Foundations of Private Law from an European perspective (P.Iamiceli, H.Beale) - CEILS, Appunti di Diritto Privato

Scarica Foundations of Private Law from an European perspective (P.Iamiceli, H.Beale) - CEILS e più Appunti in PDF di Diritto Privato solo su Docsity! 1 FOUNDATIONS OF PRIVATE LAW FROM AN EU PERSPECTIVE (P. Iamiceli) CONTENTS 1 Introduction ........................................................................................................................ 3 1.1 The Scope and Boundaries of Private Law ................................................................. 3 1.2 Conclusion ................................................................................................................... 6 2 The source of private law for a global jurist ...................................................................... 6 2.1 What Are the Sources of Private Law ......................................................................... 7 2.2 The role of International Law in Private Law matters ................................................ 9 2.3 The role of EU law in Private Law domain .............................................................. 12 2.4 The impact of EU law on national private law.......................................................... 15 2.5 European Private Law ............................................................................................... 18 3 Fundamental Rights of Individuals .................................................................................. 20 3.1 What do we intend by Fundamental Rights .............................................................. 20 3.2 Why are Fundamental Rights relevant for Private Law ............................................ 21 3.3 Legal Grounds for the Protection of Fundamental Rights ........................................ 22 3.4 Data Protection .......................................................................................................... 25 4 Property Law .................................................................................................................... 33 4.1 Role of Property Law ................................................................................................ 33 4.2 Regimes and Issues ................................................................................................... 35 5 Tort Law........................................................................................................................... 46 5.1 Sources of Tort Law and EU Perspective ................................................................. 50 5.2 Introduction of producer liability .............................................................................. 53 5.3 Strict and Fault-based Liability ................................................................................. 56 5.4 Notion of Damage and Causation ............................................................................. 62 6 Contract Law .................................................................................................................... 65 6.1 EU Contract Law ....................................................................................................... 67 6.2 Liability for breaking off negotiations and Good Faith ............................................ 70 6.3 Fraud, Mistake and Non-Disclosure.......................................................................... 72 6.4 Fairness and Control Over Unfair Terms .................................................................. 74 2 6.5 Remedies ................................................................................................................... 80 7 Challenges of Private law during the pandemic .............................................................. 82 7.1 Contract Law ............................................................................................................. 82 7.2 Property Law ............................................................................................................. 84 7.3 Fundamental Rights................................................................................................... 84 8 Impact of digitalisation .................................................................................................... 84 5 with national constitutional traditions. On one side we have a set of general principles although the charter was never recognised at a constitutional level. 1.1.2 The Balancing Function and Acknowledgement of Rights The concept of right. We already underlined that private law deals with balancing rights and freedoms among individuals and organisations, but what is “a right”? generally, we can define rights as legal powers assigned to individuals/organisations in order to pursue legitimate interests, i.e., interests that are considered by the law as worthy of protection, relevant. Legitimate interests that are taken into account by the law and may need to be balanced against each other to make proper decisions, a right is the unit we know from a legal perspective. Whatever the content, the right is a power, and it is based on law because the legal system recognises this power, meaning that I can also enforce this right. At the same time, we should consider that rights may be based not only on law but also on the exercise of private autonomy. E.g., a contract may contribute to define rights and regulate them, indeed the exercise of private autonomy, the way by which these rights are regulated, is at the core of private law. One of the scope of private law is to strike the balance between private autonomy and third parties’ or general interests. The concept of third party. Comes from the assumption of a bilateral contract, the third means the one which is not part of the contract. The third party is an individual organisation which is out of the contractual initiative. An agreement is in force only in those who have agreed to the contract. In practice, it could be that the exercise of private autonomy produces obligations to a third party, which is why norms of private law may provide limitations to the exercise of private autonomy. One of the roots of private law is to regulate private autonomy through norms. These norms may be mandatory or default rules. The concept of mandatory rule. A mandatory rule may not be defined by the parties, because it is to protect general interests, or third parties. There may be a prohibition in a legal system, e.g. for someone who is underage to go to school, in the interest of the general society. Examples of mandatory rules: social or sustainable clauses to protect weaker parties. The concept of default rule. A default rule is one from which parties may depart. Private law is full of default rules, because those speed up the process of making a contract. A default rule is a sort of “free legal consulting”. Looking at national law, the majority are default rules. The concept of right as powers and the allocation of powers in the contest of private law. One of the biggest distinctions between private and public law is that formally private law addresses relations among individuals or entities who play on a plain level field – equal arms presumption, although in practice it is not so that. If two public entities, let’s say the City Hall and the University of Trento, make an agreement, through contract they are on an equal level thus in a private law perspective. But again, if the municipality tries to make an agreement to an individual, the two parties are not on the same level; the same happens for multinational corporations against small businesses, professional against consumers, users subscription to a social media. Does private law take into account these unbalances? Yes, one of the functions in mandatory rules is to balance these differences. The concept of remedies. Ubi ius, ibi remedium. The right is at the same time the power to enforce right, to ask for justice. Normally the rules about the procedures in order to enforce the 6 right are part of procedural law, but still there is a field in between private law and procedural law, which is the law of the remedies, i.e., how to fix a situation in which my rights are violated. Examples of the diverse links between rights and remedies in western legal traditions: a) Declaration des Droits de l’Homme et du Citoyen de 1789, Article 16 b) IC, Article 24 – tutela dei propri diritti e interessi legittimi c) TFEU, Article 19(2) – provide remedies sufficient to endure effective legal protection d) CFREU, Article 47(1) – right to an effective remedy and to a fair trial e) ECHR, Article 13 – right to an effective remedy 1.2 CONCLUSION Private law is mainly due to acknowledge, balance, regulate rights and freedoms or other qualified interests as emerging within relations between/among individuals and entities (including public ones), which are primarily grounded on the principle of private autonomy within the limitations established in the law for the protection of third parties’ and general interests. Unlike in the domain of public law, (private) autonomy may primarily serve individual and economic interests; however, general interests do play a role both as limitation for private autonomy and as objectives pursued through private law instruments. Unlike in the domain of public law, the exercise of private autonomy may entail the emergence of “private powers” dealt by (private) law when balancing between private autonomy and general interests. Not only private law identifies rights but also provides measures (remedies) for their protection, mainly (but not only) through the intervention of courts awarding some sort of “satisfaction” to the aggrieved party. 2 THE SOURCE OF PRIVATE LAW FOR A GLOBAL JURIST We need now to understand where to find sources of private law, both at national and supranational level. So why is private law mostly grounded on national law? The main answer to that question deals with historical reasons. Roman Law at the time was the “supranational law”, a kind of uniform private law expanded beyond the national territories. The compilation of private law in Roman Law was the Corpus Iuris Civilis, studied in universities in the XI century, as the first example of harmonized private law in expanded territories. However, it was never made to become the common law of Europe, because of the birth of Nation-States. Parallelly to the rise of Nation-States, private law and national identity was born, first with the experience in England and later in national States in continental Europe. In most cases, the civil code was considered as reflection of unity and nationality; the national identity was combined with the affirmation of codes, with private law becoming mostly grounded on national law. There may be philosophical reasons, since private law reflects the sense of justice of the society, we can say that states more than international relations show the sense of justice typical of each culture. National law is keener to express the sense of justice within the state, and it is captured in the national constitution. The nationality of private law may also be due to procedural reasons, to the strong link between rights and remedies. Since procedural law is much more based on national law, because it is way harder to harmonise between the States than substantial law. 7 Economic reasons. Once private law is established at national level, states may use private law as economic advantage to attract investors, to enhance competitive dynamics; or approach it in a more protective way. There are philosophical, economic, procedural reasons, but there are also many reasons for a supranational private law. still, private law is for the most part a national matter. 2.1 WHAT ARE THE SOURCES OF PRIVATE LAW We must of course take into account constitutional principles, but there are other elements such as private regulations and academics that are not directly a source of law but have some influences. Private regulations are not sources of private law, because, as mainly expressed by contracts, a contract is only binding to the parties involved whereas the norm is applicable to all society. However, we more and more have access to private relations that play function of norms, for example professional communities that have their own codes of conduct, all those belonging to the community and applicable to everyone. The law acknowledges their value, also in the topic of security, product safety, all fields with standards established not by a parliament or so but mostly by private organisations. So, contracts are not a source of law, however there are some cases in which law acknowledges the role of private regulations in implementing law. Academics contribute to the making of the law somehow, new laws drafted because scholars and academics studied those fields. There are different influences by scholars in the different jurisdictions, although again they are not a formal source of law. Constitutions. In constitutions we find some general principles, e.g. non-discrimination, proportionality in balancing rights and freedoms, and the acknowledgement of rights and freedoms, e.g. rights inherent to personhood – human dignity, private life, data protection, right to health – and economic rights – right of property, to work, … These are all principles based on constitutions at national level and on the Charter at European level. The link sometimes drawn between private law and national constitutions and their statements of fundamental rights is, however, ambiguous with respect to its source of authority. On the one hand, requirements to make private law compliant with the constitution could be regarded as grounding it in cosmopolitan ideas of the protection of human rights. On the other hand, the same requirement could be regarded as a reassertion of national identity and collective solidarity by grounding private law in the nationalist constitution and its fundamental rights.2 In the past, scholars were more convinced that constitutions included norms only applicable to parliaments, today we commonly apply constitutional norms to private relations, especially by way of interpretation. We interpret private law norms in the light of norms of the constitution, at national level and at European level, i.e., interpret European legislation in light of the Charter. The Treaty on the European Union does consider the constitutional traditions common to the members states as general principles of the Union’s law. The constitutional tradition 2 Collins, Cosmopolitanism and Transnational Private Law (2012) 10 “A contract for the sale of goods (a) shall be governed by the law of the country (c) where the seller has his habitual residence (b)” In some domains, one of the main means of identification of applicable law is private autonomy, the choice of the parties. The choice of law by the parties is useful to solve the cross-border puzzle, because you choose in advance and the parties know from day one. Common in business and consumer contract at transnational level, but presents a couple of issues: 1. Unbalanced relation between the parties: an abuse of one party in choosing a law the other party has little or no clues about 2. Tension between the parties during the negotiations, because the parties might prefer different laws. If parties do not choose applicable law, we have default ones We’ve seen the structure of PIL norm, let’s say parties have not chosen the applicable law (sometimes the choice of law is not even possible), so we have to identify a norm. Who establishes the private international law norm? how many PIL are there? Does it go by country? If so, which? A uniform PIL does not exist, each national legal system has its own PIL, individuals and organisations should take into account the one of the competent court, so a court will apply a determinate PIL. Depending on the court, a different applicable law is to be considered. Very complex issue. The rules on competent court are similar to the applicable law, in fact it is likely that if PIL says that e.g. Italian norms are applicable then usually the competent court is Italian. In principle, • you need first of all to determine which is the competent court in accordance with PIL; • then you apply the PIL of that court to understand the applicable law. This process is based on the assumption that cases will be litigated. But in private law relations, you don’t start thinking on the court you want go to, you don’t want to go to court, although it is the only way to know the applicable law. This tells us also that being a judge is quite difficult, an Italian judge could be applying German law, and hard for individuals to anticipate this reasoning. How do we make it simple and usable? One way is to • try to have higher level of coordination, to make sure that more countries share the same set of private international law. The larger is the scope of PIL the more it is harmonized across states, the more it reduces the complexity. It is true that first source of PIL is national, however, there is a trend towards a more harmonisation. Again, there are • international conventions on PIL to make an agreement among the states. We have conventions and conferences, for example the Hague Conference on Private International Law3 which pushes towards a more harmonised PIL and has promoted the choice of laws. • European Law has also a role here, need to make sure the internal market works, so at least we need harmonised PIL in order to facilitate these exchanges. EU law in the area of PIL: Art. 81(2)(c), TFEU on judicial cooperation in civil matters: the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall adopt measures, particularly when 3 The role of the Hague Conference on Private International Law (87 member States now), see https://www.hcch.net/en/states/hcch-members); tens of conventions for the harmonization of PIL across the world, e.g.: • Convention of 14 March 1978 on the Law Applicable to Matrimonial Property Regimes • Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition • Convention of 1 August 1989 on the Law Applicable to Succession to the Estates of Deceased Persons • Principles on Choice of Law in International Commercial Contracts 11 necessary for the proper functioning of the internal market, aimed at ensuring: (…) (c) the compatibility of the rules applicable in the Member States concerning conflict of laws and of jurisdiction At European level, regulations are employed more than directives – both are binding but a directive is more open and needs transposition at member state level, at which the state has some discretionary power; a regulation is directly and immediately applicable to member states. The objective is to harmonise, to have equivalent norms in all member states, thus you need a regulation: • Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations • Regulation (EU) No 650/2012 of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession • Regulation (EC) No 593/2008 – the law applicable to contractual obligations (Rome I) • Regulation (EC) No 864/2007 – the law applicable to non-contractual obligations (Rome II) What are the policy implications of PIL? Functioning of global market is made easier with a scratch of International Law applicable law to all private relation. PIL brings you to a national legislation and if it is not yours, you may not feel at ease and the identification of that applicable law may be complex; the more specific the scope of the intervention the more we end up harmonising at international level, evolution of legal systems; predictability of outcomes of choices made in private relations. Private international law conceptually neither seeks nor requires regulatory convergence, it is and remains national law. b) Role of international law as substantive law This role opposes the concept of PIL as non-substantive or instrumental law. In some fields we have international conventions, but these are all measures and instruments as contracts among states, many of them binding and some of them just as model law, guidelines recommendations (not really binding). PIL provides answers only indirectly, pointing out the applicable law, it is the applicable law (as national law) to provide an answer as substantive law. The more specific the scope, the more binding agreement among the states. Normally this part of international law is harmonised and applicable to transnational situations, when it covers wider areas tends to be soft law, i.e. recommendations, and enables flexibility among the states. The substantive rule can be directly provided by international law instruments, via conventions among the States, Model Laws, General Principles etc. When you have an international piece of legislation with substantive effect (e.g. Vienna convention), in reality you still need PIL because that convention will solve lots of problems, but there may be some thigs left out, thus still need to find that rule in national legislation, applicable in the light of PIL (scope-specific pieces of legislation). In fact, international law as substantive law tends • to be scope-specific (e.g., Convention on Internal Sales of Goods between businesses); • when aimed at covering wider areas of private law, to use means of soft law rather than hard law (e.g., Unidroit Principles on Commercial Contracts); • to enable flexibility, e.g., by allowing signing States to deviate for specific matters or State citizens to opt out from provided rules. So, in cross-border situations, the role of international law as substantive law may complement but not replace the role of PIL and of national legal systems. The two approaches are complementary rather than opposite. As a transnational lawyer, (1) you frame the situation; (2) you want to know whether there is a 12 convention on your case; (3) you analyse the scope of application of the convention, whether your problem is covered by the convention, if not, you still need to go through PIL process. Supernational law has double function, (a) as a guide in the choice of law and (b) provides with pieces of international law which affect private relations at substantive level, addressing only specific matters (Vienna sales convention). 