The Constitutional Foundations of European Contract Law: A Comparative Analysis

OX FOR D ST U DIE S I N EU ROPE A N L AWSeries Editors

PAUL CR AIGProfessor of English Law at St John’s College, Oxford

GR ÁINNE DE BÚRCA Professor of Law at New York University School of Law

The Constitutional Foundations of European

Contract LawA Comparative Analysis

GutmanKathleen_Book.indb 1 11/21/2014 8:25:19 PM

OX FOR D ST UDIES IN EUROPE A N L AW

Series Editors Paul Craig, Professor of English Law at St John’s College, Oxford and

Gráinne de Búrca, Professor of Law at New York University School of Law

The aim of this series is to publish important and original research on EU law. The focus is on scholarly monographs, with a particular emphasis on those which are interdisciplinary in nature. Edited collections of essays will also be included where they are appropriate. The series is wide in scope and aims to cover studies of particular areas of substantive and of institutional law, historical works, theoretical studies, and analyses of current debates, as well as questions of perennial interest such as the relationship between national and EU law and the novel forms of governance emerging in and beyond Europe. The fact that many of the works are interdisciplinary will make the series of interest to all those concerned with the governance and operation of the EU.

ot h er t i t l e s in t h is ser i e sThe Constitutional Foundations of

European Contract LawA Comparative Analysis

Kathleen GutmanThe Criminalization of European Cartel

EnforcementTheoretical, Legal, and Practical Challenges

Peter WhelanFundamental Rights in Europe

Challenges and Transformations in Comparative Perspective

Federico FabbriniThe Principle of Loyalty in EU Law

Marcus KlamertConstitutional Pluralism in the EU

Klemen JaklicEU Consumer Law and Human Rights

Iris BenöhrThe Principle of Mutual Recognition

in EU LawChristine Janssens

The Coherence of EU Free Movement Law

Constitutional Responsibility and the Court of Justice

Niamh Nic ShuibhneEuropean Law and New Health Technologies

Edited by Mark Flear, Anne-Maree Farrell, Tamara Hervey, and Thérèse Murphy

European AgenciesLaw and Practices of Accountability

Madalina Busuioc

The Legal Effect of EU AgreementsMario Mendez

The Foundations of European Union Competition Law

The Objective and Principles of Article 102

Renato NazziniThe Emergence of EU Contract Law

Exploring EuropeanizationLucinda Miller

Participation in EU Rule-makingA Rights-Based Approach

Joana MendesRegulating Cartels in Europe

Second EditionChristopher Harding and Julian JoshuaReligion and the Public Order of the

European UnionRonan McCrea

Governing Social InclusionEuropeanization through

Policy CoordinationKenneth A Armstrong

Judicial Control in the European UnionReforming Jurisdiction in the

Intergovernmental PillarsAlicia Hinarejos

EU Counter-Terrorist Policies and Fundamental Rights

The Case of Individual SanctionsChristina Eckes


1

The Constitutional Foundations of European

Contract LawA Comparative Analysis

K AT HL EEN GU TM A N


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This book is dedicated to the memory of my mother and father,Donna and Stanley Gutman


Foreword

Kathleen Gutman’s book, which is based on her PhD thesis, is an impressive piece of academic work. As her PhD supervisor, I was a first-hand witness of her openness towards different ideas and critical comments, her perseverance in constructing a con-vincing argument, and the enormous amount of research and analytical thinking that she put into it.

This book contains a detailed and cohesive assessment of the constitutional founda-tions of European contract law. It is not, however, limited to examining the vertical allocation of powers between the EU and its Member States in the field of contract law. As she herself explains, the exercise of powers at EU level ‘is not the only element in the debate about European contract law, but it is an important one that permeates the others’. Accordingly, the book also looks at alternative and complementary routes to the adoption of instruments that aim to achieve a degree of convergence between the contract laws of the Member States. This shows that the development of European contract law has not only a ‘top-down’ dimension in accordance with the EU consti-tutional principles of conferral, subsidiarity and proportionality, but may also be the result of a ‘bottom-up’ approach.

In addition, the book is enriched by Kathleen Gutman’s expertise in US law. As a sec-ondary research focus, the book embarks on a very interesting comparative study with regard to the constitutional dimensions of contract law on both sides of the Atlantic. Throughout her meticulous analysis, the author draws important lessons from the US experience on issues such as the federalization of contract law, federal common law, the uniform law process and the Uniform Commercial Code.

Like all great classics, this book is divided into three parts. Part I defines the context in which the debate about European contract law should, in the author’s view, take place. At the outset, she brings to the reader’s attention the fact that there are no univer-sal definitions of key concepts such as ‘contract law’ and ‘private law’. Accordingly, by defining those key concepts, the author stresses the importance of semantic clarifica-tion as the pre-condition for a productive discussion. Next, she moves on to examine the EU legislative instruments that constitute the ‘hard core’ of the EU contract law acquis, and the way in which the ECJ has interpreted them. Written with an audience unfamiliar with the American contract law framework in mind, this Part of the book also comprises a concise account of the way in which the constitutional dimensions of contract law have developed in the US.

In Part II, the book sets out, in a chronological order, the main events that have given rise to the debate about European contract law. It looks, for example, at the influ-ence of the Commission’s three seminal Communications on European contract law, as well as at the reasons that triggered the adoption of the Consumer Rights Directive. This part of the book seeks to determine, in particular, whether the constitutionality of European contract law has ever been considered, either implicitly or explicitly, at European level.

Once the contours of the debate about European contract law have been drawn, Part III begins by examining whether the EU has power to act in the field of contract law. To that end, the author explores whether and, if so, to what extent Articles 81, 114, 115, 169, 352 TFEU may operate as appropriate legal bases for the adoption of a European contract law instrument. In so doing, she examines the problems con-nected with the principles of subsidiarity and proportionality that the EU legislator


Forewordviii

may encounter. The absence of legislative competence at EU level does not, however, put an end to the Europeanization of contract law. For example, by looking at the US experience, the strengths and weaknesses of softer policy-making techniques, such as the Open Method Coordination (OMC), are also examined.

Finally, the concluding chapter of the book supports the contention that Article 114 TFEU and, as the case may be, Article 352 TFEU constitute a proper legal basis for the adoption of a European contract law instrument. Whilst Articles 81, 115, and 169 TFEU may not secure compliance with the principle of conferral, they have, nonetheless, an indirect role in highlighting the viability of the EU’s internal market competence under Article 114 TFEU. As to the OMC, she notes that, because of its limitations, it may only serve as a complementary route for pursuing the European contract law project.

Written in a clear and entertaining style, this book succeeds in providing a solid analytical basis for future debates about European contract law. It is a thoughtful and rigorous study that addresses a challenging set of questions for lawyers, scholars and students in both Europe and the US. Overall, the book written by Kathleen Gutman is an excellent contribution to the literature on European Union law and I warmly congratulate her.

Prof. Dr. Koen LenaertsVice-President of the Court of Justice of the European Union


Series Editors’ Preface

The European Union has adopted a range of measures in the field of private and con-tract law, and a debate on the desirability and feasibility of harmonizing European contract law has been active for some years now. Kathleen Gutman’s book makes an informative and important contribution to this debate by focusing not just on the movement to unify or harmonize European private law, but specifically on the question of the legal and constitutional basis for EU contract law.

