The Existence of Transaction Costs as the Rationale for Maximum Harmonization of the European Common Sales Law
| Author | Mitja Kovač |
| Published date | 01 December 2013 |
| DOI | 10.1177/1023263X1302000405 |
| Date | 01 December 2013 |
| Subject Matter | Article |
534 20 MJ 4 (2013)
THE EXISTENCE OF TRANSACTIONCOSTS
AS THE RATIONALE FOR
MAXIMUMHARMONIZATION OF
THEEUROPEAN COMMON SALES LAW
M K*
ABSTRACT
In recent years, an extensive debate on the ne ed for harmonization of a European sales law
has evolved. e existing diversity of contrac t laws in the Member States has been perceived
as a barrier to trade and he nce as burdensome for the European internal market. Moreove r,
recent impact assessment studies suggest that this diversity is a source of substantial
transaction costs. e obser ved existence of such substantial transaction costs repres ents a
per se ove rwh elmin g arg umen t for the ad opti on of an opt iona l ins trum ent o n the E urop ean
Common Sales Law. e analysis and calculations of opportunity and transaction
costs that have been made provide seemingly unbiased, unprecedented, empirical and
a rmative answers. However, this paper chal lenges and critically analyses the results and
shows that it might simply be impossible to calculate eithe r the full transaction costs of legal
diversity or costs of uniformity. is analysis al so shows that: (1) calculations made by the
EU Commission rely heavily on subjective obser vation and selectively biased data; (2) that
the obtained results might be severely impaired and over conclusive; and nally (3) that
those results merely generate an anecdotal evidence of the possible volume of transaction
costs originating from that cont ract law’s di erences . In order to ob tain a more a rmative
answer on the actual amount of transaction costs, this paper provides a list of possible
re nements and suggests a set of new quantitative measures that would permit more
accurate cross- rm, cross- country and cross-industry comparison s.
Keywords: e ciency; harmonization; transaction costs; uniform European sales law;
European law
* University of Ljubljana, Faculty of Economics, Chair of Economic eory and Policy, Kardeljeva
ploscad 17, 1000 Ljubljana, e-mai l: mitja.kovac@ ef.uni-lj.si.
e Ex istence of Transaction C osts as the Rationa le for Maximum
Harmonizat ion of the European Common S ales Law
20 MJ 4 (2013) 535
§1. INTRODUCTION
Long lasting dis cussion on the need for the harmonization at European le vel of di erent
Member States’ sales laws,1 where the existing diversity of contract laws has been
perceived as an obstacle to trade in the European internal market,2 has nally, with
the concept of harmful transaction costs, gained a seemingly convincing, unbiased,
objective and economically i nspired piece of evidence – the rationale that should boost
the adoption of a harmonized Eu ropean sales law. e European Com mission observes
that the buying a nd selling of goods in the EU is governed by nat ional contract laws and
argues that the di erences between these laws make cross-border trade more complex
and costly than domestic trade.3 In order to remedy these di erences, the European
Commission has proposed an ex tensively discussed regulation on a Common Eu ropean
Sales Law.4 However, until now there has been no evidence of an a rmative answer to
the question of the actual amount of transaction costs that exist, and in November 2010
the European Comm ission awarded a public tender to IBF International Consulting for
a study supporting Impact Assessment (IA) preparation. A er extensive research, an
elaborated Impact Assessment report has been delivered, suggesting that di erences
in contract law between Member States do create a barrier to trade, as companies that
export into the new Member States face unnecessary transaction costs in the annual
amount of€1 billion. According to this report, the value of trade foregone each year
between Member States due to di erences in contract laws amounts to some tens of
billions of euros. Hence, the ex istence of ine cient tr ansaction costs is now advanced as
1 See for example P. Giliker, ‘Pre-contractua l Good Faith and the Common European Sales Law:
A Compromise too Far? ’, 1 European Review of Private Law 21 (2013), p.79–104; and A. Ogus,
‘Competition bet ween National Legal Sys tems: A Contribution of Economic A nalysis to Comparative
Law’, 2 Internationa l and Comparative Law Quarte rly 28 (1999), p.405–418.
2 On 11October 2011, the European Commi ssion published its proposa l for a regulation on a Com mon
European Sales Law (CESL). is marked the end of a process of consultat ion starti ng in 2001,
through whic h the Commission had soug ht to nd a means of improving t he quality and coherence
of existing EU law on contract law and put forward a proposal for an opt ional instr ument on
European Cont ract law as a means of facilitat ing cross-border trade, a nd increasing the protection
of consumers contrac ting across national bounda ries. Such work resulted in the six volume work,
Principles, De nitions and Model Rules of European Private Law: Dra Common Frame of
Reference: the resu lt of a research project, f unded by the Commi ssion, to produce a ‘toolbox’ to as sist
in the po ssible const ruction of a n optional i nstrument of European c ontract law. For a synthesis see:
E. Hondius, ‘Com mon European Sales Law: I f It Does Not Help, It Won’t Harm Either’, 1European
Review of Priva te Law 21 (2013), p.1–12.
3 See for example Europe an Commission Press release at: http://ec.europa.eu/justice/contr act/index_
en.htm.
4 Proposal for a Regulation of the European Parliament a nd of the Council on a Common European
Sales Law, COM (2011) 635 nal.
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