Examination of Witness (Question Numbers
20-39)
Dr Christian Twigg-Flesner
26 MARCH 2009
Q20 Lord Cotter: In a very, very
short time we have already had an extremely interesting discussion
on all sorts of possible ways of going forward. It is becoming
clear that this measure could be very complex. You did say in
your opening remarks about potential difficulties that this Directive
could present—that has become clear in a very short time—which
brings us back to the comments you made about simplicity earlier
on and of course this is not to be rushed. To get onto the main
point, it really puts in focus the necessity for clarity. I am
trying to be clear at this stage and hopefully by the end of it
all we shall all be clear, but can I ask specifically how clear
do you consider the text to be for the use of the consumer and
how could that clarity be improved without compromising its legal
integrity?
Dr Twigg-Flesner: If I understand the question
correctly, it is very much looking at the way consumers could
actually benefit from those rights. So we are leaving aside the
technicalities of the Directive and the problems that might cause
for the national departments responsible for implementing the
Directive. The idea is that consumers should be able to understand
their legal rights fairly easily by looking at either the Directive
or, more importantly, the national law implementing the Directive.
The reason for this is that most consumers, if they have a dispute,
they certainly will not go to court and litigate this. There is
fairly consistent evidence in the UK that a very, very small proportion
of disputes which could give rise to a legal claim will actually
go to the small claims court or beyond. In Dame Hazel Genn's study
from about ten years ago her conclusion was that only about three
per cent of all consumer cases which have a legal claim associated
with them—a justiciable event as she calls it—end
up in court and only one per cent eventually come to judgment.
There are a vast number of cases where consumers try to resolve
things informally, if at all. In that context the rights should
be fairly clear and easy for consumers to rely on their legal
rights and to try to persuade a trader that he has certain obligations
to honour. If you look, for example, at the chapter on sales contracts
in the Directive there are a several provisions in here where
it would actually be quite difficult for consumers at a practical
level to enforce their legal rights. There are a lot of rules
which are a little bit half-baked, if you like. If we take the
provisions on delivery, for example, there is a very clear obligation
that goods have to be delivered within 30 days (if ordered online,
for instance). That seems fine. What is not clear is what should
happen when that 30 day period has not been honoured. Does it
mean that the consumer is entitled to have his money back and
the contract is brought to an end and he can go elsewhere? Or
does it simply mean that the consumer has to wait until the trader
finally does deliver and in the meantime is entitled to have his
money back? It is a very bizarre and confusing provision. I am
not helping by not expressing it very clearly; I am struggling
to try to explain the objectives of this provision. We also see
that there is a problem more precisely with the remedies. The
consumer has bought faulty goods and is now entitled to a remedy
under the scheme, he is entitled to repair or replacement initially
which sounds very good but he does not get to choose, the trader
gets to choose under this proposal. Then there are various restrictions
on the consumer's entitlement to a replacement even when the seller
already has the right to choose between them. These criteria are
all fairly vague. In that context, trying to help a consumer negotiate
informally what sort of remedy might be most appropriate can be
quite difficult, especially if a trader is quite unwilling to
honour his obligations. This is then hedged about with more provisos,
for example certain rights are not available if the fault is a
minor fault, but what is a minor fault? Then you have to have
discussions about what makes a fault a minor fault? At what point
is a fault no longer a minor fault? Yesterday, I was talking with
members of the Law Commission about the example of a car where
the windscreen wiper is defective. Is that a minor fault or is
it not a minor fault? We might think it is a fairly minor fault
and should not entitle the consumer to terminate the contract,
whereas I am told that the Commission thought it would not actually
be a minor fault. There is a debate as to what is a minor fault
and what is not a minor fault. It is a question of degree. It
creates more room for debate between the trader and the consumer.
It puts another hurdle in the consumer's way to getting a remedy.
He is then required to notify the non-conformity within two months.
A trader can automatically say (especially if it is has been more
than two months since the goods were bought), "Well you have
not notified me on time so you are not entitled to anything".
So we just create more and more hurdles and it makes it more difficult
for consumers to enforce their rights. Even the more basic rights
are already fairly complex. In that sense the clarity in the text
from a consumer point of view is not there. There are too many
obstacles in the consumer's way to enforce rights easily and without
too many difficulties. The consumer will need legal advice from
a fairly authoritative source to actually make sense of their
legal rights.
Q21 Lord Cotter: I can see that we
could or may or would hope to get to a situation where the regulations
would legally be understandable at that stage to resolve disputes.
To get back to the issue that we have talked about before, consumers
actually buying the goods, down to the real simplicity, when you
are actually buying the goods you should be really aware how quickly
you have to raise the issue about the goods and whether you have
to return them the next day or whether you have the two months
you spoke about. It is an issue of clarity too which is very important
but obviously very difficult to achieve at the point of sale.