Noting that the political and legal debate on the unification of European private law has proceeded apace with surprisingly little attention being given to the underlying question of the nature and scope of the EU’s competence to take action in this field, the author sets out to remedy that deficit in this book. The chapters in the first part of the book address both abstract and concrete aspects of the topic, from a survey of different models of approximation of contract law, to an examination of some of the major pieces of EU contract legislation such as the Doorstep Selling Directive, the Consumer Credit Directive, the Commercial Agents Directive and the Unfair Contract Terms Directive, and to an analysis of the approach of the EU Court of Justice.

These EU-focused chapters are followed by an interesting and instructive compari-son with the experience of the United States in which contract law has been treated as remaining largely within the purview of states, with federal intervention coming largely in the form of restatements, uniform and model laws, and the Uniform Commercial Code. Analysing the various instruments and approaches adopted in the US context, the author warns against any easy assumption about the success of the US approach to the question of a uniform American contract law or its applicability to the EU context, and points to the range of tensions and debates which continue in the United States today.

In the second part of the book, Gutman presents the evolution of the debate which has taken place in Europe since the earliest days of European integration on the fea-sibility and desirability of harmonizing private law, and surveys the various academic and institutional contributions to this debate. She traces the debate across the decades, leading to the emergence of the Common Frame of Reference and numerous initiatives which followed it, and giving particular attention to the influential interventions of the Commission in the debate.

The final chapters of the book are devoted to an examination of what Gutman calls the constitutionality of the adoption of EU measures in the field of contract law – including their possible legal basis in provisions of the Treaties dealing with the internal market, consumer law and civil justice – as well as their compliance with principles of subsidiarity, proportionality and sincere cooperation. She concludes by arguing that the EU enjoys sufficient competence to adopt an appropriate European contract law instrument under the internal market provisions of the Treaty, perhaps in conjunction with the residual powers clause, and alongside various alternative and complementary routes such as the Open Method of Coordination.

This is a very clearly written, meticulous, and comprehensive work on an important subject of considerable contemporary interest in EU and private law. It should be of considerable interest to scholars and students of European integration and to contract and private lawyers alike.

Gráinne de BúrcaPaul Craig


Acknowledgments

This book is based on my doctoral thesis defended at the University of Leuven in 2010. Unknowingly, what started out as a glance at an issue of the European Review of Private Law became both an academic and personal passion. One could even say that this subject found me, instead of the other way around. It combined my interests in various fields of European Union law, such as constitutional, private, and procedural law, and their counterparts in American law. It also captured my penchant for delving into sub-jects that had not yet been fully explored in either the European or the American set-tings. Yet, there were some trade-offs in undertaking this work, and truthfully, at times, it resembled something akin to the ‘Myth of Sisyphus’, where the more I attempted to go forward, the more I became mired in a sea of further unknowns, innumerable com-plexities, and of course considerable controversy. Thankfully, there were several persons who helped me along the way to bring this book to completion.

First and foremost, to my promoter, Professor Dr Koen Lenaerts, under whom I worked as a doctoral assistant and a post-doctoral fellow at the Institute for European Law of the University of Leuven, words cannot do justice to the ways in which he has given me invaluable guidance and helped me to grow in my academic career gen-erally. I would also like to thank the other members of my doctoral jury, Professor Dr Wouter Devroe for his never-ending encouragement, as well as Professor Dr Jules Stuyck, Professor Dr Verica Trstenjak, and Professor Stephen Weatherill, all of whom prompted me to rethink and fine-tune my analysis of various points.

Secondly, there are several members of the Law Faculty of the University of Leuven, including Professor Dr Geert De Baere, Professor Dr Sophie Stijns, Professor Dr Geert Van Calster, Professor Dr Walter van Gerven, and Professor Dr Piet Van Nuffel, who inspired me along the way. And in the United States, a special note of appreciation goes to Professor Stephen Wallenstein for his support since my days as a law school student at the Duke University School of Law.

Thirdly, there are various persons and institutions without which the research for this book would not have been possible. I would like to thank the staff of the Law Library of the University of Leuven, particularly Jorinde Sercu who went beyond the call of duty to process my interlibrary loan requests and locate various publications on my behalf. I would also like to thank the Historical Archives of the European Commission, Claude Kappella of the European Economic and Social Committee Document Registry, and, most importantly, the European Parliament Document Registry for locating numerous documents that were pivotal to my research. I am further indebted to Pierre Schmitt for his translation of certain materials, and to Frans Van de Ven and Robin Schouten for their help with the logistics of relocating my research materials overseas.

Turning to the United States, I would like to express my utmost appreciation to Rodney A Ross of the Center for Legislative Archives. His invaluable assistance in locating various Congressional bills and responding to my numerous questions helped to make this book what it is, and, in fact, these materials proved to be one of the most eye-opening and exciting parts of my research. I would also like to thank the staff of the Law Libraries of Harvard University, New York University (NYU), and especially the University of California at Berkeley (Boalt) for allowing me access to their facilities and helping me to locate publications that would have been difficult to find elsewhere.


Acknowledgmentsxii

Fourthly, I owe a debt of gratitude to all those persons at Oxford University Press who helped to bring this book to print. In particular, this includes my editor Natasha Flemming for her patience and understanding throughout the process.

Finally, on a personal note, I feel grateful to say that I have four sets of ‘families’ whose support has been invaluable. My first ‘family’ is the Institute for European Law of the University of Leuven, which in addition to the above comprises Viviane Verbist, the Administrator of the Institute, and my colleagues, past and present—Angelina, Janek, Jos, Karl, Kristien, Marlies, Nana, Nathan, Pieter-Augustijn, Roel, Tim, Timothy, Tina, Tinne, Vanessa, and Vincent. My second ‘extended family’ from the second floor of the Valk and neighbouring buildings includes Hanne, Katrien, Sanderijn, Charline, Pierre, Thalia, Iasson, Govert, Bart, Dimitri, Jed, Thomas, Valérie, and so many more. My third ‘family’ consists of my friends in Belgium and the United States, especially Marianick and Patrick, Yolande and Carl, Vanessa and Bruno, Elke and Stefan, Glory, Lex, Alice, and TGS. Finally, there is my real ‘family’, including my best friend and soul sister Paula, my partner in life Luis, and my surrogate sister and aunt, Julie and Carol, respectively. And to my late mother and father, Donna and Stanley Gutman, who did not live to see this book in print, thank you for making my dreams possible and giving me the courage to follow them.

Admittedly, with the completion of this book—which generally reflects the state of the activities and law as of 1 June 2013—the all-consuming debate about European contract law and European private law continues to progress. Given the fast-paced nature of this debate, it is surely a challenge to complete any work in this area that will not be superseded by events soon after, or even before, publication. Nevertheless, if this book can play some part in helping to facilitate the ‘constitutional conversation’ about European contract (and private) law in the European Union and the ‘comparative con-versation’ with the United States, then that is more than I could have hoped for.