2.3 THE ROLE OF EU LAW IN PRIVATE LAW DOMAIN See to what extent EU law may be considered as source of (substantive) private law relevant at national level. Thus, the questions we will address are • whether EU has competence in PL; • if not, whether it has competence in specific areas of PL instead; • which instrument the Union uses in order to regulate specific fields of PL, which objectives and which results; • the horizontal direct or indirect effect; • the impact on rights and remedies; and finally • what can we intend by European Private Law and what are its main features. [Hartkamp, Van Calster] Case: A German citizen purchases a package travel to Russia through an online platform run by Austrian travel company. The offer presented on the website refers to the customer’s right to car transfer between airport and hotel without additional charge. No car is available. Mrs Haase seeks a refund for transportation costs incurred for transfers from and to airports. The contract is subject to Russian law pursuant to clause no. 29 of the contract; based on this law, no right can be assigned to a customer if such right is not acknowledged in writing in the final confirmation sent by the offeror. Identification of sources of PL, i.e., what is the applicable law. If the choice of law is the method employed for the identification of the applicable law, then Russian law is to be employed, but there may be some standards for consumer protection in European regulation, since a consumer protection goes along with the goal of creating a common market. When you have the acknowledgement that a clause may be enacted to choose one national law, its application may not be used to derogate from some basic principles of law more connected to the contract because e.g. of the nationality of the consumer or company (overriding principles). So, the question now is to what extent EU law regulates private law matters? According to the principle of conferral (Art. 4(1) Art. 5(1)(2) TUE) the European Union detains powers on primary law in the fields assigned by the treaty; it has no general power to adopt legislation in any field of private law, because it would step into states autonomy. The Union steps in only if it has powers in that field/area. In general, EU does not have exclusive competence in general private law, as it would in competition law. Nor it has shared competence – both EU and states may adopt legislation –, since there is no reference to general PL. Competence of EU in specific fields of PL: - No competence considering the system of property ownership – Art. 345 TFEU - Exclusive competence in competition law (in between public and private) – Art. 101 TFEU Plus, shared competence in some areas relevant to PL (Art. 4(2), TFEU): consumer protection, internal market (small business protection in contrast with large multinational companies; terms of payments), environment (comply with standards to reduce global warming or preserve the environment → liability: what if a company disperse some oil in the see, environmental 15 2.4 THE IMPACT OF EU LAW ON NATIONAL PRIVATE LAW We can distinguish the vertical and horizontal effect. Could private law be affected by European law to the extent that private organisation can exercise these rights not only in a vertical way (towards the state), but also on a horizontal way (company and employers). For example, the principle of non-discrimination was extended to private relationships, ref. Costa v Enel starts from a private relationship and devolves to a vertical relation because it was originated in the nationalisation of the company by the state; a direct vertical effect and an indirect horizontal effect. Again, in Van Gend & Loos the relation is vertical. In both cases it is more of a public matter, but the problem is still whether we can have a horizontal effect, direct or indirect. According to Art. 157 TFEU, on equal pay for men and women there must be equal pay, norm of the treaty that directly affect private relations (Defrenne v Sabena, C-43/75; Sabena is a flight company and Defrenne an employer, the case was brought before the ECJ and the effect of eu legislation on private relations). Art. 101(2) TFEU regards the nullity of anticompetitive agreement, see Courage v. Crehan C-453/99, on which it was established that an agreement with exclusivity clause from the owner of a bar and the producer, which was an anticompetitive agreement because the business could not choose between other better suppliers, that contract was null and void, and the court added a compensation to the guy of the bar. Another example of the horizontal effects of EU law in the area of private law is the freedom of movement of persons or services. Not only law has to comply with that but also private relations (e.g. cannot ask for only Italian referees). Principles of European law that apply directly establishing fundamental rights, ref. IR v. JQ C-68/17: “Before the entry into force of the Treaty of Lisbon, which conferred on the Charter the same legal status as the treaties, that principle derived from the common constitutional traditions of the Member States. The prohibition of all discrimination on grounds of religion or belief, now enshrined in Article 21 of the Charter, is therefore a mandatory general principle of EU law and is sufficient in itself to confer on individuals a right that they may actually rely on in disputes between them in a field covered by EU law” With general principles we are not expanding the competences of the Union, since those are always defined with the principle of subsidiarity and of conferral. Not all fundamental rights enshrined in the Charter have been (specifically) considered as general principles of EU law, thus suitable for direct application in horizontal relationships. Some have, though, such as: - Art. 21, CFREU: non-discrimination (Egenberger [C- 414/16] and IR v. JQ cases) - Art. 31, CFREU: right to an annual period of paid leave (Bauer case, C-569-570/16) - Art. 47, CFREU: right to an effective remedy before a court (IR v. JQ and Bauer cases) 2.4.1 Methods of Horizontal Application a. Primary Law • Application of EU general principles or other provisions as such or to reinforce application of open-ended principles in national law (e.g. reasonableness, fairness, public order, etc.); • Harmonious (conforming) interpretation of national law in accordance with EU law, in the light of directives and principles; • Disapplication of national law not compliant with EU law, eg: the right to a period of paid annual leave, affirmed for every worker by Article 31(2) of the Charter entails, in particular, as regards the situations falling within the scope thereof, that the 16 national court must disapply national legislation negating the principle; or in the area of contract law Delhaize case (C-47/90)6. b. Secondary Law Can horizontal effect apply also to directives, i.e., to secondary legislation and not only to primary legislation – treaties and charters? - Directives need to be transposed, there is rule of discretion - Directives often include open terms, in which the state has to decide For these reasons the direct effect at horizontal level is more difficult. If the directive includes determinate rights and unconditional specific content (in the case the state doesn’t transpose the directive, or transpose it incorrectly), it may be enforced in vertical relations but not in horizontal ones, turning towards the state because it didn’t transpose correctly the directive. Confirmations that directives as such may not implement in private relations if not transposed but you may be able to claim damages to the state, indirect effect. - C-684/16, Max Planck v. Shimizu: “76. even a clear, precise and unconditional provision of a directive seeking to confer rights on or impose obligations on individuals cannot of itself apply in a dispute exclusively between private persons”. - C-91/92, Faccini Dori: consumers may not enjoy rights to repudiate contract concluded out of business premises, if the directive, that introduces this consumer right within the limitations therein specified, has not been implemented by national legislation. However, according to the principle of conforming interpretation, national legislation must be interpreted along the ratio of the directive, regardless its implementation and the existence of constant non-conforming national caselaw. Moreover, the open-ended terms provided by national legislation may be invoked to pursue the same result envisaged by a directive (e.g., good faith, public order). Finally, remedies are introduced against the MS violating EU law, in accordance with Francovich C-6/90, damages may be claimed against the MS not implementing a directive clearly and unconditionally assigning rights. 2.4.2 Influence on Rights and Remedies According to Van Gerven: The concept of right refers, in my view, to a legal position which a person recognized as such by the law – thus a legal “subject” (hence the name “subjective” right) – may have and which in its normal state can be enforced by that person against (some or all) others before a court of law by means of one or more remedies, those are classes of action, intended to make good infringements of the rights concerned, in accordance with procedures governing the exercise of such classes of action and intended to make the remedy concerned operational. A remedy is the way through which the individual organisation holding a right may enforce it, via a determined procedure. The impact of EU Law can be found in: 6 Spanish seller does not comply with delivery obligation in a wine sale contract with a Belgian buyer. He invokes force majeure based on national legislation prohibiting him from exporting the wine. The buyer finds this prohibition being against art. 35, TFEU (prohibition of quantitative export restrictions). The Court finds that national restriction may not be applied. Therefore, breach is not excused and seller must perform. 17 - Art. 19(1), TEU: (…) Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law. - Art. 47(1), CFREU (Right to an effective remedy and to a fair trial): “Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article. (…) [fair trial, legal aid]. In the absence of Community legislation in this area, the rules implementing the principle of res judicata are a matter for the national legal order, in accordance with the principle of the procedural autonomy of the Member States Since rights are by definition uniform in substance, the constitutive (form) and executive (application) elements of the remedies must be as efficient and uniform as possible across the Union. It is for MS to lay down the remedial rules (principle of national procedural autonomy – up to the state to find a remedy), but such competence is subject to limitations, both • to ensure effective legal protection (subject to principle of effectiveness) – the rules must not be framed in such a way as to make it in practice impossible or excessively difficult to exercise the rights conferred by Community law; and to establish legal coherence (principle of equivalence) – the rules must not be less favourable than those governing similar domestic actions. Influence of EU law also in this regard (private law is also about remedies). This involves a balancing act with the aim of finding the right balance between national (specific aim which the domestic remedial rules pursue) and European interests (protecting EU rights of individuals); different elements must be weighed against each other – nature of the EU right, nature and gravity of the breach, nature and aim of domestic law provision. According to Van Gerven, the balancing (especially by the CJEU in preliminary ruling procedures) should be considered within the framework of the adequacy test (remedy sufficiently adequate) rather than the minimum effectiveness test (remedy virtually impossible or excessively difficult). The principle of adequate judicial protection of EU rights through national law remedies, rather than the principle of minimum effectiveness, provides the proper test for assessing the consistency of domestic rules with EU law. Article 47 of the Charter on the right to effective judicial protection is sufficient in itself and does not need to be made more specific by provisions of EU or national law to confer on individuals a right which they may rely on as such. About non-European countries, Van Gerven describes a convergence of one jurisdiction or law to another as a matter of spill-over effect, i.e., the impact which EU law has indirectly on the laws of MS as result of legislative, regulatory or judicial action of national authorities in areas which do not fall within the sphere of EU law. Legislative spill-over occurs among EU and MS when one part of national law affected by EU law transposes a legal instrument into another part of the same national law not affected by EU law; moreover, it occurs in relations of the EU with third countries, especially with members of the European Economic Area (EEA), which includes Iceland, Norway and Lichtenstein along with the MS, and the European Free Trade Area (EFTA), which is composed also of Iceland, Norway, Lichtenstein and Switzerland. This convergence is the result of the development of common principles of law in a continuing process of cross-fertilisation between EU and MS’ legal orders and affects also the judicial systems. 20 the internal market, and if so to what extent. If such obstacles do exist, the European Institutions may be called upon to take appropriate action.” Available options: I. no EC action; II. promote the development of common contract law principles leading to more convergence of national laws; III. improve the quality of legislation already in place; IV. adopt new comprehensive legislation at EC level. EU Commission Communication “A More Coherent European Contract Law. An Action Plan” (2003/C 63/01). Rephrased options and objectives: 1. To improve the quality of the Community acquis in the area of contract law a. A common frame of reference establishing common principles and terminology in the area of European contract law b. High quality and consistency of the Community acquis in the area of contract law (…) 2. To promote the elaboration of EU-wide standard contract terms (…) 3. Further reflection on the opportuneness of non-sector specific measures such as an optional instrument in the area of European contract law (…) The most recent EU Commission’s initiatives: - The revision of the existing consumer acquis - The development of a Common Frame of Reference (CFR), not adopted yet - The development of an Optional Instrument o The failed proposal for a Regulation on Common European Sales Law [CESL] (COM/2011/0635 final) - ‘A Digital Single Market Strategy for Europe’ [COM(2015) 192 final] 3 FUNDAMENTAL RIGHTS OF INDIVIDUALS Fundamental rights are gaining more and more importance in the field of Private law, especially from an EU perspective. • First, we’ll try to understand what fundamental rights are and what are the main ones; • why are they relevant in PL; • what are the legal grounds for fundamental rights protection both at national and supranational level – whether these norms are directly applicable in PL relationships (direct horizontal application); • focus on data protection within this wider area of FR. 3.1 WHAT DO WE INTEND BY FUNDAMENTAL RIGHTS The Charter of FR of the EU is a source of primary legislation, as declared with Lisbon, in order to create social cohesion and common belief of people that recognise themselves with common values – much more than just an economic union. In between values and responsibility we have duties, values bring about responsibility and duties to other people. Preamble CFREU 21 The peoples of Europe, in creating an ever closer union among them, are resolved to share a peaceful future based on common values. Conscious of its spiritual and moral heritage, the Union is founded on the indivisible, universal values of human dignity, freedom, equality and solidarity; it is based on the principles of democracy and the rule of law. It places the individual at the heart of its activities, by establishing the citizenship of the Union and by creating an area of freedom, security and justice. […] Enjoyment of these rights entails responsibilities and duties with regard to other persons, to the human community and to future generations. These are not maps of EU competences, the matter listed are fundamental rights, not necessary covered by EU law. When the Union adopts instruments in the matters in which it is competent, then these rights should be respected – not because there is a fundamental right in healthcare then EU has competence in that matter. Right for an effective remedy is one of the core; principle of reality and proportionality. 