Guest author Nick Mallett is the most experienced English lawyer working in the direct selling industry, having served as an “out-sourced in-house counsel” to many companies for over 30 years. Having stepped down from partnership, he continues to provide legal counsel to clients as a Consultant to DMH Stallard LLP, a leading law firm in the UK. Nick has spoken at many DSA conferences, both in the UK and overseas, and founded the Legal Affairs Committee of the UK DSA, serving as its Secretary until 2011. Nick is a partner of Pan European Solutions, a specialist European consultancy firm for direct selling.
Guest Post by Nick Mallett
Europe – a Single Market?
From a business perspective, the thought of the European single market is extremely attractive. An aggregate gross domestic product which exceeds that of the USA (€12.894 trillion against US$16.566 trillion in 2012) and a population of 739.2 m (USA 313.9 m) spread across a substantially contiguous land mass of 10,180,000 km2 (USA 9,826,675 km²) sounds very attractive.
So, where’s the problem? The “European project” has evolved over more than 60 years from an economic community with elements of a free trade zone, through various stages, to the current “ever closer union”. All of this is music to the ears of all but the most nationalistic.
The problem derives from the fact that the EU consists of not one, not a few, but (currently) as many as 28 nations, and the inescapable fact that it is difficult to create a truly single market from such diverse components, even with the best will in the world. That best will cannot be taken for granted even throughout the member states, among which there are many different perceptions of the nature and shape of the EU. These perceptions differ quite widely among the governments of the member states, all of which should be regarded as willing if not enthusiastic participants, to say nothing of the many and various anti-EU campaigners.
The EU is not synonymous with “Europe”. There are several nations which are commonly regarded as “European” but which are not members of the EU, for example Norway and Switzerland. In some cases and to some degree this does not matter as certain other countries are linked to the EU via the European Economic Area, by which they are included in the customs union and tend to adopt EU law, to all intents and purposes as if they were full members of the EU.
Leaving politics aside, why and to what extent is the EU not a single market? One of the answers lies with the law. Member states are, of course, sovereign law-makers in their own right. Membership of the EU gives rise to the assumption of certain legislative obligations by those member states. Depending upon your perspective, this can be seen as a dilution of national sovereignty, or taking a share in sovereignty over a greater area.
The EU creates law in a number of ways, the principal forms being:
• By treaty, which need not concern us in this context as treaties ordinarily operate between entities such as the EU itself, member states, other nations and other international organisations, such as the United Nations;
• By Directive, which is a form of legislation addressed to the member states, directing the to legislate in a particular way; and
• By Regulations, which create a form of law which is directly applicable in the member states.
The submission to a shared EU sovereignty is clear (at least in principle) as regards the future of regulation once a member state joins the EU. The many problems which arise all seem to derive from the fact that all member states came to membership of the EU with their own histories and traditions which have a distinct bearing on the form, substance and effect of their law, even law created at the behest of the EU via a Directive, or having direct effect via an EU Regulation.
One major area of divergence between the member states results from the lack of a uniform law of contract throughout the EU. A lot of EU legislation has been concerned with adjusting the legal position between contracting parties, but without a common law of contract, the effect can be widely divergent. There is a long-term project in progress aimed at remedying this problem, but the fact that the project is now into its fifth decade gives an indication of how difficult a problem it is.
One aspect of this problem results from the existence within the EU of jurisdictions of two widely divergent types, civil law and common law.
Even without these differences, the implementation of EU law within the member states was inconsistent. Many Directives permitted the member states to enact national law to a higher standard than the directive required, so many member states did so. Recently, the trend has been to “maximum harmonisation” Directives, which forbid member states having or keeping laws to any higher level. For example, if a “maximum harmonisation” Directive obliged the member state to give people a right exercisable within 14 days, the member states could not allow 28 days.
Furthermore, Directives have occasionally allowed member states to take advantage of “derogations”, permitting them to take alternative approaches to the transposition of the Directive.
As a result of all this inconsistency, it is hardly surprising that the same EU law can be interpreted differently in different member states, and even that substantially identical cases can be concluded differently, dependent upon where the hearing takes place. This is a nightmare for lawyers, let alone for business!
The result is that when a business wishes to venture into the EU for the first time, it cannot yet expect a level playing field throughout the EU. Depending upon the product range, sales methods and reward schemes, the picture will be in the nature of a patchwork quilt. There are not 28 entirely different regimes; some countries tend to follow similar patterns and practices, but it is often necessary to seek specialist local advice. In practice, few if any businesses embark upon a launch across the entire EU, and there are expert consultancies which are experienced in leading businesses through the process.