KRG


Contents

Abbreviations xxiTable of Cases xxviiTable of Legal Instruments and Other Documents xxxiii

Introduction 1Setting of the Problem 1Objective and Structure 4Scope and Potential Challenges 6

I. CONTEXT

1. The Constitutional Framing of European Contract Law 131.1 Introduction 131.2 Terminology 13

1.2.1 Constitutionality and the ‘constitutional’ designation 141.2.2 European contract law and its relationship to European

private law 171.2.2.1 The meaning(s) of European contract law 171.2.2.2 The meaning(s) of European private law and

similar variants 211.2.2.3 Comparative leaps to the US 24

1.2.3 Approximation and related processes 251.2.3.1 Approximation, harmonization, and unification 271.2.3.2 Harmonization models 311.2.3.3 Coordination 361.2.3.4 Codification 371.2.3.5 Europeanization (and formerly Communitarization) 391.2.3.6 Convergence 401.2.3.7 Comparative leaps to the US 40

1.3 The Scope of EU Contract Law and Its ‘Hard Core’ 411.3.1 The Doorstep Selling Directive (85/577/EEC), repealed by the

Consumer Rights Directive (2011/83/EU) 441.3.2 The Commercial Agents Directive (86/653/EEC) 451.3.3 The Consumer Credit Directive (87/102/EEC), repealed by the

new Consumer Credit Directive (2008/48/EC) 461.3.4 The Package Travel Directive (90/314/EEC) 481.3.5 The Unfair Contract Terms Directive (93/13/EEC) 491.3.6 The Timeshare Directive (94/47/EC), repealed by the new

Timeshare Directive (2008/122/EC) 511.3.7 The Distance Selling Directive (97/7/EC), repealed by the

Consumer Rights Directive (2011/83/EU) 531.3.8 The Consumer Sales Directive (1999/44/EC) 54


Contentsxiv

1.3.9 The Late Payment Directive (2000/35/EC), repealed by the new Late Payment Directive (2011/7/EU) 55

1.4 Perennial Themes 561.4.1 Union competence and the roles played by Articles 114

and 115 TFEU 561.4.2 The relationship between consumer and general contract law 591.4.3 The Union legislature’s piecemeal approach 60

1.5 Conclusions 61

2. The Role of the Court of Justice in European Contract Law 622.1 Introduction 622.2 The Court of Justice’s Interpretative Role 63

2.2.1 The relationship between certain directives within EU contract law 63

2.2.2 The relationship between EU contract law and the national contract law regimes 69

2.3 The Court of Justice’s Lawmaking Role 762.3.1 The definition of European ‘federal common law’ and its

‘hard core’ 772.3.2 Illustrations of European ‘federal common law’ in

contract law 782.4 Recourse to Comparative European Contract Law Materials

by the Advocates General 842.4.1 Illustrations: Quelle, Ilsinger, and Messner 852.4.2 Potential implications for the Court’s role in European

contract law 892.5 Conclusions 92

3. The American Contract Law Framework 933.1 Introduction 933.2 American ‘Federal Common Law’ 94

3.2.1 General overview 943.2.2 Origins of American ‘federal common law’ 95

3.2.2.1 Swift v Tyson 953.2.2.2 Erie Railroad Co. v Tompkins 97

3.2.3 Tensions underlying American ‘federal common law’ in contract law 101

3.3 The NCCUSL and the Uniform Law Process 1033.3.1 General overview 103

3.3.1.1 The meaning of uniform laws 1043.3.1.2 The distinction between uniform laws and model laws 1053.3.1.3 The NCCUSL and the American federal system 106

3.3.2 Origins of the NCCUSL 1073.3.3 Tensions underlying the uniform law process 114

3.3.3.1 State-by-state enactment 1143.3.3.2 State variation 1143.3.3.3 The need for revision 115


Contents xv

3.4 The ALI and the Restatement Project 1153.4.1 General overview 115

3.4.1.1 The work of the ALI 1163.4.1.2 The Restatement project 1173.4.1.3 The meaning of a Restatement 117

3.4.2 Origins of the ALI and the Restatement project 1193.4.3 Tensions underlying the Restatement project 121

3.4.3.1 Restating the law ‘as it is’ versus ‘as it ought to be’ 1223.4.3.2 The Restatements and codification 1233.4.3.3 The impact of the Restatements 123

3.5 The UCC 1243.5.1 General overview 124

3.5.1.1 Structure 1253.5.1.2 Functional approach 1253.5.1.3 The meaning of the ‘Uniform Commercial Code’ 125

3.5.2 Origins of the UCC 1273.5.2.1 From the Uniform Sales Act to the Williston-ABA

Federal Sales Act 1273.5.2.2 The Merchants’ Association Federal Sales Act 1303.5.2.3 From the Federal Sales Act to the UCC 1313.5.2.4 The UCC takes shape: Federal and state versions 133

3.5.3 Tensions underlying the UCC 1353.5.3.1 The UCC and interstate/intrastate uniformity 1353.5.3.2 The UCC and federalization 1363.5.3.3 The UCC and consumer protection 138

3.6 Conclusions 141

II. DEBATE

4. The Debate Begins 1474.1 Introduction 1474.2 Academic Projects 148

4.2.1 The Commission on European Contract Law 1494.2.2 The Study Group on a European Civil Code 1524.2.3 The Network of Excellence 153

4.3 The Early European Parliament Resolutions 1564.3.1 The 1989 Resolution 1564.3.2 The Commission’s response to ‘Problems of harmonizing

civil law’ 1634.3.3 The 1994 Resolution 1654.3.4 The 1999 Working Paper 1684.3.5 The 2000 Resolution 170

4.4 The European Council Meeting at Tampere 1724.4.1 Events leading to Tampere and the Vienna Action Plan 1724.4.2 The Tampere Conclusions 175

4.5 Conclusions 178


Contentsxvi

5. The Debate Solidifies 1805.1 Introduction 1805.2 The 2001 Communication 1805.3 The 2003 Action Plan 186

5.3.1 Responses to the 2001 Communication 1875.3.1.1 The European Parliament’s 2001 Resolution 1875.3.1.2 The Council’s 2001 Report 1925.3.1.3 The EESC’s 2002 Opinion 1945.3.1.4 Stakeholder responses to the 2001 Communication 196

5.3.2 Content of the 2003 Action Plan 1995.4 The 2004 Communication 204

5.4.1 Responses to the 2003 Action Plan 2055.4.1.1 The European Parliament’s 2003 Resolution 2055.4.1.2 The Council’s 2003 Resolution 2065.4.1.3 The European Central Bank’s 2003 Letter 2075.4.1.4 Stakeholder responses to the 2003 Action Plan 208

5.4.2 Content of the 2004 Communication 2105.4.3 Aftermath of the 2004 Communication 216

5.4.3.1 The Hague Programme 2165.4.3.2 The EESC’s Opinion on European insurance contract law 218

5.5 Conclusions 219

6. The Debate Continues 2216.1 Introduction 2216.2 The Path to the CFR 221

6.2.1 The 2005 Progress Report 2216.2.1.1 The Council’s 2005 Conclusions 2246.2.1.2 The European Parliament’s 2006 Resolutions 2246.2.1.3 The Commission’s 2006 Note to the Council 227

6.2.2 The 2007 Progress Report 2286.2.3 The publication of the Draft Common Frame of Reference 2296.2.4 Ongoing reflection about the CFR by the Union institutions 232

6.2.4.1 The European Parliament’s 2007 Resolution 2326.2.4.2 The European Parliament’s 2008 Resolution 2336.2.4.3 The Council’s 2008 Report on four fundamental

aspects of the CFR 2346.2.4.4 The Council’s 2008 and 2009 Reports on further

aspects of the CFR 2386.3 The Review of the Consumer Acquis and the Path to the

Consumer Rights Directive 2406.3.1 The EC Consumer Law Compendium 2406.3.2 The 2007 Green Paper 242

6.3.2.1 Responses to the 2007 Green Paper 2456.3.2.2 The EESC’s 2007 Opinion 2456.3.2.3 The European Parliament’s 2007 Resolution 2466.3.2.4 Stakeholder responses to the 2007 Green Paper 247

6.3.3 The Consumer Rights Directive 248


Contents xvii

6.4 The Path to the Proposed CESL and Beyond 2526.4.1 The Stockholm Programme 2526.4.2 The 2010 Green Paper 253

6.4.2.1 Responses to the 2010 Green Paper 2576.4.2.2 The EESC’s 2011 Opinion 2586.4.2.3 The European Parliament’s 2011 Resolution 2586.4.2.4 Stakeholder responses to the 2010 Green Paper 260

