European contract law in business-to-business transactions · European contract law would replace the national contract law. • About four in ten surveyed enterprises (38%) favoured

Flash EB No320 – European Contract Law, B2B Analytical Report

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European Commission

Flash Eurobarometer

This survey was requested by DGJUSTICE: and coordinated by Directorate General Communication

This document does not represent the point of view of the European Commission. The interpretations and opinions contained in it are solely those of the authors.

European contract law in business-to-business transactions Analytical Report Report: 2011

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Flash EB Series #320

European contract law business-to-business

transactions

Conducted by The Gallup Organization, Hungary

upon the request of the DG JUSTICE-A-2: Civil law and contract law

Coordinated by Directorate-General

Communication

This document does not represent the point of view of the European Commission.

The interpretations and opinions contained in it are solely those of the authors.

THE GALLUP ORGANIZATION


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Table of Contents

Table of Contents.................................................................................................................................. 3

Introduction........................................................................................................................................... 4

Main findings ........................................................................................................................................ 6

1. Company background ....................................................................................................................... 8 1.1 Company characteristics ............................................................................................................. 8 1.2 Involvement in cross-border trade ............................................................................................ 13

2. Barriers to cross-border trade.......................................................................................................... 15 2.1 Contract law-related barriers..................................................................................................... 22 2.2 Contract law-related barriers blocking cross-border trade? ...................................................... 25

3. Contract law.................................................................................................................................... 27 3.1 Contract law currently applied.................................................................................................. 27 3.2 Evaluation of the possibility of a single European contract law............................................... 29 3.3. Anticipated effects of a single European contract law............................................................. 33

4. Annex tables.................................................................................................................................... 37

5. Survey details.................................................................................................................................. 90

6. Survey questionnaire....................................................................................................................... 93


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Introduction The exchange of goods and services is governed by contract law. Problems in relation to using, agreeing, interpreting and applying contracts in cross-border transactions may therefore affect the smooth functioning of the internal market. To date the European Commission has aimed to address these problems by adopting measures targeted to specific contracts or sectors. This sector-specific approach has, however, not been able to resolve a number of problems. The European Parliament and Council have consistently affirmed the need for greater coherence in order to ensure the proper functioning of the internal market. The European Commission has undertaken a series of initiatives aimed at increasing the overall coherence of European contract law. The present survey (Flash Eurobarometer #320 about Business attitudes towards cross-border business-to-business (B2B) transactions and the usefulness of a European contract law) was designed in order to obtain first-hand feedback on several issues affecting businesses involved in cross-border sales to other businesses. Another survey, conducted in parallel to this study, looked at businesses attitudes regarding European Contract Law in relation to sales to final customers (Flash Eurobarometer #321: Business attitudes towards cross-border business-to-consumer (B2C) transactions and the usefulness of a European contract law). This present survey covered the following themes:

• Background information on the surveyed businesses • Their involvement in cross-border B2B transactions • The importance of various barriers to cross-border B2B sales • How contract law is applied in current cross-border contracts • An assessment of the European contract law initiative, the preferred model of

businesses and the anticipated effect on cross-border transactions. In this Flash Eurobarometer survey (No. 320), a total of 6,475 managers (senior executives or, where available, legal officers) in the 27 EU Member States were interviewed by telephone, between the 14 and the 22th of January, 2011. Note that the survey only included enterprises that were either currently involved in cross-border business-to-business transactions (sales/purchase of goods or services) or were planning to do this in the future. For the sake of readability, the report refers to these enterprises as “surveyed enterprises”1. The sample was randomly selected in each country within certain activity sectors (NACE Rev 2.0):

• C: Manufacturing • G: Wholesale and retail trade: repair of motor vehicles, motorcycles and personal and

household goods • I: Accommodation and food service activities • J: Information and communication • K: Financial and insurance activities.

Seventy-nine percent of the surveyed companies were micro-enterprises (with 9 or fewer employees), 16% were small enterprises (10-49 employees), and 5% of the overall sample were medium to large enterprises (50+).

1 The majority of the samples indeed have traded cross-border, the proportion of those only “interested” in such transactions was 8% on the EU level.


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The targeted number of interviews varied dependent on the size of the country. In most EU countries, the targeted sample size was 250. However, in Cyprus, Luxembourg and Malta, the sample size was reduced to 150. Sampling weights with regard to all issued sample were calculated in each country (to correct for the deliberate over- and under-sampling in the various size segments) and transferred to the respondent units that satisfied the above mentioned screening criteria. In order to calculate EU27 averages, the county-level results were combined proportional to the size of the estimated number of enterprises in the specific sectors surveyed. Due to the low sample sizes at national level, readers should be aware that the Member State level results are subject to a sampling error ranging from about ± 6.2% (where the national sample size is 250) to ± 8.2% (in countries with a sample size of 150). The sub-setting of the samples in various “filtered” questions further increases this range. Sampling errors for the EU level data are, however, much smaller; i.e. less than 2% for the total EU sample (depending on the question). A technical note explaining the manner in which Gallup and its partner institutes conducted the survey is attached in the annex. It provides further details on the interviewing methods employed, the sampling techniques used and the statistical margins of error.


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Main findings Main barriers of cross-border transactions

• Enterprises are faced with various barriers that interfere with their ability to trade cross-border with other businesses. These barriers may be practical (such as language barriers or means of delivery) as well as legal, e.g. related to the contract law applied in such transactions. According to the reports of managers of the surveyed enterprises, issues related to diverse contract law environment were almost as important as some other issues that may be barriers to (a heavier) involvement in cross-border trade.

• While non-contract law-related problems (the most important being tax regulations with 38% and formal requirements like licensing with 36%) scored slightly higher than any of the contract law-related obstacles. 35% of respondents said that difficulties in finding out about the provisions of a foreign contract law was an obstacle which impacted upon their decision to sell cross-border, 31% considered it an obstacle to obtain legal advice on foreign contract law and 30% considered it difficult to agree on the applicable foreign contract law.

Contract law as a barrier to trading cross-border

• Among potential obstacles to cross-border trade, the survey specifically enquired about the extent (if any) to which each of the following contract law-related barriers had impacted their cross-border business-to-business trade:

1. Difficulty in agreeing on the applicable foreign contract law;

2. Difficulty in finding out about the provisions of a foreign contract law;

3. Problems in resolving cross-border conflicts, including costs of litigation abroad, and

4. Obtaining legal advice on foreign contract law

• About half (49%) of the companies surveyed in the EU indicated that at least one of the above listed potential barriers had at least some – even if minimal – impact on their cross-border activity. About one in six of the surveyed enterprises (16%) indicated that at least one of these factors had a big impact, another 16% felt at least some impact and 17% confirmed at least a minimal impact of any of the contract law-related problems tested.

• Contract law-related issues posed a barrier more or less equivalent to the practical difficulties of trading with other businesses cross-border (the latter being language problems, issues with cross-border delivery and after-sales maintenance). Tax regulations and the need to comply with formal requirements were less significant barriers of being involved in cross-border B2B transactions compared to contract law-related and practical difficulties.

• Companies only interested in cross-border trade are dissuaded from cross-border trade to a much greater extent than those already trading cross-border. 64% and 66% in this group said that contract law and practical obstacles had at least a minimal impact on their cross-border trade compared to 48% and 54% companies trading cross-border currently. In the segment of those only planning to participate in cross-border trade, heavy concerns related to contract law problems exceeded those related to practical obstacles (great barrier: 33% vs. 27% respectively).


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• Contract law-related concerns were in fact hindering businesses from cross-border trade, at least to some extent. Most companies (64%) stated that contract law-related barriers at least occasionally (i.e. “not very often”) deterred them from doing such business. Only 33% of those who reported an impact of contract law-related barriers indicated that such problems were not preventing them at all from engaging in cross-border transactions.

• The contract law-related problems typically occurred together with other obstacles companies were facing when trying to trade cross-border. Overall, only 3% of the surveyed enterprises cited contract law-related obstacles having at least a minimal impact on their cross-border trading, and reported at the same time no other problems interfering with their ability to carry out transactions with other EU countries.

European Contract Law

• The majority (60%) of the surveyed enterprises had the impression that their own national contract law applied to most of the transactions that they were engaged in across EU borders. About one in seven (14%) assumed that most transactions were under the jurisdiction of the other party’s national law.