Dr Twigg-Flesner: There is an idea to at least
make consumers aware of the main rights they get at the point
of sale. So when it comes to the right of withdrawal for example,
the idea is that they are told about this at the time they enter
into the contract, but the question is, to what extent do consumers
take note of this information at the appropriate point in time.
They might only be interested once they have received the item
and then they do not like it; they might then be interested in
trying to return it and they might then realise it is beyond the
14 days and they have not taken all this information in. In that
sense there may be a problem with getting all this information
that you are talking about out to consumers at the appropriate
time.
Chairman: I am very tempted to ask all
sorts of questions, but I am going to hand over to Lady Gale.
Q22 Baroness Gale: It seems from
the consumer's point of view it is going to be very confusing.
Dr Twigg-Flesner: I think that is right, yes.
From the legal academic's point of view it is quite confusing
as well. We have already had various conferences where people
have tried to debate what the particular provisions might mean.
This is at the level of "alleged" experts so how consumers
can be expected to understand it I do not know.
Q23 Baroness Gale: Why is this? Listening
to you now, I think the consumer will be very confused; how are
you going to get that clarity? Why draw up something that is going
to be even more confusing?
Dr Twigg-Flesner: Because it looks pretty in
many ways! It is a nice legal document; the Commission can be
proud of that. More seriously though; I think part of the problem
was that there was already a body of rules in place and to a large
extent what we have here restates that. There have been some changes
and improvements, but we are also borrowing a lot from what we
had before. I suspect again that there will be a time element
to this; because there was a desire to have something in place
fairly rapidly, the opportunity to actually clarify the law was
not taken as much as could have been. If the information that
I have been getting is right, there is going to be more of a time
lag in getting this Directive negotiated and adopted. I think
there is a real opportunity to go back and actually see if we
can clarify some of these provisions and perhaps take out some
of the obvious obstacles to consumers. I know this is trying to
balance the interests of traders and consumers, but I think it
must be in the interests of both parties to have a fairly clear,
straightforward legal framework without too many restrictions.
The incentive has to be there now to take more time and go through
it again. As you say, does this make sense from the consumer point
of view? Are these rights really going to be effective at a practical
level? Yes, we can all, as lawyers, look at these rights and create
problem scenarios then apply these rules and debate how these
rules might work, but as we move to practical experience that
is not going to be helpful for the day to day problems that consumers
will encounter. In those contexts I think those rights do need
looking at again.
Chairman: I am going to move on to Lady
Perry because I think if we get some sense of scope we might be
able to ask some of the other questions within that.
Q24 Baroness Perry of Southwark:
Thank you for your clarifications so far; speaking for myself
we are still struggling with some of this. We were very interested
to see that in paragraph 12 of your evidence you suggested the
scope of the Directive might be too limited. How would you like
to see the Directive improved in that context and what would be
the implications of maintaining the current restricted scope?
Dr Twigg-Flesner: That returns us to an issue
which we have already touched upon at the start. We are talking
about four previous Directives being replaced by one. The classic
example that is always taken and I will take now as well is the
set of rules on the right of withdrawal, the right of cancellation,
the cooling off period. This is made available at the European
level in five Directives. It is certainly the Directive on timeshare,
the Distance Selling of Financial Services Directive, the Consumer
Credit Directive and it will now be in this Directive. I think
there may also be one in life assurance but I am not sure so I
may have to confirm this to you separately.
Q25 Baroness Perry of Southwark:
Will this Directive catch up the others?
Dr Twigg-Flesner: No, it will not. The Timeshare
Directive has already been adopted and has its own set of rules
on the right to withdraw. The Consumer Credit Directive has recently
been revised and now contains a right of withdrawal as well. Whilst
all these Directives seem to settle on a standard 14 day period,
from memory, the exact rules are different; the exact scope of
the right of withdrawal in these circumstances is slightly different.
There are some variations; they are not too great but there is
variation. I think when Professor Howells and I came to talk to
this Committee about the Timeshare proposal, we did make the point
that it seemed slightly odd to push the withdrawal provisions
in timeshare when this Directive was already being discussed as
a proposal. Clearly there is the idea to have one coherent European
law on the right of withdrawal. To me it would make a lot more
sense to take aspects such as the right of withdrawal or perhaps
information duties which do apply across all of the consumer Directives,
and to regulate those more coherently in one measure but then
apply those rules across the board. So instead of having a Timeshare
right of withdrawal and a Distance Selling of Financial Services
right of withdrawal, have one central provision on the right of
withdrawal and then let other Directives "borrow" that.
In that way, national law could also introduce one central set
of national rules on the right of withdrawal and cross-refer essentially.