6.4.3 The Expert Group and the 2011 Feasibility Study 2616.4.4 The Proposal for a Regulation on a Common European

Sales Law 2646.4.4.1 Opinions of the national parliaments 2686.4.4.2 Responses of the Union institutions and bodies 269

6.4.5 Ongoing reflection about specific types of contracts 2716.5 Conclusions 272

III. CONSTITUTIONALITY

7. The Constitutional Parameters of European Contract Law 2777.1 Introduction 2777.2 Reasons for the Neglect of Constitutionality at the

European Level 2777.3 The Overarching Treaty Framework 2807.4 The Principles of Conferral, Subsidiarity, Proportionality, and

Sincere Cooperation 2827.4.1 General overview 2827.4.2 The principle of conferral 285

7.4.2.1 The definition of the principle of conferral 2857.4.2.2 The legal basis requirement 2877.4.2.3 The Lisbon Treaty 291

7.4.3 The principle of subsidiarity 2947.4.3.1 The definition(s) of the principle of subsidiarity 2947.4.3.2 The distinction between material and procedural

subsidiarity 2977.4.3.3 The Lisbon Treaty 303

7.4.4 The principle of proportionality 3057.4.4.1 The definition(s) of the principle of proportionality 3057.4.4.2 Proportionality inside and outside subsidiarity 3067.4.4.3 The Lisbon Treaty 308

7.4.5 The principle of sincere cooperation 3107.4.5.1 The definition of the principle of sincere cooperation 3107.4.5.2 The role(s) of the principle of sincere cooperation in

European contract law 3107.4.5.3 The Lisbon Treaty 311

7.5 Conclusions 311

8. European Contract Law and the Internal Market 3138.1 Introduction 313


Contentsxviii

8.2 The Relationship between Articles 114 and 115 TFEU 3138.2.1 Overview of approximation in the Treaties and the three-level

hierarchy 3138.2.2 Text of Articles 114 and 115 TFEU compared and the order of

preference 3168.2.3 Lingering ambiguities concerning Articles 114 and 115 TFEU 319

8.2.3.1 The ‘internal market’ versus the ‘common market’ 3208.2.3.2 ‘Object’ versus ‘directly affect’ 3228.2.3.3 Establishment ‘and’ versus ‘or’ functioning 323

8.3 The Scope of Article 114 TFEU 3248.3.1 The ‘object’ and ‘approximation’ prongs of the case law 3248.3.2 The limits of Union competence under Article 114 TFEU 325

8.3.2.1 The ‘object’ prong: Tobacco Advertising I and its evolving ‘refinement’ 327

8.3.2.2 Parameters of obstacles to trade: Distinguishing obstacles sensu lato and obstacles sensu stricto 338

8.3.2.3 Parameters of existing (and future?) appreciable distortions of competition 345

8.3.3 The exercise of Union competence under Article 114 TFEU 3508.3.3.1 The ‘object’ prong 3508.3.3.2 The ‘approximation’ prong 3538.3.3.3 Implications for European contract law 357

8.3.4 Comparative reflection with the US 3588.4 The Relationship between Articles 114 and 352 TFEU 360

8.4.1 The roles played by Article 352 TFEU vis-à-vis Article 114 TFEU 360

8.4.2 A contract law instrument modifying national contract law 361

8.4.3 An optional instrument of contract law 3658.4.3.1 The European Cooperative Society case and related

jurisprudence 3658.4.3.2 Dimensions of a European optional instrument of

contract law 3698.5 Conclusions 377

9. European Contract Law and Consumer Protection 3789.1 Introduction 3789.2 The Template for the Analysis of Article 169 TFEU 380

9.2.1 The Treaties: The emergence and development of Article 169 TFEU 3809.2.1.1 The former Treaty framework 3819.2.1.2 The present Treaty framework 388

9.2.2 The case law: The indirect role of Article 169 TFEU 3909.2.3 Usage: Theory versus practice and proposals for change 398

9.2.3.1 Theory 3989.2.3.2 Practice 4039.2.3.3 Proposals for change 406


Contents xix

9.3 The Scope of Article 169 TFEU 4099.3.1 The limits of Union competence under Article 169(2)(b) TFEU 4109.3.2 The exercise of Union competence under Article 169(2)(b) TFEU 413

9.4 The Relationship between Articles 169, 114, and 352 TFEU in European Contract Law 4159.4.1 European consumer contract law and ties that bind:

Consumer protection and the internal market 4159.4.2 Comparative reflection with the US 419

9.5 Conclusions 420

10. European Contract Law and Judicial Cooperation in Civil Matters 42110.1 Introduction 42110.2 Article 81 TFEU as a Potential Legal Basis in European

Contract Law 42310.2.1 The former Treaty framework 42310.2.2 The present Treaty framework 42710.2.3 Missed opportunity for European contract law? 436

10.3 The Relationship between Articles 81, 114, and 352 TFEU in European Contract Law 43710.3.1 Union measures adopted under Article 81 TFEU

(ex Article 65 EC) 43910.3.2 The limits of Union competence under Article 81 TFEU

and the linkage to Article 114 TFEU 44410.3.3 The exercise of Union competence under Article 81 TFEU

and the linkage to Articles 114 and 352 TFEU 44710.4 Conclusions 448

11. Alternative and Complementary Routes in European Contract Law 45011.1 Introduction 45011.2 Enhanced Cooperation 451

11.2.1 The virtues and vices of enhanced cooperation 45111.2.2 Can enhanced cooperation be authorized? 454

11.2.2.1 The existence of Union competence: A ‘boomerang’ to constitutionality 457

11.2.2.2 The internal market-related conditions: Linkage to Articles 114 and 352 TFEU 459

11.2.2.3 Enhanced cooperation as a last resort: Linkage to the principle of sincere cooperation 462

11.2.3 Should enhanced cooperation be used? 46311.3 An Intergovernmental Treaty 465

11.3.1 Distinguishing levels and approaches 46511.3.2 An intergovernmental treaty under public international law 466

11.3.2.1 Historical relic of days past in the debate about European private law? 466

11.3.2.2 Problems associated with an intergovernmental treaty 46811.3.3 An ad hoc convention method 469


Contentsxx

11.4 ‘Softer’ Models: The OMC, American Techniques, and the CFR 47111.4.1 The OMC 47111.4.2 American techniques 47411.4.3 The CFR 477

11.5 Conclusions 479

Conclusion 481The Constitutionality of European Contract Law In Toto 481The Future Path of European Contract Law 483

Index 485


Introduction

Setting of the ProblemAt present, European contract law embodies one of the most far-reaching and con-troversial debates in the European Union (EU). As the story is commonly told, with the work of several prominent academic projects, certain European Parliament res-olutions, and the European Council meeting at Tampere serving as catalysts, the Commission promulgated the 2001 Communication on European contract law1, which placed this subject on the EU’s political agenda. This Communication has been followed by a steady stream of documents issued by the Commission, as well as other Union institutions and bodies, which continue to refine the EU’s role in European contract law.2 Recent activities emanating from these documents—such as the Draft Common Frame of Reference (DCFR),3 the Consumer Rights Directive,4 and the proposal for a Regulation on a Common European Sales Law (proposed CESL)5—have only served to intensify the discussion of the future path of contract law at the European level. Nevertheless, detailed examination of the constitutional dimensions of European contract law, or its so-called constitutionality, continues to lag behind. In effect, the debate about European contract law has proceeded in somewhat of a ‘backwards’ fashion: while the plans and the activities envisaged for ‘the way forward’6 for European contract law progress, in-depth assessment of the EU’s competence in this context remains largely unattended to, instead of the other way around.