• The proposition to adopt a single EU contract law that could replace or supplement national contract laws in cross-border transactions was strongly favoured by the surveyed enterprises. At the EU level, 7 in 10 companies would choose the jurisdiction of an EU contract law if it existed (30% were “very likely”, 40% just “likely” to use it). Overall, one in five companies indicated that they would be unlikely to choose the aforementioned single European contract law to govern their transactions (12% were “unlikely” and 8% “very unlikely”); 10% had no opinion.

• A majority of the surveyed enterprises (52%) preferred the situation where such a single European contract law would replace the national contract law.

• About four in ten surveyed enterprises (38%) favoured an optional EU contract law, 13% thought that such a law should be available for the companies as an option for their cross-border transactions, while 25% felt that the best solution would be an optional EU contract law equally applicable in domestic and cross-border transactions. One in 10 managers could not or would not answer this question.

• A third of the surveyed enterprises (35%) were positive about the anticipated effects of adopting a single European contract law. Roughly 1 in 10 (9%) at the EU level said that the option to choose the European contract law for business-to-business cross-border transactions would increase their related activities “a lot” and a further 25% estimated that this would increase their cross-border activities “a little”. Most enterprises, however, felt that the adoption of a single European contract law that could be selected to govern cross-border contracts would not change the volume of their cross-border activities (54%).

• The main beneficiaries of such an EU contract law would be those companies that were only considering becoming involved in cross-border trade: the majority (52%) of these enterprises assumed that as a result of such legislation their cross-border activities would increase (22% said it would increase a lot, 30% that it would increase a little).

Flash EB No320 –European Contract Law, B2B Analytical Report

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1. Company background

1.1 Company characteristics This survey interviewed enterprises2 that were either involved or interested in becoming involved in cross-border business-to-business transactions (see below) and active in certain economic sectors. Initially, we describe the companies at the EU level that are either active or interested in cross-border business-to-business trade. Clearly, cross-border trading with other businesses within the EU is not restricted to larger enterprises: the vast majority of companies that confirmed that they were currently involved or interested in becoming involved in cross-border business-to-business trade were micro-enterprises (79% on average across the EU, led by 89% in Malta, 88% in Finland and 87% in Portugal).

89 88 87 86 86 85 84 84 83 83 82 79 78 78 76 76 75 75 75 75 75 74 74 73 73 72 67 65

8 10 10 10 12 12 12 13 15 15 15 16 16 15 18 19 21 20 19 18 19 21 23 20 21 22 27 26

4 2 3 4 1 4 4 4 3 3 3 5 6 8 6 6 4 4 7 7 7 5 4 7 6 6 6 10

0

20

40

60

80

100

MT FI

PT

BG EL IT CY IE RO

BE SI

EU

27

NL

DE

ES

FR SE

EE

UK

AT

DK PL

SK

HU LV

CZ

LT

LU

1-9 10-49 50+

D1. How many employees do you have in your company? Base: all companies, % by country

Company size in terms of number of employees

The overall proportion of small enterprises (10-49 employees) in the weighted EU sample was 16%, with the medium and large segments being represented by 5% of the overall sample. Enterprises with at least 10 employees were most likely to be represented in the study’s sample in Luxembourg (36%) and Lithuania (33%). Those who were only interested in conducting cross-border B2B trade were more likely to be micro-enterprises (86%) and only 1% in this group had more than 50 employees – 13% were small enterprises (a country breakdown of this information is not available due to the low number of those only interested in such trade among the sampled enterprises).

2 screened from a total population of all enterprises in the following activity sectors: manufacturing, wholesale and retail trade, accommodation and food services, information and communication, and financial and insurance activities


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As for the turnover of the enterprises, the majority (54%) did not provide data for our interviewers. In order to assess more complete results, we added the missing turnover figure from the sample lists, where available (the sample lists themselves may or may not have contained turnover figures, and even in the countries where this is generally available, in many instances this information was not

provided), thereby decreasing the rate of ‘missing’ information to 45%. The chart shows the proportions of the various company sizes, by turnover, after the addition of this auxiliary data. Most enterprises interviewed – corresponding to the fact that they were predominantly micro-enterprises – had an annual turnover of less than 1 million euros (35%). Of the surveyed enterprises, 7% had a turnover of 1-2 million, 9% had a

turnover of 2-10 million euros and 5% reported a turnover greater than 10 million in 2009. Annex Table 4a shows this information by EU Member State; however, the most pronounced difference was seen in the actual availability of turnover information. Looking at those who did provide their 2009 turnover figures (or where it was available from the sampling frame), the distributions in each country were similar to the EU figure: most enterprises in each country belonged to the lowest income segment.

Largest product categories in companies’ sales

15

12

11

10

7

6

4

4

1

29

Products from the engineering sector, e.g. machinery

Clothing, footwear and accessories (including jewellery and cosmetics)

Food and drinks

Furniture, furnishings and decoration (including do-it-yourself goods and maintenance products)

Cars, motor vehicles and parts

Household appliances, electronic goods and information technology goods

Leisure goods (ex. books, audiovisual material, toys...)

Digital products

Financial and insurance services

Other goods

D3. Which of the following product categories is the largest in your sales?Base: all companies, % EU27

When asked about the dominant product categories offered, most surveyed enterprises indicated they were selling some kind of machinery (15%), 12% were mainly involved in the sales of clothing and footwear, 11% traded in food and drinks and 10% were selling furniture and decoration. Less than 1 in 10 companies in the sample were selling cars and related parts (7%), household appliances (6%), leisure goods (4%), digital products (4%) and just 1% of enterprises were primarily selling financial

Company size in terms of turnover

35

795

45

Up t o 1 m illio n euro

Mo re than 1 m illio n a nd up t o 2 million euro

Mo re than 2 m illio n euro a nd up to 10 m illio n euro

Mo re than 10 m illio n euro

DK /NA

D 2. What w as your co mpa ny’ s turno ver in 2 009 ?B ase: al l c ompanies , % EU27


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services. Many enterprises involved in cross-border trade specified another product category that they were primarily selling (29%). Only a quarter of the surveyed enterprises were mainly on the recipient side of business-to-business transactions (either domestic, or cross-border): 25% indicated that they were mainly buying products or services from other companies. The vast majority (75%) reported significant sales activity with business clients: 45% indicated that they were equally involved in buying and selling with business partners, and 30% indicated that they were predominantly selling to other enterprises. The compositions of the national samples showed major differences in this regard – those primarily active as buyers were most frequently seen in France (45%), while less than 1 in 10 enterprises indicated that they were mainly buying, in such relationships, in Hungary, Bulgaria and Latvia (8%-9%). The largest shares of enterprises that considered themselves as predominantly sellers in business-to-business transactions were seen in Italy (45%) and the Netherlands (40%). See Annex Table 6a for more details at a country level. Differences according to business characteristics were most pronounced in the category of those who mainly participated as buyers in cross-border transactions: the proportions of these were well below the average in the medium-to-large segment (13%), among those who only offered distance sales methods in their regular business (17%), and those who were trading with four or more countries (16%); see Annex Table 6b. Most enterprises offered in-premises sales for their clients (59%), but many were selling via distance methods: 39% offered the opportunity to buy products by phone or mail order, 36% sold online and 23% were involved in door-to-door selling or other out-of-premises sales (i.e. at trade fairs, markets, etc.). Overall, 65% of the surveyed enterprises were offering their products via some kind of out-of-premises (“distance”) sales channel: these were mainly seen in Estonia (84%), the UK (81%), Hungary (79%), Ireland and Spain (both 78%).

Are you mainly involved in B2B transactions as a buyer or a seller?

25

30

45

0

Ma inly as a buyer

Ma inly as a seller

E qual inv olvem ent as a buy er and a s a seller

DK /NA

D 4. Are you m ainly involved in b usiness-to-b usiness transactions as a b uyer o r a seller?

