European legal and procedural reforms: the future

Change is everywhere but, in Europe, the scale of the legal and procedural reforms that will take place over the next 20 years will be seismic. Are you prepared?

There are two main driving forces here. First, the European Commission will seek to strengthen the single European market, by moving further towards single rules of substantive law and of litigation procedure. The Commission’s object is to encourage both businesses and consumers to increase their trading across borders. This is partly achieved by moving towards harmonised rules and partly through greater transparency and predictability of legal claims and litigation in other states, so that people will have greater confidence that rights can be enforced if things go wrong. After all, which of us would have confidence in enforcing cheaply or quickly a claim in, say, Greece or Italy?

Second, some national governments are in any case reforming their procedural rules so as to increase access to justice and cut the costs of litigation. The Woolf reforms in England and Wales are prime examples of this trend. Woolf has been copied in the Netherlands, and other reforms have occurred in Spain and Germany. As part of this process, class action rules have been introduced in the UK, Spain and Sweden and are being discussed in other Scandinavian states, Italy and Ireland.

Some in industry would oppose any class action mechanisms; others would argue that such rules are inevitable. Whether they encourage bad claims depends on the details: for example, is the mechanism an ‘opt-in’ (as in UK) or an ‘opt-out’ (as in USA)?

Mechanisms for funding litigation are important further examples of change that may have a profound impact on ‘compensation culture’. The US contingency fee is generally viewed as a Bad Thing. The reasons for this lie more in the fact that contingency fees are unregulated and excessive than in the contingency principle. The recent UK experience with conditional fee agreements has demonstrated this. The UK system has, of course, run into trouble over unregulated, after-the-event claims farmers, but the government accepts that this sector must be controlled: their existence is an unavoidable consequence of a ‘loser pays’ rule.

An example of what is happening in substantive law – and of how the European Commission approaches the reform agenda – is that of contract law. The Commission would like to bring about a single European code of law. The area of contract is selected as the first step.

Consultations have demonstrated that it would be too difficult to promulgate a code of contract at this stage, not least because it would upset other areas of national law that inter-relate with contract, such as property law.

So the Commission will proceed carefully, by getting academics to build on existing comparative work: on common principles of contract in national laws; and on the existing Community acquis, which largely comprises consumer protection directives on unfair contract terms, consumer credit, distance selling, package holidays, sale of goods, consumer guarantees and so on.

A ‘Common Frame of Reference’ will be drawn up by 2008. At that stage, the CFR will form a code of Community law on contract and could be adopted as the proper law of cross-border transactions. The Commission also hopes that the CFR could influence interpretation of national contract law (a bit worrying, this, if judges are expected to interpret national law in the light of non-binding Community provisions) or could become a binding code at an appropriate time. Meanwhile, attention can be turned to harmonising other areas of law. For example, a draft code on tort has been produced by an academic network. One notices here the Commission’s reliance on a ‘softly, softly’ approach, and on academic resources.

Those who look clearly at the legal agenda over the next 20 years predict that the rules of substantive law and procedural law, and the system of funding litigation, will all change as a result of further European harmonisation and national modernising agendas. History shows that the process of European harmonisation never merely produces an averaging of existing national rules; instead, it results in an evolution based on developments in underlying policy, often strengthening consumer protection. In this process, there is a danger that changes in rules will upset the balance in society between consumer and industrial interests. Unexpectedly adverse effects can sometimes be produced by innocent changes in litigation rules. But there is potential in the coming years for major changes to emerge in the climate of litigation. An overheated US-style litigation culture could easily emerge throughout Europe.

Some companies are already starting to fund research, gather information and find ways of encouraging informed debate about these issues. For example, the European Justice Forum, based in Brussels, is being created to fund research at Oxford University. Further details can be supplied to those who care about a balanced future…