This is certainly not to say that there has been no attention paid to the constitutional dimensions of European contract law or European private law generally.7 In fact, over a decade ago, in 1997, an international conference was convened at Scheveningen in the Netherlands, at the bequest of the then Dutch Presidency of the Council, during which the morning session was devoted to the question of whether there was a proper legal basis for a European civil code.8 Likewise, both before and after this conference,

1 Commission Communication on European Contract Law, COM (2001) 398 final, 11.7.2001 (2001 Communication). 2 See generally Part Two.

3 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law—Draft Common Frame of Reference (DCFR), full edn (Sellier, 2009/Oxford Univ Press, 2010). See Chapter 6, § 6.2.3.

4 Dir 2011/83/EU of the European Parliament and of the Council of 25 Oct 2011 on consumer rights, amending Council Dir 93/13/EEC and Dir 99/44/EC of the European Parliament and of the Council and repealing Council Dir 85/577/EEC and Dir 97/7/EC of the European Parliament and of the Council, [2011] OJ L304/64 (Consumer Rights Directive).

5 Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final, 11.10.2011 (proposed CESL). See Chapter 6, § 6.4.4.

6 This is taken from the title of the Commission Communication, European Contract Law and the revision of the acquis: the way forward, COM (2004) 651 final, 11.10.2004.

7 For discussion of the relationship between European contract law and European private law, see Chapter 1, § 1.2.2.

8 For a record of the conference papers, see (1997) 5 ERPL 455. See also ‘Editorial: European Private Law between Utopia and Early Reality’ (1997) 4 MJ 1.


Introduction2

the extent of the EU’s competence in contract law and other fields of private law has attracted a range of opinions from scholars in publications too numerous to mention, perhaps explaining the remark by one commentator that ‘[m] uch ink has already been poured on the question of legal competence for [Union] measures in this field’.9 Still, significant problems exist in the treatment of this subject. In particular, three stand out.

First, many crucial questions concerning the limits and exercise of Union compe-tence in European contract law have yet to be fully addressed. It is usually the case that certain Treaty provisions are singled out for analysis, the most prominent candidates being Articles 114, 115, 169, 81, and 352 TFEU. However, some of these provisions, such as Articles 169 and 81 TFEU concerning the Union’s competence in consumer protection and judicial cooperation in civil matters, respectively, are often discarded without cognizance of the extent to which they are interwoven in the constitutional assessment of European contract law. For other provisions, the limits of Union compe-tence are read restrictively without engagement with the evolution of the relevant case law, as illustrated by the controversy concerning Article 114 TFEU. Moreover, only exceptionally does one find detailed discussion of the linkages between these Treaty provisions, whether it is confronting the residual scope of Article 115 TFEU vis-à-vis Article 114 TFEU, the symbiotic relationship between Articles 114 and 169 TFEU, the boundary line between Articles 114 and 352 TFEU, or the extent to which some of these provisions may be used together. As a related point, over the years, various alterna-tive or complementary routes to Union action in contract law have been contemplated in the debate, such as enhanced cooperation, an intergovernmental treaty, and the Open Method of Coordination (OMC), without much detailed inquiry as to their constitutionality and suitability in relation to European contract law.

For that matter, much of the focus has been placed on the existence of Union compe-tence, ie the legal basis requirement, and not so much on the exercise of Union compe-tence, in terms of the roles played by the principles of subsidiarity, proportionality, and sincere cooperation in this context. Certainly, the principles of subsidiarity and pro-portionality readily appear in the discourse, often as arguments opposing far-reaching Union action in contract law (and other fields of private law). Yet, generally speaking, there is not much deep investigation as to the operation of these two principles, as well as the principle of sincere cooperation, in connection with the aforementioned Treaty provisions or the alternative and complementary routes to Union action put forward in the debate. Surely, this is one area in which there may never be unanimous agreement, and for certain issues, it is only with recent case law that answers have started to emerge. Be that as it may, until matters concerning the existence and exercise of Union com-petence are thoroughly explored, the debate about the constitutionality of European contract law continues to be as elusive as ever.

Secondly, there is no standardized semantic and legal framework governing the con-stitutional assessment of European contract law, which makes delving into this topic something of a Herculean task. Semantically, there are no universal definitions for the prevalent terms used in the debate about European contract law. Instead, many terms are used in different ways or have the potential to inject particular nuances and biases into the discussion, which makes even talking about the constitutional dimensions of European contract law extremely difficult. Legally, there is no template upon which to frame the analysis of the relevant Treaty provisions or alternative and complementary

9 S Swann, ‘Elective European Contract Law. A Possible Response to the Action Plan’ in M Meli and MR Maugeri (eds), L’Armonizzazione Del Diritto Privato Europeo—Il Piano D’Azione 2003 (Giuffrè Editore, 2004) 23, 40.


Setting of the Problem 3

routes to Union action mooted in the debate. Each of the Treaty provisions under discussion—Articles 114, 115, 169, 81, and 352 TFEU—underpins a distinct chron-ology in the Treaty framework and enlivens its own set of controversies, which to a great extent have not yet been explicitly answered in the case law or by the changes brought about by the Lisbon Treaty.10 Likewise, several alternative and complementary routes to a European contract law instrument are situated within broader topics that generate a complex and controversial debate of their own apart from that concerning European contract law, as illustrated by the discussion of enhanced cooperation vis-à-vis ‘flex-ibility’ and ‘differentiation’ in the EU or the OMC vis-à-vis the so-called ‘new modes of governance’. Most importantly, the ‘institutional record’ of constitutionality in the documents disseminated by the Union institutions in this setting is largely unexplored, with the result that it remains unclear to what extent the discussion of Union compe-tence has played a role in the developments underpinning European contract law (and European private law generally) at the European level.

Thirdly, despite the fact that references to the United States (US) have steadily crept into the debate about European contract law,11 in-depth comparative reflection with the EU in this context is sorely lacking. Generally, such references have either been used in a positive sense as a source for potential models for use in the debate about European contract law—usually involving Restatements, uniform and model laws, and the Uniform Commercial Code (UCC)—or in a negative sense, as part of argu-ments against far-reaching action in contract law and other fields of private law at the European level by pointing to the American ‘internal market’ in which private law is regulated for the most part at the state level without the need for any federal contract or commercial law code. Yet, there does not seem to be much realization of the numer-ous attempts to unify areas of state contract law at the federal level and the extent to which these attempts have coloured the American contract law landscape through to the present day. In addition, in seeking to transplant American techniques to the EU, there does not seem to be much appreciation of the problems resulting from their use in the US and of the dangers, let alone terminological confusion, associated with their application to European contract law.

These problems are surely not the only ones plaguing the constitutional assessment of European contract law, but they have potentially devastating consequences for the developments taking place in this setting. They leave the legality of present and future European contract law initiatives uncertain. They affect the identification of the most appropriate solutions to the problems that the debate about European contract law is supposed to solve. They may also lead to misperceptions about the scope of Union competence and the viability of supposed alternatives to Union action in contract law, which have the potential to put the debate about European contract law on the wrong path. As will be seen, matters relating to the EU’s constitutional competence have already started to play a part in steering the course of the activities envisaged for European contract law and the decisions taken at the European level. Union compe-tence is therefore not the only element in the debate about European contract law, but it is an important one that permeates the others.