B ase: all compan ies, % EU27

Type of sales channels used

5 9

39

36

23

2

In-premises sales

Phone, po st and o ther m eans of dista nce co mm unica tion

Internet

Do orst ep selling a nd other out of prem ises channels

DK /NA

D5. Which o f the follow ing sales cha nnels do you use?B as e: all com panies, % EU27


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84 81 79 78 78 77 75 75 75 71 71 69 67 66 66 65 65 64 63 62 60 59 59 58 57 5448 48

0

20

40

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100E

E

UK

HU IE ES FI

PL

CZ

DK

NL SI

LT

DE

LU FR

EU

27

SK

LV

BE

AT

SE

MT

EL

PT

BG

RO CY IT

Note: proportion of companies that were using at least one ditance sales channel (incl. via the Internet, by phone, post and other means of distance communitcation, doorstep selling and other out-of-premises channels)

D5. Which of the following sales channels do you use?Base: all companies, % by country

Companies using “distance” sales channels

The least likely to offer off-premises sales opportunities to potential customers were Italian and Cypriot companies (both 48%) together with those interviewed in Romania (54%). Those who were currently trading cross-border were more likely (65%) than those who were only planning to do so (59%) to use distance sales channels. The direct relation between the propensity of cross-border trading and the availability of distance sales opportunities was further supported by the fact that those companies that traded with more countries (4+ countries) were significantly more likely to use off-premises sales methods (74%) compared to those who only traded with one other country (60%). Among the companies in the study sample, sales over the Internet were most frequently offered by British and Estonian firms (both 56%), but also by about half of the companies in the Czech Republic and the Netherlands (both 54%), Poland and Ireland (both 49%). On the other hand, only 11% in Cyprus and 15% in Greece were selling online.

56 56 54 5449 49 46 46 46 43 43 43 40 39 39 38 36 35 33 32 31 28 27 25 25 21

15 11

0

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40

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NL

PL IE FI

LT SI

BE

DK

LU

DE

HU SE

SK

EU

27

FR

AT

ES

BG

MT

RO PT

LV IT EL

CY


Companies’ sales channels: the Internet

The availability of online sales was not related closely to the size of the enterprises; however, small enterprises were more likely – 40% at the EU level – to offer such sales channels, compared to micro- and larger enterprises (35% in both categories offered Internet sales); see also Annex Table 7b.There was an evident relationship between selling over the Internet and the intensity of cross-border trade: those who made transactions with businesses in at least four other EU Member States were almost twice as likely (46%) to have Internet sales than those who were not currently trading cross-border (27%).


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Overall, the proportion of those enterprises that only offered in-premises sales remained below half of the interviewed businesses in most Member States; on average, 34% of those surveyed had no off-site sales. This peaked in Italy and Cyprus (both 51%), while it was very atypical in Estonia (16%), the UK (18%) and Hungary (19%).

51 5143 42 41 40 39 38 36 36 35 34 34 34 33 30 29 28 28 25 24 24 23 22 22 19 18 16

39

21 40

1826

1833

19

4532

4943

2940

25

5038 41 40 48 41

5241

52

2844

3749

10

2817

4032

4228

43

2033

16 2337

2642

2034 32 33 27 35

2537

26

5137

4635

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IT CY

RO PT

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FR SK

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27 LU

DE SI

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CZ FI

ES IE HU

UK

EE

In-premises sales only Distance sales methods only Both


Type of sales channels used

The proportion of companies that were only offering distance sales channels was high: 41% at the EU level only offered out-of-premises sales options to their customers. The countries where the proportion of such companies was the highest were the Czech Republic (52%), Germany (50%), Latvia, Estonia (both 49%) and Denmark (48%).


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1.2 Involvement in cross-border trade Predominantly, the surveyed enterprises had previous experience in either buying or selling cross-border: 92% were currently trading cross-border, while 8% indicated they were interested in trading with companies from other EU Member States. These proportions varied slightly between countries, but the samples primarily consisted of enterprises with current cross-border trading experience.

Involvement in cross-border trade

99 98 98 98 97 96 96 96 96 95 95 95 95 93 93 93 92 90 90 88 86 85 84 84 84 8274 67

1 2 2 2 3 4 4 4 5 5 5 5 5 7 7 7 8 10 10 12 14 15 16 16 16 1827 33

0

20

40

60

80

100

DE

LU AT IE SE

SK

UK

FR

NL

PT IT DK LT

BE SI

CZ

EU

27

EL

MT

PL

EE

HU LV FI

ES

BG CY

RO

Currently involved Interested in being involved

D02. Which of the following statements correspond to your situation?Base: all companies, % by country

The countries where companies were the least likely to be actually involved in selling or buying cross-border were Romania (67%), Cyprus (74%) and Bulgaria (82%). Those companies that were only interested in cross-border sales were most often found among micro-enterprises and those who only had in-premises sales; generally, however, the picture was similar to the EU average in each business segment (see Annex Table 1b. for details). As for the number of countries that the sampled companies were trading with, about a third (34%) traded ‘currently’ with enterprises (or final consumers) in two or three Member States, 32% were trading with at least four countries and 23% were just serving / making purchases from one other Member State. About 1 in 15 (8%) were only trading domestically (but were still interested in cross-border transactions). Trading with more than three countries was most typical of German enterprises: 46% said they were doing this. Swedish

Number of EU countries where companies make cross-border transactions

8

23

34

32

3

Do m est ic trade only

1

2 - 3

4 +

DK /NA

D 6. Besid es [COU NTRY], in ho w m any other EU count ries d o you currently m ake cross-b order transactio ns?

B ase: all com pan ies, % EU27


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(43%), Danish and Luxembourgish (both 40%) and Austrian and British (both 39%) companies were also well above the average in this regard. On the other hand, in Portugal for example, a rather large number of enterprises indicated that they only traded with one other country (43%) and the proportion of such companies was also fairly high in Italy, Ireland (both 30%).

46 43 40 40 39 39 38 37 34 34 34 33 33 33 32 31 30 30 30 27 25 25 23 23 21 19 19 18

33 33 3442 42

31 2739 38 43 33 31 36 36 34 40 33 41

45

28 34 40 34 31 32 34 3729

17 17 1914 15

19 28 1023 15 30

2323 25 23

2020

25 15

26 2423

3024

43

2026

20

0

20

40

60

80

100

DE

SE

DK

LU AT

UK

NL

EE

FR SI

IE PL

LT

CZ

EU

27

BE FI

SK

EL

ES

HU

MT IT LV

PT

CY

BG

RO

4 + 2 - 3 1

D6. Besides [COUNTRY], in how many other EU countries do you currently make cross-border transactions?Base: all companies, % by country

Number of EU countries where companies make cross-border transactions

Number of countries:

Trading with many (at least four) Member States was mainly characteristic of medium and large enterprises (62% of those with at least 50 employees dealt with businesses from at least four other EU countries), and those offering online sales were also significantly more likely than the average to trade with businesses in more than three Member States (41%, see Annex Table 8b).


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2. Barriers to cross-border trade Enterprises are faced with various barriers that interfere with their ability to trade cross-border with other businesses. These barriers may be practical (such as language barriers, after-sales services or means of delivery) as well as legal e.g. related to the contract law applied in such transactions. In order to explore the extent to which each of these factors plays a role in preventing businesses from trading with one another across national borders within the EU, the survey asked the following question:

What impact do the following potential obstacles have on your decision to sell / purchase across-border to / from businesses from other EU countries? (Large impact, some impact, a minimal impact, no impact);

A - Language (communication problems, translating documents, etc.) B - Difficulty in agreeing on the foreign applicable contract law C - Difficulty in finding out about the provisions of a foreign contract law D - Cultural differences E - Tax regulations F - Formal requirements e.g. licensing, registration procedures G- Problems in resolving cross-border conflicts, including costs of litigation abroad H - Obtaining legal advice on foreign contract law I - Problems with cross-border delivery J- After-sales maintenance abroad

Items B, C, G and H in the above list were directly related to the contract law applied in such transactions. Items A, I and J will henceforth be referred to as “practical obstacles”.

Impact of potential obstacles on companies’ decision to sell or purchase cross-border

11

10

8

6

5

9

6

7

5

2

4

12

12

12

10

11

10

10

9

10

6

3

15

14

15

18

18

13

15

14

15

17

5

58

58

57

63

63

60

62

61

63

72

62

4

6

8

2

3

9

8

9

8

3

27

Tax regulations

Formal requirements e.g. licensing, registration procedures

Difficulty in finding out about the provisions of a foreigncontract law

Language (communication problems, translatingdocuments, etc.)

Problems with cross-border delivery

Problems in resolving cross-border conflicts, includingcosts of litigation abroad

Obtaining legal advice on foreign contract law

After-sales maintenance abroad

Difficulty in agreeing on the foreign applicable contract law

Cultural differences

Other

Large impact Some impact Minimal impact No impact DK/NA

Q2. What impact do the following potential obstacles have on your decision to sell / purchase across border to / from businesses from other EU countries?