3.2 WHY ARE FUNDAMENTAL RIGHTS RELEVANT FOR PRIVATE LAW how do these FRs have an impact on private relationships? - Can a doctor lawfully trat a patient against her/his full consent when the treatment may save his/her life? On one side the right to life, on the other side the right to refuse medical treatment, as expression of the right of consent and freedom to dispose of our body (right of refusal, link to the freedom of religion e.g.); concern on the dignity of human being in following the treatment. We have general principles, and legal rules on full information, what is very critical is when the refusal may cause your death. Fundamental rights have often two dimensions: the 22 individual dimension (right to life, freedom of expression, to education), some of them are collective or also produce an impact upon interests of the others (right to body integrity – sexually transmissible disease). - Can anyone lawfully contract over his/her own body parts? Only gratuitously or also for an economic consideration? Because of FR, you need regulations in order to mediate these exchanges. - Can anyone lawfully contract over his/her personal data, e.g., by selling his/her own personal story to a novelist? Not all personal data goes through the consent of the person, people may use public information without your consent. What if after a year, the person wishes to revoke the consent? The contract is binding, unless it expresses the withdrawal; still there is the fundamental right to control your personal data, your approach and reflection on society. It is because of fundamental rights that you can say the breach is important. There may be different FRs contrasting each other, in that case you have to strike a balance, a small violation of HR should be taken into account too, it is a case-to-case assessment, one of the criteria is proportionality and necessity, taking into account the intensity, gravity and seriousness of the violation. FR may imply limitations for private autonomy, these limitations may have an impact on contractual freedom, may also limit the exercise of other fundamental rights, FR are not homogeneous – may prioritized, they are not (all) absolute, most of them may be limited and balanced against other FRs or general interests. Absolute or not absolute? CJEU, 16 February 2017, C-578/16 PPU, C. K., v Republika Slovenija The prohibition of inhuman or degrading treatment or punishment, laid down in Article 4 of the Charter, is (…) of fundamental importance, to the extent that it is absolute in that it is closely linked to respect for human dignity, which is the subject of Article 1 of the Charter CJEU, 27 February 2020, C-836/18, Subd. del Gobierno en Ciudad Real The Court has previously accepted that the derived right of residence under Article 20 TFEU is not absolute, since Member States may refuse to grant it in certain specific circumstances. Thus, the Court has previously ruled that Article 20 TFEU does not affect the possibility of Member States relying on an exception linked, in particular, to upholding the requirements of public policy and safeguarding public security. 3.3 LEGAL GROUNDS FOR THE PROTECTION OF FUNDAMENTAL RIGHTS How do we identify fundamental rights, how do we understand whether they are relevant in private law relations? In order to answer, we have to look at the sources and legal basis for FR. Seen the problem, which legal instrument do we use? Legal grounds that go both at national – constitutions – and international level – Universal Declaration of HR, ECHR, CFREU. All these sources are relevant and also in courts, especially the supreme courts. Most of the balancing exercises that we tried to engage are usually engaged by constitutional courts or supreme courts: how are general principles and FR truly balanced in reality? The criteria of proportionality, necessity, etc. are created by courts. HR law is judge-made law. What are sources and legal basis for fundamental rights, i.e., which rights are protected and how do they balance in respect for general interests. Since FRs are not absolute, normally they 25 preventing the court from reviewing the decision taken by catholic institutions? The field of application is of the Union, thus the Charter applies. This is a clear example of how a general principle of EU law may bring a change in the national jurisprudence, and from the horizontal application of the principle of non-discrimination giving rise to a right not to be discriminated. Before the entry into force of the Treaty of Lisbon, which conferred on the Charter the same legal status as the treaties, that principle derived from the common constitutional traditions of the Member States. The prohibition of all discrimination on grounds of religion or belief, now enshrined in Article 21 of the Charter, is therefore a mandatory general principle of EU law and is sufficient in itself to confer on individuals a right that they may actually rely on in disputes between them in a field covered by EU law. CONCLUSIONS: - FRs are widely acknowledged by general principles and constitutional norms at national and supranational level; - They must not only be respected in vertical but also in horizontal relationships, although national legal systems may differently frame this application and supranational norms may be applicable subject to limitations based on States’ competence and margin of appreciation; - FRs are not homogeneous and not all are absolute; - Most of them may be limited and balanced against other FRs or general interest; - Courts play a major role in the identification, safeguard and balancing of FRs. 3.4 DATA PROTECTION We will start our analysis on data protection first by focusing on ECJ’s caselaw and its approach on the balancing of fundamental rights in online media matters; then we’ll take a brief view on European data protection law, i.e., what do we intend by data protection, personal data, processing in EU law, why is the right to data protection a FR, what are the main rules of data protection and how it can be enforced in EU law. Google Spain SL C-131/1210 On 5 March 2010, Mr Costeja González, a Spanish national resident in Spain, lodged with the AEPD a complaint against La Vanguardia Ediciones SL, which publishes a daily newspaper with a large circulation, in particular in Catalonia (Spain), and against Google Spain and Google Inc. The complaint was based on the fact that, when an internet user entered Mr Costeja González’s name in the search engine of the Google group (Google Search), he would obtain links to two pages of La Vanguardia’s newspaper, of 19 January and 9 March 1998 respectively, on which an announcement mentioning Mr Costeja González’s name appeared for a real-estate auction connected with attachment proceedings for the recovery of social security debts. The fundamental rights at stake are on one side data protection and respect for private life, on the other freedom of expression, press and information. Google is involved for being the search engine, an intermedium that makes it possible for that information. In fact, that information would not be so apparent without the source engine (article of 1998). 10 Case C-131/12, Google Spain SL, Google Inc. v Agencia Española de Protección de Datos (AEPD), Mario Costeja González 26 “the processing of personal data carried out in the context of the activity of a search engine can be distinguished from and is additional to that carried out by publishers of websites, consisting in loading those data on an internet page” The operator of the search engine “collects” data, organising it within the framework of its indexing programmes, storing it and making it available to its users in the form of lists of search results. The data operator is processing data regardless of the type of information, nor it is affected by the fact those data have already been published on the internet, and therefore are not altered by the search engine. The court thus undergoes a process of balancing between the FRs through the principles of effectiveness and proportionality. The question was not on the accuracy of the information, but on the fact that it was old in time; the balancing exercise that the Court had to make was whether to protect personal data and privacy, rather than the right to information of the public, which also stands with the economic interests of the search engine. The court asks itself whether the search engine is an important means to access the information: if we removed the search engine, would that information still be accessible? The effective remedy is not the removal of the article but its deference, which is also less intrusive with the right to press. The main point of the decision of ECJ is that on one side the processing of personal data should be carried out in the lights of the Directive 95/46, the effectiveness of which would be compromised without an effective and complete protection of the fundamental rights and freedoms of natural persons; on the other side, the protection of the individual’s right would not be effective if the data subject asked to remove the article, given the ease with which information published online can be replicated. Instead, the effective and complete protection of data subject would be achieved asking Google to delist that information. Also under the principle of proportionality, data protection usually prevails over right to information and economic interests. “As the data subject may, in the light of his fundamental rights under Articles 7 and 8 of the Charter, request that the information in question no longer be made available to the general public on account of its inclusion in such a list of results, those rights override, as a rule, not only the economic interest of the operator of the search engine but also the interest of the general public in having access to that information upon a search relating to the data subject’s name.” This is again about balancing, because on one side data protection and on the other economic interest of the search engine, right to access information for people. However, special circumstances may overturn that priority, for example the preponderant interests of the general public in having access to the information in question. CNIL/Google case C-136/17 When the operator of a search engine receives a request for dereferencing, it must ascertain •the reasons of substantial public interest and • whether not delisting the web page in question is necessary for exercising the right of freedom of information by internet users. That is because, although the data subject’s rights protected by Article 7 and Article 8 of CFREU override the freedom of information of internet users, that balance may depend on: - The nature of the information in question - Its sensitivity for the data subject’s private life (the interference must be strictly necessary) - Role played by the data subject in public life 27 Within the GDPR, there is a specific provision devoted to the right to be forgotten which was introduced based on the caselaw. Article 17 GDPR 1. The data subject shall have the right to obtain from the controller the erasure of personal data concerning him or her without undue delay and the controller shall have the obligation to erase personal data without undue delay where one of the following grounds applies: (a) the personal data are no longer necessary in relation to the purposes for which they were collected or otherwise processed; (b) the data subject withdraws consent (…); (c) the data subject objects to the processing (…); (d) the personal data have been unlawfully processed; (e) the personal data have to be erased for compliance with a legal obligation; (f) the personal data have been collected in relation to the offer of information society services (child protection) 2. Where the controller has made the personal data public and is obliged pursuant to paragraph 1 to erase the personal data, the controller, taking account of available technology and the cost of implementation, shall take reasonable steps, including technical measures, to inform controllers which are processing the personal data that the data subject has requested the erasure by such controllers of any links to, or copy or replication of, those personal data. In data protection responsibilities and duties are hardly on one single person, in many cases they involve more subjects, because in the web with the data flow is so easy to process data. There is the possibility to request to be delisted from an information, by filling a module, the search engine would later have to inform the information provider. Paragraph 3 specifies when the right to be forgotten does not exist, which is to the extent that processing is necessary • freedom of expression and information; • for compliance with a legal obligation, or in the public interests; • public interest, scientific or historical research purposes or statistical purposes; • exercise or defence of legal claims. 3.4.1 Data protection and EU law Is data protection a matter of EU or national law? National constitutions make some reference to privacy, although not directly to data protection11; this specific right is not included in constitutional provisions, but the right to data protection was introduced at national level by the Union, via a Directive in 1995 and a regulation later (GDPR). The move from a directive to a regulation is justified by the data flow, which doesn’t really have boundaries. The intervention of the Union in the area of data protection is justified not because of the Charter, which doesn’t expand the competences of EU, but because the flow of personal data throughout the Union influences the pursuit of economic activities at the level of the Union, on consumer protection and competition law, and mainly the internal market: our data are like goods traded in the market, thus we should take care how data are treated. 11 See references to privacy of correspondence, e.g.: art. 10, German Grundgesetz; art. 13, Italian Constitution. See wider references extending to data in, e.g.: Sec. 18, Spanish Constitution; Artt. 49-51, Polish Constitution 30 be visited by persons who are not Facebook users and so do not have a user account on that social network. In that case, the fan page administrator’s responsibility for the processing of the personal data of those persons appears to be even greater, as the mere consultation of the home page by visitors automatically starts the processing of their personal data. Joint and several liability → “(…) the existence of joint responsibility does not necessarily imply equal responsibility of the various operators involved in the processing of personal data. On the contrary, those operators may be involved at different stages of that processing of personal data and to different degrees, so that the level of responsibility of each of them must be assessed with regard to all the relevant circumstances of the particular case”. Data protection is a fundamental right as part of the charter, linked with private and family life and is linked also with others: right to information, right to self-determination, right to personal identity and reputation, non-discrimination (the fact that some personal data may be connected to a page, it may bring a discrimination because of that personal data – Article 9, GDPR). Not only data protection is a FR and comes with others reinforcing them, but also conflicts with others, e.g., freedom of expression (Art. 11 CFREU), conflict of interests, private autonomy to conduct a business (Art. 16 CFREU), right to health; as FR, data protection is very often linked with the protection of others, by protecting one I protect also the others, but in some cases it conflicts with others. 3.4.2 Main Rules and Principles on Data Protection In the view of GDPR and of the Charter, data should be processed lawfully, fairly and in a transparent way; purpose limitation (educational recordings for our study only); data minimisation (processing of data must be grounded on the reasons to which you may be processing data); the process should be accurate; storage limitation (the massive amount of data should be controlled and for its purpose); security, integrity and confidentiality; accountability of the controller. The processing needs a legal basis, meaning that either the processor is based upon the consent of data subject, or based on other objective reasons, i.e., necessary for the execution of a contract (e.g., bank transfer), or necessary for the compliance of legal obligation (e.g., University provided list of professors that may be vaccinated based on their age), protect vital interest of data subjects, legitimate interests (vague expression, which must be balanced against overriding interests of fundamental rights and freedoms of data subjects). An example (Privacy Policy, Facebook) – last visited on 10 March 2021: “We collect, use and share the data that we have in the ways described above:  as necessary to fulfill our Facebook Terms of Service or Instagram Terms of Use;  consistent with your consent, which you may revoke at any time through the Facebook Settings and Instagram Settings;  as necessary to comply with our legal obligations  to protect your vital interests, or those of others;  as necessary in the public interest; and  as necessary for our (or others') legitimate interests, including our interests in providing an innovative, personalized, safe, and profitable service to our users and partners, unless those interests are overridden by your interests or fundamental rights and freedoms that require protection of personal data.” 1. Consent 31 General principle of self-determination, every person must have the right to self-determine the destiny, personal integrity as a person. This principle is reflected in the GDRP, Art 6. The processing must be related to specific purposes and legal obligations (performance of a contract, request by public authorities, performance of public tasks); legitimate interests, i.e., good reason to protect data, which is so wide and so closed to specific needs of the controllers and processors that needs to be balanced with FRs and infringement of data subjects’ rights → may not be a good reason if FRs have priorities. For example: primacy policy of Facebook. Consent is the key of data protection, processors use it as a legal ground in case the other legal grounds “fall”. But how is this consent provided? It is not up to the data subject to provide the proofs that the consent is being given, but it is up to the controller to provide evidence plus the consent must be given in a written declaration, clearly distinguished from other matters. The usual case is a contract, the legislator is expecting that the consent is given explicitly and specified, moreover it must be withdrawable – differently than contract consent. It looks like we are forced to give consent to access information. In the regulation the only point is that there must be a reasonable connection between the consensus and the goal, the purpose. The controller should be careful when they condition the access to services for the access of personal data; if this consensus does not exist or it is forced, it is meaningless and violates freedom of consent. Ref. Romania case. Are we really sure that consent is the right tool to ensure fair data processing? Is it a real instrument in our hand to provide data subject in governance of our data? Ref Whatsapp privacy policy and relation with Facebook, the infringement of privacy for commercial purposes. The current policy declaration is that nowadays Facebook does not use our data for product suggestions. The dispute between Irish Data Protection commission and other Data Protection Authorities in other MS, was not about the legal ground of Facebook, but the not-freely induced consent that was forced to the subject: we had the impression of not having other options than to provide consent. 