The question of course then is whether we would create one general
consumer right of withdrawal which would be applicable in all
consumer contracts, including those not directly regulated at
the European level. I think one example which the Office of Fair
Trading gave in its response to the Department of Business, Enterprise
and Regulatory Reform now Business Innovation and Skills (BIS)
consultation was the Order on extended warranties which has a
45 day cooling off period because there were particular issues
associated with that and there is some concern that if you go
too far you might actually take away the freedom of national law
to regulate differently when there is a real need.
Q26 Baroness Perry of Southwark:
Presumably there are some countries that have no right of withdrawal
legislation of their own.
Dr Twigg-Flesner: To the extent that it is not
governed by European law, yes, but all countries have to have
the right of withdrawal in respect of those contracts regulated
at the European level. As far as distance selling is concerned,
doorstep selling and timeshare there will already be a right of
withdrawal. In other areas where the EU has introduced one more
recently, the national might not actually have one as yet so there
will already be a change there.
Q27 Chairman: Are you saying that
it would probably have been a better approach to have legislated
on issues rather than areas like the right of withdrawal rather
than a broader approach?
Dr Twigg-Flesner: Possibly. I am going to sound
even more German than I am already sounding, but there is an idea
that certain provisions which are common to all aspects of European
law—the right of withdrawal is one example, information
duties are another—and there is a suggestion that you can
have one baseline Directive law or baseline regulation, whatever
it is to be, which provides a key reference point for all these
areas. If you are going to have the same basic approach in timeshare
and general consumer rights and financial services, then you could
actually refer back to this general level first and use that as
the main reference point if you like. Going back to the debate
about harmonisation as well, there is obviously now a thought
process going on that some areas might be excluded from the full
harmonisation scope but certain areas are clearly open for full
harmonisation. Again the key examples are the right of withdrawal
and information duties where it might make sense to have one coherent,
standardised European set of rules to help the creation of contracts.
Most consumer contracts will be performed without problems. The
vast majority of consumer contracts go well without any problems;
it is just when you have a problem after contract that you would
have to talk about which rights you have.
Q28 Baroness Gale: What is your view
on how applicable the general consumer information requirements
in Articles 5-7 are? Is there a danger that these might lead to
an overload of information for consumers? You highlight the lack
of clear remedies, so how easy will it be for consumers to ensure
that their rights under this part of the Directive are applied?
Dr Twigg-Flesner: Again consumer information
rules have been very popular at the European level from the word
go I think. They have always relied on greater transparency as
an alternative to more substantive regulation. They have always
seen this as a European tool: either we have the right of withdrawal
or we get information duties or both. The problem we have had
so far is that these information duties are all fairly higgledy-piggledy;
they are very unstructured. You get long lists of information
with no coherent or logical order to them. In that context there
was already concern about information overload or confusion rather
than clarification to consumers. The Package Travel Directive
for example contains a long list of items and information that
needs to be provided. The Timeshare Directive, even in its new
form, is equally bad because it contains a long list of different
items of information not in any particular order; there is no
logical order to them. The advantages of what we have in Article
5 of the Directive which provides the general information obligation
is that it is at least an attempt to give more structure to it.
So there are clear chunks of information, but there might still
be too many chunks of information. I know there is some research
outside the legal field in the social sciences about the ability
of consumers to absorb information and to process information,
and if they get too much information at once they will take none
of that information in and rely on it. There is perhaps a suggestion
that there is too much being given to consumers up front. The
assumption is that if you provide consumers with all this information
they are well informed and they make the right decision. Whether
that is the case with even the small structured list I am not
entirely sure. I think the benefit is that we do have greater
clarity in terms of how the information is to be arranged. That
would certainly help to make it easier for consumers to receive
this information. Again coming back to the theme of full harmonisation,
perhaps it would have been nice to have created some standardised
information template in which this information can be provided.
It is still very much down to the individual traders to arrange
this information in an appropriate manner. In the context of consumer
credit, for example, there is a standardised European credit information
form now that can be used across the EU for advertising credit
and making information on consumer credit available. That might
very easily have been adopted in a similar form in this context;
you give a general template which could then be used across the
entire EU to make it easier for traders to present the information
in one coherent, logical manner. The problem is that whilst the
EU has always introduced information duties, it has always left
the question of what happens if the information is not given or
not given correctly to national law. The consequences of not complying
with these obligations have always varied and that looks like
it will continue under this Directive because it is still left
to national law to deal with the consequences of a failure to
provide information as required, so there can still be a lot of
variation at a national level between what should happen: should
a consumer be entitled to terminate a contract if they do not
have all the information? Should they be entitled to damages if
they have suffered a loss? All these questions are not actually
tackled by this Directive.
Q29 Baroness Gale: Do you think they
could be or should it always be left to the national law?