Base: all companies, % EU27Graph sorted by ‘any impact’


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A number of managers identified problems with several of the listed barriers; all the listed obstacles had an impact ranking in the same order of magnitude: from 38% for tax regulations to 25% for the lowest rank obstacle- cultural differences. Very few managers added spontaneously “other” obstacles to the proposed list, which may indicate that the most important systemic obstacles were covered by the former items of the questionnaire. Most managers indicated tax regulations as a barrier (38% reported at least a minimal impact). Issues with formal requirements of entering a foreign market (registration, licensing, etc.) was the second most widespread concern (at least a minimal impact, 36%. The third largest problem was obtaining information about a foreign contract law applicable to their transactions (35% said that this had an at least minimal impact on their trading activity). Language problems affected such transactions for 34% of companies. The same applies to problems with cross-border channels of delivery. About 3 in 10 respondents felt that resolving cross-border conflicts, obtaining legal advice regarding foreign contract law, after-sales maintenance issues, and difficulties in agreeing on the applicable foreign law had some impact on their cross-border trading. Cultural differences within the EU were considered to be the least troublesome; only 25% felt that this had at least a minimal impact on their operations. (See also Annex Tables 10-19). Overall, these factors affected the cross-border activities – at least to some extent – of most of the surveyed enterprises. At the EU level, 80% of companies confirmed that at least one of the proposed obstacles had at least a minimal impact on their trading with businesses in other EU countries. The least likely to say this were managers of Slovak (53%), Hungarian (65%) and Spanish (67%) companies, but even in these countries the clear majority felt that at least one of the listed barriers adversely affected their cross-border trade.

44

20 21 16 1327

11 18 13 16 12 11 10 13 16 1319

12 18 14 13 513

20 14 133 6

17

1620

2019

14

1614

1216 21 18 18 17 11 15

1015

1213 19

2013

1314 11

11 11

14

23 1315 18

1024 18 25 17

15 18 20 16 18 17 14 16 13 17 11 18 17 9 12 1519 15

2541 46 49 50 50 50 50 50 51 51 52 53 53 54 55 56 56 56 57 57 57 58 59 60 61 67 68

0

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27 DK LT

SE NL

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LU FR LV

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A great barrier A medium barrier A small barrier An unimportant barrier


Categories were created on the basis of the following obstacles: ’Difficulty in agreeing on the foreign applicable contract law’ or’ Difficulty in finding out about the provisions of a foreign contract law’ or ’Problems in resolving cross-border conflicts, including

costs of litigation abroad’ or ’Obtaining legal advice on foreign contract law’Base: all companies, % by country

Contract law in cross-border trade

As mentioned, four items the survey asked about were related to problems with the use of contract law sanctioning cross-border transactions. About half, 49% of the companies surveyed in the EU


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indicated that at least one of these four items had at least some – even if minimal – impact on their cross-border activity3. About one in six of the surveyed enterprises (16%) indicated that at least one of the factors was having a big impact, another 16% felt at least some impact and 17% confirmed at least a minimal impact of one of the contract law-related problems tested. However, the majority, 51%, claimed that none of these obstacles had any impact on their operations. Greek companies were the most likely to indicate that contract law-related barriers affected their cross-border activity to any extent: 75% of Greek enterprises and at least half of the enterprises in Poland (59%), Slovenia (54%), Germany (51%), Portugal, Cyprus, Ireland, Belgium and the UK (50% each) indicated that at least one of these barriers had an impact on their inter-EU business-to-business trading. On the other hand, 68% of companies in Slovakia, 67% in Malta and 61% in Spain, felt that contract law-related difficulties having no impact at all. As the graph below clarifies, contract law-related issues posed a barrier more or less equivalent to practical difficulties of trading with other businesses cross-border (the latter being language problems, issues with cross-border delivery and after-sales maintenance). The surveyed enterprises surveyed felt that the two types of obstacles were problematic to similar degrees, however practical concerns were slightly more often mentioned than those related to contract law (54% vs. 48% among those who were currently trading indicated that these had at least a minimal impact, respectively).

Barriers to cross-border trade

14

13

10

9

16

19

11

12

18

22

15

14

52

46

63

65

Contract law related obstacles

Practical obstacles

Tax regulations

Formal requirements


Base: all companies, % EU27

Currently involved incross-border trade

Interested in being involvedin cross-border trade

Contract law related obstaclesA great barrier A medium barrier A small barrier An unimportant barrier

33

27

18

19

18

23

19

18

13

16

17

17

37

34

46

47

Those who were only considering involvement in such transactions were more likely than those who were currently trading to say that these potential barriers had at least a minimal impact on their decision to sell/purchase cross-borders, in each distinct dimension tested. In other words: companies only interested in cross-border trade were dissuaded from cross-border trade to a much greater extent than those already trading cross-border. 64% and 66% in this group said that contract law and 3 Note that for this analysis the answer categories were recorded as follows: great barrier: At least one of the contract law-related obstacles was considered to have a big impact medium barrier: At least one of the obstacles was considered to have some impact (but none had a big impact) small barrier: At least one of the obstacles was considered to have a minimal impact (but none had a big or some impact) unimportant barrier: None of the obstacles in the category had even a minimal impact.


page 18

practical obstacles had at least a minimal impact on their cross-border trade compared to 48% and 54% companies trading cross-border currently. In the segment of those only planning to participate in cross-border trade, heavy concerns related to contract law problems exceeded those related to practical obstacles (great barrier: 33% vs. 27% respectively). These companies were roughly twice as likely as companies already engaged in cross-border trade to see each of the four categories as great barriers to trade. Compared to contract law-related and practical difficulties, tax regulations and the need to comply with formal requirements were less significant barriers to being involved in cross-border B2B transaction. This was true regardless of whether the company was already trading or was only planning on it4. It must also be noted that contract law-related problems were typically not standalone issues – they typically occurred together with other obstacles companies faced when trying to trade cross-border. Overall, only 3% of the surveyed enterprises cited contract law-related obstacles having at least a minimal impact on their cross-border trading, and at the same time reported no other problems interfering with their ability to carry out transactions with other EU countries. When looking at the relative burden imposed by contract law and practical difficulties by Member State, the opinions are somewhat more mixed. In most countries, the proportion of those affected by contract law problems was slightly lower than those who were affected by practical difficulties. However in a number of countries practical and contract law-related issues had affected (at least to some extent) the same proportion of businesses (in the Czech Republic, Cyprus, Latvia, Portugal, Romania, Slovenia and Slovakia results were within the margin of error). In Greece and Hungary contract law-related problems were considered more likely to affect cross-border trade than practical difficulties (the difference was 4 percentage points in Greece and 5 percentage points in Hungary). In all countries, tax regulations and the need to comply with formal requirements were less significant barriers of being involved in cross-border B2B transactions compared to contract law-related and practical difficulties. (% of "at least a small barrier")

Contract law-related obstacles

Practical obstacles Tax regulations

Formal requirements

EU27 49 55 38 37 Belgium 50 54 35 38 Bulgaria 44 50 39 37 Czech Rep. 46 46 29 31 Denmark 49 53 31 40 Germany 51 56 36 38 Estonia 43 50 35 31 Greece 75 71 55 54 Spain 39 43 28 23 France 44 53 32 28

4 Note that tax regulations and formal requirements were presented as individual items in the questionnaire but these are likely to consist of a number of issues (e.g. indirect taxes, direct taxes, needs to familiarise with tax regulations, need to adapt to different reporting requirements etc.) From a methodological point of view, it is possible that the aggregated impact of each of these – would these have been asked separately – could have been higher than the currently recorded value.


page 19

(% of "at least a small barrier")

Contract law-related obstacles

Practical obstacles Tax regulations

Formal requirements

Ireland 50 60 37 40 Italy 43 53 35 30 Cyprus 50 51 33 24 Latvia 43 42 44 31 Lithuania 48 57 39 42 Luxembourg 44 49 33 32 Hungary 40 35 29 31 Malta 33 40 23 30 Netherlands 47 51 35 30 Austria 45 50 35 32 Poland 59 66 46 48 Portugal 50 51 40 34 Romania 41 43 41 40 Slovenia 54 56 40 45 Slovakia 32 32 22 23 Finland 42 54 29 29 Sweden 47 57 29 39 United Kingdom 50 60 45 43 As the table below illustrates, the proportion of those who felt that some of the contract law-related issues affected them was lower across segments than the proportion of those who felt that some of the practical difficulties applied. Tax regulations and formal requirements, as standalone burdens, were less troublesome for businesses in each segment.

