Approval Scheme (CCAS) that had been governed until April 2013 by the Office of Fair Trading in the United Kingdom. Upon the closing of the Office of Fair Trading, this procedure was taken over by the Trading Standards Institute (TSI). This independent institution now manages the approval of consumer codes, which is in other words a neutral (former state-affiliated) business endorsement, designed to enhance consumer protection as well as business reputation. When looking at the criteria required for code approval, most of it taken over from the previous format, it becomes clear that the TSI actually uses standards that are common to the rules set up by different consumer directives. One example is Criterion 3l, according to which ‘[t]he code shall address the additional effort/help to be provided to vulnerable consumers as appropriate to the sector’. This requirement, as general as it may sound given that it must cover a wide ambit of business activities, still echoes the very specific category of consumers referred to in Article 5(3) of the Unfair Commercial Practices Directive, namely that of vulnerable consumers, who should benefit from even better protection. What this example shows is the existence of a possible ‘European creep’ in self-regulation. Whether it is the result of institutional design (e.g. the Office of Fair Trading was a state-affiliated institution that was itself held to respect the European rules), or the mere spontaneous standardization of a higher consumer protection business target, such accreditation schemes prove that self-regulation is indeed affected by European law-making, and it can itself become a vessel of further harmonisation. As beneficial as self-regulation might be for harmonisation, it also poses certain dangers, as too much self-regulation might lead to fragmentation rather than harmonisation. This is very much the case of trust-marks, whose rapid proliferation might leave users – consumer and businesses alike – confused. However, the centralization of such practices by means of a public-private partnership like the one elaborated on above shows that self-regulation can be influenced by European law and in turn, can positively affect convergence. This is exactly what Article 10 UCPD stands for – the recognition of private actors collaborating with state mechanisms designed to protect consumer interests.

e) General clause

Assumption: instruments establishing general clauses lead to less harmonisation than those not using such clauses.

To understand what this factor refers to, the concept of ‘general clauses’ must first be defined. There are many references in legal literature to ‘general clauses’. A lot of these references are made in relation to the principle of good faith. However, in the context of the Convergence Index, a general clause is to be understood as a provision in the text of the Directive that uses a general test in order to determine whether the professional has fulfilled a specific legal standard. The general test is set up to include several generic conditions that might make reference to open-ended norms. For the purposes of this study, open-ended norms are considered to be behavioural and moral standards that parties are held to respect in a given contractual situation, characterized by their content being circumstantial and determinable on a case-by-case basis. In Ramsay’s words, general clauses ‘pose questions rather than provide answers’. The main issue with general clauses is that they leave a lot of leeway for their interpretation, and thus the views of national courts may diverge when the general clause is applied. This can be seen in the case law of the Court of Justice when dealing with two of the most important directives in consumer law: the UCTD and the UCPD. These two directives together have generated over 70 preliminary reference questions, as is detailed in Section X of this Chapter.

f) Black list

Assumption: instruments that annex a black list of practices lead to more convergence.

This variable is determined by the fact that if the European legislator sets out examples of practices which national courts are required to follow, then it is more likely that legal systems converge more, since the list has a unifying role in relation to practice. This is the example of the black list found in the UCPD. This factor can also be including the case of directives that make use of practical examples to relate to some of their more abstract content. Apart from the UCPD and the UCTD, there are no other directives in this study that have such exemplificatory lists. Another important distinction to be made is the difference between black and grey lists. While black lists have the unifying effect mentioned before, the same cannot be said for grey lists. Normally such lists will only include examples of practices that must still be tested against circumstantial facts.

g) CJEU case law

Assumption: the more judgments are issued by the CJEU on a specific instrument, the less convergence this leads to.

This factor emphasizes that apart from discussing CJEU case law in case-specific details, it is equally necessary to understand the story behind the overall number of cases. All the existing preliminary reference cases on each of the five directives are looked at, in an attempt to determine what drives national courts to send questions to the Court of Justice. This factor is supposed to shed light on whether the case law trends per directive show any similarities, or whether there are any outliers – for example directives that have a very high number of preliminary reference questions. There are several ways in which the number of cases before the Court of Justice may be interpreted. First, one could argue that the more judgments there are the more convergence this leads to, since national courts can subsequently rely on more guidance from the European court. This interpretation is plausible in so far as it can be said that courts are under an obligation to take into account CJEU judgments and they acknowledge this obligation for all of the cases before them. However, the very existence of Article 99 of the Rules and Procedure of the Court of Justice places doubt on the reliability of this interpretation. In recent years, especially when dealing with the UCTD, the Court started issuing orders instead of judgments. These orders are procedurally justified using Article 99 above. The fact that the Court still issues reasoned opinions in spite of the high load of existing case law can be interpreted to mean that national courts simply do not understand how to apply transposing legislation. A number of seven such orders can be consulted below in Section 3.3 of this Chapter. It thus follows that the Romanian, Spanish, Hungarian and Slovak courts behind these specific preliminary references have asked questions that the Court had addressed before. This stands to show that even in spite of the growing body of case law on the UCTD, national courts continue to look at the Court of Justice for interpreting Article 3 of the directive and its interaction with national provisions. Alternative argumentations can be proposed (e.g. temporarily de-cluttering national courts, etc.), but the very complexity of instruments such as the UCTD or the UCPD must be borne in mind. On the one hand, the UCTD has been used in the aftermath of the economic crisis in 2008 to protect consumers who had taken loans from banks and ended up with the banks enforcing boilerplate clauses without taking recourse to normal court proceedings. On the other hand, but still in connection with the point just made, neither of the two instruments addresses their impact on national procedural law, or on general contract law in order to determine the effect of unfair terms or commercial practices. These two arguments come to support the foundations of the assumption that more case law reflects more confusion. One alternative interpretation that can be ruled out is the claim that the more case law exists on a directive, the more prevalent it is in practice. The example of internet sales shows why this argument cannot stand. Since 1997 when the DiDS was introduced and until 2013 when it was repealed, it has only led to a number of 5 cases. In other words, for 16 years the Court of Justice has barely ruled on matters dealing with online contracts, which might seem rather shocking. Still, it has ruled over as many as 19 cases on Unfair Commercial Practices, and over more than 45 cases on Unfair Contract Terms. In the light of these numbers compared, it seems feasible to consider that a higher number of cases might point the finger to a specific directive, the implementation of which did not suffice to make national courts understand how to apply the European rules.