Dr Twigg-Flesner: I think there is a possibility
to come up with something coherent, but perhaps the time is not
right for this yet. This is one of those instances where perhaps
the Common Frame of Reference might have assisted because this
contains model rules on appropriate remedies for consumers and
sanctions imposed on traders where information duties are not
being complied with. Whether they are good sanctions or not is
a different matter but there is a model in there which could have
been looked to and perhaps been borrowed in this context. One
could have decided to introduce, for example, a right to damages
or a right to bring a contract to an end if certain information
is not provided. That said, of course, what is happening here
as well is a link between this Directive and the Unfair Commercial
Practices Directive which already contains very extensive information
obligations through the prohibition of misleading practices and
misleading omissions, so failure to provide information. Under
the Unfair Commercial Practices Directive there is already the
possibility to go after traders who do not comply with obligations.
It does not give consumers individual rights and I think this
Directive, to some extent, opens up the possibility to give consumers
rights in those circumstances, but it is then passed back to national
law which does not really ensure that there is more coherence
and more clarity. I think one of the areas where there is possibly
going to be some deterrents in terms of traders' willingness to
offer goods cross-border is to do with information duties and
the consequences they face of not providing information. Pushing
this back to national law is probably not particularly helpful
for those traders. Again there is an inconsistency within the
Commission's own reasoning, if you like, by saying that we must
make it easier for traders to go cross-border, but something as
fundamental as this is not regulated at the European level consistently
and completely.
Baroness Gale: Thank you. I think you
have given a very good explanation which shows the difficulties
with it all.
Q30 Chairman: Are there other areas,
apart from the consumer credit templates, that we could learn
from? Food labelling is one where there is a lot of work about
consistency going on in Europe; there must be other areas where
information and how the information is presented and the way consumers
actually understand the information could be gleaned. Would you
have any advice for us on that?
Dr Twigg-Flesner: I am not entirely sure as
to how areas like this are being dealt with. I think the new Timeshare
Directive does deal with the issue more coherently. I think that
contains model contracts in the annexes which is an example of
offering more guidance to traders and being more complete. A more
coherent template across the board, perhaps an annex to the Directive,
might help traders generally because of course these information
obligations are not limited to distance selling contracts, they
are applicable to all contracts. So it might be helpful for high
street traders to know what they have to do to comply with these
information obligations and perhaps some more guidance as to how
you provide this information when you order goods by telephone
might be useful as well. There might be an opportunity to provide
more guidance and more clarity in this text.
Q31 Chairman: You said that you support
the principle of one single withdrawal procedure but question
the modalities of the procedure as it is proposed. Can you explain
your reservations about the proposals on consumer information
and withdrawal from distance and off-premises contracts? How would
you like to see the provisions improved?
Dr Twigg-Flesner: This is a technical point
I am afraid where we go into the proposal itself. The basic intention
I think is sound; to have clarity as to how consumers should withdraw
because at the moment there is considerable uncertainty. There
is obviously a right of withdrawal already but the way this is
exercised varies at national level. When we did the Consumer Law
Compendium we found quite a bit of variation at national level.
To have more clarity I think is beneficial for traders. However,
if we look at Article 14 of the current proposal, it does make
it fairly cumbersome for a consumer, to exercise his right of
withdrawal. It has to be done in writing or alternatively through
an internet site; if there is a form on the web to fill in you
can do it that way. But it has to be done in writing in a certain
format. Why should it not be possible, for example, for a consumer
to indicate withdrawal by telephone or simply by returning the
goods? I think that is accepted in some countries—you can
simply return the goods—but now it seems you have to withdraw
and then do something else to ensure the return of the goods.
The obligations on traders and consumers respectively are fairly
detailed and I am not entirely convinced that they are going to
be workable in practice. It might make it very difficult for consumers
in practice to utilise the right of withdrawal if they have to
spend time writing a letter or filling in a form on the internet.
Not everybody is computer savvy and likes to do that; they might
well not bother exercising their right of withdrawal. There could
be obstacles to consumers exercising their right to withdrawal.
I think in that sense the more general point comes into play as
well and that is perhaps the lack of drawing on research from
non-legal fields. It is very much a legal exercise and I know
there have been some surveys undertaken by the Commission as part
of its proposal but there is some research in the social sciences
literature, consumer behaviour literature and so on that tries
to examine how consumers really respond in certain situations
and I am sure there are interesting findings on how cancellation
rights actually work in practice and what influences the consumer's
decision in exercising their right of withdrawal. I am not sure
that this has been fully taken into account by the Commission
in drafting this proposal. I think that is a general problem,
that they do not really draw on this kind of evidence base, the
research base that exists in other fields. It is very much done
as a legal exercise and perhaps less reliance on law and more
reliance on wider research might be helpful.
