Harmonization of EU Contract Law adopted on the basis of Article 114 TFEU

Sammanfattning: Contract law has traditionally been regulated by national law which has raised certain problems in cross-border transactions caused by the divergences in domestic contract law among the Member States. Therefore, the diversity of national law has been increasing the challenges in practice for entrepreneurs which is causing a lack of legal certainty, uniformity and creates serious obstacles that hinder the well-functioning of the internal market. There are relevant obstacles created by contract law. Concerning the pre-contractual stage, the notion of contract, validity and autonomy. During the contractual period often discrepancies occurs between EU law with national law and inconveniences regarding that the freedom of contract is limited by each Member States' rules which are different between them. Lastly, in the post-contractual stage, there are often barriers connected with the remedies for non-performance and nonconformity; enforcement, jurisdiction, and applicable law. Accordingly, the rules and their scope are distinct in each Member States. This fact makes cross border transactions more expensive due to the obligation for the foreign undertakings to assume extra costs to get legal advice to ensure success in the cross border transactions. Furthermore, undertakings must assume the administrative cost in each jurisdiction involved in the transaction and their own jurisdiction in order to fulfill the different national requirements. In consideration of the multiples barriers created by contract law that hinder the internal market, it is important to analyze whether the Union can act on contract law in the name of the internal market. Thence, the treaties lay down that Articles 4(2)(a), confers a shared competence of the internal market which means that the Union and the Member States can adopt measures to pursue this objective. Article 26 defines the internal market as the area without internal frontiers in which the free movement of goods, persons, services, and capital is ensured in accordance with the provisions of the Treaties, and Articles 114 TFEU and 115 TFEU confer the Union of the legislative power to adopt measures to ensure the well-functioning of the internal market. The approximation of laws is a legal tool to help the market to function properly and is stated in Article 114 TFEU, which has a broad scope and also some constitutional limits to use it. Hence, firstly, Article 114 TFEU has a residual feature which means it is possible to use just if there are no other provisions available. Secondly, the approximation of the laws requires a multiplicity of national laws that hinders the well-functioning of the internal market. Thereby, the diversity itself is not a justification to use article 114 TFEU. It is a mandatory condition that the diversity of laws is causing obstacles for the internal market. Moreover, the approximation of laws refers to the harmonization of the existing national law which differs from the creation of new legal forms that fall in the scope of article 352 TFEU. Thirdly, the measure to be adopted must have as a main objective the well-functioning of the internal market. It is not enough that the measure improves incidentally the functioning of the internal market. In addition, the measure to enact must identify clearly the current obstacles and/or the future obstacles that interfere with the internal market however the proposed measure shall be addressed to remove those identified obstacles. Lastly, the measure adopted on the basis of Article 114 TFEU shall comply with the subsidiarity and proportionality principles. Other provisions that might be suitable as a legal basis of a future measure on contract law are Articles 81, 352, or 115 TFEU. A measure which uses as a legal basis Article 81 would be limited to cross border transactions excluding domestic transactions. In juxtaposition Article 352 TFEU might be is an appropriate legal basis as long as the measure to enact deal with the creation of news legal forms. Lastly, Article 115 TFEU is limited to enact directives and excluding the possibility of enacting regulations. Consequently, these articles have less probability to be used as a legal basis of a future harmonization of contract law due to its scope. It is clear that Article 114 TFEU for its broad scope is the most optional provision to be used as a legal basis for a future measure on EU contract law. Thus, firstly regarding its residual feature, a future measure on EU contract law can fulfill these criteria due to there is not competence stated in the treaties regarding contract law and there is no other provision to be applicable. Secondly, regarding the requirement that there shall be a multiplicity of national law that affects the internal market; undoubtedly contract law has been creating barriers that affect the functioning of the internal market. The numerous barriers created by contract law have been recognized by the Union. Thereby, an instrument to harmonize contract law can fulfill this requirement. Besides, the analysis of the future measure itself is required to determine if the measure is falling under the scope of harmonization (Article 114) or if it is falling under the scope of creation of a new legal form (Article 352 TFUE). Thirdly, a measure that uses as a legal basis Article 114 TFUE shall identify the obstacles and the measure shall be addressed to remove these obstacles. This requirement can be satisfied by the future instrument that harmonizes contract law, taking into account that in this long evolution of EU contract law the Union has identified obstacles created by national contract law and recognizes that are significant for the internal market. Accordingly, it is likely that the measure to enact can satisfy this condition. Lastly, regarding ensuring subsidiarity and proportionality principles, a future instrument on contract law is feasible to respect that subsidiarity and proportionality, on the ground that it is the Union who can achieve better the objectives pursued and it is unlikely that the measure goes beyond the strictly necessary to reach the aims. However, the election of a legal basis will depend on the content and the objectives of the future measure to harmonize contract law. Notwithstanding, Article 114 TFEU would be the appropriate legal basis. As long as the future measure on contract law satisfies the conditions to use Article 114 TFEU and observed the case law regarding the scope of Article 114 TFEU as a legal basis.