(% of "at least a small barrier") Contract law-

related obstacles Practical obstacles

Tax regulations

Formal requirements

NUMBER OF PERSONS EMPLOYED 1-9 48 54 37 35 10-49 55 57 42 41 50+ 58 65 43 45

INVOLVEMENT IN CROSS-BORDER TRADE Currently involved 48 54 37 35 Interested in being involved 63 66 54 53

SALES CHANNELS In-premises sales only 46 51 34 33 Distance sales methods only 50 56 38 37 Both 52 59 42 41

CROSS-BORDER TRANSACTIONS With one other country 41 46 32 28 With 2-3 other countries 48 58 38 36 With 4+ other countries 55 57 39 39


page 20

ONLINE/E-COMMERCE Yes 51 61 40 41 No 48 52 37 34

INVOLVED IN B2B TRANSACTIONS AS A BUYER OR A SELLER Mainly as a buyer 48 55 38 33 Mainly as a seller 46 54 36 35 Equal involvement as a buyer and as a seller 52 56 39 40

Overall, there were only small differences between business segments when it came to the contract law problems in cross-border trade. Roughly half of the companies (46%-58%) in each segment felt that the problems related to different contract laws in each Member State posed difficulties at least to a minimal extent. The overall picture rather homogeneously suggests that most enterprises were somewhat affected by these, but they were not often considered as great barriers. The only exceptions were, as discussed above, companies that indicated interest in cross-border trade but reported no current activity. Here respondents were more concerned about contract law-related issues than the average: 33% of companies in this group indicated that these issues would have a “big impact” on their cross-border activities. The least concerned about contract law issues were companies that only offered in-premises sales (i.e. no cross-border sales: 54% in this group felt that contract law-related problems had either no impact on their cross-border transactions) and those who traded with only one other country (59%). Conversely, those who were involved in distance sales and those who traded with more countries were more concerned about these issues.

CONTRACT LAW-RELATED OBSTACLES

a gr

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a m

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a sm

all b

arrie

r

an u

nim

porta

nt

barr

ier

NUMBER OF PERSONS EMPLOYED 1-9 16 15 17 52 10-49 18 18 19 45 50+ 9 27 22 42

INVOLVEMENT IN CROSS-BORDER TRADE Currently involved 14 16 18 52 Interested in being involved 33 18 13 37

SALES CHANNELS In-premises sales only 14 15 17 54 Distance sales methods only 16 17 18 50 Both 19 17 16 48

CROSS-BORDER TRANSACTIONS With one other country 12 13 16 59 With 2-3 other countries 15 18 16 52 With 4+ other countries 17 17 21 45

ONLINE/E-COMMERCE Yes 18 16 17 49 No 15 16 17 52

INVOLVED IN B2B TRANSACTIONS AS A BUYER OR A SELLER

Mainly as a buyer 14 16 18 52 Mainly as a seller 16 16 15 54 Equal involvement as a buyer and as a seller

17 17 19 48


page 21

Impact of potential obstacles on companies’ decision to sell or purchase cross-border

Tax regulations

Formal requirements e.g. licensing, registration procedures

Difficulty in finding out about the provisions of a foreigncontract law

Language (communication problems, translatingdocuments, etc.)

Problems with cross-border delivery

Problems in resolving cross-border conflicts, includingcosts of litigation abroad

Obtaining legal advice on foreign contract law

After-sales maintenance abroad

Difficulty in agreeing on the foreign applicable contract law

Cultural differences

Other



Base: all companies, % EU27Graph sorted by ‘any impact’

10

10

8

5

5

8

6

7

5

2

4

11

12

12

10

10

9

10

9

9

6

3

15

14

15

18

18

13

14

14

15

17

5

60

60

59

65

65

62

63

62

65

73

63

4

5

7

2

2

8

7

8

7

2

26

18

19

18

17

9

20

15

12

14

3

2

19

18

16

13

20

14

15

17

19

8

1

17

17

17

22

17

14

16

14

12

21

6

33

34

32

39

40

35

38

37

38

57

51

13

13

17

10

14

17

16

20

18

11

41

Currently involved incross-border trade

Interested in being involvedin cross-border trade

A more detailed look at the segment of companies only considering to be involved in cross-border B2B trade compared to current traders reveals that companies interested in cross-border trade are significantly more affected by all the listed obstacles than the current traders segment. Most of the obstacles are also 2-3 times more likely to create a large impact for companies interested in cross-border trade than for current traders. The barrier that had the largest impact for companies interested in cross-border trade was anticipated problems with resolving cross-border conflicts, which underlines a significant disparity between the anticipations of companies only interested (a large impact for 20%), and the experiences of those who were already involved in cross-border trade (a large impact for 8%). The rank order of the problems in two groups is however very similar to the overall picture (dominated by those who were currently trading, who made up the majority of the samples in each Member State, see section 1.1). The only individual concern where those only planning to be involved in cross-border trade were less concerned (relatively speaking, compared to other issues) than current traders was the aspect of cross-border delivery which ranked the second lowest in this segment. Another important observation is that only a minority (i.e. less than 50%) attributed no importance with regard to each but one of the individual barriers (the exception was “cultural differences” which even among those without a direct experience in cross-border trade with other businesses was dismissed as unimportant by the majority, 57%). The proportion of those who lacked an opinion on this question (considering all items) was systematically higher among those who were not currently involved in cross-border B2B trade.


page 22

2.1 Contract law-related barriers This section looks at the four contract law-related barriers tested by the survey individually. Difficulty with agreeing on applicable contract law (which is subject of agreement among parties in B2B transactions) had the greatest impact on cross-border operations of enterprises surveyed in Greece: 16% in this country indicated that this problem had a large impact on their cross-border operations, and 44% indicated at least minimal impact. The proportion of those who were at least minimally burdened by this aspect was relatively high in Poland (38%), the UK (35%) and Slovenia (35%).

166 6 5 6 8 5 3 2 3 5 5 4 6 5 3 3 3 2 7 4 3

12 7 5 2 3 0

14

12 715

611

107 10 9

9 10 10 7 9 9 5 10 77 9

6

4 97

5 4 3

14

2023

1521

1315 20 18 17 15 13 13 14 12 13 17 11 14 10 10 14

6 6 9 13 84

44 5351 57

6861 63 63 66 61 65 67 64 64

51

70 67 72 74 72 7261 66 60 69

7980

62

12 9 13 87 8 7 5 10 6 5 9 10

24

6 9 5 3 6 516 12 18

112 5

31

0

20

40

60

80

100

EL

PL

UK SI

LU

BE

EU

27

IE IT CZ FI

DE

EE

NL

BG

DK LT

ES

PT

FR

AT

SE

CY

RO LV

SK

HU

MT



Base: all companies, % by countryGraph sorted by ‘any impact’

Impact of potential obstacles on companies’ decision to sell or purchase cross-borderDifficulty in agreeing on the foreign applicable contract law

The most likely to state that such problems impacted their cross-border trading (even if minimally) were enterprises of at least medium size (44%), those who did not have direct trading experience (but were interested in it). In the latter group the proportion of those who felt this was a great barrier reached 14% and only 38% said it had no impact (18% had no opinion, see Annex table 11b.) Difficulties in finding information about provisions of foreign contract law was once again a widespread problem in Greece (26% indicated that this had a big impact on their operations, and 64% in this country reported at least a minimal impact), and above average results were detected in Poland (where 42% had problems with clarifying the terms of foreign contract law), Slovenia (42%) and Germany (38%).


page 23

26

10 9 9 7 614 8 10 3 6 8 6 4 7 4 7 8 5 9 3

12 11 6 9 4 3 2

18

12 19 14 11 10

1312 10

16 11 10 10 1415

9 710 11 7 10

9 78

911

6 4

20

20 14 1518 20

9 15 14 15 16 14 15 13 9 17 17 11 13 13 157 10 12 8 10

1311

28

50 52 56 6048

60 57 57 63 64 64 5849

62 60 61 68 6671

6554 50

68 67 65 73

50

8 8 7 6 416

5 8 9 4 4 4 1120

7 9 8 4 50

719 23

6 7 10 5

34

0

20

40

60

80

100

EL

PL SI

DE

DK

UK

CY

EU

27

BE IT PT

AT

LT

SE

EE IE NL

HU FI

LU CZ

RO

BG ES

FR

LV

SK

MT




Impact of potential obstacles on companies’ decision to sell or purchase cross-borderDifficulty in finding out about the provisions of a foreign contract law

As to enterprise segments, the opinions are fairly similar to those outlined in the previous instance: medium-to-large enterprises (44%) but especially those who were only interested in being involved in cross-border trade (51%) felt any impact of this potential barrier. On the other hand, those who were trading with one other country only were least affected (65% claimed no impact). See Annex table 12b for more details.

