L'Europe: Chacun pour soi?
L’Europe: Chacun pour soi, or: Europe: Let each Member State solve its own problems, was what could be read in newspapers a few weeks ago when the disastrous effects of the credit and banking crisis began to become manifest. It seemed as if every Member State of the European Union was only trying to protect its own national financial institutions and that nationalism was going through a period of unexpected revival. That period, however, only lasted for a few days. It rapidly became clear that, due to regional (European) and global integration of capital markets, national solutions would not work and that only European and global measures would be effective.
For Europe, the credit crisis may prove to be a blessing in disguise. What began as the European Community for Coal and Steel, followed by the European Economic Community and the European Atomic Energy Community, gradually developed into what we now call a European Union, which is slowly moving in the direction of a state-like structure. (An overview of all the European treaties can be found at http://europa.eu/abc/treaties/index_en.htm.) The statement that Europe is moving into the direction of a state-like structure is a highly sensitive assertion in the light of growing euroscepticism, not only in the UK and Ireland, but also in other Member States. According to eurosceptics, the European Union should be limited to its original purpose: the creation of a common market. Political and legal cooperation should be sought only if the interests of the common market unequivocally demand it, but economic cooperation must remain the driving force.
Paradoxically, the credit crisis has shown that this eurosceptic approach may well be the best promoter of accelerating European political and legal integration. In order to rescue failing banks and to keep the financial system functioning, coordinated European measures have proved to be the best (not to say: the only) solution. Such economic measures – and no one will deny that these measures have been in the interest of the common market! – have only become possible after extensive political consultations and the resulting agreements. It shows that European integration – which originates in the desire to create an integrated market, thus making the Member States economically dependent upon one another, in order to avoid another devastating war – can still be said to only truly advance when so dictated by economic necessity.
What also has become clear is that we should regulate at a European level more strictly (perhaps I should say: in the most strict manner), first of all, the supervision of financial institutions (banks, insurance companies, and, not to be forgotten, hedge funds and private equity funds). We should, however, also regulate more strictly the so-called financial products, whose effects and risks have sometimes not even been fully understood by specialist economists and lawyers. The European Parliament should therefore have a close look again at the proposed changes in the Financial Collateral Directive, whose implementation in the laws of some Member States have been causing grave difficulties. (For general information on the financial markets infrastructure, see http://ec.europa.eu/internal_market/financial-markets/index_en.htm. More information on the Financial Collateral Directive can be found at http://ec.europa.eu/internal_market/financial-markets/collateral/index_en.htm. See also Commission of the European Communities (Brussels, 17.03.2008), Proposal for a Directive of the European Parliament and of the Council amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims, to be found at http://ec.europa.eu/internal_market/financial-markets/docs/proposal/sfd_fcd_proposal_en.pdf.) Do we still feel, in the light of all the turmoil on the financial markets, that non-publication of a financial collateral arrangement is such a good thing? Do we really consider it justified that, simply because some Member States have no formal requirements with regard to the creation, validity, or admissibility in evidence of the provision of credit claims as financial collateral, all the other Member States must abandon these requirements?
We should also carefully reconsider the introduction of a euro-mortgage, based on the model of the non-accessory German Grundschuld. Is it really in the interest of borrowers that their bank can easily transfer such a mortgage? Are borrowers sufficiently protected by a security agreement in which the bank promises not to enforce the mortgage upon repayment of the loan? Does such a security arrangement, being no more than a contract, which does not bind third parties, give sufficient protection to borrowers whose bank transferred the mortgage as part of a securitisation scheme? (On the integration of the EU mortgage markets and on the euro-mortgage, see http://ec.europa.eu/internal_market/finservices-retail/home-loans/integration_en.htm.)
So far, the development of European private law has mostly concerned contract and tort law. The credit and banking crisis has made it clear that property law should be seen as equal, or perhaps even, for the time being, as superior in importance to contract and tort law, given the urgency of a new regulatory framework for financial products and financial security arrangements. It is therefore amazing that the European Commission has issued a draft directive on consumer rights, aimed at reaching more consistency and coherence in European consumer contract law as well as replacing minimum harmonisation by maximum harmonisation. (See http://ec.europa.eu/consumers/rights/cons_acquis_en.htm. On the same day (8 October 2008) that it was published, the draft was fiercely criticised by the German Minister of Justice (http://www.bmj.bund.de/, under Pressemitteilungen). Such criticism can be no surprise, as the draft may result in less protection for consumers instead of maintaining the existing level of protection.
One result of the present credit and banking crisis should be that priority is given to a short-term legislative programme in the area of financial products and financial property arrangements, particularly to protect consumers and restore their confidence in the financial system. Member States and the European Parliament should be aware of this.This Issue
The current issue contains four contributions. The first of these is a discussion by Sylvette Guillemard of contractual freedom and extinctive prescription. The author of the second paper, Seamus O'Tuama, compares the American and Commonwealth influences on judicial review under the Irish Constitution. The third contribution is that of Viola Heutger, who focuses on legal language in the context of drafting the principles of a European law of sales. Finally, Catherine Kessedjian reviews a book by John Gillespie on commercial law reform in Vietnam.
Sjef van Erp,