2. Data subject’s rights in case of an infringement i. Right to information ii. Right to access by the data subject: only with access to your own data you can know how they are used iii. Right to rectification: you can ask some unnecessary data to be modified, if false, or cancelled iv. Right to erasure v. Right to restriction of processing vi. Right to data portability: related with the possibility to have your data with you when you change email address e.g. and want to record your previous conversations vii. Right to object: complementary to the right to consent, to counterbalance it viii. Right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her similarly significantly affects him or her 3. Enforcement rights i. Right to lodge a complaint with a supervisory authority. This may trigger investigating powers, available measures: injunctions, fines ii. Right to an effective judicial remedy against a supervisory authority’s decision iii. Right to an effective judicial remedy against a controller or a processor 32 iv. Right to compensation for material and non-material damages Harmonisation is more general; approximation is more “weaker” to define this concept, because harmonising is removing all the obstacle, to approximate is the beginning of the process. Question time. What is the difference between mandatory and default rules and what is their role in defining the scope of private autonomy? It depends on the interests, mandatory rules normally limit private autonomy to protect the interests of the contracting party (weaker party), so that it is more willing to take part of the contract; the general interests of the community and society (environment, social security). default rules seem to acknowledge to a wider extent private autonomy, private initiative is more supported; default rules simplify the transaction, present a starting point for the contracting parties; default rules may also have a protecting function to weaker parties, e.g., there are cases in which a legislators may not want to use a mandatory rule because there are not general interests, but might want to put a default, a standard by which the weaker party (buyer or client) is not put to disadvantage, the starting point puts the weaker is a strong position. What is the role of private international law and what is the role of EU in private international law?  Does EU law have competence in the area of private law? If ever, on which legal grounds? Legislators competence from private law: article 3, commercial policy, which effects field of shared competence, internal market and consumer protection. Expand on internal market. Ref. tobacco advertising.  Can EU principles have direct application in matters of private law? Can you make one or two examples based on the case-law of the CJEU? Application of a directive, Bauer case does not preclude general principles from application, principle clear and certain, non-discrimination art.21. a general principle embedded in a regulation, it is definitely applicable also in horizontal relations. A principle that is clear, direct and special, it has direct effect in horizontal relations, the ECJ has provided number of decisions in that, but it is a controversial fact. The directives are not directly applicable in horizontal relations, but not general principles. To what extent and how can the CFREU be applied when addressing matters of private law?  Why is data protection regulated under EU law?  What are the main principles relating to processing of personal data pursuant to EU law? Consent, principle of purpose limitation 35 from “grabbers” to supporter of the community’s economic development. How to combine the market approach to property rights (Tragedy of the Commons) to an economic development and the preservation of communities’ rights. “The institution of property as a peculiar form of regulation of the economy” 4.2 REGIMES AND ISSUES From the Draft Common Frame of Reference, which was the outcome of an academic work by European scholars under the EU Commission, with the objective to define a common set of principles in the field of private law, however it doesn’t hold any legislative force, nor is it a political mandate, but it represents the European legal culture in the field of private law. The draft doesn’t only cover contract law (lot of pressure for harmonization), but also extends to other areas, including property. DCFR. VIII.–1:202 ‘Ownership’ is the most comprehensive right a person, the ‘owner’, can have over property, including the exclusive right, so far as consistent with applicable laws or rights granted by the owner, to use, enjoy, modify, destroy, dispose of and recover the property. Ownership looks more like a bundle of rights, so comprehensive that includes a number of rights and powers to the owner, of course these rights come with limitation, but in principle it is very extensive. The concept of ownership is opposed to the concept of possession. DCFR, VIII.–1:205(1) Possession, in relation to goods, means having direct physical control or indirect physical control over the goods. Possession revolves more around a factual dimension, we do not focus on the legally grounded power to dispose of the object but on the physical control. Ownership is based on a legally grounded right, possession is a factual circumstance, regardless of the right. The owner’s powers/control may include: - Use - Management and protection - Investments - Access by third parties (granting/denying access; exclusionary feature of ownership) - Transfer of resources - Right to profits or other benefits - Duty to bear costs, risks and liabilities Different regimes may exist depending on whether these powers/rights/liabilities are assigned to individuals, groups of individuals, public in general, individuals or institutions in charge of holding the property in the interest of one of the previous. To distinguish and capture the different regimes we can either: 1. Look at the nature of the owner: a. private v. public ownership → private ownership is assigned to individuals and private organisations, public ownerships is ownership assigned to public entities; although the problem is that we still have to distinguish between private and public 36 b. individual v. collective ownership (if more than one owner, as in a forest); or collective v. co-collective ownership 2. Look at the nature of the asset, i.e., goods and embedded interests: private or public goods, not related to an individual. E.g., the owner of a painting, is the painting private or public? Public good has collective interests, but how to define them? The main issue is accessibility. We may have private ownership of public good, but may include some limitation in the public interest (limited ownership). This is why we don’t have a definite distinction between private and public ownership. The protection of general public interests occurs in: - Publicly owned property (historical monuments or forests) → public authorities and public powers or duties based upon law and pursuing general interests - Privately owned property (historical buildings, paintings) → possible limitations to property rights’ holder in the general interest 4.2.1 Contribution of constitutional law in the field of property law The right to property as a right is enshrined in modern national Constitutions and supranational Charters/Conventions. Member States’ constitution: - French Declaration of the Rights of a Man and Citizen, sec. XVII “Property being an inviolable and sacred right, no one can be deprived of private usage, if it is not when the public necessity, legally noted, evidently requires it, and under the condition of a just and prior indemnity.” - German Federal Law, art. 14 “Property and the right of inheritance shall be guaranteed. Their content and limits shall be defined by the laws. Property entails obligations. Its use shall also serve the public good.” - Italian Constitution, art. 42(1),(2) “Property is public or private. Economic goods belong to the State, to entities or to private persons. Private property is recognized and guaranteed by law, which prescribes the ways it is acquired, enjoyed and its limits in order to ensure its social function and to make it accessible to all. (…)” CFREU, art. 17 (right to property). 1. Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest. 2. Intellectual property shall be protected. ECHR, art. 1, Protocol (1952). The protection of property was added through a protocol in the convention, with a different approach, which is more generally framed, about possession more than ownership or property, in order to ensure a wider scope of application, it does not make the distinction a limitation to the protection of HR (no technical definitions). At the same time we find some similarities: balancing between individual and public interests, that may justify legal intervention. 37 Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. What is the role of the ECHR and the CFREU in defining ownership. The right to property is a fundamental but not absolute right, thus a balancing is needed, which is normally done at national level, although the European Courts have intervened in some cases: - Ownership over cultural objects: Van Gogh Case15 In most jurisdictions, cultural objects may be owned by public or private entities; in both cases limitations apply in the public interest, including a State’s pre-emption right in case of sale to a private person. The legislator is totally able to define a balancing between public and private dimension of ownership, important to understand which public interests. This power of the state must be proportional and transparent, not a limited power of the state. The court specifies the scope of application of Art. 1 and the concept of “possession”, which is autonomous, not limited to ownership of physical goods and independent from the formal classification in domestic law. The considerations of the court on the general principles behind the State control of the market in works of art are that it is legitimate for a State to take measures designed to facilitate in the most effective way wide public access to them, in the general interest of universal culture. And concluded that if the authorities could exercise their right of pre-emption at any time the seller's rights would always be restricted, with the consequence of an unjust enrichment of the Italian State. Thus, there was a violation of Art. 1 of Protocol No. 1. - Property rights v. public health: Avian flu case The question here is whether the legislative measures adopted in Hungary to compensate the impact of the restrictive measures adopted within the avian flu outbreak were consistent with the Charter, since the measures were covering costs and actual losses but not loss of profits. Was it consistent with the right to run a business (art. 16, CFREU), the right to property (art. 17, CFREU) and the right to an effective remedy (art. 47, CFREU). The Court has held that it does not have jurisdiction to rule on the legality of that national law, because EU law doesn’t provide a general principle requiring full compensation in all circumstances. - The distinction between ownership and possession (balancing individual interests related to property rights): Pye case 15 Painting declared by It. Min. a work of historical and artistic interest (1954). In 1977 sold by owner (private collector) to an intermediary, who first declares the sale as exclusive purchaser and only after 6 yrs (1983) as purchaser on behalf of a third party (applicant before the Court). Original owner’s declaration of the sale to the State for the possible exercise of pre-emption right (no exercise). 1983: applicant’s attempt to sell the painting to the Guggenheim Collection upon information to the State for its pre-emption right. The State contests the validity of the original sale and of the declaration thereof. 1988: applicant’s offer to the State (not accepted); subsequent sale to Guggenheim, declared to the State for the possible exercise of pre-emption rights. Nov 1988: State exercises pre-emption rights in respect of 1977 sale (much lower price), considering the 1977 declaration as non- compliant with legal requirements, therefore making the right of pre-emption free of any time limitation. Has the applicant’s right been violated under art. 1, Protocol? 40 A property right is more generally a real right (diritti reali), normally over objects, that may be enforced towards everybody. For example, servitude: the right to pass through a piece of land of the neighbour, may be a property right when enforceable to the neighbour and any future owner of the land, because the property right is attached to the res, it is not just a contractual right with the person, thus it is real and enforceable towards everybody. The legal order will establish a list of property rights that would serve as real rights in a property system, different from ownership that may be assigned to different persons or individual organisations; some are limited, e.g. to pass through a land doesn’t mean the right to grow plants in it. Having a property right ≠ being the owner. Normally we have six rights of use and two security rights, not a long list, in fact, property rights belong to a numerus clausus, meaning the list is closed. That is because these principles limit the private autonomy, otherwise an individual could create a property right, and because property rights have an impact on the ownership so always should be able to distinguish which type of right you are having, in order to be enforceable against everybody they must be known by the community (core element: role of transparency of the system). The mere possibility that the right to ownership is deprived from its content by private autonomy is counterbalanced by the principle of numerus clausus, to protect ownership (French Revolution, freedom of property without the infringement of the state). So first, the principle is necessary for the functioning of the exchanges of the market, to avoid obstacles to the circulations of ownership, and also to preserve full ownership, without an excessive limitation through the imposition of property rights. You may have different types of property rights, some lists may include open-ended property rights. In a trust, the principle of the numerus clausus is less consistent, the scope of the trust is defined in the act, with the rights and the benefits; in the end the concept of trust tends to provide to the list quite an open-ended feature. The trust can expand the context of a property rights. The numerus clausus is there, but one feature of trust is that the scope is defined by the act, then you can have a free definition of the scope of the property right. It is power of law establishing the ownership; depending on rules established in the law, you may become owner through a certain way or another, and legal systems may differ on simple rules, for example in France if a contract is invalid in its form, you don’t have the property; in Germany if it comes out that the personal agreement is not valid, for the registry the new owner is still the purchaser. Another important aspect of private law is the protection of property rights, for which the law provides restitutionary remedies and declaratory remedies – when a dispute has as an object the ascertainment of the ownership right. 4.2.4 Sources At which level do we find these sets of rules (national/supranational)? The main source of property law is national law, but in cross border situations private international law will tell us which law is applicable. With property rights, the rule is lex rei sitae, meaning that you apply the law of the state in which the object is located. The rule is easy to describe but hard to apply (movables and immaterial things). Succession law crosses property law on one side because succession establishes one of the ways in which property rights may go from one to another, one of the modes of transfer of property; the goods may be displaced all over the world, in the end a simple rule may become difficult. In this system, where it is mainly up to national law to define property law, although with cross-border situations especially for movables, what is the role of EU legislation. 41 Art. 345 TFEU The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership. This seems to be a limitation of competences of EU in the field of property ownership, in the past specifically referred to the system of undertakings (for the state to establish the policy of the property regimes of undertakings). The role of the CJEU between national sovereignty and the EU freedoms and principles in golden share and Fearon: - Free movement of capital (the Belgian State’s golden share in a privatized investment company, power to prohibit transfers and takeovers) - Non-discrimination (Fearon and the State’s compulsory acquisition against non-Irish residents) The Segro case (C-113/16) Civil case to understand to what extent Eu law may interfere with national law. The case was about the acquisition of usufructus, the accession law in 2003, before the accession of Hungary in 2004, the Union limited the purchasing of land in Hungary only for Hungarians only for a number of years, but then get rid of these limitations; when those laws had been abolished because of the accession law (Hungarian law was forced to change), the Hungarian legislators precluded the right of usufruct (very close to ownership) to the outsider of the family of the current owner, indirect way to say that you must be in the community. Should the reservation made under article 345 TFEU be intended as making primary EU law inapplicable in the field therein defined? Does this effect extend to general principles and fundamental freedoms in EU law? The court said the legislator wants to safeguard the purchasing of the land, not because of a nationalistic flavour, but because the development of the country, what is not proportionate is the limitation to the closed family members, it was an indirect discrimination and not totally justified for the purposes of the legislation. Art 345 doesn’t extent national legislation dealing with property regimes from applying important and fund parts of EU legislations, especially regarding fundamental rights and freedoms, which have to be respected in property regimes. Hungarian law precluding the acquisition of right of usufruct over agricultural land unless the right is created in favour of a “close member of the same family”. “whilst Article 345 TFEU (…) expresses the principle that the Treaties are neutral in relation to the rules in Member States governing the system of property ownership, that article does not, however, mean that rules governing the system of property ownership current in the Member States are not subject to the fundamental rules of the FEU Treaty” Regarding transfer of moveables and cultural objects. European legislation and fundamental freedoms have to be taken into account, e.g. art. 34 – 35 TFEU on free movement of goods and prohibition of restrictions on import and export. Dealing with rules on transfer of goods, we should remember we should not hinder free movement of goods among MS; the articles prohibit limitation of MS on import and export, although enable MS to protect national treasures, e.g. can impose some regulations on treasures possessing artistic historic values – ref. right of pre-emption of the state in the exporting of a painting, based on the need to protect valuable objects. 42 Cultural objects at EU level. Eu legislation, particularly fundamental freedoms have to be taken into account, especially the free movement of goods and the prohibition of restrictions on import and export (art. 34-35 TFEU). Art 36 TFEU The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of (…) the protection of national treasures possessing artistic, historic or archaeological value (…). Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States Limitation to MS on the export and imports of goods of treasures possessing artistic or historic value, based on the need to protect those valuable objects. Cultural objects are the matter of Directive 93/7. The objective rule to enable cooperation among MS in regard to cultural objects, in particular the case in which cultural objects would be unlawfully removed from one MS, in which case you need to rely on cooperation. On national level, a doctrine applies against purchasers, which is the bona fide principle. A contract is the means to become owner of goods, which must be valid and follows the principle of nemo plus (cannot acquire what the other person does not have). In a contract you get bona fide possession, meaning you become the owner taking the object in good faith assuming the seller is the legitimate owner; this is an adjustment of the system without which the market wouldn’t work and induces owner to take care of the assets (so that other people won’t pretend to be owners). This shows the impact on EU legislation upon the field of property law in national legislation (bona fide purchasers rule). Transfer of property rights via succession. The problem about succession from a supranational pov is a problem of private law. In a succession the alternative is a will (testament) or not; also how to allocate debts and to what extent these can reduce the right of the heir to the asset. Succession law is normally a national matter, but the problem becomes how to identify the applicable law in the field of succession law in cross borders situations. EU Regulation 650/2012, because we are in the field of PIL (normally regulations than directives), thus enables all courts to apply the same PIL. The regulation allows movement of persons and ability to organize succession in advance, planning through choice of law. Art. 22 A person may choose as the law to govern his succession as a whole the law of the State whose nationality he possesses at the time of making the choice or at the time of death One single applicable law for the whole succession. Objective: transfer of property rights shall be ensured, both for transfer by will and through intestate succession. From the perspective of property law, with regard PIL, the applicable property law depends on the place of location of the asset. Art. 22 of the regulation shows a different approach, inherited from contract law, in that it allows the choice of the law of the legal system not in which the asset is placed but of which the person has nationality. An option, not mandatory rule, because the person will be able to organise succession as such; the choice is made in a public act, to simplify the administration. You do not choose how to distribute the assets, but you choose the law governing the transaction. You can also transfer specific property rights different from ownership, according to the numerus clausus principle and national sovereignty in the definition of property rights. 45 - Security rights, what are them (ref. Smits) the impact on EU law on national law in this regard (Directive on secured transaction in consumers protection) → ??? priority to creditors: generally all creditors are equal, but there is a priority to the creditor holding security rights. Does the EU have competence in the area of property law under the norms of the Treaties? To what extent do four fundamental freedoms influence national property law? Could you please provide examples based on the EU caselaw? To what extent can cultural objects be considered object of private ownership? How does EU law influence their regulation? To what extent does EU influence national rules and principles on transfer of rights? Please provide one or two examples based on EU legislation or caselaw. What is the rationale of the numerus clausus principle in property law and to what extent does UE law influence its application, if ever? Case-based questions: Mrs Blanc, a French citizen, owns a factory and runs an industrial activity related with sports- wear production. Due to the Coronavirus outbreak and multiple pandemic waves, the French government adopts strict measures to stop contagion in the framework of the EU coordinated response to the pandemic. For a certain period, which is quite lengthy, such measures include a lockdown of all factories not immediately related with basic needs of the population and the health care system. In the framework of the EU-funded Recovery Plan, the Government action provides for economic support for investments by existing industry willing to reconvert their business into target activities (such as production of sanitary masks). Mrs Blanc benefits from this support; her ordinary production is stopped and all pending orders suspended, whereas part of the productions chains is directed to produce sanitary masks. After the emergency, only part of the losses are covered through the conversion plan and the value of the business is significantly lower than before the outbreak. Questions: whether, under the Charter of Fundamental Rights of the European Union, Mrs Smiths’ right to property over the factory and freedom to conduct a business may be limited by health-related measures such as those described above; even if such limitation may occur under applicable national law and the Charter, whether Mrs Smits may invoke the Charter to claim any compensation from the French Government; particularly, whether the Charter could be invoked to claim loss of profits Competences of EU: art. 16, 37, … but not in the competence of EU the contest of compensation, especially loss of profit, recovery plan must be approved by Eu commission → control of EU, but not a competence of EU to oblige a state to compensate and no rule inside treaty, and ECJ can only interpret legislation in light of the treaties. In the charter there is no right to compensation if your property is just limited and not deprived (art. 17 CFREU); no fundamental right of full recovery, within MS discretion to find remedies for those who suffered damages. On one side, reference to previous cases and question of competence, if a 46 case was purely national the charter would of course not be applicable, it may be applied within the contest of EU law. Framing of the case: why certain provisions; identify the rights at stake; engage in a balancing; question of the claim (EU articles + national procedural autonomy). The point is not that in this case there was no remedy, but whether it was the most effective and appropriate (shape competence of MS). 5 TORT LAW A tort is a wrongdoing that produced some damages or loss, and the law under certain conditions enables to recover from those losses from someone liable for that wrongdoing. What is a tort from a private law perspective and what are the main functions of tort law. For example, in a sport activity, two features must be taken into account, the adoption of safety measures by organisation and compliance by sport player with those; tort law is about damages and also regulating activities. Is this an activity you want to limit/prohibit/regulate? According to the answer you may come up with a type of tort law; indirectly tort law has a regulatory function: saying a party is liable if hadn’t taken sort of precautions, you’re regulating the activity on the matter. In the example of the surgery, which type of interests are protected by the tort law? right to health, self-determination (right to dispose of one’s own body); can these interests be protected through contract law? medical malpractice is more of a matter of procedural distinction, it is not about the results, more about the efforts. Is there a contract between patient and the doctors? Mix of contract and tort approaches in different legal systems, because you may have a contract with the hospital and not with a single doctor, people involved with whom you may not have a contract. Who can claim damages? Considering the injured person, tort law fails to provide remedies if the person is not there anymore, but look at beneficiaries. Environmental damages have consequences on the whole community, brings about questions on who is affected, is the remedy to be substantial monetary retribution or more sustainable activities to reduce damages. With regard to vaccines, there is a high degree of uncertainty, not aware of what would happen with the vaccination. Who would bear the effects? Under the principle of precaution, the player should enact all possible measures in order to prevent relevant consequences in terms of safety and security of health. In the uncertainty, the state has to take the more reasonable solution. One of the approaches in tort law is that these clauses may be valid to the extent they so not cover gross negligence or fraud, so if the producer was grossly negligence in the making of the vaccine, they should be liable although there is some degree of state liability. Tort may deal with the infringement of property rights, it extends to protect your property rights as well, may serve the purpose of protecting personhood rights as well as property rights unless damage caused by the action of someone. Not because of loss there is a claim in tort, if the assumption of risks justifies the loss and limits the assumption of responsibility. For example, regarding big companies like amazon thus an economic loss in a business, is it part of torts; amazon may not be sued for tort, because of the laws of the internal market (freedom to conduct a business), so not an unfair damage. Tort law is not about curing all type of damages, but establishing liability in damages, for which you may also need a reason, i.e., when, on which legal ground can you establish someone is liable for damages occurred to someone else. From 47 fraud at corporate law and financial market you caused a loss that damaged thousands of people you are liable under tort law, because the investors were induced to invest in a system known for not being profitable and caused a huge effect and a policy response by the states. Legislation on how to make financial market more transparent when offering financial instruments to the parties, knowing w hat is behind, which level of risk are they taking: in a plane there is a known risk, in buying shares you expect them to be profitable. Rules that investors may invest knowing and being informed on what they are buying; the persons putting these shares on the market are liable. Compare to the Amazon and Paravia: in both cases an economic loss by being a player on the market (buying shares or start a business), as far as everybody complies to the law of the market, benefits and loss are there regularly but when those are violated you can claim damages because your losses are unjust. Personal injuries are normally considered unjust losses, of course also there you could consider consent and justification, but tort law is to cover them. In the case of economic losses, the approach is more restrictive, and becomes relevant if there is an infringement of competition law. Other possible cases: - A negligent doctor causes the death of the CEO of a multinational Apart from the moral damage, the family suffers also an economic loss because deprived of the source of income; also the multinational was also deprived of a key role in the economy, loss of income for business. Can’t recover from the loss of a creditor (since the CEO is a creditor to the company) and have to look at the extent to which you can replace it, depending on which there may be a liability in tort. The infringer cannot really anticipate the consequence in his/her behaviour, but you have to pay for damages whatever it is, because the main purpose is compensation. - A mother is morally destroyed when watching the news announcing her son’s murder The moral distress of the lady is emphasized by the way she was informed, is the moral distress shifted in terms of liability to the broadcast? Cannot blame the source for broadcasting the information but have a look in the method. - An article on Mr Smith’s activity has significantly harmed his reputation Freedom to press, if the activity is exercised in a just way and presented in a fair way (form of expression), there is no ground for liability in tort. - By riding his bicycle, Mark severely hurts Christine’s beloved cat Right to ownership is infringed and the loss is not economic but legal systems are restrictive in targeting non-economic losses in which MS take different approach, moral damage is a share of material damage (if damaged to the arm, the loss is quantified by the physical consequences but the moral damage is a share of the physical damage). Tort as wrongdoing causing damages to someone and entitling him/her to a remedy (normally a monetary one) aimed at making him/her whole. Wrongdoing that establishes tort and liability, what is tricky is to establish liability for a wrongdoing. Unlike in property law: • Tort creates a specific relationship btw the wrongdoer and the victim → right to ownership induces respect to other people, but do not have a specific relationship to those. • The latter has a ‘personal’ (not an absolute) right to damages towards the former → legal relationship between two determined persons – field of obligations, in civil law system tort is part of the law of 50 To conclude, tort law is primarily aimed at compensation, it may deter wrongdoings by discouraging dangerous and harmful activities and providing incentives for the adoption of adequate precautions. Its penalty function is much more critical, it may be endorsed by legal systems in special instances. 5.1 SOURCES OF TORT LAW AND EU PERSPECTIVE 1. What does tort law regulate? 2. What are the legal sources of tort law? a. At national b. At supranational level 3. What is the role of international private law? 4. Is EU competent in the area of tort law? 5. In which areas of tort law has EU law emerged so far and why? What does tort law regulate? • It defines the concepts of damage and unlawful act as the main bases for liability, in general and open-ended terms (eg, unjust damage) or having regard to affected interests (eg, act unlawfully injuring the life, body, health, freedom, property or another right). • It establishes whether liability is based upon wrongdoer’s fault or on other (objective) elements (eg, ownership of the object, causing the injury) – accountability. • It establishes which type of link existing btw wrongdoing and damages – causal link. • It defines which losses may be recovered (eg, economic and non-economic losses). • It determines defences available for the wrongdoer (e.g. consent, acting at risk, contributory “fault”, etc.). What are the sources of tort law? Mainly national legislation in both general tort law and specific instances. In cross-border cases the Rome II Regulation on the choice of law for extra- contractual relationships as part of EU private international law. EU tort law (specific instances), involving liability for breach of EU law (by EU institutions and MSs) and other forms of liability (eg, defective product liability, liability in data protection, environmental liability, liability for antitrust infringements). Cross-border cases and the role for PIL in the EU. Rome II Regulation (EU/2007/864) as part of EU private international law. Its main rule: applicable law is the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur. Lazar v Allianz (C-350/14): “Art. 4(1) Regulation (EC) No 864/2007 (Rome II), must be interpreted, in order to determine the law applicable to a non-contractual obligation arising from a road traffic accident, as meaning that the damage related to the death of a person in such an accident which took place in the Member State of the court seised and sustained by the close relatives of that person who reside in another Member State, must be classified as indirect consequences of that accident, within the meaning of that provision.” Is EU competent in the area of (general) tort law? “Can harmonization of tort law be said to ‘improve the conditions for the establishment and functioning of the internal market’?”17 See, eg, preamble of the Product Liability Directive: 17 (Giliker, 2009) 51 the existing divergences [in national law] may distort competition and affect the movement of goods within the common market and entail a differing degree of protection of the consumer against damage caused by a defective product to his health or property And the one of the Environmental Liability Directive the objective of this Directive, namely to establish a common framework for the prevention and remedying of environmental damage at a reasonable cost to society, cannot be sufficiently achieved by the Member States and can therefore be better achieved at Community level by reason of the scale of this Directive see art. 4, TFEU; environment as matter of shared competence btw EU and MSs. In which more specific areas of tort law has EU law emerged so far? How do we explain EU competence in these areas? - Liability of EU or MS institutions (art. 340(2), TFEU; Francovich, C-6/90; C-9/90; Brasserie du Pêcheur SA v Federal Republic of Germany, Joined Cases C-46/93 and C- 48/93) - Defective product liability (Directive 85/374/EC) - Antitrust Damages (Directive 2014/104/EU) - Damages in data protection (General Data Protection Regulation (GDPR), EU/2016/679) - Environmental liability (Directive 2004/35/CE) - Motor liability insurance (Directive 2009/103/EC) Liability of EU or MS institutions. Art. 340 TFEU (ex Article 288 TEC) (…) 2. In the case of non-contractual liability, the Union shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties. A parallel judge-made rule for MS liability for breach of EU law: o Francovich (C-6/90; C-9/90) and liability of law-makers "The full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible." (Francovich principle) o Brasserie du Pêcheur SA v Federal Republic of Germany (Joined Cases C-46/93 and C-48/93) and liability of States (all powers may be involved) "(...) where a breach of Community law by a Member State is attributable to the national legislature acting in a field in which it has a wide discretion to make legislative choices, individuals suffering loss or injury thereby are entitled to reparation where the rule of Community law breached is intended to confer rights upon them, the breach is sufficiently serious and there is a direct causal link between the breach and the damage sustained by the individuals. (...) That principle, which is inherent in the system of the Treaty, holds good for any case in which a Member State breaches Community law, whatever be the organ of the State whose act or omission was responsible for the breach (...). Pursuant to the national legislation which it applies, reparation of loss or damage cannot be made conditional upon fault 52 (intentional or negligent) on the part of the organ of the State responsible for the breach, going beyond that of a sufficiently serious breach of Community law. Reparation by Member States of loss or damage which they have caused to individuals as a result of breaches of Community law must be commensurate with the loss or damage sustained. (…) National legislation which generally limits the damage for which reparation may be granted to damage done to certain, specifically protected individual interests not including loss of profit by individuals is not compatible with Community law. Moreover, it must be possible to award specific damages, such as the exemplary damages provided for by English law, pursuant to claims or actions founded on Community law, if such damages may be awarded pursuant to similar claims or actions founded on domestic law." o Traghetti del Mediterraneo SpA v Repubblica italiana (Case C-173/03) and liability of judges Community law precludes national legislation which excludes State liability, in a general manner, for damage caused to individuals by an infringement of Community law attributable to a court adjudicating at last instance by reason of the fact that the infringement in question results from an interpretation of provisions of law or an assessment of facts or evidence carried out by that court. Community law also precludes national legislation which limits such liability solely to cases of intentional fault and serious misconduct on the part of the court, if such a limitation were to lead to exclusion of the liability of the Member State concerned in other cases where a manifest infringement of the applicable law was committed. Defective Product Liability (Directive 85/374/EC). Art. 1 Defective Product Liability Directive: The producer shall be liable for damage caused by a defect in his product. Free movement of goods and the functioning of the internal market. The complementary role for regulation (eg, safety regulation) and liability rules. A strict liability approach to ensure effective protection to consumers. Antitrust Damages (Directive 2014/104/EU). Article 3 – Right to full compensation 1. Member States shall ensure that any natural or legal person who has suffered harm caused by an infringement of competition law is able to claim and to obtain full compensation for that harm. 2. Full compensation shall place a person who has suffered harm in the position in which that person would have been had the infringement of competition law not been committed. It shall therefore cover the right to compensation for actual loss and for loss of profit, plus the payment of interest. 