ESBA once again voiced the serious concerns of its members regarding the European Commission's proposal for a Regulation on the law applicable to contractual obligations in civil and commercial matters (Rome I). A draft report will be adopted in the European Parliament's Legal Affairs Committee on Tuesday 20th November but, as yet, the proposal has not undergone a full Impact Assessment by any of the EU Institutions.
In contrast to current arrangements, which give consumers the protection of their home country's mandatory laws when a business actively targets customers in that country, Article 5 of Rome I implies that this jurisdiction will now govern all contracts relating to business online, in their entirety. Any well run SME trading across borders online will therefore want to understand the legal systems in up to 27 EU Member States.
Speaking ahead of the Committee meeting, ESBA President, Tina Sommer said, "SMEs will simply not be able to afford the legal, translation and implementation fees necessary to trade across the EU. They will act as a deterrent to cross-border e-commerce." Indeed, in the absence of an Impact Assessment at EU level, The Federation of Small Businesses, an ESBA member, has estimated these to be at least EUR 15,000 per SME, per member state - in excess of EUR 240,000 for the whole EU Market.
Beyond the vast financial burdens, ESBA considers that "Rome I" will limit growth and jobs. In addition, completion of the Single Market (a Review of which is ironically scheduled to be published this week) will be hindered. Far from protecting consumers, individuals and SMEs will be disadvantaged. According to a Eurobarometer poll, only 29% of retailers today sell cross-border, using distance-selling methods. This will get worse if Article 5 of the Commission's proposal is applied, reducing choice in the EU.
"Whilst a series of amendments have been proposed, ESBA considers that the only way forward with this proposal is to take a step back," Tina Sommer added. "There is a lack of evidence to suggest that the current Rome Convention needs changing into a Regulation and our research has revealed Rome I's damaging implications. I again urge the Parliament to demonstrate its commitment to Better Regulation by calling for the proposal to be withdrawn until a full Impact Assessment is carried out".
