What Costs Might the Drawing up

Many arguments in favour, or against, harmonising European contract law or rendering it uniform, have their basis in an economic analysis of law. These arguments are, however, not founded on concrete economic data or on research carried out ‘in the field’. These arguments are rational, in that there is the common conviction that it is currently not possible to establish if it is more advantageous to maintain the existing situation or if it is more advantageous to change the system, by passing from a polycentric normative model to a centralized one, on the basis of economic analysis.

The perspective of economic analysis of the process of creating European contract law is the basis upon which contributions from some scholars with different scientific and cultural backgrounds, as well as from different countries, converge. Some believe that rules of private international law and conventional rules — such as those included in the 1980 Rome Convention — lead to uncertainty in the choice of applicable law and, as a result, to costs that should be avoided. However, the answer to this does not appear to be rendering them uniform, but rather offering the parties greater freedom in their choice of applicable law. The ‘virtues of diversity’ are all oriented towards increasing contractual freedom, rather than imposing a binding choice on the parties. Only the harmonization of consumer contract law is to be wished for, even if a ‘European contract law code’ of an optional nature is, overall, also acceptable.

As it is impossible to calculate the costs and benefits of harmonization the way forward is to compare different solutions. Opting for change could, (in the opinion of H. Wagner) result in costs of a political nature, lead down a different path to that originally planned and achieve results that are less satisfactory than forecast. In contrast, the existing situation allows us to choose a preferable situation, encourages efficient competition between legal systems and would reduce costs linked to bureaucracy to a minimum.

The same economists are also aware of the fact that ‘legal diversity’ creates costs: firstly, costs of acquiring information needed to choose the applicable law and therefore to adapt the drafting of the contract to be signed. There are costs from legal action arising from the application of one’s own rules to different legal systems and costs that arise from contracts exposed to the uncertainty of continual changes in the contract law of different systems. There are also costs that arise from the legal administration systems that change from country to country.

With the awareness that diversity creates costs, the solution of harmonization appears, at first sight, to be the remedy for all ills. However, it is rejected because it, in turn, generates costs linked to agreements and therefore a step by step approach is considered ‘more desirable’. This approach does not have the ambitious aim of drawing up a ‘complete’ code of European contract law, but aims to first resolve normative controversies arising from cross-border operations, through uniform rules and then to promote the convergence of civil procedure systems in order to improve the administration of justice in a European context.

From the ‘behavioural’ point of view, it is thought that operators do not see the need for change and that a spontaneous convergence of rules relating to contracts is, therefore, preferable.

Acquis is also not considered the best method for achieving this aim. Some believe that instead of harmonization, it generates diversity, and uncertainty rather than uniformity of interpretative choice. This occurs for various reasons:

  • (i) directives aim for minimal harmonization and the Community legislator leaves the Member States free to fill in the gaps, or to raise the standard of protection for interests to be safeguarded, or to make additions to the approved base texts, so that in national legal systems, EU-derived rules do not correspond perfectly;
  • (ii) the interpretation of directives and norms to be implemented varies, because they contain general clauses, vague expressions and generic terms. They, therefore, legitimize the attribution of different meanings to the same rules in different legal systems
  • (iii) acquis is fragmentary, it touches marginal sectors or aspects and directives are not coordinated.

However, if drawing up a code that is ‘imposed on the parties’ appears fairly undesirable, the solution as a whole is a kind of ‘model code’ chosen by the parties as the contract law.

At the end of the day, even those who argue in terms of an economic analysis of law come to the conclusion that a model code is preferable to the current situation.