Contract law proposals spook small online traders

Small businesses are making a concerted effort to influence the wording of a draft EU regulation that could force online traders to comply with 27 different sets of national rules on contractual obligations.

Franco Frattini, the commissioner for justice, freedom and security, drafted proposals for the so-called Rome I regulation in 2005. The proposals are an attempt to update the Rome Convention, which was signed by member states in 1980.

According to small- and medium-sized enterprises (SMEs), Frattini’s proposals could reverse a clause on the application of country-of-destination rules contained in the Rome Convention. Exemptions from rules in the consumer’s country are granted in cases where no advertising is directed at citizens of the target country.

"The wording in Article five of the new draft is so vague it allows for a reversal of that," said Andrew Cave, a senior adviser at the London-based Federation of Small Businesses (FSB). An obligation to comply with 27 sets of laws could dissuade SMEs from engaging in online trading activities, worth billions of euros per year in the EU.

"From our perspective, you are taking money from small businesses, the EU growth creators, and putting it straight in the pockets of consumer lawyers," said Cave.

The FSB’s views are shared by German centre-right MEP Klaus-Heiner Lehne. "I propose to keep the wording of the old convention," he said, pointing out that Frattini’s rules had been proposed without an impact assessment to measure potential effects on the market.

Amendments to the Rome I proposals will be voted on in the European Parliament’s committee on legal affairs in June. A first reading agreement with the Council of Ministers is foreseen. Only the UK and Luxembourg have opposed the proposed rules.

Small businesses are making a concerted effort to influence the wording of a draft EU regulation that could force online traders to comply with 27 different sets of national rules on contractual obligations.