Q32 Chairman: Are there more lawyers
than sociologists looking at this?
Dr Twigg-Flesner: I get the impression there
are, yes, which is good for us of course.
Q33 Baroness Young of Hornsey: Thank
you for your efforts to try to make this comprehensible, particularly
to lay persons.
Dr Twigg-Flesner: I hope I am succeeding.
Q34 Baroness Young of Hornsey: I
think we will get there in the end! It is particularly helpful
when you give illustrative examples, so perhaps you could think
about that in relation to the next question. I would be interested
to perhaps have some of those references to the social science
research that you referred to just now, particularly short and
to the point pieces that might be quite helpful in understanding
the area. My question concerns sales contracts and lack of conformity.
You have concerns in that area. The chapter on sales contracts
applies to mixed contracts (both goods and services). Again if
you could think of an illustration that would be helpful. What
do you understand by this and do you consider it to be a useful
inclusion in the paper? How would you amend the chapter to address
your concerns, particularly with regard to remedies in cases of
lack of conformity and this two month time limit within which
a consumer should raise an issue of non-conformity? We are talking
about how consumers behave, what they understand and how they
act. That seems to me to be a complete minefield for people to
try to get to grips with, so over to you.
Dr Twigg-Flesner: I will try to be concise if
I can. On the first point, the idea of mixed contracts, there
is—certainly in English law and in other jurisdictions as
well—a bit of a debate when you have contracts which do
not just involve the straightforward sale of goods. If you go
to the high street and pick a microwave you then go to the desk
and pay for it. That is a straightforward contract sale; there
is nothing else involved. However, if you buy a washing machine
or a dishwasher sometimes you have to rely on someone not just
to deliver it but also to connect it to the water system and so
on. So there is a service element attached to that contract because
you obviously need an expert to do the plumbing for you and some
electric work. So you have varying degrees at some point between
just having the goods, having goods with a service element to
them and perhaps, at the other extreme, having a contract which
is as much service as it is goods. If you have a fitted kitchen
provided, for example, there is going to be a strong service element
because somebody has to potentially redo the room where the kitchen
is going to go, replaster it, retile it; there is a lot of service
being provided in this context. There is a question, certainly
in national law, which legal framework deals with this? English
law makes a fairly rigid distinction between contracts involving
the pure sale of goods and contracts involving sales and services
combined. The main difference in English law is with regard to
the remedies. You have one set of remedies under the Sale of Goods
Act when you have a contract of sale. You have different remedies
under the Supply of Goods and Services Act. The Sale of Goods
Act has a fairly detailed scheme (I will not go into the detail
now); with the Supply of Goods and Services Act which deals with
these mixed contracts in English law there are no remedies as
such. You go back to your common law remedies which are very vague
and certainly not accessible to the average consumer. What the
Directive seems to be doing with this definition of mixed contracts
is that it is trying to overcome any national distinctions that
might be made by simply saying that if you have a contract which
involves the supply of goods we will treat it as a contract of
sale for our purposes, so it does not matter if there is a small
service element or a large service element or even if the service
element is predominant and the goods are almost ancillary. Whenever
goods are supplied our provisions on conformity and remedies will
apply to those goods. That achieves simplification and avoids
discussions and classification problems which, admittedly, are
more for national law and more for academics in many ways; they
are nice exam questions usually but not very practical. In practice
you would obviously find ways around this. It is interesting that
the Court of Appeal got itself into a muddle a couple of years
ago in a case ostensibly under the Supply of Goods and Services
Act but where they then relied on reasoning in the Sale of Goods
Act which was not applicable at all. There is an instance here
where the UK law might benefit from simplification following this
model. I think the Directive is not very clear and this is based
on discussions I have had with one or two Commission people about
their understanding of this idea of mixed contracts. Their understanding
is that the provisions on sales apply to any contract which involves
the supply of goods, whether there is a service element to it
or not, whether the service element is large or not or even predominant.
What they have not really thought about is what they mean by supply
of goods because there are questions of hire and hire purchase
and I think this is not the intention. I think we are talking
about contracts involving the outright transfer of ownership as
it is commonly understood. On that point I think it is a good
useful inclusion and a useful clarification, and it can help,
certainly from an English law point of view, to clarify English
law. It will make implementation more difficult but that is an
issue I think has been tackled anyway. There was an announcement
about a White Paper last week by the Prime Minister about consumer
law which does talk about regulatory simplification and the distinction
between the different types of contracts is one that has been
identified for action. On the conformity standard itself, the
requirement that goods have to be in conformity with a contract
is essentially retained from the existing Consumer Sales Directive.
