The Existence of Transaction Costs as the Rationale for Maximum Harmonization of the European Common Sales Law

In recent years, an extensive debate on the need for harmonization of a European sales law has evolved. The existing diversity of contract laws in the Member States has been perceived as a barrier to trade and hence as burdensome for the European internal market. Moreover, recent impact assessment studies suggest that this diversity is a source of substantial transaction costs. The observed existence of such substantial transaction costs represents a per se overwhelming argument for the adoption of an optional instrument on the European Common Sales Law. The analysis and calculations of opportunity and transaction costs that have been made provide seemingly unbiased, unprecedented, empirical and affirmative answers. However, this paper challenges and critically analyses the results and shows that it might simply be impossible to calculate either the full transaction costs of legal diversity or costs of uniformity. This analysis also shows that: (1) calculations made by the EU Commission rely heavily on subjective observation and selectively biased data; (2) that the obtained results might be severely impaired and over conclusive; and finally (3) that those results merely generate an anecdotal evidence of the possible volume of transaction costs originating from that contract law's differences. In order to obtain a more affirmative answer on the actual amount of transaction costs, this paper provides a list of possible refinements and suggests a set of new quantitative measures that would permit more accurate cross-firm, cross-country and cross-industry comparisons.