Costs and benefits of an optional European sales law (CESL)

Abstract

This contribution assesses the proposed Common European Sales Law (CESL) and its potential to enter into a fruitful competition with national laws ("Optional Scheme") against the background of a more general theory on vertical regulatory competition - drawing on the much richer theory of horizontal regulatory competition (namely concerned with Delaware). It does so along three lines of arguments: (i) Regulatory vertical competition, on a level playing field, has the potential to combine advantages of centralized rule-setting and decentralized rule-setting, but fails to do so in the case of this proposal. (ii) Regulatory vertical competition is in danger of being distorted by the central rule-setter when this rule setter not only makes one of the offers, but also arranges the conflict of laws rules and potentially even does in a way which favours its own offer - and this has been done in CESL. This kind of distortion of competition leads to the effect that parties may make choices not according to substantive law quality of the set of rules chosen, but because only one set profits from particularly advantageous rules of choice (reduction of transaction costs and economies of scale etc.). Finally, (iii) regulatory vertical competition may potentially lead to positive network effects of such importance that the set of rules proposed by the central rule setter, in fact, even though being optional only discards competitors altogether nevertheless. This may be an explanation of how the Delaware effect works and this may lead to a situation in which the 'external competition' of an EU Contract Law - with the national legislatures - is no longer strong enough. Therefore in the last two sections, the question is asked (i) how best to arrange 'internal competition' about the best ideas and the best schemes for an EU Contract Law Code and (ii) how to gain time for doing so (interim alternatives which would equally allow to realize most of the benefits which the adoption of CESL is aimed at). Based on all three lines of arguments, the paper strongly favours - as a minimum requirement - the transition for all national laws to an unrestricted home country principle for consumer sales, namely in e-commerce transactions.