Question 1. Does the current regulation of contract law, and, in particular, any divergence of laws at national level, present problems or not?

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1 Call for Evidence and Views on the European Commission s Green Paper on policy options for progress towards a European Contract Law for consumers and businesses List of questions for response We would welcome responses to the following questions set out in this Call for Evidence and Views. Please your completed form to: andrew.lee@justice.gsi.gov.uk. Question 1. Does the current regulation of contract law, and, in particular, any divergence of laws at national level, present problems or not? If problems are present, how significant or otherwise are they? How can any problems be quantified, and who is affected by them? Comments: In our members experience, any deficiencies in the functioning of the internal market do not derive from the law of the contract but arise from other factors such as the cultural, language and regulatory barriers. In terms of legal barriers, enforcement is the main problem not choice of law. The governing law of the contract does not present any problems to our members. It is not a contentious point in their dealings with their contracting counterparties and clients. Our members whilst being English companies do not take the position that they will only operate under English law. Our members operate under governing laws other than English law in accordance with business needs. When they do so, either they have the internal legal capability under that particular jurisdiction s law or they will take appropriate legal advice to assess their legal position. Our members take the view that the introduction of a 28 th regime is a solution to a nonexistent problem. Question 2. What are your views on the relative advantages and disadvantages of each of 1

2 the options and sub-options identified in the Green Paper? In particular, which should be preferred and why? Option 1: Publication of the Results of the Expert Group Option 2: An official toolbox for the legislator 2(a) via a Commission act; or 2(b) via inter-institutional agreement Option 3: Commission Recommendation on European Contract Law 3(a) via encouragement for Member States to replace national laws with the European Union instrument; or 3(b) via encouragement to Member States to incorporate the European Union instrument as an optional regime Option 4: Regulation setting up an optional Instrument of European Contract Law Option 5: Directive on European Contract Law Option 6: Regulation establishing a European Contract Law Option 7: Regulation establishing a European Civil Code It would be helpful if your response could address all the points raised in the Green Paper and discuss the relative merits of the options (e.g. the relative merits of choosing a soft law option from a hard law one; the balance of argument between an optional legal instrument and a mandatory one, etc.). If you wish to declare a preferred option from amongst these (or suggest other ideas) then please do so. As with all aspects in this exercise, please cite and reference any available evidence to support your submission. In particular if costs and impacts are presented as determinative factors in your option appraisal please include / reference any evidence for those. Comments: It is the view of our members that none of these options are needed. Our members strongly oppose Options 5, 6 and 7. Whilst our members do not actively support any of the remaining options, our members would nevertheless have no objection to Option 2 (a tool box for legislators) but query to what extent it is needed and the practicalities of how such a tool box would be updated. Our members would also not object to Option 4 (optional instrument) as they support freedom of choice between the parties in business dealings. However, crucially, Option 4 would create significant legal uncertainty rather than remove it until such time as a coherent and reliable body of case law is developed this would take decades. This single factor would make this 28 th jurisdiction unattractive to our members and they would not use it as a 2

3 matter of their own choice and resist using it if asked to operate under this jurisdiction by a client or counterparty. Our members believe that adding a 28 th jurisdiction which covers their business may have the perverse result of adding something for contracting parties to disagree about or introduce delay when there is currently no problem in the sphere of business in which they operate. Question 3. Should any future work / response cover any or all of: business-to-business contracts? business-to-consumer contracts? on-line transactions? What are the specific points that lead you to conclude this? Should any solution attempt to regulate both cross-border and domestic contracts or approach those separately / differently? What would be the priority needs to be addressed for each of these groups and how might that be done? What would be the key features of any solution and why? Comments: Subject to our comments above on the necessity of such an instrument, it is our view that the scope of this proposal (contract law for consumers and businesses) is too wide and consequently too ambitious. The successful models cited in the Commission s Green Paper (paragraph 2 on Vienna Convention on International Sales of Goods and the Principles of International Commercial Contracts) are narrow in scope. Our members are not involved in B2C and online transactions as this is generally effected on an intermediated basis so our members comments relate to the B2B sphere. It is however their view that it is critical that any consideration of contract law should separate consumer law from business law otherwise there is a risk of consumer law principles seeping into business law where they have no place. Consumer law is regulatory and enshrines policy decisions on where the balance should lie between consumers and businesses. Consumers have the freedom to contract or not to contract but they cannot realistically negotiate their contracts without bringing commerce to a halt and driving up costs. It is our members view that any further work on B2C and on-line contracts should be undertaken in the context of the Consumer Directives workstreams. 3

4 Question 4. should it: What should be the preferred material scope of any instrument? In particular (a) (b) (c) have a narrow or a broad scope (see paragraphs & 2 of the Green Paper)? cover all or only specific types of contracts which ones and why (paragraph 4.3.3)? if a code is created should it also cover any other issues and what might those be (see paragraph of the Green Paper which specifically mentions tort, unjustified enrichment and the benevolent intervention in another s affairs as possibilities here)? Comments: This comment is again subject to our comments on the basic issue of the necessity of such an instrument. One of the reasons why our members do not support an EU contract instrument is that no contract law can operate in a vacuum. Other areas of law needed to be considered so that contract law can operate include (without limitation) the law of agency, assignments, proprietary aspects, prescription, fraud, unjust enrichment, restitution, undoing of a contract/mistake, tort, etc. For such an EU instrument to operate, an entire body of EU law on these and other related areas would need to be created to accompany this new instrument. In other words, if the Commission were to introduce a contract law instrument and wanted to create a coherent and workable body of law, it could not sensibly do so in isolation. From a practical perspective creating such a body of law would be a massive undertaking taking many years to conceive and draft. It would be a huge task to try to define in isolation how fiduciary obligations interact with contract law. Also, it is not clear what the treaty basis would be to embark on such an undertaking. Question 5. Are there any other matters not covered in the Commission s Green Paper or this Call for Evidence which you think should be addressed in this exercise and any following work? What are those issues and why should they be covered here? Comments: The Commission has not made a case for the necessity for developing an instrument on EU contract law. Our members are generally concerned at the genesis of this project namely that it is an academic project which has not had the benefit of consultation and input from business who would after all be the users of such an EU instrument. If a 4

5 proposed 28 th regime is to apply to any sector, the Commission needs to demonstrate that there is a real need for this in that sector and undertake a rigorous impact assessment. Introducing a sweeping instrument in the manner currently envisaged could result in more damage than harm in sectors where there is no need for it. The area in which our members operate is one such sector. 5

6 About you Please use this section to tell us about yourself Full name Job title or capacity in which you are responding to this Call for Evidence and Views (e.g. member of the public, etc.) General Counsel Christiane Valansot Date 25 November 2010 Company name/organisation (if applicable): Address Investment Management Association 65 Kingsway London Postcode If you would like us to acknowledge receipt of your response, please tick this box SW6 1LH x (please tick box) Address to which the acknowledgement should be sent, if different from above If you are a representative of a group, please tell us the name of the group and give a summary of the people or organisations that you represent. 6

7 Investment Management Association The IMA represents the asset management industry operating in the UK. Our Members include independent fund managers, the investment arms of retail banks, life insurers and investment banks, and the managers of occupational pension schemes. They are responsible for the management of 3.4 trillion of assets, which are invested on behalf of clients globally. These include authorised investment funds, institutional funds (e.g. pensions and life funds), private client accounts and a wide range of pooled investment vehicles. 7