That is a little bit disappointing because it is not the easiest
provision; it is fairly technical and it contains some very odd
phrasing which could have been clarified. If we take, for example,
the requirement that goods have to be fit for any particular purpose
for which the consumer requires them, this is the case but the
trader has to accept the purpose for which the consumer requires
those goods. It is a very technical way of expressing this; it
is the terminology from the Directive. I can see by your frown
that it does not seem to make a lot of sense and to me it is very
difficult to apply; it seems to be a very cumbersome procedure—what
sort of action is required by a seller to "accept" the
consumer's purpose? Funnily enough, I do think in this case—this
is a very risky thing to say—that English law has the advantage
in Section 14(3) of the Sale of Goods Act which has a more straightforward
provision I think which could be a template for this Directive.
I say this because the Directive itself borrows to some extent
from an international measure, the United Nations Convention on
the International Sale of Goods, which contains a similar provision
on conformity for commercial contracts. Interestingly, that particular
provision borrows from the English provision. Where it has also
perhaps not taken a useful opportunity is to clarify the kinds
of elements of quality that could usefully be taken into account
in identifying whether goods meet the level of quality expected
by a consumer. In English law we have a long list of different
factors (fitness for all common purposes, durability, freedom
from minor defects, even safety); other jurisdictions require
proper packaging for example—which incidentally seem to
be very important in the cross-border context where goods will
be sent across borders; if they are not packaged properly they
might get damaged in transit—appropriate user instructions
and warnings and so on. It would have been helpful in my mind
to spell those out in more detail in the Directive and therefore
ultimately in national laws because that helps to clarify how
this test might work in practice. There could be some opportunity
for clarifying things. I would also once again emphasise the problem
of remedies. I have touched upon this already, the remedies in
Article 26 again are fairly complex. Not only do we give the seller
the right to choose as opposed to the consumer which is a policy
decision and debatable, but the restrictions on having certain
remedies, the question of whether the remedy is disproportionate,
whether it is impossible to provide a remedy, all this, even though
there is some attempt to clarify this, is still pretty vague and
still very difficult for both traders and consumers to really
make sense of when which remedy has to be provided in law. I suspect
it will all become a matter of negotiation between trader and
consumer and the law is going to become secondary. There will
always be a risk in that situation that a trader might get the
upper hand on the consumer. Then we have the provisions where,
even though we have this arrangement of remedies under the Directive,
if certain things do not happen the consumer has the free choice
but if we look at the circumstances when the consumer suddenly
gets the free choice, will these ever be workable in practice?
To take one of the examples, the consumer gets the free choice
of any of the four remedies provided under the Directive if the
trader has refused to remedy initially. The consumer says, "This
thing is not in conformity, can I have it repaired or replaced?"
and the trader says, "I am not doing anything". Now,
all of a sudden, the consumer has the full choice. But if the
trader says, "I am not going to do it" the trader is
not going to do it so what is the benefit of this provision? It
seems slightly odd. Also, the trader must have failed to remedy
the lack of conformity within a reasonable time or without significant
inconvenience, but that seems to me to be requiring the consumer
to wait until the trader has actually failed to do this rather
than when a trader is not going to do this. The trader might say,
"We can repair this but it is going to take six months"—does
the consumer have to wait for six months before they can go for
another remedy? Surely not, but the text of the Directive perhaps
could benefit from clarification on this point. This is almost
stylistic; it can be easily resolved. Similarly, does it mean
that only on the third reappearance of a defect can the consumer
move to a different remedy? These are things that could be clarified.
The final point you raise is the two month time limit which is
an interesting one. It was in the previous Directive as an option
given to the Member States; Member States were given the choice
to introduce this. Some Member States did; some Member States
did not. I think ten did not of the 25 that were subjects of the
study initially. It was not an overwhelming support by the Member
States in favour of this rule. The argument is that it makes it
easier for traders to close the book on certain transactions.
It also makes it perhaps more significant for consumers to make
the effort to test the goods they buy so that things can be resolved
more quickly. But it can also have the effect of making it more
difficult for consumers to enforce their rights because any lack
of conformity that is notified to a trader after more than two
months from the date of sale will allow the trader the opportunity
to say, "Hang on, you could have told me sooner; you didn't
tell me within two months therefore I am not providing any remedies
at all". There is this sudden barrier given to consumers
to actually enforce their rights. Professor Howells and Professor
Schulze made the point in a paper in a book that has just been
published that if you travel a lot and you buy goods abroad whilst
you are travelling you might not even remember where exactly you
bought them until you go back next time round. You know where
the shop is in a small street in Brussels but you do not actually
remember the name or address and you have thrown away the receipt
(that is very careless, but people do), and you are next going
to Brussels in three months' time so you are not able to seek
a remedy because by the time you go back it is going to be very
difficult to overcome the two month notification problem. Without
a receipt of course you will find it more difficult anyway. It
is just going to create additional barriers, especially in the
cross-border context, which seems to be non-sensical. It will
be difficult enough at a national level or at a local level but
in the cross-border context I think you need to be more generous;
if you have to have notification it has to be longer. I would
certainly argue against any kind of notification because I do
not see the need for it.
