The Confederation of British Industry (CBI) has warned that new cross-border trade laws proposed by Brussels will cause companies legal difficulties, damage online businesses and undermine the UK’s financial services sector. CBI Deputy Director-General John Cridland has called on EU policy-makers to urgently review the Rome l contract legislation before it goes to the European Parliament for debate.
Under the proposals a UK firm selling its goods and services to consumers across the EU would no longer be governed by English law. Instead it would have to navigate through up to 27 different, often conflicting legal regimes or opt not to do business outside the UK.
Financial and legal services firms will be particularly affected because they will lose the right to decide which country’s law applies to a contract with a foreign company. In the event of a dispute a court could over-ride the companies’ choice and rule that a different legal system applies.
Currently firms operate under international legal principles agreed in 1980 and the European Commission claims to be simply formalising the existing process. But the CBI, and other business groups, argue it is bringing in major new law without looking at the potential costs and complications involved
“The proposed legislation was sold as a simple legal tidying-up exercise when the European Commission embarked on the process but has turned into a major operation,” says Cridland. “It will produce substantive new law and turn accepted cross-border trade principles on their head. Yet the Commission has not carried out any regulatory impact assessment and, despite serious concerns by business, shows no indication of doing so. The practical impact is likely to be immense for firms who trade across the EU. Businesses will have three choices: spend time and money getting to grips with the varied and conflicting legal regimes of each member state they trade with; chance their arm that their processes will meet the required standards; or, most worryingly, stop trading with some countries altogether.”
“The existing rules work well in practice, if approved, the Commission’s proposals will introduce uncertainty and confusion at considerable cost both to European businesses and consumers,” says Simon James, chairman of the CBI’s Working Group of Rome. “The current rules strike a balance between the need to protect consumers but also to respect the legitimate interests of businesses. The Commission’s proposals, made without any impact assessment, cast aside that balance, potentially discouraging cross-border trade and reducing consumer choice. The lack of an impact assessment is particularly concerning. Businesses and consumers in the EU are entitled to legislation of the highest quality. That will only be produced if the Commission follows the best practices in its preparation. This must include detailed consideration of the impact of new laws.”