Examination of Witness (Question Numbers
1-19)
Dr Christian Twigg-Flesner
26 MARCH 2009
Q1 Chairman:
Good morning and welcome, Dr Twigg-Flesner. We are immensely grateful
to you for taking the time to come and talk to us this morning.
We are at the very beginning of this inquiry so although we had
a teach-in from an adviser last week, we are still really exploring
the issues in some detail. What I would ask you, when you get
to the evidence, is that you are not too technical and that you
use straightforward language. You can, if you wish at the end,
submit supplementary evidence if you think there are things that
on reflection we have not really got clear or understood, or any
questions we do not reach today although we hope to get through
all the questions as you are our only witness. I now have to ask
you for the record if you would state your name and your official
title. I will then invite you to make an opening statement if
you so wish and after that we will go into the questions.
Dr Twigg-Flesner: My name is Christian Twigg-Flesner.
I am a Reader in law at the University of Hull. I am also a member
of the Acquis Group which works on the draft Common Frame of Reference.
I have also been part of the team that prepared a comparative
analysis of the implementation of the existing Directives into
the 27 Member States which formed part of the evidence base on
which the Commission based its proposal.
Q2 Chairman: Do you wish to make
an opening statement or go straight into the questions?
Dr Twigg-Flesner: I have a brief statement if
I may. I am very pleased that the Committee is taking the time
to look at this proposal because it is actually a very, very important
proposal. It raises a lot of difficult issues which I think need
to be investigated thoroughly. I am a little bit concerned that
the Commission had plans to push this through very rapidly and
it is slowly realising that it cannot rush this particular proposal.
It is good that there is an opportunity to go into the detail
a little bit and identify some of the difficulties which this
proposal might cause for national laws, in particular for consumer
protection in the UK.
Q3 Chairman: So this inquiry might
be at a quite valuable moment.
Dr Twigg-Flesner: I think so, yes.
Q4 Chairman: I want to start by talking
to you about the overall objectives and underlying principles.
We have heard before and you say it again that the piecemeal evolution
of EU consumer law has caused a significant degree of incoherence
between the various measures. I am not going to go through the
list. You support in principle the adoption of the proposed horizontal
approach as a means of overcoming existing inconsistencies and
gaps in legislation. Could you explain what practical problems
for either consumer protection or the internal market have ensued
from the inconsistencies and the gaps that you have identified?
Dr Twigg-Flesner: As you have already indicated,
the current Directives have evolved over about 20 to 25 years.
When particular issues were identified for legislation by the
Commission a Directive was adopted. So we have very discrete Directives,
one on doorstep selling, one on distance selling and so on. They
were all designed independently of one another so when they were
drafted there did not seem to be that much of a cross-referencing
process between issues regulated in an existing Directive and
issues about to be regulated in a new Directive. As a result each
Directive stands on its own. This goes into issues such as the
basic definitions of, say, consumer and trader—or seller
and supplier, as is often used. Those definitions are not consistent
between the Directives. There is some inconsistency between the
type of transactions which are regulated at a European level and
therefore subject to a European law and which are left unregulated
and therefore for national law. For example, we have some contracts
which are doorstep contracts and are regulated under this one
Directive but others, for example, where the trader comes at the
invitation of the consumer not regulated under European law but
regulated in our UK law after an amendment that was made last
year. So you have these regulatory gaps between different Directives.
You also have different exceptions from the Directives, so the
contracts which are not subject, for example, to a right of withdrawal
under the doorstep selling are different from those under distance
selling. Consumers may not actually know when they can exercise
the right of withdrawal and when they are tied into a contract
without being able to enjoy the benefit of a cooling off period.
The advantage of this horizontal approach which is now being proposed
is that you have a much more coherent definitional base and you
tackle consumer contracts generally; instead of having specific
types of consumer contract we are now very much dealing with contracts
of sale and contracts for services and all consumer contracts
across the board, so we introduce the same kind of scheme for
all consumer contracts. That in principle has an advantage because
you have a much more coherent set of rules at the European level,
if coherence is what you would like of course.
Q5 Lord Lea of Crondall: We have
touched on this before, there is still a paradox because the perfection,
as it were, is never going to be possible. This is called a draft
Directive on consumer rights and it sounds as if it is across
the board. In fact it is a Directive on four particular points.
So how are we actually making progress on the very point that
you have made while we are still in that business? Or have I misunderstood
you?