25

10 10 13 7 914 9 4 6 3 7

176 9 7 10 4 8 1

8 11 5 4 6 8 4 2

15

7 911

10 4

1010

10 8 14 9

5

1010 9 7

57

95

79 8 5 5 4 5

11

19 15 11 15 187 13 16 17 13 14 7 13 10 11 9

16 11 14 115

7 8 8 5 9 10

3955 59 63 68

5158 60 63 62 64 63 64 68 67

61 6754

6652

6954 62

77 71

45

6578

10 9 73 0

1811 9 6 7 6 7 7

3 513 7

219

248

22 184 10

37

185

0

20

40

60

80

100

EL

PL

BE

FR

LU

UK SI

EU

27

DK IE IT AT

CY

PT

DE

NL

CZ

SE ES

MT FI

RO LT

HU EE

BG LV

SK




Impact of potential obstacles on companies’ decision to sell or purchase cross-borderProblems in resolving cross-border conflicts, including costs of litigation abroad

Costs and other problems related to cross-border litigations impacted the cross-border B2B trading activities of Greek companies the most. 25% of the enterprises surveyed in Greece felt that this had a big impact on their cross-border activities, and 51% felt at least minimal impact. Polish (36%), Belgian and French (both 34%5) enterprises also expressed such concerns more frequently than firms in other Member States. 5 note that for France the figures nominally add up to 35% on the chart, due to rounding


page 24

As to enterprise segments, those who were not currently involved in cross-border trade (only interested: 48%) and those of at least medium size (40%) were most likely to report an impact of this burden. Those trading with one other country only were the least concerned (68% felt no impact, see Annex table 16b.). Greek managers were most likely to express grave (as well as “some”) concerns about the costs of legal advice related to national differences in contract law. 18% felt this had been a great barrier for them and over half (52%) felt that this burden impacted their respective activities at least minimally. Polish (41%), British and Slovenian (both 39%) managers were also more concerned about this problem (indicating that it had at least a minimal impact) than their colleagues from other Member States.

187 5 7 4 9 7 7 6 6 5 7 10 6 6 5

102 7 4 2 3

9 4 4 5 1 2

18

1310

158

11 13 11 10 13 10 812

10 12 1110

98

7 8 75

7 8 73 3

16

21 24 1721

13 13 14 15 11 14 157 14 11 12 8

15 11 14 15 13 9 11 10 913 11

3852

47 54 59 59 65 59 62 6270

5060 56

66 6954 56

66 64 70 70 71 70 73 69

47

80

10 8 14 8 9 83 9 8 9

2110 15

6 318 18

8 11 6 7 7 8 5 10

35

5

0

20

40

60

80

100

EL

PL

UK SI IE BE

PT

NL

EU

27

EE

LU

BG CY

LT

DK

DE

RO SE ES

CZ IT AT

FR FI

HU LV

MT

SK




Impact of potential obstacles on companies’ decision to sell or purchase cross-borderObtaining legal advice on foreign contract law

According to company segments the previously described pattern prevails: those only interested in cross-border activities and those employing at least 50 people were the most likely to feel an impact (46% and 40%, respectively), and those trading with only one other country were the least likely to be affected (70%). (See Annex table 17b.)


page 25

2.2 Contract law-related barriers blocking cross-border trade? Focusing on enterprises that claimed to be affected by one or more of the contract law-related potential barriers of international trade within the EU, the majority (64%) claimed that such barriers at least occasionally deterred them from doing such business. Only 3% of these companies said that these problems completely deterred them from trading cross-border (“always”). 12% indicated that such concerns significantly decreased their cross-border activity (that they were “often” deterred from cross-border activities), 49% said these obstacles occasionally (i.e. not very often) discouraged them from cross-border trade, while 33% said that such problems were not preventing them at all from engaging in cross-border transactions. Micro-enterprises, affected by issues related to cross-border contract law, were more likely to indicate that such problems did prevent them from doing such business: 16% in this segment reported that they were always or frequently deterred from cross-border activities for such reasons, as opposed to 11% among small, and 6% among medium and large firms. Nevertheless, across all segments the most widespread opinion was that it had happened occasionally (“not very often”). Heavier involvement in cross-border business increased the likelihood that companies had infrequent problems rather than no problems at all: those who were trading with at least four other countries were more likely to indicate that such problems did occasionally (“not very often”) deter them from doing cross-border business (56%) compared to those who were only trading with one other country (43%), while members of the latter group were more likely to state that such issues never prevented them from doing business (38% versus 31% among those who traded with more than four countries). It should be remembered that these were only those companies that already reported any problems related to contract law in their within-EU business-to-business transactions, for more details see Annex Table 21b.

How often did these obstacles deter you from conducting cross-border transactions?

312

49

33

3

A lway s

Oft en

No t very o ften

Nev er

DK /NA

Q3. You said t hat so me issues relat ing to contract law have an im pact o n your cross-bo rd er business-to -business

transactio ns. How often d id these ob sta cles d eter you from conducting cross-bo rd er tra nsactions?

B as e: com panies stated that is sues re lating to contract law h ave an im pac t on their c ross-border B2B tr ans ac tions, % E U27


page 26

Results also varied somewhat between Member States, primarily in the proportion to which managers indicated that such barriers caused minor disturbances (that they were “not very often” deterred from doing business cross-border due to these issues), or that these issues did not affect their cross-border operations at all. In all countries, at least 43% of those reported problems related to varying contract law across countries were at least occasionally deterred from conducting cross-border transactions due to the such obstacles. These obstacles had the most significant effect in Luxembourg, Estonia, Italy, Greece and Poland where more than 70% were deterred (at least occasionally from cross-border trade) due to this reason.

2 1 3 3 1 1 016

3 4 5 4 2 2 1 0 6 0 1 1 2 4 0 0 0 0 4 1

189

19 1912 18 15

17

12 917

4 9 6 3 76 14

5 610 7

6 4 8 6 2 2

6873 50 50

57 51 5133

49 5041

53 48 51 54 51 4742

50 48 42 42 44 45 41 41 39 41

10 1527 23 27 29 32 33 33 35 31 38 36 33 42 38 41 43 40 43 45 43 47 44 45 48 51 52

2 3 2 6 3 2 2 2 3 1 5 0 5 70 4 2 1 4 2 1 5 3 7 6 5 3 3

0

20

40

60

80

100

LU

EE IT EL

PL

BE

AT

CY

EU

27

DE

ES

MT

HU LT IE CZ

UK PT

DK SI

FR

LV

NL

BG

RO SE

SK FI

Always Often Not very often Never DK/NA

Q3. You said that some issues relating to contract law have an impact on your cross-border business-to-businesstransactions. How often did these obstacles deter you from conducting cross-border transactions?

Base: companies stated that issues relating to contract law have an impact on their cross-border B2B transactions, % by countryGraph sorted by ‘blocking barrier to any extent’

How often did contract-law related obstacles deter you from conducting cross-border transactions?


page 27

3. Contract law As the above analysis shows, contract law is one component in the set of barriers that enterprises are faced with when engaging in cross-border trade with other companies. This section discusses the current contract law that typically governs the transactions of enterprises engaged in within-EU cross-border transactions with other businesses, the enterprises’ opinion about contact law and the preferred model of a single European contract law; in addition, it reviews their expectations regarding the catalysing effect of such a regulatory environment on cross-border business activities in general. Key results in brief: The vast majority of the surveyed enterprises surveyed believed that their own national laws governed their cross-border contracts. Nevertheless, businesses were strongly in favour of introducing a single EU instrument, especially if it completely eliminated national variations in this regard. Some surveyed enterprises also expected that the possibility of choosing a single European contract law would probably facilitate their cross-border activities.