3. Full compensation under this Directive shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages. Damages in data protection. General Data Protection Regulation (GDPR) EU/2016/679 Article 82 – Right to compensation and liability 1. Any person who has suffered material or non-material damage as a result of an infringement of this Regulation shall have the right to receive compensation from the controller or processor for the damage suffered. (...) 55 - Producer → trader → business customer (e.g. elevator sold to a real estate, which turns to be defective) not covered by the directive because it only aims at protecting consumers, thus you have MS legislation, although there are EU standards to be applied e.g. antitrust (unfair practice in competence law) - Producer → retailer → consumer although very often this chain is more complex, but it is the main field in which the directive applies. - Non-EU producer → EU-importer → Retailer → consumer linked with the safety standard regimes, how to be sure they are safe enough; if a producer wants to sell in Europe they should know to comply with EU standards, but should they be liable for not doing so? That is out of EU jurisdiction, but we may have a gatekeeper, i.e., the importers deemed as they were the producers because have to monitor over the compliance of the goods. So, the chain is covered, since by the EU the importer is the one liable, so that indirectly we extend the scope of application of EU law, because the importer will have contractual power to refuse the goods if not compliant with EU law. This is the same effect as in data protection, ref. GDPR the export of data out of the EU you are responsible to check effective protection in the receiver MS. (exporter gatekeeper, in PL importer as gatekeeper). - Non-identifiable producer → retailer (supplier) → consumer if we do not know the producer, because the business practices are confusing, you focus on the first known identifiable player in line, i.e. the retailer (or supplier for the consumer, thus the seller), who has two options: identify the producer or bear the risk. Has to put the consumer in the position to sue the producer, thus if not provided you sue the supplier. Definition of producer (art.3(1)) o Manufacturer o Any person who puts the name or trade mark o Any person who imports into the EU products (gatekeeper) o Supplier if the producer cannot be identified Art.7, i.e., when the producer is not liable: o If did not put the product into circulation. In order for the directive to be applied you need a supply chain in which at some point the product is put into circulation, a distribution o The product is not manufactured for sale and for the distribution into the market ECJ, to explain when a product is not put into circulation, i.e., when the producer did not intend the product to leave the process of manufacture or when the manufacturing process is not yet complete. Sanofi case 2006 (C-127/04) Vaccine produced by A (producer), delivered by B (provider) to the hospital (service provider). B is wholly controlled by the producer, so is B to be considered a producer? If the distribution chain is closely connected to the producer it is necessary to go beyond the formality and find the substance looking at the facts of the directive, look at what the subsidiary does. Not only separation of the entities but substantial terms, being involved in the production chain, when the link between the two entities is so close, you may consider it as producer. Arhus Amtskommune (C-203/99) 56 Corporate construction in the chain. The players in the market should not design their chain or corporate structure in a way to put them outside of the scope of the directive. Cannot escape liability by means of construction of the corporate chain, the court called for effectiveness. Patient needs kidney transplant, during the process the kidney is flashed with a defective fluid, with the result of making the kidney useless. Physical damage to the patient cause couldn’t undergo the transplant. Two subsidiaries are the two hospital: the producer of the fluid and the user of the fluid and service provider to the patient. Århus Amtskommune (AA), owner of two hospitals: B. Fluid’s producer C. Service provider (transplantation). If you sue the main owner, can you say is a producer through one of the subsidiaries, and can you say the product has been put in the market, because technically it was not sold in the market. Is AA the producer? Was the product put into circulation? The producer used two arguments: the product wasn’t meant to enter market circulation, and the hospitals are not to be considered legal business as in Art.7 because they provide health services freely. According to the ECJ, the hospital is a business activity although supported by the State through taxpayers, and the product has left the sphere control of the producer once embedded in the service since the user needs to be put in the sphere of the service provider because is specifically needed (cannot inject kidney by yourself). A product embedded in a service, it doesn’t matter whether the service provider buys it from the market or has different corporate structure, in any case a product is put into circulation and the producer must be liable. If not interpreted in this way you create an exception in which a product is produced also by the supplier. Approach: describe the chain and expand the scope of application making sure the producer is not able to escape the liability. Put on the market because it is made available to users via the supply chain, wider interpretation in order to ensure effectiveness, to make the producer not able to escape the liability. The notion of product. Which products are involved with this directive? Moveable objects, or moveable embedded in an immoveable (piece of roof, pipes, …), as conceived as component of a product. Wider chain because involves all the different producers of the components. Food area: tomato sauce, the product liability directive refers to the tomato sauce not to the primary tomato, MS however can extend the directive as involving also the tomato as such, which can be defective because of farming process, seeds, water used, pesticides etc… Normally these products are tangible, the only intangible product expressed in the directive is electricity, but since it is the only one mentioned, normally intangible products are not included. In the case of software or digital product non embedded in tangible device, the directive cannot be applied but the expansion made by the caselaw of ECJ and at MS level extends the scope of the directive. The directive also covers body materials (organs). Notion of product extended, but not beyond tangible things. 5.3 STRICT AND FAULT-BASED LIABILITY Why is the PLD considered a strict liability regime and not a fault-based one? Why is strict liability important in this area? What are its shortcomings if any? What is the role of defences in a strict liability regime? General distinction between fault, intention or strict liability: - Marc causes an accident when trying to avoid a wild animal suddenly crossing the road → no liability, although we can see the fault; may look into liability of the road owner (if provided the necessary precautions to avoid animals crossing the road) and the state 57 (in a strict sense, in that it is owner of the wild animal). In extra-contractual liability intention is not necessary, whilst in criminal law you also need intention - Mrs Brown gets sick after eating oysters at a prestigious restaurant → producer of the oyster and restaurant both should be strictly liable, PLD will only apply to the producer but only to the restaurant when involved in the production chain in the making of a meal (producer of primary product – component; and producer of the complete meal – assembler). But the restaurant is a borderline case because it doesn’t have the sophisticated means to examine the products. Fault, intention and strict liability are accountability criteria, in order to shift the damage to the liable person you need criteria to establish who should bear the consequences: either the person is at fault, has intentionally provoked or it is one of the objective situation which the law provided liability. According to Guido Calabresi, the law establishes if the consequences of an accident are to be shifted basing on many criteria, meaning the law makes considerations on the cost of accidents when deciding whether to assign liability. (1) From economic perspective, you should strike a balance, e.g. who is the best (or cheapest cost-) avoider of accidents; who is the one who can get best insurance? Not only just and fair but also efficient to use that precautions. E.g. Ford Motor case (Smits), the cost to take precautions was higher than the cost to pay damages and was awarded punitive damages. (3) fairness orientation, that is not only to take into account the cost of precautions and possibility of higher consequences but also just and fair precautions (economically oriented and fairness oriented), e.g., when is it fair to allocate the costs of accidents to a person rather than another? (2) Another criterion is the regulatory criteria, to avoid the risk, i.e., which type of activities should be encouraged/discouraged; which level of precaution should be encouraged/discouraged? The questions on choosing the criteria to make someone liable to be asked are: who do you want to make liable? what do you want to make effective? The policy consideration behind the shield of liability (legislators try to limit liability by no liability use), for example in the case of vaccination, is to encourage the production of vaccines and the administrations by the doctors; the state is taking the liability instead of the companies. Precautionary principle: with regard to safety concerns, you should take all the best precautions so that the value of life is conserved. Tort is generally fault-based in many legal systems. Fault as an open term: how to interpret it? Through the lens of DCFR (VI.–3:102: Negligence): A person causes legally relevant damage negligently when that person causes the damage by conduct which either: (a) does not meet the particular standard of care provided by a statutory provision whose purpose is the protection of the person suffering the damage from that damage; or (b) does not otherwise amount to such care as could be expected from a reasonably careful person in the circumstances of the case This type of liability revolves around the fault of the wrongdoer, who produces a breach of a standard (of care, reasonable precautions, …), so the defendant has to prove. Objective v. subjective criteria to assess fault: are individual competences relevant? Should, e.g., fault be differently addressed as regards a professional? Should the costs of precautionary methods be taken into account? Fault in the Learned Hand formula [B < PL; Burden of precaution shall be 60 The notion of defect is adjusted to the vulnerability of the person and the function of the device and the defect must not be proven singularly. The role of information. Products are defective not only because of the physical feature but also because people are not instructed correctly in the way they should use the product safely. E.g., side-effects in a drug’s leaflet, a detergent’s bottle shows warning about skin contact but does not provide any instruction about actions to be taken in case of contact, or also the language and accessibility of information from the one commonly spoken in the place where the product is commonly distributed. Information may also have a deterrence function (e.g. cigarettes packages). Not always massive information is what we need, conveyance of information, i.e., when we have a concise warning, we read it whilst a long one we don’t. The expectation of reasonable misuse by the user: how reasonable? The legislators also claimed the producer have to take into account the reasonable misuse of the user, side of tolerance that should be anticipated. E.g., producer of safe car that may go at 200 km/h but as a producer you should not rely on the fact that all drivers will stop at 200, thus should make the car safe even if the driver goes faster. Time and scientific development. Also, producers have to follow and take into account the scientific development, although may be excused if some scientific founding come later than the entering into the market. The producer has a duty to keep himself up to date (the principle of precaution). Exceptions to liability: Art. 7. The producer shall not be liable as a result of this Directive if he proves: (a) that he did not put the product into circulation; or (b) that, having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterwards; or (c) that the product was neither manufactured by him for sale or any form of distribution for economic purpose nor manufactured or distributed by him in the course of his business; or (d) that the defect is due to compliance of the product with mandatory regulations issued by the public authorities; or (e) that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered; or (f) in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product Number of circumstances in which the producers may escape the liability, even though e.g. the producer may be liable for not recalling the product when the discovery is made, or possible that a product may be composed of many components, thus the manufacturer of a component may attribute the liability of the assembler or producer because badly provided instructions. An example from the 2018 EC Report on the PLD application. A person suffered severe personal injuries when the front brakes of the second-hand motorbike he was riding seized without warning and he was thrown off. The motorbike had been well-maintained, had low 61 mileage and was only two years old. The claimant sued and won in the first instance. An appeal by the producer failed because the Court explained that the Claimant did not have to prove the existence of a specific design or manufacturing defect for there to be a finding of defect, nor did he have to show how the defect was caused. The Claimant merely had to show that a defect existed at the relevant time and that this caused the accident. The Court found on the expert evidence that there must have been a defect in the brakes of this particular motorbike. This susceptibility was not present in other bikes of the same type, and therefore the Court was entitled to infer that these particular brakes were defective, and the Claimant had proved his case. Can the producer’s liability be affected by the actions of other players? 1. Within the production chain Liability of the manufacturer and liability of the component’s producer (art. 7(1)(f)), we can distinguish three situations: o multiple players contribute with the production (ref. art. 7, the component’s producer can escape liability if can prove instructions given by the final producer) both covered by the PLD o Component’s producer may be exempted under art. 7(1)(f) o Both may jointly liable, meaning that an obligation to pay damages regards more than one debtor, at national level either the final producer or solidarity in liability (the victim can recover full damage by only one person) Normally national systems will allow for joint liability which just enables to get the full amount from one single person. The rule according to the directive as far as producers of the final product or of the components. 2. Outside of the production chain In the case which you have multiple players, but some operate outside the production chain (retailers, traders, suppliers), art. 8(1) applies. Without prejudice to the provisions of national law concerning the right of contribution or recourse, the liability of the producer shall not be reduced when the damage is caused both by a defect in product and by the act or omission of a third party. 