Dr Twigg-Flesner: To some extent we are still
in that business and that is one of the criticisms of the current
proposal—that of course the draft Directive only covers,
as you say, four key areas. They are four very important areas,
for example the unfair terms section deals with all consumer contracts
whether services, goods or anything else; it is quite a significant
area that is covered here. The same goes for the chapter on sales
contracts; this is again a very broad chapter. In that sense we
are dealing with a much wider range of consumer contracts than
was previously covered. The definition of distance contracts has
been significantly broadened, for example, as has the definition
of off-premises contracts. We catch more contracts overall. However,
there are certain issues which remain outside the scope of this
Directive. Previously, this Committee looked into the Timeshare
Directive which has now been adopted. That is a specific contract
which is not necessarily regulated by this Directive in any meaningful
way. There are other contracts not covered by this Directive.
There has been some concern, for example, that the regulation
of services contracts, whilst partially covered by this Directive,
is not actually done very successfully so far. We are achieving
greater coherence but we are not achieving full coherence. This
is not a complete regulation of consumer contract law at the European
level but a more in depth regulation than previously.
Q6 Chairman: One of the things you
said is that this is being pushed forward in a way faster than
the problems around it can be resolved. That is how I would put
what you were saying.
Dr Twigg-Flesner: Yes.
Q7 Chairman: If we tried to encompass
even more Directives would that complicate the exercise even further?
Dr Twigg-Flesner: Without a doubt it would,
yes, because you would have to bear in mind issues raised by other
Directives as well. For example, if the Electronic Commerce Directive
(which, admittedly, is not a consumer specific Directive but has
issues to do with consumer protection) were included in this proposal,
there would be those issues to be integrated as well. It would
make the whole Directive more complex but the end result would
be a much more complete and coherent picture at the European level
than we have now.
Q8 Chairman: Is it better to take
this step and this bite now and recommend that others are taken
later? Or would you have thought it would have been better to
take longer and do the whole step together?
Dr Twigg-Flesner: That depends on what the "now"
is going to be. If the "now" is going to be the proposal
as it stands—I know we will be talking about full harmonisation
later on—then I think we are probably better off waiting.
If we abandoned full harmonisation and said that we are just going
to tidy up the law in these areas where there is a need to tidy
up—even at minimum harmonisation level—we can improve
the acquis a lot by tidying up the inconsistencies that currently
exist—then it is possible to move quickly on this Directive
and come back to the other issues at a later stage.
Chairman: That is extremely helpful.
I think that is what Lord Lea was getting at, do we look for perfection
or do we actually get where we can get and what are the benefits.
Q9 Lord Eames: I am interested in
the connection between regulation or Directive. You have suggested
in some of your material that perhaps there should have been greater
exploration before they took the step. Before you come to that,
do I detect in the answer you gave to some of my colleagues earlier
on that you have genuine apprehension—I think that is the
best word to use—in the speed of this process in terms of
political niceties and so on? Really I would like to know if you
could explore a bit further why you feel there should have been
greater inquiry before they made a decision.
Dr Twigg-Flesner: There are two issues there.
First of all I will come back to the question of speed at which
this has proceeded. The Commission would undoubtedly respond that
they have done a very thorough investigation into the issues,
and it has taken several years to get to where we are now. I got
the impression when the proposal was presented initially that
there was a desire to perhaps arrive at an agreed final text before
the present Commission ends its term in office and before the
European Parliament steps down for its elections. Because of the
sheer breadth of even this small Directive I think there are so
many fundamental issues about what European consumer law is going
to do that it does require much wider debate. It cannot be done
as a quick fix exercise as the Commission might have been hoping.
There are a lot of issues being raised about the level of protection,
for example, which will be given to consumers under this Directive.
I think there will be several Member States who will be able to
point to certain areas where the Directive undercuts the existing
levels of protection, the UK included in some areas. That will
be controversial and if it is rushed through it will become quite
a difficult Directive to implement at national level because some
of the implications have not been sufficiently explored. Also
I think that there needs to be greater input from the various
interest groups. I know there has been a Green Paper on this Directive
before the proposal was drafted rather, but the responses seemed
to be heavily biased towards the business community. I think the
consumer voice has been lost slightly; this is another opportunity
for the consumer voice to be heard and perhaps taken more fully
into account. In that sense the speed issue is an important one;
there needs to be a bit more deliberation about what this Directive
is going to do, what level of protection it is going to set, but
also about the actual quality of the legislation. I think we might
come onto this later on, but there is certainly a question mark
about some of the drafting and some of the precision in the detail
on this proposal. It certainly raises a number of difficult issues.