10 See, eg, L Miller, ‘European contract law after Lisbon’ in D Ashiagbor et al (eds), The European Union After the Treaty of Lisbon (Cambridge Univ Press, 2012) 227.

11 This includes scholarly literature and institutional documents issued in the debate, as discussed in Part Two. Although this book does not discount that there are various differences between the EU and the US in this setting, references to the US have become a part of the debate itself, which indicates the need for such comparative reflection.


Introduction4

Objective and StructureIn view of the foregoing problems, the objective of this book is to provide a cohesive assessment of the constitutional dimensions of European contract law by examining the scope of certain prominent Treaty provisions in the debate, namely Articles 114, 115, 169, 81, and 352 TFEU, which potentially confer competence on the Union to adopt a comprehensive instrument of substantive contract law, on the one hand, and the viability of certain alternative and complementary routes to the adoption of such an instrument contemplated in the debate, on the other. This will be done with a primary focus placed on the analysis of the limits of, and the linkages between, these Treaty provisions and their interplay with the principles of subsidiarity, proportionality, and sincere cooperation, as well as a secondary focus as to how comparative analysis with the US may contribute to the constitutional assessment of European contract law, with the overarching aim that this book may be of practical value to lawmakers, practitioners, and scholars in connection with the initiatives envisaged in the debate about European contract law for the foreseeable future.

In line with this objective, this book is divided into three interlocking parts. Part One comprises three chapters (Chapters 1–3), which concern the context for the debate about European contract law in the EU and comparative reflection with the US. Chapter 1 sets forth the constitutional framing of European contract law, with a view to clarify-ing the meanings of the various terms used in the debate and elucidating a specific set of Union contract law measures—referred to as the ‘hard core’ of the EU contract law acquis—which underpin certain perennial themes relating to the role and competence wielded by the Union legislature in the field of contract law. Chapter 2 explores the three distinct roles played by the Court of Justice in European contract law, which include the Court’s interpretation of these Union contract law measures, the Court’s formulation of Union judge-made rules of contract law, and the increasing recourse by the Advocates General to comparative European contract law materials. Chapter 3 turns to the US and focuses on four major strands of the American contract law framework—American ‘federal common law’, uniform and model laws, Restatements, and the UCC—to facilitate understanding of their meaning, the problems associated with their usage, and the extent to which attempts to approximate contract law at the federal level were part of their emergence and development.

Part Two concerns the debate about European contract law. It encompasses three chapters (Chapters 4–6), which are roughly divided according to the chronologi-cal sequence of events through which this debate has evolved at the European level. Chapter 4 details the beginnings of the debate through the work of certain academic projects, the European Parliament’s early resolutions, and the European Council meet-ing in Tampere. Chapter 5 evaluates the Commission’s three seminal Communications on European contract law and the responses from the other Union institutions and stakeholder groups. Chapter 6 outlines the present path of the debate about European contract law, with particular regard to activities relating to the CFR, the Consumer Rights Directive, and the proposed CESL.

Part Three contains five chapters (Chapters 7–11), which concern the constitution-ality of European contract law. Chapter 7 provides an overview of the constitutional parameters governing Union competence in contract law in order to evaluate several reasons advanced to explain the neglect of detailed discussion of constitutionality at the European level, to delineate the overarching Treaty framework, and to elucidate the roles played by the principles of subsidiarity, proportionality, and sincere cooperation


Objective and Structure 5

in this setting. Chapter 8 examines the scope of Union competence under Articles 114, 115, and 352 TFEU for the adoption of a European contract law instrument, optional or otherwise, to achieve the Union’s internal market objectives. Chapter 9 explores the scope of Union competence under Article 169 TFEU in the field of con-sumer protection and the linkage with Articles 114 and 352 TFEU as far as the adop-tion of a European contract law instrument including consumer contract law, in all or in part, is concerned. Chapter 10 analyses the scope of Union competence under Article 81 TFEU concerning judicial cooperation in civil matters and the linkage with Articles 114 and 352 TFEU in connection with the adoption of a European contract law instrument. Chapter 11 investigates the viability of several alternative and comple-mentary routes to the adoption of a European contract law instrument contemplated in the debate, which include enhanced cooperation, an intergovernmental treaty, and certain so-called ‘softer’ models comprising the OMC, certain American techniques (Restatements, uniform and model laws, and the UCC), and the CFR. This is followed by the general conclusions of this book.

Together, these three parts comprise the constitutional foundations of European contract law. Part One lays the ‘grounding’ for the discussion of the debate about European contract law and the contract law framework in the US, both semantically in terms of the terminology used in each setting and legally in terms of providing the template for understanding the approach taken to matters of contract law in the European and American legal orders. Part Two illuminates the ‘institutional record’ of constitutionality in the various documents issued by the Union institutions and bodies and thus contains the ‘meat’ for understanding the ways in which Articles 114, 115, 169, 81, and 352 TFEU, along with certain potential alternative and complementary routes, have, explicitly and implicitly, come into play. Building on these layers, Part Three provides detailed study of the extent to which the aforementioned Treaty provisions may constitute proper legal bases for the adoption of a European contract law instru-ment and the extent to which certain alternative and complementary routes to such an instrument may be resorted to.

Following from this three-part structure, however, there are certain caveats placed on the analysis. First, as a general matter, the presentation of the material is not always linear and sometimes jumps back and forth in time. This is in part the result of the way in which the debate about European contract law has developed at the European level. This is also to some extent the outcome of the three-part structure of this book, in the sense that issues covered in one chapter become relevant later on, after other chapters have been presented. In the present author’s view, this cannot be avoided on account of the need to place certain chapters in the relevant parts in order to construct a sound framework for the discussion. Moreover, with regard to the US, it should not be missed that until this book, the extent to which attempts to approximate areas of private law, including contract law, at the federal level had largely been concealed amidst historical documents and scattered literature over the years, which meant that the true picture was relatively unknown even to American audiences. In order to provide a cohesive record of such attempts, it is necessary to discuss the emergence and development of certain components comprising the American contract law framework in substantial detail. Finally, as already mentioned, Part Two aims to set forth very much for the first time a detailed account of the ‘institutional record’ of constitutionality at the European level, which until now was mostly hidden beneath the various documents issued in the debate. This explains why, in relevant chapters, the discussion may be con-sidered descriptive at times. The presentation of the Union institutions’ engagement


Introduction6

with constitutionality is done with a view to laying the groundwork for the analysis of the relevant Treaty provisions that follows.

Scope and Potential ChallengesGiven the importance of the constitutionality of European contract law, it may be won-dered why this subject has not yet occupied a premier place in the debate. The answer to this question alludes to three main challenges posed by this subject, which in turn draw out the scope and limitations of this book. At least in part, these challenges may also help to explain why issues surrounding the constitutionality of European contract law have been bypassed in the literature and why the Union institutions have been reluctant to delve deeply into this subject so far.12

First, there is the evolving nature of the debate about European contract law and the overarching Treaty framework. The constitutional assessment of European contract law has been situated within two ever-changing constellations. On the one hand, the debate about European contract law is essentially a ‘moving target’, since its momen-tum and the constitutional issues underlying it are constantly morphing over time. As aptly described by one jurist:

Anyone taking it up with the intention or hope of keeping up with the pace of legal policy devel-opment and remaining on top of the current stage of academic debate is letting themselves in for a race in which he will inevitably feel like the unfortunate hare which, despite all its efforts, kept on arriving too late: something else will have changed or articles whose relevance has to be assessed first will have appeared.13

As a result, this debate does not follow one single path, but instead meanders down several roads, all the while raising unprecedented constitutional issues in its wake and whose endpoint has not yet been determined. The research into the constitutionality of European contract law therefore suffers from the limitation that it does not have the benefit of hindsight and instead is captured by the ongoing activities taking place in European contract law as they occur.