3.1 Contract law currently applied Cross-border business transactions are typically governed by the national contract law of the seller or buyer. When asked, 60% of managers thought that the transactions they conducted with other businesses located elsewhere in the EU were most often governed by their own national contract law. About one in seven (14%) assumed that most transactions were under the jurisdiction of the other party’s national law, while a mere 1% thought that the transactions that they were mostly involved in were governed by the contract law of a third country. Roughly 1 in 10 (9%) of surveyed enterprises indicated that some international conventions or the UNIDROIT principles were applicable to most transactions that they were involved with. Importantly, almost one in five respondents could not meaningfully answer this question: 17% said they could not or would not answer this question. The results across business segments were fairly balanced at the EU level, as Annex Table 9b shows. The most striking – but nevertheless not surprising – difference was that a very high proportion of those who were not currently trading cross-border could not answer the question (42%). The majority in each segment had the impression that their own national contract law applied to most of the transactions that they were engaged in across EU borders; those companies that were typically

Contract law that most often governs companies B2B cross-border transactions in the EU

6014

1

9

17The nat ional contract law o f [C OUNTR Y]

The nat ional contract law o f t he co untry whe re the other party is based

The nat ional contract law o f a t hird country

Co nt ra ct laws no t relat ed to any particular country e.g. int erna tional conv ent ions o r UNIDR OIT principlesDK/NA

Q 1. Which contract law mo st o ften governs yo ur b usiness-to-b usiness cro ss-bord er t ransactions in the EU?

Base: all com panies, % E U27


page 28

buying from other businesses, and were less likely to sell to other businesses, were most likely to state that the contract law of the other party’s country applied to most transactions (20% compared to 10% of those companies that were typically selling in business-to-business transactions). Furthermore, the companies that only offered in-premises sales were somewhat more likely than others to state that their national law applied to the contracts that they might have cross-border (63% versus 58% of those who offered distant sales opportunities). However, those nuances did not significantly change the perspective of the overall message: most enterprises involved in cross-border trade within the EU thought that usually their own national contract law applied to these transactions. While there were notable variations between countries, in each Member State more managers tended to assume that the national contract law governed the greatest proportion of their cross-border transactions, usually by a high margin. The law of a third country was not thought to govern cross-border transactions to any significant extent in any Member State. However, the feeling that international conventions applied varied greatly between countries, from a mere 4% in Germany and Italy to roughly a quarter of companies in Finland, Estonia and Lithuania (24%, 24% and 26%, respectively). There was a similarly high variance in the proportion of those who could not tell which contract law applied to most of their cross-border transactions: as many as 45% in Malta, 32% in Sweden and the UK could not tell which law applied to (most of) their cross-border transactions.

Contract law that most often governs companies B2B cross-border transactions in the EU

77 77 71 65 64 63 62 61 61 60 59 57 57 52 48 47 47 46 44 44 43 41 39 39 34 33 28 28

10 7 13 2012 18 16 11 14 14 13 16 18

1918

12 13 20 20 13 15 1627

14 22 2119 17

00 1 1

11 0

0 0 1 1 2 0 12

1 10 1

1 1 2

1

1 0 23 0

44

9 5

78 11

12 10 9 12 919

8 9 24

88

18

13 1624

19

14 15 17 26

10

9 13 6 9 16 10 11 16 15 17 15 177

21 2416

32 2717

29 2518 15

32 28 28 25

45

0

20

40

60

80

100

DE IT LU SK ES

AT

FR

CY

HU

EU

27

BE

CZ

PT

PL IE EE

UK

RO LV

DK

NL FI

SI

SE

BG EL

LT

MT

The national contract law of [COUNTRY]The national contract law of the country where the other party is basedThe national contract law of a third countryContract laws not related to any particular country e.g. international conventions or UNIDROIT principlesDK/NA

Q1. Which contract law most often governs your business-to-business cross-border transactions in the EU?Base: all companies, % by country


page 29

3.2 Evaluation of the possibility of a single European contract law

The proposition to adopt a single EU contract law that could replace or supplement national contract laws in cross-border transactions was strongly favoured by the surveyed enterprises. At the EU level,

7 in 10 companies involved or interested in cross-border business-to-business transactions would choose the jurisdiction of an EU contract law if it existed (30% were “very likely”, 40% just “likely” to use it). Overall, one in five companies indicated that they would be unlikely to choose the aforementioned single European contract law to govern their transactions (12% were “unlikely” and 8% “very unlikely”); 10% had no opinion. A relative majority, at least, in each Member State favoured a European contract law, indicating that they would be “likely” or “very likely” to use it rather than national laws in cross-border business-to-business transactions. Such an opinion was most widespread in

Luxembourg (83%) and Slovenia (82%) but in a further 20 Member States (RO, HU, ES, CZ, SK, EL, CY, BG, FI, PL, DE, IT, PT, MT, LT, LV, FR, AT, SE, BE) at least 6 in 10 companies felt that EU-level rules could provide a useful alternative over national contract laws that they were typically using. Hungarian companies were the most enthusiastic: 53% claimed that they would be very likely to use the European contract law, and similarly positive opinions were also widespread in Malta (48%) as well as in Slovenia (45%).

27

45 4053

3139

31 3843

35 35 33 36 2617

30

48

19 2129

3730

23 1829

18 20 13

56

3739

25

4738

45 3832

40 39 41 3746

5440

21

50 4637 28 32

39 41 2631 25

31

6 8 7 8 6 7 11 9 9 9 12 14 11 11 14 12 12 12 13 14 1611 11 20

14 2416 22

7 5 5 7 5 6 1 3 8 6 6 3 10 48

8 7 4 6 11 9

8 158

1820

16

25

6 4 9 8 11 11 12 12 8 10 8 9 6 136 10 13 16 14 9 10 20 13 14 14

723

9

0

20

40

60

80

100

LU SI RO

HU ES

CZ

SK

EL

CY

BG FI

PL

DE IT PT

EU

27

MT

LT

LV

FR

AT

SE BE

EE

NL IE DK

UK

Very likely Likely Unlikely Very unlikely DK/NA

Q4. If you were able to choose, for your business-to-business cross-border transactions with a partner from another EU country one single European contract law, how likely would it be that you would use it?

Base: all companies, % by countryGraph sorted by ‘very likely’+ ‘likely’ responses

Likelihood of using the European contract law for B2B EU cross-border transactions

Likelihood of using the European contract law for B2B EU cross-border transactions

30

40

12

8

10

Very lik ely

Likely

Unlik ely

Very unlike ly

DK/NA

Q4 . If yo u w ere able to choose, for yo ur b usiness-to-b usiness cross-b order transa ctio ns w ith a partner from

ano ther EU country one single Europ ean co ntract law , how likely wo uld it be that you wo uld use it?

Base: al l c ompanies, % E U27


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The only Member State where more enterprises found it unlikely that they would choose European contract law was the UK: 25% indicated that it was very unlikely and 22% that it was unlikely that they would opt for the single EU code. A high proportion of respondents in Denmark (23%) and Sweden (20%) could not answer this question.

