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EU law threatens ecommerce

Retailers are warning that a proposed European Union law on contracts will curb the growth of online sales and impose “serious” costs on businesses that trade overseas via the internet.

The proposed regulation, to be voted through the European parliament next month, will mean that companies which sell products across borders will have to deal with customer complaints under the different legal systems of all 27 EU countries.

In a written plea to the EU industry commissioner Günter Verheugen, the British Retail Consortium (BRC) and the CBI warned that the cost burden could stop businesses, especially smaller enterprises, from trading in EU markets.

They criticised the European Commission for ploughing ahead with the proposal without properly assessing its impact.

The Rome I regulation aims to give an existing 1980 Rome convention between EU countries a more robust legal basis.

However, concern has arisen about new provisions in the regulation’s Article 5, which introduces the idea that any business-to-consumer contract will fall under the law of the country in which the consumer is resident.

Alisdair Gray, the consortium’s Brussels director, explained that the article’s wording meant that businesses engaging in cross-border trade would have to undertake a “financially onerous study” of the legal requirements in other EU member states.

“The sheer cost and uncertainty inherent in such a scenario is so high, that it is simply not credible to assume that companies, and small ones in particular, could engage in such trade,” he said.

For example, companies trading abroad would have to go through cumbersome background checks to determine whether they have to register officially in all the countries they sell to. This creates a “lawyer’s feast”, where foreign courts could take action against a company for not complying with every aspect of local laws.

Media trade associations including PPA had signed a press statement reiterating concerns raised in the letter to Commissioner Verheugen, in advance of the Parliamentary first reading vote on the dossier, taking place next Monday.

Sources: Sunday Times, PPA

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