Q35 Lord Inglewood: Having listened
to this extremely interesting evidence, the conclusion that I
have drawn is that what you are telling us is really that there
are two aspects of this. The first one is that the legislators
need to decide what is the optimum regime from a consumer protection
perspective.
Dr Twigg-Flesner: Yes.
Q36 Lord Inglewood: Logically the
best way of implementing that would be via a regulation which
was proposing maximum harmonisation. If you were to do that, the
problem is that you have essentially more or less completely Europeanised
consumer protection law and that has a significant political implication
which may well be politically unacceptable to those who actually
put the law on the statute books. Is that the essential tension
as you see it at the heart of this process?
Dr Twigg-Flesner: One of the essential tensions,
yes, but not the only one. The whole idea of going for this regulation
and possibly combined full harmonisation as you call it, is that
you achieve the essential regulatory objective which the Commission
is using as a justification for doing what they are doing right
now, which is to create a simplified, better legal framework at
the European level. The Commission has said in other documentation
that wherever politically acceptable we should go for a regulation
as opposed to a Directive because that achieves greater simplification.
This may be one area where it is not politically acceptable, as
you say, and I think you are probably right, I do not think Member
States will be too keen for their consumer law to be entirely
Europeanised; we need to have discrete areas such as air travel
where it looks easy enough to try to achieve something, but the
core of consumer law entirely Europeanised I think is going go
be very unpalatable. However, by going for a Directive you do
not necessarily take away the problems which are one of the motivating
factors behind this current review which is to achieve greater
clarity. There is scope putting the matter back in the hands of
national legislatures; they still have to implement Directives;
they will still get things wrong occasionally; they will still
not just copy out Directives as they stand. So you do not necessarily
achieve the clarity and simplification that you might want.
Q37 Lord Inglewood: You recognise
that may be the road down which it will go but looked at from
a pure consumer protection perspective that is the second best.
Dr Twigg-Flesner: Yes, because with full harmonisation
you have to compromise and you lose the ability at national level
to intervene where there is a real need. Consumer law is not a
technical, nor a technocratic, issue; it reflects certain societal
values and culture values from the various Member States. Some
Member States have a very high level of protection for good reasons;
others have a lower level of protection for other reasons and
they lose that freedom. You might say that in Europe, we are moving
towards European citizenship and we should be moving towards more
coherent European social models and so on and perhaps one consistent
European consumer policy. However, if we do that, do we want to
be so firmly linked to the internal market as it is now? Do we
want to reduce consumer law or consumer policy purely as a market
building issue? Or do we really want a good, solid, coherent,
helpful consumer protection regime? If we do then this is not
the way to go forward. We need to have a much stronger debate
about what sort of values we want to have as part of our European
consumer policy and we have to then divorce it from internal market
considerations.
Q38 Chairman: That would be a good
place to stop but I need to ask you the last question about unfair
contract terms to make sure we have squared the whole circle.
Could you explain the arguments for and against the extension
of the unfair contract terms provisions to negotiated terms? Could
you also explain how you envisage the grey list system of terms
presumed to be unfair working in practice for both the consumer
and the trader? Finally, how do you think limiting the black list
(not a term I like, I have to say) to five terms will affect UK
law?
Dr Twigg-Flesner: The current Directive on Unfair
Contract Terms is limited to not individually negotiated Terms,
in other words standard form contracts. I think one of the reasons
behind this is that German law was a strong inspiration for this
Directive. Of course, Directives never give the effect to one
particular national law but certain ideas are picked up at the
European level and then broadened out. Safety regulations, for
example, from the UK influence the European Safety Directive.
There are always ideas coming from a national level and then elevated
to the European level. In the UK the experience we have had is
that we have had an awful lot of cases, particularly in the construction
sector, where attempts were made to bring about negotiations over
the contract by some means to then evade the application of the
national rules implementing the Directive. So if you draw a line
between negotiated and non-negotiated contracts you will find
a lot of attempts being made by traders to manufacture, if you
like, negotiations so as to avoid having their terms subject to
the Unfair Terms Regulations. Basically you go through a standard
form contract and talk through each term and say, "Are you
happy with this?" and argue with the consumers for the chance
to influence the term of this and therefore it is no longer a
non-negotiated term. It escapes this whole idea about evading
the protection given to consumers, if extended to negotiated terms.
That said, in other jurisdictions it will actually be a very serious
problem in terms of the internal coherence of those jurisdictions.
So German law, for example, will be particularly opposed to this.