3. The role of the injured person Art. 8(2). The liability of the producer may be reduced or disallowed when, having regard to all the circumstances, the damage is caused both by a defect in the product and by the fault of the injured person or any person for whom the injured person is responsible. The liability of the producer may be reduced when can prove the damage is caused by fault of the injured person. With regards to third parties out of the production chain: - Producer’s liability and supplier/retailer’s liability. Can the latter be held responsible for the former (vicarious liability) under the directive? - Liability of the service provider using a defective product. When the player contributes to put the product into circulation. The position of the service provider is not covered by the directive, the question is whether the national system may provide a parallel regime of liability. Can different regimes co-exist (concurring liabilities – producer of good and producer of service)? Should always be possible for the injured party to 62 go after the producer, in order to get recovery you need to sue the hospital. The national systems may enact legislation coherent with the scope of the directive, allowing the consumer to sue the provider, which although must be able to sue the producer. The Skov case (C-4023/03) Salmonella poisoning due to consumer’s use of defective eggs, produced by Skov and bought from Bilka (retailer). Danish pre-existing legislation: retailer’s liability for damages caused by defective products (vicarious liability). Does the directive admit this different regime? What is the impact on producer’s liability? PLD as a full harmonization directive. “Since, in the great majority of cases, the supplier does no more than sell the product in the state in which he bought it and only the producer is able to influence its quality, it was thought appropriate to concentrate liability for defective products on the producer. It follows that it was after weighing up the parts played by the various economic operators involved in the production and distribution chain that the choice was made to allocate liability for damage caused by defective products in principle to producers, and only in certain defined cases to importers and suppliers, in the legal system established by the Directive.” - Strict producer liability: retailer’s vicarious liability not admitted - Fault-based producer liability (not covered by PLD): vicarious retailer’s liability, admitted Besancon v. Dutrueux (C-495/10) Mr Dutrueux, who was 13 years old at the time, suffered burns during surgery carried out on 3 October 2000 at Besançon CHU: the burns were caused by a defect in the temperature-control mechanism of a heated mattress on which he had been laid. Does Defective Product Liability Directive prevent MS from regulating product liability as regards service providers, who use defective goods in their business? Can different regime co-exist (concurring liabilities)? - Producer of good - Producer of service The effet utile of the Directive and the possible combination between producer liability and (no-fault based) service provider liability. To sum up: o Fault, strict liability and regimes based on reversed burden of proof as alternative or complementary systems for allocating the consequences of accidents that occur in market and society o Policy considerations together with legal traditions influence the choice of these regimes o PLD as a strict liability regime and a complementary tool for market regulation o The deterring function of strict liability 5.4 NOTION OF DAMAGE AND CAUSATION Notion of damage. Article 9 provides the definition of damage in the directive. MS have different approach in the definition of damage. The damage is of course related to the defect but does not involve the product itself. Art. 9 For the purpose of Article 1, 'damage' means: 65 One thing to keep in mind with presumption is that it may be rebutted, meaning the other party may always provide counterproof. The proportionality rule in the PETL. Art. 3:103. Alternative causes (1) In case of multiple activities, where each of them alone would have been sufficient to cause the damage, but it remains uncertain which one in fact caused it, each activity is regarded as a cause to the extent corresponding to the likelihood that it may have caused the victim’s damage. (2) If, in case of multiple victims, it remains uncertain whether a particular victim’s damage has been caused by an activity, while it is likely that it did not cause the damage of all victims, the activity is regarded as a cause of the damage suffered by all victims in proportion to the likelihood that it may have caused the damage of a particular victim. The rebuttable presumption of joint liability in the DCFR. VI.–4:103: Alternative causes Where legally relevant damage may have been caused by any one or more of a number of occurrences for which different persons are accountable and it is established that the damage was caused by one of these occurrences but not which one, each person who is accountable for any of the occurrences is rebuttably presumed to have caused that damage. Causation as tool for establishing or excluding liability (either/or). Sometime relevant for reducing the amount of damages due. Assessment requires the use of open-ended concepts and often implies discretion upon courts. The choice of assessment criteria may be driven by policy consideration, concerning, inter alia, the nature of interests and stake, as is the case for personal injuries. Product liability as a laboratory for causation assessment. More to come (future vaccination cases…). Different approaches in causation are regarding civil law, in criminal law the burden of proof is much heavier. 6 CONTRACT LAW In general terms, the law allows verbal contract; also the purpose and the context tell you whether there is a contract. Coffee machine there is a contract because the sell is shown in the display and your acceptance is shown in the introduction of the money. What if the same fact can be framed as a tort and as a contract? E.g. if go to Macca and get burned by the spilled coffee. Concurrent regimes, there are systems (e.g. Belgium and France) which normally decide contract as the controlling regime using tort only if cannot frame the situation in a contract; other systems are more open (e.g., Italy), which allow the freedom of choice. Ref. DCFR, a contract is an agreement which is intended to give rise to a binding legal relationship or to have some other legal effect; it is a bilateral or multilateral juridical act22. Agreement → binding legal relationship. The contract is used to: - Create obligations (and corresponding rights), e.g. when providing finance, insurance or other services - Create real rights (e.g., security rights) 22 DCFR, II.–1:101 66 - Transfer rights (e.g., property) - Set a company, an association, a partnership - Plan and execute a common interest project There may be specific elements in specific traditions, but in any case there is, from socio- economic functions agreed by the parties, a (legal) enforceability of promises. The doctrine of consideration in English common law: “Something of value in the eye of the law must be given for a promise in order to make it enforceable as a contract” (Treitel, based on Thomas v. Thomas, 1842). A wider idea of contractual value/interest as justification for legal appreciation of economic transactions in the shape of legally binding agreements, i.e. contracts. Gratuitous contracts are possible in many legal systems, although normally a higher level of formality are required, to compensate the lack of economic consideration. Contract law is intrinsically based upon the principle of private autonomy, a contract is based on the wills of the parties, no one obliges to conclude a contract: freedom to choose the party, the terms, the contractual form (oral v. written) and contractual formation (online v. offline, automated v. competitive procedures of formation, negotiated v. smart contracts, etc.). The role of private autonomy and the role of private law is also including but not limited to mandatory rules that protect interests of third parties or general interests that may not disregarded by the contracting parties. DCFR. II.–1:102: Party autonomy (1) Parties are free to make a contract or other juridical act and to determine its contents, subject to any applicable mandatory rules. The role of contract law is the one enabling the use of contracts by defining the procedural infrastructure in which contracts are formed, interpreted, executed and enforced. Contract law also fosters private autonomy by defining models and forms to be used as defaults. We find rules aimed at rebalancing the parties’ powers or unfair terms that impair the effective use of contractual freedom. Another scope of contract law is defining the possible limitations of private autonomy through a balance between private autonomy and the need to respect general interests and third parties’ rights, including fundamental rights. Default rules are more prominent, but mandatory rules are more important in the protection of weaker parties and general interests. Open-ended terms of a contract must be interpreted, thus have rules of interpretation, with also rules on how to perform a contract (e.g., good faith). Increasing needs for special contract law regimes based on the status (qualification) of the parties: - Party-to-party contracts regardless their qualification/status - Business-to-business contracts (and public administrations?) - Business-to-consumer contracts - Consumer-to-consumer contracts Or special contract law regimes based on the modes of contracting – negotiated v. standard (not negotiated terms); off-line v. on-line contracts. All these variations tell us the mapping of contract law: general contract law is mainly addressed at national level; special regimes of contract law are seldom in civil codes, but mostly in special scope legislation which had an impact from supranational sources. Since special scope legislation is so important, international impact also on the framework of contract law. International point of view, e.g. Convention on International Sale of Goods (Vienna, 1980); from EU perspective, e.g. EU consumer law (unfair terms, unfair commercial practices, consumer precontractual and contractual rights, etc.), EU business transaction law (late payments, misleading and comparative advertising, antitrust agreements, BtoB unfair trading 67 practices in agri-food supply chain, etc.), EU law on online transactions and distance selling, EU (consumer) sale law (online and offline). Thus is EU competent in the area of contract law? if consider only general contract law, the answer would be negative, but contract is the main legal instrument in the market and difference among several jurisdictions may impair the functioning of the market, thus EU legislation has intervened. Examples of cross-fertilization btw national general contract law and EU special regimes. See e.g. sec. 307, BGB, on standard terms creating unreasonable disadvantages contrary to the requirement of good faith (B2C and B2C); new art. 1171, French civil code, on standard contract terms creating significant imbalance. Compare these with Unfair Contract Terms Directive. See, e.g., extension of B2C regimes on unfair commercial practices to B2B relations (Scandinavian countries, Austria). E.g., I prohibit misleading practices, whether those impact in the validity of the contract is a matter of national law. The role of EU contract law from a private international law perspective is Rome I Regulation (EU Regulation no. 593/2008), which allows the choice of applicable law in contracts, the role of overriding mandatory rules as a limitation, the default criteria and the rule of “closest connection” to the contract. What is the role for soft law and general principles identified at supranational level by scholars and legal experts groups? Not legally biding; either general scope or focused on specific transactions. - International (EU and extra-EU) o The Unidroit Principles (1994-2010) – BtoB commercial contracts o Uncitral model laws on specific contract transactions (e.g. construction contracts, procurement of goods, e-commerce, etc. - European o The Principles of European Contract Law (1995-2003) o The European Contract Law Action Plan (2003) and the Draft Common Frame of Reference (2009 6.1 EU CONTRACT LAW The sources of European contract law are both hard and soft laws. “Hard” EU contract law refers to EU Directives, relating both to consumers – Regulatory directives (misleading advertising, unfair commercial practices, consumer credit) and directives on private law (doorstep and distance selling now Consumer Rights Dir., unfair terms, consumer sales, digital content and digital services) – and to commercial contracts (late payments, commercial agents). Apart from directives, the EU has also enacted regulations: Rome I & II (on the applicable law) and Brussels I & I bis (jurisdiction). Another source of hard law is the caselaw of CJEU, in the interpretation of Directives and Regulations, in the application of the TFEU and the Charter and in the establishment of the general principles of EU law (e.g., effectiveness). The story of EU contract law goes beyond the existing directives and regulations, including also soft law principles (restatement, not grounded on statues) that represent a common core. These represent neutral rules for international transactions, i.e., restatements as part of effort to simplify cross-border contracts, since it is useful to have “neutral” rules translated. There are international conventions as the Vienna convention and the international Sale of Goods (CISG), and the Unidroit Principles for International Commercial Contracts as part of international soft law. From the EU law perspective, there 70 o Controls over unfair terms - In performance o Contra proprium factum - In exercising remedies o No termination for slight breach in order to escape unprofitable contract Under English law there is not doctrine of Good Faith, but English courts may develop equivalent controls or rules against some specific instances with a similar result. Ref. Interfoto v Stilletto [1989]: “In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognises and enforces an overriding principle that in making and carrying out contracts parties should act in good faith… English law has, characteristically, committed itself to no such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness.” The PECL recognises the principles of Good Faith and Fair Dealing under art. 1:201 (1) Each party must act in accordance with good faith and fair dealing. (2) The parties may not exclude or limit this duty The PECL includes words and concepts used differently, e.g., the term agreement. An agreement is so if there is an offer and an acceptance, but can it be conceives as an actual meeting of minds (subjective), or you appear to make a proposal (objective)? E.g., a Trier wine auction, if A reasonably thought B was making an offer, under French law there would be no agreement, under German law there would be a contract but it may be avoided for mistake an under English law there would be a binding contract. Ref. Smith v Hughes [1871], “If whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party ’s terms.” Why do we have such different rules? Seem to be differences in the approach, policy and philosophy. Not just a matter of history but also a matter of the aims of law and the role of court. 6.2 LIABILITY FOR BREAKING OFF NEGOTIATIONS AND GOOD FAITH Sufficient agreement, in all systems a contract requires an agreement between the parties but also a minimum or sufficient content of the agreement (is it gonna work?), although sometimes parties agree only on the bare bones, thus it may be held they have not reached an agreement or the court may think they actually intended the contract. The PECL summarizes the situations in all legal systems. Article 2:101: Conditions for the Conclusion of a Contract (1) A contract is concluded if: (a) the parties intend to be legally bound, and (b) they reach a sufficient agreement without any further requirement. Article 2:103: Sufficient Agreement (1) There is sufficient agreement if the terms: (a) have been sufficiently defined by the parties so that the contract can be enforced, or 71 (b) can be determined under these Principles For example Maize Driers case, the agreement was very short and the French Court of Appeal claimed it did not constitute a genuine contract, because many things were left unsettled; the Court of Cassation on the contrary claimed a short agreement may be binding if containing the necessary elements of a contract. Some legal systems recognise that even though there isn’t a definite contract, there may be an “agreement in principle”, a sort of agreement to agree, a preliminary contract as a preparatory step for the final contract, and if one party refuses to continue, the other party may have a remedy. In an agreement in principle there is more than mere negotiation but less than a definitive contract, it needs to be distinguished from cases in which the parties, though in negotiations with each other, do not intend there to be any legal commitment. In many legal systems these are recognised, not of course as the full, final contract (which has yet to be agreed) but as a form of preliminary contract intended to serve as a preparatory step towards a definitive contract – and so if the agreement is not reached because one party refuses to negotiate further, the other may have a remedy. Under French law, if all the essential elements are settled and only secondary elements remain to be agreed upon, then the contract can be concluded (not a binding contract if missing elements are essential); this is a preparatory step which may force parties to continue their discussion in good faith but does not necessarily lead to the conclusion of a contract. Avant-projet Catala was the first to name and attempt to define the accord de principe, although the clause wasn’t included in the reformation of the Civil Code. English law quite different than the continental, ref. Walford v Miles [1992]25, according to which the reason why an agreement to negotiate (or an agreement to agree) is unenforceable is simply because it lacks the necessary certainty. The breaking off of negotiations. A and B negotiate, they seem to be in broad agreement; B assumes that there will be a contract and incurs expenditure in preparation for contract, or passes up another opportunity; A then refuses to agree or fails to negotiate. Most continental systems recognise there must be good faith in the course of negotiation, the continuation and breaking off negotiation must satisfy the requirements of negotiations, both in France and in Germany. Jhering established the culpa in contrahendo, i.e., the fault in the contracting process. If A pretend to negotiate with B whilst already decided to contract with C, it may be discouraging competitor C from making offer to B. This behaviour is punished under civil law as a breach of good faith or culpa in contrahendo, whilst not in English law, although could trigger the doctrine of fraud. Thus, in the two legal systems there is not such a practical difference. It is fine to have parallel negotiations but not if the other party is led to believe no other negotiations (French law). PECL Article 2:301: Negotiations Contrary to Good Faith (1) A party is free to negotiate and is not liable for failure to reach an agreement. 25 The respondents (Miles) decided to sell their business, and entered into negotiations with the appellants (Walford). The sellers agreed orally to deal with the buyers exclusively and to terminate negotiations with any other competing buyer (a ‘lock-out’ agreement). However, it was not specified how long the agreement was to last. The sellers later decided not to proceed with the negotiations and went on to sell the company to a third party. The buyers sued for breach of the oral ‘lock-out’ agreement. The majority in the Court of Appeal held that the agreement was no more than an agreement to negotiate and was therefore unenforceable. Bingham LJ disagreed: he said the agreement should last until it became clear that the parties though negotiating in good faith could not reach an agreement. The House of Lords upheld the decision of the Court of Appeal. 