If I may come onto the second point, this is the question about
whether it should be by directive or regulation. I will explain
the main difference between the two. A Directive is a European
measure which needs to be transposed into national law, so each
national legislature has to pass legislation which gives the effect
to a Directive in national law. As part of this process, each
national legislature has the opportunity to perhaps modify the
text of the Directive, to expand it a little bit to make it fit
with national legal terminology and so on. This has been the process
so far, combined with minimum harmonisation. The evidence that
we discovered in the Compendium Project was that Member States
do considerably vary in their approaches to transposition of Directives.
Some do copy out Directives, some occasionally copy out Directives,
occasionally try and integrate Directive provisions with national
law where it already exists. In other countries, specifically
those with a civil code approach, they try to integrate those
provisions to a civil code or adopt an entirely separate consumer
code. There are all sorts of different ways of doing it. The end
result is that we cannot necessarily point to each national law
and say, "Okay, if you have a Distance Selling Directive,
where is the national Distance Selling Law?" There will not
necessarily be one; it will be scattered around different areas
in the law. This has been regarded as one of the problems I think
because neither traders nor consumers can easily identify where
they can find the corresponding national laws when you have a
Directive. The objective of this present process is to simplify
the law and to create greater regulatory simplicity, but if we
proceed with a Directive there is nothing to stop each national
legislature maintaining this same process or taking bits from
the Directive and putting them into one bit of legislation, separating
it out. There is no obligation to then introduce a consumer code
or a consumer act, if you like in English law, that fully implements
the Directive. We can still maintain, if we like, our Unfair Terms
in Consumer Contracts Regulations, aspects of the Sale of Goods
Act; we can have Distance Selling Regulations in a modified form;
we can keep our Doorstep Selling Regulations as they are with
some tweaks. We would still have scattered pieces of legislation.
However, if we now have a trader from, for example, Estonia who
wishes to trade with an English consumer and in most instances
UK consumer law then applies to this contract, that Estonian trader
will still have to figure out where these different bits of the
Directive have been implemented into national law and then obviously
get some advice on what the national law actually says and means.
With a regulation you do not have that problem of course. The
regulation is a European measure which operates independently;
it is immediately applicable before a national court. There may
be a need to modify aspects of national law to make it consistent
but on the whole the regulation will be the governing text. We
have this, for example, in the context of the denied boarding
regulation; if your plane is cancelled or delayed you have certain
rights to immediate compensation under European law. That is a
regulation which is directly applicable. It is perfectly possible
and I think more consistent with the regulatory simplification
objective that the Commission has based this on to consider a
regulation as opposed to a Directive. The regulation would be
immediately applicable; it would be one single text in one single
place that everybody could work from. It would be immediately
visible; everybody would know that regulation 25/2010 would apply
to consumer contracts; there would not be this concern about transposition,
the problems that can result in faulty transposition, different
pieces of legislation giving effect to Directives from different
national laws and so on. The drawback is that it would make consumer
law very much European law and I think there might be a political
problem with that because it would very much indicate that consumer
law has been effectively given over to the European level. It
is largely the case already through the internal market policy
but at least you retain the possibility of introducing new national
rights following on from a Directive by presenting them as national
rights. The Consumer Protection from Unfair Trading Regulations,
which were introduced last May, implement the Unfair Commercial
Practices Directive, and yet it became a great simplification
exercise of the UK consumer law which was presented in this way
partially—which is a good thing but obviously you would
lose that because you would only have one European regulation.
There is an advantage of simplicity if you go for a regulation.
It is more consistent with the objectives pursued by the Commission
in terms of regulatory simplification. It would avoid the problems
associated with the implementation that we now have but it is
certainly going to be perhaps more controversial politically.
Chairman: I think what you are saying has implications
for the question of full harmonisation and what seems to be a
lack of consistency between saying that you have a regulation
but there are problems of harmonisation.
Q10 Lord Inglewood: That was a very
fair balancing of the pluses and minuses of the two approaches.
I have one or two questions and I would like to take little bite-sized
bits. I think we can agree that what we are trying to do here
is to establish a regime across a number of different national
jurisdictions which have different legal systems in them. You
can either do that at a Community level either by full harmonisation
or a lot of harmonisation, alternatively much less, with mutual
recognition in terms of trying to achieve your single market.