LIKELIHOOD OF CHOOSING THE EU CONTRACT

LAW IN CROSS-BORDER B2B TRANSACTIONS

Very

unlikely Unlikely Likely Very likely DK/NA

NUMBER OF PERSONS EMPLOYED 1-9 8.1 11.9 39.4 29.8 10.9

10-49 9.1 12.2 41.5 30.0 7.3

50+ 4.1 14.9 41 32.4 7.6

INVOLVEMENT IN CROSS-BORDER TRADE currently involved 8.2 12.0 39.9 29.6 10.2

interested in being involved 6.2 13.1 37.5 33.9 9.2

SALES CHANNELS In-premises sales only 7.9 11.6 43 26.9 10.7

Distance sales methods only 7.4 13.0 39.2 32.1 8.2

Both 8.9 11.3 37.8 30.5 11.5

CROSS-BORDER TRANSACTIONS with one other country 8.9 13.4 44.1 22.5 11.2

with 2-3 other countries 8.0 10.7 39.7 29.7 11.8

with 4+ other countries 7.5 12.1 36.8 36.5 7.1

CONTRACT LAW IN CROSS-BORDER SALES a great barrier 4.3 5.3 36.3 50.1 3.9

a medium barrier 3.5 10.0 47.2 34.5 4.8

an unimportant barrier 10.0 14.2 38.8 24.1 12.9

ONLINE/E-COMMERCE Yes 7.3 13.3 38.5 31.7 9.2

No 8.4 11.4 40.5 29.0 10.7

INVOLVED IN B2B TRANSACTIONS AS A BUYER OR A SELLER Mainly as a buyer 9.0 13.0 40.8 27.6 9.6 Mainly as a seller 7.0 12.1 38.7 30.6 11.7 Equal involvement as a buyer and as a seller

8.2 11.7 40.0 30.8 9.2

As the table above shows, there was very little variance across business segments as to whether they would prefer a single European contract law, assuming this was available to them: the vast majority in each segment was either likely or very likely to adopt that jurisdiction for their cross-border contracts with other EU businesses. The segments where the opinions were most positive (leaning towards the “very likely” category) were those trading with many countries (four or more: 37%), and obviously those for whom the


page 31

current contract law situation was seen to be a barrier. As many as 50% of those stating that the current obstacles related to contract law had a major impact on their cross-border activity claimed that they would be very likely to choose the EU contract law in international transactions; 35% of whom contract law issues inferred some difficulties were also very likely to adopt the single EU instrument (versus 24% of those who had minimal difficulties at most with the current diversity of national contract regulations). The appreciation of the initiative did not depend on company size, or any other factor: in every segment, only about one in five companies indicated that they would not be likely to choose the single EU contract law to govern their cross-border contracts with other businesses. The majority of enterprises preferred the situation where such a single European contract law would replace the national contract law applicable to domestic transactions as well. At the EU level, 52% of surveyed enterprises were in favour of a single European contract law replacing national contract laws, thereby eliminating the differences that may introduce problems in cross-border trade in the single European market. 38% favoured an optional instrument. 13% thought that such a law should be available for the companies as an option for their cross-border transactions, while 25% felt that the best solution would be an optional EU contract law equally applicable in domestic and cross-border transactions. One in 10 managers could not or would not answer this question. As Annex Table 25b clarifies, opinions barely varied across business segments: most respondents in each one advocated the adoption of an EU contract law for cross-border and domestic transactions. Medium and large enterprises were the least likely to prefer that solution; however, even there, 44% of companies supported this solution. Member States, however, were more split in their opinions on this question: in 11 EU countries, an absolute majority supported a mandatory EU contract law that completely replaced the various national contract laws across the Union (the most prominent supporters were companies from Malta (70%), Italy (65%), Spain and Romania (both 57%), France, Greece and Cyprus (all 56%) and Portugal (55%). (See chart on the next page.)

Preferred contract law for B2B transactions if a European contract law was developed

13

25

52

10A European contract law that you could chooseas an alternative to the national laws for yourcross-border transactions only

A European contract law that you could chooseas an alternative to the national laws for bothyour cross-border and domestic transactions

A common EU contract law replacing 27national contract laws

DK/NA

Q7. If a European contract law was developed, what would you prefer for your business-to-business transactions?

Base: all companies, % EU27


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70 6557 57 56 56 56 55 54 52 51 51 48 48 47 46 46 43 40 40 40 40 40 39 39 39 36 31

3 19

135 11 10 8 8 13 13 11 7 14 12 17 16 14

12 1018 16 16 15 15 17 15 15

13

139

2228 22

3122 29 20 25 24 34 26 28

27 2926

26 2923 25

34 34 3235

29 3132

13 8 9 11 113

14 8 13 10 14 8 11 12 8 9 15 20 21 19 1910 12 15 10 18 18 24

0

20

40

60

80

100

MT IT ES

RO

FR

EL

CY

PT

SK

EU

27

DK PL FI

LU

DE SI

IE NL

UK CZ

SE

HU

BG

BE

AT

LV

EE

LT

A common EU contract law replacing 27 national contract laws

A European contract law that you could choose as an alternative to the national laws for your cross-border transactions only

A European contract law that you could choose as an alternative to the national laws for both your cross-border and domestic transactions

DK/NA

Q7. If a European contract law was developed, what would you prefer for your business-to-business transactions?Base: all companies, % by country

About half of the companies in Austria (52%) and Hungary (50%) supported the non-mandatory application of a single European contract law for both international and domestic transactions. In 16 Member States, at least four out of ten surveyed enterprises favoured an optional instrument, in seven more Member States around one out of three surveyed enterprises supported an optional instrument. A fairly high number of managers could not choose between the options offered: Sweden and the Czech Republic (both 19%), the Netherlands (20%), the UK (21%), and Lithuania (24 %.)


35 34 34 34 32 32 31 31 29 29 29 29 28 28 27 26 26 26 25 25 24 23 22 22 22 20 13 90

20406080

100

AT

HU PL

BG LT

BE

EE

EL SI

PT

LV

UK

RO

LU

DE FI

NL IE SE

EU

27

DK

CZ

ES

CY

FR

SK

MT IT

A European contract law that you could choose as an alternative to the national laws for both your cross-border anddomestic transactions

19 18 17 17 16 16 16 15 15 15 15 14 14 13 13 13 13 12 12 11 11 10 10 8 8 7 5 30

20406080

100

IT CZ

DE

AT

SE

HU SI

LV

BG

EE

BE FI

IE LT

EU

27

SK ES

LU

NL

DK

FR EL

UK

CY

PT

PL

RO

MT

A European contract law that you could choose as an alternative to the national laws for your cross-border transactionsonly

Q7. If a European contract law was developed, what would you prefer for your business-to-business transactions?Base: all companies, % by country

An optional instrument applicable only to cross-border transactions was preferred by Italian (19%), Czech (18%), German and Austrian (17% both) enterprises the most, and by Maltese (3%), Romanian (5%) and Polish (7%) enterprises the least. A similar optional instrument that could be chosen for


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domestic as well as cross-border transactions was most favoured by Austrian (35%), Hungarian (34%), Polish (34%) and Bulgarian (34%) enterprises, and least in Italy (9%) and Malta (13%).

3.3. Anticipated effects of a single European contract law About a third (34%) of the surveyed enterprises expected that the possibility of choosing a single European contract law would probably facilitate their cross-border activities. Roughly 1 in 10 (9%) at the EU level said that the option to choose the European single contract law for business-to-business cross-border transactions would increase their related activities “a lot” and a further 25% estimated that this would increase their cross-border activities “a little”. Most enterprises, however, felt that the adoption of a single European contract law that could be selected to govern cross-border contracts would not change the volume of their cross-border activities (54%). About 1 in 10 (11%) enterprises did not provide a response to this question.

15 16 11 8 14 616

7 9 6 9 8 5 7 6 5 6 5 1 2 6 3 1 2 1 3 4 4

30 26 30 33 27 3423

31 25 27 22 23 24 22 22 23 22 21 25 22 18 19 21 20 17 14 13 11

39 4050 44 38

49 49 49 54 56 6248 57 53 58

61 60 67 61 65 6855

7365 75 70 71

68

0 20

12

2 1 1 13 1

0

31

2 1 01

0 12

2

11

02 1

216 17 9 14 19

10 11 13 11 87

2211 18 12

10 13 6 13 106

205 12 7 10 11 15

0

20

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80

100

CY

EL

ES IT RO PT

PL

LV

EU

27

LU

DE

BG

BE

HU

NL

CZ

SK AT

LT

SE FR

MT FI

EE SI IE UK

DK

Increase a lot Increase a little Not change Decrease DK/NA

Q5. If you were able to choose one single European contract law for your business-to-business cross-border transaction in the EU, would your cross-border operations ...?

Base: all companies, % by countryGraph sorted by ‘increase a lot’ + ‘increase a little’ responses

If companies were able to choose one single European contract law for their B2B cross-border transaction in the EU, would their cross-border operations ...?

The main beneficiaries of such an EU contract law would be those companies that were considering becoming involved in cross-border trade: 22% of these companies felt that their cross-border activities could “increase a lot” as a result of such legislation. Similarly, those who felt that the current situation with the diversity of national contract law regulation was a great barrier to their operations confirmed in similar proportions (23%) that the adoption of an optional single European contract l

Documents

European contract law in business-to-business transactions · European contract law would replace the national contract law. • About four in ten surveyed enterprises (38%) favoured