Interestingly, if we look at the draft Common Frame of Reference
which has now been presented in its final form by the academic
groups, the one area—the only area—where there was
no complete agreement between those involved in drafting this,
is with regard to the section on unfair contract terms where it
has been left open whether that section should govern only non-negotiated
terms or also negotiated terms. That is one area where there is
a dispute even at that level of academic debate. The Law Commission
looked into unfair terms a few years ago and presented a very
thorough report which unfortunately has not resulted in legislation,
but again the Law Commission recommended going for a scheme that
applies to negotiated terms as well because again you avoid the
difficulties of demarcation where the UK legislation applies or
does not apply. I think it would make it easier for consumers
to have the benefit of the Unfair Terms Directive in those circumstances.
Would it make a big difference in practice? I think the vast majority
of consumer contracts will still be based on standard form contracts.
In many ways practically it might not make a great deal of difference,
but in those contracts where you have attempts to create negotiation
to evade the implementation you would rule that out. There would
be a benefit to consumers in that sense. Yes, there might be legal-theoretical
objections to extending this to negotiated contracts in some jurisdictions,
but ultimately what should be the main reason for doing this is
consumer protection; focusing on consumer protection would be
more appropriate. The grey list—as it is called and whether
it is good terminology or not again is debatable—there is
an important clarification in this text compared to the Unfair
Terms Directive because it is now made clear that this is a presumption
that these terms are unfair. So there is an opportunity for a
trader to show in the circumstances of a particular contract that
despite the fact that a term is suspicious, it might still be
fair. One example I can think of is where the consumer has the
benefit of legal advice. The consumer will enter a particular
contract and get advice on this because it is quite a big contract,
for example a home refurbishment contract where he has the benefit
of an architect who has a legal adviser and explains to the consumer
what each term means. It might look suspicious under this list
but he has had advice, he knows the implications of it, you could
say at this point he has not walked into this blindly, he knows
what a term will mean and the consequence of having that term.
Perhaps at that point the unfairness might be rebutted. In most
consumer contracts I think the presumption is that it is going
to be very difficult for the trader to rebut this presumption.
The only way a trader can do this is by effectively going through
the general test of unfairness and saying that with reference
to the test the term does not create a significant imbalance under
the contract nor is it contrary to good faith. At that point of
course if I may as an aside, the test itself in the Directive
as it currently stands has been transposed into this proposal—this
is the same test as before, but that test was previously criticised
at the various review stages of the Directive, for example by
the Economic and Social Committee at the European level. It is
regrettable that the Commission has not tried to clarify this
test. There is an opportunity missed here I think to clarify the
good faith test and explain more clearly what is meant by good
faith at the European level because that is still left very uncertain.
English law, which historically does not like good faith very
much because English law does not like broad brush doctrines such
as good faith, would perhaps benefit from greater clarity. The
judicial House of Lords has had a chance to deal with this in
one case in particular but their analysis of good faith has not
been universally received positively across the European Union
for example so there is perhaps an opportunity here to clarify
the law in the Directive by perhaps modifying the test. I think
it would be very helpful for consumers because as long as the
term you are complaining about can be linked to a term in this
grey list then the consumer can start from the assumption that
the term is not binding on him or her and it will effectively
be for the trader then to prove that the term is in fact fair.
That is quite a high threshold. Will it work in the informal context?
I do not know. That again is a question that is difficult to deal
with. Finally, the list of terms which are always unfair, a very
short list and I am not entirely sure whether those five terms
are all particularly significant. The first one is and the first
one matches what we have in English law in the Unfair Contract
Terms Act which does rule out certain terms in all circumstances.
Some of the others seem to me to be fairly minor terms; there
might be others in the grey list which perhaps ought to be considered
for moving across to the "black list". I have had the
benefit of seeing a pre-draft of this proposal before it was officially
adopted by the Commission. There was a longer black list and some
of those terms in that black list, as it was then proposed, I
thought were probably better placed there. There was one term
dealing, for example, with contract variation terms where it would
be an unfair term if that term allowed a trader to vary the contract
without good reason or without giving the consumer an opportunity
to terminate the contract at that point in time. So where you
are locked into a 12 month contract and after the second month
your charges are increased and you are tied into this, those kinds
of terms would always be unfair. There is some scope for modifying
that black list.
Q39 Chairman: We are going to have
to finish because we are up to time, but I have a list of questions
I could have asked. I suppose the most basic goes back to a comment
you made when you said is it worth giving up the consumer protections
we have for what we are going to gain by the way this Directive
is presently written and the need to examine your very comprehensive
evidence for where it would bring benefit and where we need recommendations
that it would not. We are going to have to do a lot more thinking.
Dr Twigg-Flesner: If you have questions you
want me to deal with in supplementary evidence, by all means do
send me a list and I would be more than happy to answer in writing.
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