On the other hand, the overarching Treaty framework in which the constitutional inquiry is situated has also evolved considerably during the years in which the debate about European contract law has unfolded at the European level. Over the past dec-ade, the former Treaty framework comprising the EU and EC Treaties14 has been the subject of major institutional reform. As set into motion by the Laeken Declaration,15

12 See Chapter 7, § 7.2.13 C Joerges, On the Legitimacy of Europeanising Private Law: Considerations on a Law of

Justi(ce)-fication (Justum Facere) for the EU Multi-level System (METRO, 2003) 1–2 (reprinted in A Hartkamp et al (eds), Towards a European Civil Code, 3rd rev and expanded edn (Kluwer/Ars Aequi Libri, 2004) 159). Though referring to European private law generally, such remarks may be considered to apply equally to European contract law. For similar remarks of frustration, see, eg, T Wilhelmsson, ‘The Ethical Pluralism of Late Modern Europe and Codification of European Contract Law’ in J Smits (ed), The Need for a European Contract Law—Empirical and Legal Perspectives (Europa, 2005) 121, 123.

14 Consolidated versions of the Treaty on European Union (EU Treaty), [2006] OJ C321E/5, and the Treaty establishing the European Community (EC Treaty), [2006] OJ C321E/37. To avoid confusion, the provisions of the former EU Treaty are denoted by EU, whereas those of the EU Treaty as amended by the Lisbon Treaty are denoted by TEU.

15 Presidency Conclusions, Laeken European Council, 14–15 Dec 2001, Annex I: Laeken Declaration on the Future of the European Union, [2001] 12 EU Bulletin, point I.27 (Laeken Declaration).


Scope and Potential Challenges 7

the work of the European Convention paved the way for the failed Draft Treaty estab-lishing a Constitution for Europe (Draft Constitutional Treaty16) and ultimately the Lisbon Treaty,17 which amended the EU Treaty (TEU) and the EC Treaty, renamed the Treaty on the Functioning of the European Union (TFEU). Consequently, the discussion of the Union’s competence in European contract law has had to straddle these institutional developments, and with the entry into force of the Lisbon Treaty on 1 December 2009, has had to contend with the replacement of the relevant provisions of the EU and EC Treaties cited in the debate (as well as the references to the European Community, now superseded by the Union) and the changes brought about by the Lisbon Treaty in relation to these provisions and the constitutional framework of the EU generally.18

Together, these points have significant implications for the scope of this book. Despite the fact that the TEU and the TFEU now constitute the governing Treaty framework, this book includes discussion of the relevant provisions of the former EU and EC Treaties, the work of the European Convention, and the failed Draft Constitutional Treaty, since they have left an indelible imprint on the constitutionality of European contract law.19

Moreover, although the debate about European contract law is likely to continue for the foreseeable future, activities at the European level have reached a crucial culmina-tion stage with the proposed CESL, which alongside the adoption of the Consumer Rights Directive and the completion of the DCFR constitute an important basis from which to evaluate the EU’s competence in this setting. The fact that the proposed CESL and the final or political version of the CFR have not yet been adopted and that further initiatives may still be in the pipeline is not fatal to the analysis because it works within the frame of the debate as it has developed thus far and is not contingent on the politi-cal choices to be made. In line with its overarching aim, this book seeks to provide the constitutional groundwork for the initiatives envisaged for European contract law so as to be of practical value when the definitive choices are made. As already noted, mat-ters relating to Union competence have started to have an impact on the course of the activities contemplated at the European level, with the result that laying such ground-work would appear to be of the utmost importance, especially under circumstances in which these initiatives and potentially others are undergoing discussion and formula-tion at the European level. This explains why the analysis is framed broadly to cover the adoption of a comprehensive instrument encompassing contract law rules relating to commercial and consumer transactions in a general sense, whether optional or oth-erwise, thereby including but not necessarily being limited to the proposed CESL, as well as several potential alternative or complementary routes to such an instrument.20

16 Draft Treaty establishing a Constitution for Europe, [2004] OJ C310/1. There was a previous version of this Treaty promulgated in 2003. See Chapter 7, § 7.3.

17 Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, [2007] OJ C306/1; consolidated versions of the Treaty on European Union (TEU), [2012] OJ C326/13, and the Treaty on the Functioning of the European Union (TFEU), [2012] OJ C326/47.

18 Where the discussion pertains to matters that took place before the entry into force of the Lisbon Treaty, reference is made to the EU or Union in place of or alongside that of the former EC or Community, as well as to the numbering of the relevant Treaty provisions under the former and present Treaty frameworks. For brevity’s sake, quoted passages referring to the former Community or EC Treaty may be replaced by the Union or TFEU in brackets.

19 See Chapter 7, § 7.3.20 For further discussion of the concept of a ‘comprehensive’ instrument of contract law, see

Chapter 1, § 1.2.2.1.


Introduction8

Thus, apart from the field of consumer contract law, which is an inherent feature of the debate itself, this book excludes detailed consideration of the constitutionality of possible Union instruments concerning specific types of contracts, such as insurance contracts, which manifest special considerations and individualized treatment in the debate. This is so even though the discussion of insurance contracts intersects to some extent with the constitutional assessment of European contract law with particular regard to optional instruments and thus cannot be left out altogether.

Secondly, there is the breadth of the debate about European contract law and the con-stitutional inquiry. As already alluded to, the literature on European contract law is massive and has become something of a ‘cottage industry’ in itself.21 Taking account of the increasing array of books and journals in several Union languages, this makes for superhuman efforts to keep track of all of the commentary bearing on the consti-tutionality of European contract law. Furthermore, the debate is considerably broader than the label ‘European contract law’ would seem to indicate. As will be seen in the coming chapters, the debate about European contract law emanated from, and still remains entangled with, a larger debate about European private law and a so-called ‘European civil code’.22 As a result, the constitutional assessment of European con-tract law inevitably bumps up against questions concerning the Union’s competence to take far-reaching action in other areas of private law beyond contract law. Through this linkage, such assessment may also become intertwined within a broad array of political, economic, cultural, and social arguments relating to the role to be played by a comprehensive European private or contract law instrument,23 for example, whether it is to make the internal market function better or whether it represents deeper social, cultural, or political values.24 This makes it quite easy for everything to blur together, and as a result, the objectives underlying the debate about European contract law (and European private law generally) can become linked to the discussion of Union compe-tence. This may explain, for instance, why the potential impact of European contract law for Union citizenship and European ‘social justice’ have become subsumed within the discussion of legal basis,25 or why, given the implications heralded by European contract law for the future course of comparative legal research and education, some scholars have contemplated the Treaty provisions on research and development as potential legal bases for Union action in this setting.26

21 As with European private law generally: see, eg, JM Smits, ‘European private law and the com-parative method’ in C Twigg-Flesner (ed), The Cambridge Companion to European Union Private Law (Cambridge Univ Press, 2010) 33. 22 See Chapter 1, § 1.2.3.4.

23 For a summary of the various arguments, see, eg, D Mazeaud, ‘Faut-il avoir peur d’un droit européen des contrats?’ in De tous horizons: Mélanges Xavier Blanc-Jouvan (Société de législation comparée, 2005) 309; S Weatherill, ‘Why Object to the Harmonization of Private Law by the EC?’ (2004) 12 ERPL 633.

24 See T Wilhelmsson, ‘The Legal, the Cultural, and the Political—Conclusions from Different Perspectives on Harmonisation of European Contract Law’ (2002) 13 EBLR 541.