What do you think are the pluses and minuses of full harmonisation
versus mutual recognition and a looser regime? I want to develop
this in subsequent questions.
Dr Twigg-Flesner: Can I briefly indicate what
we mean by full harmonisation because of course that is a term
that has a number of different meanings itself. In this context
full harmonisation simply refers to the fact that, if there is
European legislation, it sets the absolute standard of protection
that can be adopted in a particular area. The Member States have
no freedom to deviate from whatever is laid down in the Directive.
It does not necessarily mean that the entirety of consumer law
becomes European but in those areas where there is European legislation
that freedom for regulation is lost. As I said previously, that
can mean that you would perhaps reduce the level of consumer protection
in one or two instances in various national laws. The advantage
of it of course—I am sure we will come back to this—is
an entirely coherent set of rights across the European jurisdictions.
The level of protection is going to be the same wherever you go,
subject to the points I made previously about implementation and
problems associated with that. The idea of minimum harmonisation
with mutual recognition is one that, I have to confess, I never
quite understood how that would work in the case of private law.
It is something that works to my mind quite easily in the context
of fairly technical rules, for example rules on packaging or rules
on labelling or rules on presentation; they are fairly clear and
fairly technical rules. Private law is not technical; consumer
law is an aspect of private law.
Q11 Lord Inglewood: Surely the point
about the mutual recognition is that although it is understood
by all the parties concerned that the provisions are not identical,
they are considered to be sufficiently close to each other that
they are equivalent and therefore you will achieve through this
route an equivalent level of whatever it is you are trying to
bring about, in this case consumer protection.
Dr Twigg-Flesner: The assumption is that as
long as something is possible in one country, you should be able
to have the same thing in another country. That is the underlying
tenet of mutual recognition.
Q12 Lord Inglewood: If that is right,
surely what you are saying is that this is the permitted rule
in country A and if you are dealing with it from country B (which
also has somewhat similar provisions) the two are considered to
balance each other out. It does depend on there being a degree
of consumer protection legislation wherever you go, does it not?
That is the rub, the equivalence.
Dr Twigg-Flesner: Mutual recognition came about,
for example, in the context of the free movement of goods. There
is a very famous judgment from 1979, the Cassis de Dijon
judgment—
Q13 Lord Inglewood: After all, this
is actually about the movement of goods.
Dr Twigg-Flesner: Or services.
Q14 Lord Inglewood: Principally goods
in fact.
Dr Twigg-Flesner: It works when you are dealing
with rules specific to those goods. If you say you can market
cassis with a lower alcohol content elsewhere but you cannot market
it with a lower alcohol content in Germany, then the assumption
is that because it is lawful to market those goods in Belgium,
you can market them in Germany. That is mutual recognition. So
if they are imported you are not going to stop importation just
because they do not correspond with your local laws. I am still
not convinced that you can apply the same reasoning in the context
of consumer rights.
Lord Inglewood: Is the argument not that
if each Member State within your common area has certain consumer
rights, and if you decide from a community level that they are
equivalent—that is a big proviso—then rather than
harmonising if you are in country A and you carry out a contract
for somebody in country B, depending on where the law applies,
if the consumer in country A does a contract with somebody in
country B and country B's law applies, it will be enforceable
in country A if necessary. You are achieving an equivalent outcome
without harmonising all the different parts.
Chairman: Lord Inglewood, it is not a
problem that there is not equivalence.
Q15 Lord Inglewood: That is correct,
but that is the basis of low level harmonisation because it involves
a greater degree of mutual recognition.
Dr Twigg-Flesner: The idea of mutual recognition
is that if we have one set of consumer rights in country A and
a consumer in country A contracts with a trader from country B,
if the level of protection in country B is lower but the law of
country B applies then the assumption is that as long as the trader
complies with country B he is doing everything right. Then you
will have a consumer in country A expecting to have a certain
level of protection because it is his home country and he contracts
from his own country, if you like, suddenly finding himself in
a position where his protection is lower.
Lord Inglewood: Once you approach it
on that basis—which may be right—you are always ratcheting
it up to the highest level in the 27 countries.
Lord Eames: Which is inevitable.
Lord Inglewood: Is that desirable?
Q16 Chairman: The question is, is
it inevitable?
