Withdrawal rights and their impact on domestic law

1. James Netto Withdrawal rights and their impact on domestic law

2. Introduction • Article 12 of TFEU: • “Consumer protection requirements shall be taken into account in defining and implementing other Union policies and activities.” • Article 169: • “In order to promote the interests of consumers and to ensure a high level of consumer protection, the Union shall contribute to protecting the ...economic interests of consumers, as well as to promoting their right to information, education and to organise themselves in order to safeguard their interests.” • Centred around the idea of guaranteeing the autonomy of the individual on the market without profit-making intentions. • Focused on: • Consumer’s freedom of choice and decision • Protection of legitimate expectations • Right to seek information and access to justice • Right to withdraw

3. What is the right of withdrawal? • “A right of withdrawal gives the consumer the possibility, without giving any reasons and without incurring any penalty, of no longer being bound by a contract” (Ius Commune Casebooks – Consumer Law) • Enhances the right to self-determination and protects the freedom to contract

4. Does the right of withdrawal violate “pacta sunt servanda”? • “The principle of autonomy of the will is not a purely formal principle...in certain cases, only the right of withdrawal permits the consumer to exercise this responsibility. But if, once the period for withdrawal has lapsed, he did not revoke the decision that was formally taken, ‘pacta sunt servanda’. Instead of contradicting this principle, the right of withdrawal...gives the principle an additional justification...”. (Stauder – Pacta sunt Servanda and the Right of Withdrawal) • Thus, merely a more refined more version of the principle is seen in the right of withdrawal.

5. Situations for the right of withdrawal • Broadly distinguished between two groups of cases: Psychological Deficit Not in a position to take a rational decision through aggressive sales practices Information Asymmetry Held to have insufficient information to take a well-considered decision

6. Examples • Germany • Distance learning contracts (§4 FernUSG) • Insurance contracts (§8 VVG) • Consumer credit contracts (§7 VerbrKrG) • France • Dating agencies and languages courses (Art L 311-15 Code de la consommation) • Purchase and construction of a house (Art L 271-1 Code de la construction et de l’habitation) • Spain • Package holidays (Art 9.4 of the Law 21/1995) • Netherlands • Immovable property (Art 7:2 NBW) • UK • Consumer credit contracts (Trading Standards Acts)

7. Harmonisation of the right of withdrawal in Europe • Attempted regulation and harmonisation: • Doorstop Selling Directive; Timeshare Directive; Distance Selling Directive; Life Assurance Directive; Consumer Credit Directive • Use of differing terminology, cooling-off periods, notice periods etc. have led to complications and differences across sectors. • Harmonisation has also been problematic when the domestic framework for making contracts is analysed.

8. Impact of EU law: Germany • §355 ff BGB, §361a and b were harmonised in line with the right of withdrawal regulations from Europe. • Bundesgerichtshof: contracts were not fully valid until the right of withdrawal expired. Until then: schwebend unwirksam– pending. • As a result of the pending status, the consumer was only entitled to performance once the contract was fully valid.

9. Impact of EU law: Germany • Significant problems: academics – consumer should be allowed to refrain from his right to withdraw to be able to claim immediate performance. • Current law: Distance selling contracts are fully valid from beginning, and invalidated later by the consumer.

10. Impact of EU law: France & England • France: Relevant codification: Contract not complete until the period of withdrawal has lapsed • Yet: academics have argued otherwise: R Baillod – Le droit de repentir (1984) • England: Regulated in turn by different Acts of Parliament

11. Conclusion: Reform and the future • Such disparities and inconsistencies in this field are of concern: • Position of the European Union: • “The Commission will examine the possibility and desirability of harmonising the method of calculating the cooling-off period under existing consumer-protection legislation” – European Council and Parliament • Communication from the Commission to the European Parliament and the Council – A more coherent European contract law – An action plan. • UK Law Society: (Law Society position - Consumer Rights Directive - 28 February 2009) • “opposed to full harmonisation as a general rule, not least because it entails a decrease in the level of protection. For example, it would remove the right to reject as a remedy in the first instance.” • “opposed to the narrow immediate emergency exception to the withdrawal period in the case of off-distance premises contracts. It would be a disincentive to, among others, solicitors making home visits for those ill or housebound and limit consumer’s freedom of choice and access to justice.” • Academia: the DCFR and AcquisGroup. Conclusion