25 See, eg, MW Hesselink, ‘European Contract Law: A Matter of Consumer Protection, Citizenship, or Justice?’ (2007) 15 ERPL 323 (reprinted in S Grundmann (ed), Constitutional Values and European Contract Law (Kluwer, 2008) 241); L Moccia, ‘Du “marché” à la “citoyenneté”: à la recherche d’un droit privé européen durable et de sa base juridique’ (2004) RIDC 291; and more recently, L Moccia, ‘European Law: From “Market” to “Citizenship”’ in L Moccia (ed), The Making of European Private Law: Why, How, What, Who (Sellier, 2013) 47; S Nadaud, Codifier le droit civil européen (Larcier, 2008) 223–225.

26 See, eg, J Ziller, ‘The Legitimacy of the Codification of Contract Law in View of the Allocation of Competences between the European Union and its Member States’ in MW Hesselink (ed), The Politics of a European Civil Code (Kluwer, 2006) 89, 112–113 (rejecting such provisions).


Scope and Potential Challenges 9

It is not disputed that the various political, economic, social, and cultural arguments have an important role in the debate, and it cannot be foreclosed that other Treaty pro-visions may eventually become relevant in relation to the constitutional dimensions of European contract law. Nonetheless, the scope of this book is primarily limited to the analysis of the extent of the Union’s (internal27) competence under Articles 114, 115, 169, 81, and 352 TFEU.28 This is because, as illustrated in Part Two, these five Treaty provisions have been the predominant focus of the institutional documents and scholarly literature on European contract law thus far. For the same reason, although the extent to which other fields of private law will be included in the initiatives envisaged at the European level remains to be seen, the scope of this book is limited to the field of contract law in line with the way in which the debate has unfolded at the European level, although it should not be discounted that this book may be of value to the discourse on Union competence in other fields of private law. In addition, given the growing volume of literature on European contract and private law, this book does not claim to be exhaustive. It is based on a broad, representative selection of scholarly literature, institutional documents, Treaty materials, and case law of the Union courts that is considered most relevant for a cohesive assessment of the constitutional foundations of European contract law.

Finally, there is the wide expanse for comparative reflection between the EU and the US in connection with the debate about European contract law. Inside the constitutional inquiry, the determination of the extent of the Union’s competence under the above-mentioned Treaty provisions inevitably invites inquiry into comparable provisions of the US Constitution, such as the Interstate Commerce Clause29 in relation to Article 114 TFEU or the Necessary and Proper Clause30 in relation to Article 352 TFEU, both of which command an extensive body of literature and jurisprudence of the US Supreme Court. Outside the constitutional inquiry, there are several subjects related to the debate about European contract law that lend themselves to fruitful reflection with the US.31 So far, these subjects generally appear to fall into three baskets or categories. First, there are matters related to the institutional framework needed to support the ongoing activities in European contract law (and European private law generally), for example, the creation of the European Law Institute (ELI), which beckons analogy to the American Law Institute (ALI),32 or the reform of the EU judicial architecture,

27 As part of the evolving discourse on European contract and private law, attention has been placed on external aspects of the Union’s competence in this setting, the detailed discussion of which also exceeds the scope of this book. See, eg, J Wouters, ‘Private Law, Global Governance and the European Union’ in ALM Keirse and MBM Loos (eds), Alternative Ways to Ius Commune—The Europeanisation of Private Law (Intersentia, 2012) 21, 32.

28 To a lesser extent, there is also discussion of provisions related thereto, eg, the free movement provisions in connection with Art 114 TFEU: see Chapter 8, § 8.3.2.2.

29 US Constitution, Art I, § 8, cl 3 (providing in relevant part that Congress ‘shall have Power . . . [t] o regulate commerce . . . among the several States’).

30 US Constitution, Art I, § 8, cl 14 (providing that Congress ‘shall have Power . . . [t] o make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof ’).

31 Within the European setting, these issues are often related to the ‘legitimacy’ of Union action in European contract law and European private law generally. See further Chapter 1, § 1.2.1.

32 The European Law Institute (ELI) was founded on 1 June 2011 at the Inaugural Congress held in Paris: see in particular the presentation given there by Professor George Bermann, provid-ing salient reflections on the functioning of the two organizations (on file with author). See also eg, L Liebman, ‘The American Law Institute: a model for the new Europe?’ in F Cafaggi and H Muir-Watt (eds), Making European Private Law: Governance Design (Edward Elgar, 2008) 209; CU Schmid, ‘Legitimacy Conditions for a European Civil Code’ (2001) 8 MJ 277, 291–294. Although previously removed from the EU’s agenda (see Chapter 5, § 5.3.1.1), the creation of the ELI was revisited in recent


Introduction10

which has included mention of the American system of federal courts.33 Secondly, the substance of the contract law rules formulated by academic projects associated with European contract law or in instruments to be adopted at the European level, as in the case of the proposed CESL, may merit discussion of the approach taken in the US in relevant instruments, such as the UCC. Thirdly, issues and concerns related to the process by which rules of contract law and other fields of private law are formulated, especially in terms of the role played by these academic projects and the participa-tion of various interested parties in the debate about European contract and private law, may direct attention to the American scholarship on the decision-making pro-cesses of the so-called ‘private legislatures’ of the ALI and the National Conference of Commissioners on Uniform State Laws.34

The detailed discussion of these subjects would not only make this book consid-erably longer in length, but also would be likely to take the constitutional inquiry off-track. Therefore, the scope of this book is limited to those aspects drawn from the American setting that, in the present author’s view, make a salient contribution to the constitutional assessment of European contract law. This means that all such provi-sions of the US constitutional framework comparable to those relevant to the debate about European contract law cannot be treated in depth. This also means that this book must exclude discussion of the abovementioned topics falling outside the confines of constitutional inquiry; yet, as will be seen, they are interrelated to some extent with the discussion of the debate about European contract law and the American contract law framework, with the result that this book may at least provide a ‘launching pad’ for further development in the literature.

In sum, given all of the problems and challenges underlying the constitutional foun-dations of European contract law, it may be asked why anyone would want to undertake such an endeavour. In response, for far too long, this subject has been stunted in various ways, whether by way of assumptions about the scope of Union competence and the operation of the principles of subsidiarity and proportionality, the lack of recognition of the extent to which the discussion of Union competence has crept into the debate at the European level from the very beginning, and the fallacy of the American contract law experience. The time has come to change this path and to place more focus on the ‘constitutional conversation’ about European contract law and the ‘comparative conversation’ with the US. It is therefore hoped that this book may help to bring the constitutional dimensions of European contract law to the forefront and to provide a firm foundation upon which the complex issues and the perennial tensions miring this area can be constructively discussed and appropriate solutions can be found.

years. It is a private organization with its secretariat in Vienna, and one of its first activities following the opening ceremony on 17 Nov 2011 concerned the proposed CESL: see F Jacobs, ‘The European Law Institute’ (2012) 18 ELJ 175; Written Question E-008069/2012 by A Fox, ‘Common European Sales Law’, available at <http://www.europarl.europa.eu/>; for the ELI’s activities, see its website, <http://www.europeanlawinstitute.eu/>.

33 See, eg, J Basedow, ‘The Court of Justice and Private Law: Vacillations, General Principles and the Architecture of the European Judiciary’ (2010) 18 ERPL 443, 469–472; Schmid, n 32, 288 and citations therein.

34 See Chapter 3, § 3.5.3.3.


The Constitutional Foundations of European Contract Law: A Comparative Analysis

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