Dr Twigg-Flesner: I am not sure it is inevitable,
actually. There might be an incentive for traders to base their
trading place in a jurisdiction with comparatively low rights
and they rely on mutual recognition, as long as they comply with
the fairly low standard in the country in which they are based,
they could obviously undercut consumer protection elsewhere. That
said, of course, to some extent this is an issue that has already
been taken care of by the Rome Regulation on the law applicable
to contracts because there is a provision in there specifically
on consumer contracts which in most instances is designed to give
consumers the benefit of their home jurisdiction, in which case
mutual recognition would be undermined in any event. I think we
should be careful not to throw mutual recognition in together
with minimum harmonisation because whilst there is some debate
as to whether minimum harmonisation immediately entails the obligation
towards mutual recognition, I think the Court of Justice has certainly
not taken the view that you cannot have varying degrees of protection
and national law and require traders who are subject to that national
law to adhere to that. If we had the mutual recognition approach,
even though the consumer's law would normally apply, one would
say that as long as the trader does what he has to do under his
national law he has done everything that is required despite the
fact that the consumer is actually entitled to greater protection.
Q17 Lord Inglewood: If you have minimum
harmonisation then clearly you have a benchmark below which someone
cannot go, which takes me to the final part of my line of questions
which is that in certain circumstances it is left open to Member
States to add to the minimum permitted level of harmonisation.
What is your attitude towards that? It makes it difficult for
traders and it may superficially appear attractive to consumers,
but it is going to be a disincentive to traders trading into jurisdictions
where there is a much higher level of protection than either Europe
stipulates or they are used to at home.
Dr Twigg-Flesner: That is actually the key argument
on which the Commission has relied, of course, in presenting this
proposal for full harmonisation, the idea that traders are discouraged
from offering their services and goods across the European market
because of the different legal regimes applicable to consumer
transactions. I have to confess I am not entirely convinced by
the strength of this objection. Yes, of course it is true that
the laws are different and traders will be facing a degree of
increased costs if they are to investigate what the different
national laws are, but I suspect there may be other factors at
play that deter traders—as well as consumers for that matter—from
getting involved in cross-border selling. There may be cost issues
purely in terms of having to ship goods across borders, having
to deal with cross-border complaints, potentially; there will
be language questions; there may be culture questions. If you
look at the consumer side, how many consumers do shop beyond immediate
local boundaries? In many cases they do not. Some get involved
in distance buying of course, but the vast majority of consumers
still shop very much locally.
Q18 Lord Inglewood: In terms of the
goods we are talking about, some are likely candidates for quite
long distance selling and some are not. Equally, I suspect, there
is a difference between items which are expensive and which are
not. If I were a trader in this country selling to a consumer
in Greece an expensive good where the resolution of any dispute
was in Greece, I would be pretty reluctant to do it.
Dr Twigg-Flesner: I am sure that is the case,
yes, but I think you would still be reluctant even if the laws
were the same because there would still be the problem of having
to track the Greek implementation, finding out what that Greek
implementation says, getting Greek legal advice. Your transaction
costs have not actually been reduced. You would still be facing
the same problem. I would not say it is misleading but in many
ways it is a slightly overstated argument to say that just because
the laws will be the same it will encourage more traders and consumers
to trade.
Q19 Lord Inglewood: Do you think
that the concept of a single consumer market actually is a fantasy?
Dr Twigg-Flesner: Not at all. I think the regulatory
approach is perhaps not the most ideal for this purpose. If I
may make an aside, I am actually increasingly of the opinion that
the Commission missed a trick by not actually thinking about a
cross-border-only regulation, in fact. In the debate around the
draft Common Frame of Reference there was some discussion about
the "Blue Button" on consumer law. This is an idea developed
by Hans Schulte-Nölke who is one of the main persons involved
in the Common Frame of Reference, and his idea is that you can
offer an optional instrument on consumer law, an optional European
law on consumer transactions, which you can offer as an alternative
to national laws. If you did that, in many ways you could almost
avoid having to further harmonise national laws purely applicable
to national transactions because it would create a proper European
alternative. This is very much in the early stages and the Commission
has certainly not really picked up this idea in any meaningful
manner. It might perhaps be a much more logical way towards providing
a regulatory framework for the European market because at least
that way you have one coherent set of European rules which is
available to those who want to get involved in cross-border shopping
whereas the vast majority of national and local transactions would
not be affected.
Chairman: I am going to move on because
I think we are going to come back to this time and time again.
I want to go back to clarity. Lord Cotter?
| 