72 (2) However, a party who has negotiated or broken off contrary to good faith is liable for the losses caused to the other party. (3) It is contrary to good faith, in particular, for a party to enter into or continue negotiations with no real intention of reaching an agreement with the other party. In Germany there is “culpa” liability for breaking off negotiations for no good reasons, in France the court seeks tortious liability for abusive breaking off of negotiations (ref. Hydrotile Machine). The breaking off of negotiations without good reason will give rise to liability to compensate the other for damage suffered as a result of his reliance on the expectation. English law understands liability not in contract but in negligence (tort), ref. Box v Midland Bank Ltd case. English law establishes that a simple promise is not binding even if accepted by the other party, unless the promisee provides consideration (intend to be legally bound or does something – ref. Carlill v Carbolic Smoke Ball Co) or some economic value in exchange for the promise. US: doctrine of promissory estoppel26. If A makes gratuitous promise, B reasonably relies on it, A liable (usually as if contract), normally used when A indicates to B that will be contract (ref. Hoffman v Red Owl Stores). E: promissory estoppel only if A giving up existing right vs B, except if promise/indication that will transfer land or other defined property. To some extent all systems do provide remedies when one of the parties break off negotiations, although in the civilian systems in the case of fault committed during the negotiations, the reparation of the resulting loss is not calculated so as to compensate the loss of benefits which were expected from the contract that was not concluded. The remedies concern the wasted expenses by corrective justice, to re-establish the previous status quo. There are exceptions, e.g. Plas v Valburg case, in the Netherlands three stages of the negotiation process and if a party was justified in the expectations of a contract which was later broken off, an obligation to pay compensation in positive interests exists. The duty of pre-contractual good faith in the Netherlands may give rise to a duty to continue negotiations, and where that duty is not complied with a court hold the behaviour contrary to good faith. Different systems use different types of arguments in order to reach the same results. 6.3 FRAUD, MISTAKE AND NON-DISCLOSURE Need to develop a neutral description, otherwise too doctrinal concepts, thus parties enter a contract on the basis of incorrect or incomplete information. How many different facts situations we have to face. Basic distinction: mistake about the terms of the contract or about the facts; then a mistake can be deliberately caused, unintentionally caused, self-induced (known or unknown), or based on shared assumptions. Fraud. A positive statement of a fact that is known to be untrue, to deliberately trick someone in a belief that is not true. The person who’s been victim of the fraud can avoid the contract in all systems, even if is to something relatively unimportant (ref. PECL art. 4:107). In addition, in fraud there will always be liability for damage, but not the profit that would have been included if the statement was true. 26 The doctrine of estoppel is based on the principle that consistency in word and action imparts certainty and honesty to human affairs, whereby a court may prevent or "estop" a person from making assertions or from going back on his or her word. 75 - E: no general doctrine but specific control on undue influence and unconscionable bargains - FR: extend notion of duress (by circumstance – lesion) + doctrine of cause Derives from roman law; if a contract was very unfair, it could be voided. Ref. art. 1674 cciv: where a seller has suffered a loss greater than seven-twelfths of the price of an immovable, he is entitled to apply for the rescission of the sale (applicable only to seller of immovables) Most systems claim that there must be at least a wrong behaviour that justifies the annulment of a contract, not just because it is unbalanced. eg BGB sec 138. o BGH, 24.01.1979 Pool/Billiards → contract void only if one party has exploited the other o BGH, 12.03.1981 disproportionate loan FR: notion of lesion + doctrine of cause Cause is an additional requirement for formation of a contract alongside agreement and subject matter defined, present in the code of 1804. The cause has two meanings: (1) objective cause, what each party expects to receive in synallagmatic contract (if a party wasn’t getting anything out of a contract, then there is no cause), doesn’t necessarily require an exchange (as English law). (2) subjective cause, i.e., the purpose of the contract. it happens when the purpose is illegal, and also when the purpose is impossible. video rental case [12.21 FR] French law also has the doctrine of duress “par circonstances”, i.e., where a person takes advantage of the other party being in a difficult situation. E: undue influence. Doctrine where the parties are in a relationship, and one of them takes advantage of the relationship for signing a contract; this may involve misuse of emotional or physical dependence, and also misuse of trust. It may be used both by the defendant or by someone known to the defendant, eg guarantee for a bank loan. + doctrine of unconscionable dealing, when the party suffers from “bargaining weakness” (old poor and ignorant cases or lack of education). Rejection of general doctrine in English law: “the English law gives relief to one who, without independent advice, enters into a contract upon terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other” US uniform commercial code sec 2-302: unconscionable contract or clause; used as general control of fairness. Unfair terms. Standard terms or general conditions of contract, which are drafted in advance by one party and are not negotiated with the other party. It may also happen that B didn’t read the terms, or didn’t understand them, or maybe there wasn’t enough information by the judge. The last problem is that party A is not willing to change the contract. twin problem: 76 - unfair surprise - inequality of bargaining power (power to contract) In all systems, court decisions and legislation control these problems. The courts have four questions in this regard: 1. Was it part of the contract (incorporation) 2. Does the clause cover what happened (interpretation) 3. Whether the clause was subject to a general or judicial doctrine (on unfair clause) 4. Whether the clause was subject to control by legislation E: objective approach if A should have realised that B’s terms meant to be part of the contract, English courts say that it depends on whether there has been reasonable notice by the parties, or if there has been a previous course of dealing, meaning whether A is bound by the clause depends on whether B gave reasonable notice of the clause. Interfoto case [21.1 E] However, the requirement for reasonable notice does not apply for signing a contract. If A signs the contract, the terms form part of the contract, it’s irrelevant whether you have read the terms or not. L’Estrange v.Graucob – no relief on ground of mistake. FR: subjective agreement Ref. tragic flying lesson case. It’s on the other side of the spectrum in respect to English law. Sometimes, though, knowledge may be inferred; ref. air passenger in a hole case. DE: German courts fell back to the notion of GF Ref. greedy accountant (1970). The notion then incorporated into legislation, sec 305 BGB – if I want to bring something unusual into the contract, I have to inform you. Stronger than reasonable notice because it also applies when the contract has been signed. Part of the BGB, applying business to business as much as business to consumer contracts (although major list of invalid terms, that can be applied by analogy to business to business contracts). Thus very broad control in Germany. Then, the courts will try to interpret the cause narrowly, so as not to apply to what has happened, by means of the contra proferentem doctrine, i.e., to interpret the clause as narrowly as possible against the party relying on the clause. This occurs in all legal systems. - Beck v Szymanowski → complaints about goods not delivered Equally the courts have said that if the D does something completely different from what he was expected to do, then the clause is null. These rules of interpretation have much less importance lately, while the role of legislation has increased. court controls FR: use of two approaches to avoid giving effect to exemptions. - rotting vegetables case (1959) [21.5] → cause doesn’t apply if fraud or gross carelessness. Doctrine of cause used as well for courts control. - chronopost case (1996) [11.18 FR] → the fundamental duty is not just to deliver, but to deliver properly + if there’s no clause, there is no contract. - chronopost 2006 → A clause would never apply if covered non-performance of an essential obligation. Although they got rid of the doctrine of clause in 2006, they actually moved the provision of the doctrine to a specific situation, i.e., art. 1170 cciv (any contract term which deprives a 77 debtor’s essential obligation of its substance is deemed not written, meaning you cannot have a clause on unfair terms if it deprives a contract of the essential obligations). E: fundamental breach. Similar to France - Karsales v Wallis (1956) → the majority said the clause did not apply when the defendant did something different from what he was supposed to do (matter of interpretation); Judge Denning, on the other hand, said if there is a serious breach og contract, justifying termination (apart from the clause), the clause does not apply (doctrine of fundamental breach). The only problem is that the doctrine of fundamental breach does not distinguish btw unfair clauses and clauses that may be fair allocation of risk btw parties who know what they are doing. - photo production v securicor [21.8] → the house of lords said that it is just a question of interpretation + there was legislation to back the decision of the court. DE: referred back to GF - greedy accountant case [T]he person who relies on standard terms assumes for himself control over the general freedom of contract as far as the content of the contract is concerned. He is therefore obliged at the stage of drafting those standard terms to look to the reasonable protection of the interests of his future contractual partners. If he brings to bear his own interests only he abuses the freedom of contract which to this extent is limited by § 242 BGB. The clause does not, however, accord with the principle of good faith, because in setting the level of the remuneration claim of the agent in the case of early revocation of the mandate it pays no attention at all to the extent to which services have actually been provided at that point, but instead gives full remuneration even in the case where he has performed minimal or even no services at all… A provision which makes such an outcome possible is contrary to equity and represents an abusive pursuit of the self- interest of one contractual partner at the expense of the other whose justifiable needs are insufficiently taken into account. control over substance included in sec 307 BGB → provisions in standard business terms are ineffective if, contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract with the user, an unreasonable disadvantage may also arise from the provision not being clear and comprehensible. This applies to B2C and B2B since it is general law. EU consumer contracts. Very similar to German law; directive 93/13/EC on unfair terms in consumer contracts. art. 3(1): a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. Exemption for “core terms”, art. 4(2) establishes that “assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the either, in so far as these terms are in plain intelligible language”. Implementation of the directive: 80 - Chronopost (1996) [11.18 FR] - 2006 Chronopost case (ECB3 p 384) o Article 1170 Cciv 6.5 REMEDIES All systems recognise remedies for the breach of a contract; Remedies for breach of contract generally available in almost all legal systems: - asking a court to make the other party perform (specific performance) - withholding performance until the other party performs - termination of contract - reduction of the price - damages - restitution (unjust enrichment after termination) cciv art 1217 a party towards whom an undertaking has not been performed or has been performed imperfectly, may: refuse to perform or suspend performance of his own obligations; seek enforced performance in kind of the undertaking; request reduction in price; provoke the termination of the contract; claim reparation of the consequences of non-performance. Sanctions which are not incompatible may be combined. damages may always be added to any of the others. In German law only liable in damage if at fault, do not provide a clause for force majeure. Under French law any ourt may order the payment of a penalty in order to ensure compliance to the creditor. In German law there is a right to claim performance, sometimes the court will declare the claimant owns the piece of land or object of the contract and establish the immediate registration; but when this is not possible, the court may force the debtor by coercive punitive detention or payment. Both civil systems have strong ways to make the debtor comply. Sometimes it is not possible for the debtor to do what the contract requires (goods of the same kind), thus could deliver equivalent commonly available goods. Under both French and German law it is also possible that a creditor has an obligation performed by a third party at the cost of the debtor. Enforced performance may involve the enforcement of the defendant under coercive penalties or by a third party. Under English law, specific performance is considered inadequate and allows monetary remedies only; if the creditor can get a substitute or other goods, damages are always considered to be adequate (e.g., sale on goods – specific performance only if no substitute available, ref. Falcke v Gray). If the goods are not unique, their value is to be handed over in case of fail delivering. Regarding functional equivalence, the differences are not so big, both in France and in Germany performance by a third party is allowed… Under the Consumers Sales Directive the MS are required to give the buyer the right to ave non-conforming goods repaired or replaced. E: the common law enforces monetary remedies only; the reasons are historical: for procedural reasons, it wasn’t very practical ordering specific performance. Specific performance is an equitable remedy, thus it would only be given if it was necessary to supplement common law. Remedies are always considered to be adequate if a substitute can be obtained. 81 The only case in English law where specific remedies are given as a matter of routine is in a contract for the sale of land; all the court has to do is declare the transfer of property. Property in goods may pass when the contract is made, there is no order for delivery unless the good is unique; in that case, there are only damages for value + it doesn’t matter that it would take a long time to get substitute. - bronx engineering: 9 months delay - sky petroleum: SPP ordered bc it was completely terminated → functional equivalents: FR and G, performance by third party; E, terminate contract, obtain substitute, claim damages to cover cost. Hostility to the idea of specific performance, not only a waste or resources, but yokes the parties together in a continuing hostile relationship; much better that if fails performance walk out of the contract and pay damages instead. Under consumer sales directive (1999/44/EC), it requires MS to give the buyer the right to have non conforming goods replaced or repaired. Contracts for work: - sec 634 BGB, rights of the consumer in the case of defects - consumer rights act 2015; sec 55, right to repeat performance E: non-consumer law → the court will not order SPP if it would require supervision. Ref. case co-op v argyll stores. Can you always get specific performance in those systems which include it as a remedy, even if would mean a waste of resources? Under German law yes, all means necessary, although allows the obligor may refuse performance to the extent that performance requires expense and effort which is grossly disproportionate to the interests. other restrictions: 1. impossible (physical or legal) 2. obligations requiring personal service by D 3. E: not if P has not yet performed and cannot be ordered to do so (mutuality) + hardship (SPP is discretionary) Cases: - insulated windows [23.18 (DE)] → elimination of defects as covering all measures which are necessary in order to produce work which, taken as a whole, is in conformity with the contract and is free from defects. it however has a limitation: disproportionate expense in English law, the same sort of problem arises in relation to damages - ruxley v forsyth [23.19 (EN)] → unreasonable to have the work redone - french swimming pool [23.20 FR] → party may require performance whenever possible About disproportionate expense: PECL art 9:102 about non-monetary obligations is more like the German legislation. The reformed French cciv adapted accordingly, so now it establishes in art 1221 that “a creditor of an obligation may, having given notice to perform, seek performance in kind unless performance is impossible or if there is a manifest disproportion btw the cost to the debtor and its interest for the creditor → contrary to the judgement on the french swimming pool case. PECL ART 9:102 also states that SPP cannot be obtained where the aggrieved party may reasonably obtain performance from another source. (closer to english position, practical result 82 of the inadequacy of damages test). it was however controversial → DCFR more in favour of SPP, so the only limitations are impossibility and disproportionality. Monetary obligations, in England. If the claimant has performed his part of the contract, he can claim the price. but what if he hasn’t performed it yet and the defendant doesn’t want the goods or services anymore? o if requires D’s co-operation, no SPP (will have to terminate the contract) o if D’s co-operation is not required, the goods may be made available; as for performance of services, the other party can go ahead without D’s cooperation, only if they have a legitimate interest in performing, and not terminating the contract. Germany has reached the same result differently: SPP is always available, but there is a provision that allows it to terminate the contract for serious reasons. In German law specific performance will always be available, but also allows termination for good cause, although the right to claim damages is not precluded by the termination (indirect limitation of specific performance). The same is true for french law; art 1794 cciv. Termination. Termination for breach seems to go hand-by-hand with specific performance, in that it is different in the different systems as much specific performance is different in the different systems. FR: 1804 not widely available, you could only terminate a contract by court order; 2016 cciv termination by notice in any case; however, the court may reinstate the contract. G: party may terminate for non-performance; E: termination given rather easily; allowed for breach if it deprives it of substance of contract or if the term broken is a condition. no warning of time for performance expired + no doctrine of good faith PECL: termination if non-performance is fundamental; it is fundamental if it substantially deprives the party of what is entitled to, or for strict compliance fundamental to contract. 7 CHALLENGES OF PRIVATE LAW DURING THE PANDEMIC changes at national and European level because of the pandemic – high level of health protection within the objective of EU policies. We do expect the role of the EU to grow, the Commission has indeed pushed with a demanding manifesto for the protection of fundamental rights of EU citizens. 7.1 CONTRACT LAW How do contract rules change in circumstances and deal with new challenges, and does it have an impact only at national level, or we also expect EU law to step in (e.g., new concept of fairness). Portuguese perspective, during the period of Portugal’s financial bailout suffered a major financial crisis, its legal system is a good example on how the pandemic can bring major changes, not specifically in the legislation but in the way courts will be dealing with the change of circumstances regime. economic impact, courts’ decision-making.