Reform of Contract Law in Estonia: Influences of Harmonisation of European Private Law

AuthorIrene Kull
PositionProfessor, University of Tartu
Pages122-129

Irene Kull

Professor, University of Tartu

Reform of Contract Law in Estonia: Influences of Harmonisation of European Private Law

Estonia has become known as one of the most reform-inclined countries in Europe. Rapid restructuring of the economy in the spirit of liberalism, reform of the entire private law system upon the principle of private autonomy, and adaptation of the legal system to the EU accession requirements were completed swiftly and without long discussions1. The first laws were the reform laws, the aim of which was to support economic reforms, but also the first parts of the new Civil Code were adopted quite soon after the regaining of independence2. The legislative process was from the beginning to be largely influenced by the decision of the Estonian Parliament from 1992 on the continuity of legislation, but, fortunately, this was only a parliamentary policy decision and did not indicate a direction that it was obligatory to follow. In practice, the recommendation to use old laws or drafts from the first independence to draft the new legislation on contract law was ignored3. The Law of Obligations Act 4 , adopted on 28 September 2001 and entering into force on 1 July 2002, has been influenced by the most important sources of European harmonised private law, such as the Principles of European Contract Law (PECL), the Principles of International Commercial Contracts (UNIDROIT principles), and the 1980 Convention on Contracts for the International Sale of Goods (CISG). Also the civil laws of European countries were taken into account as models for drafting the LOA. Most influential were the German Civil Code, the Swiss Code of Obligations, and the civil codes of Austria and the Netherlands5. The decision to follow the model of a pandectic civil code and adopt parts of the civil code as separate legal acts guaranteed that the most important fields of civil law were reformed first and that the whole of private law was drafted under the same principles. Work on the Law of Obligations Act started in 1994 when the first commissions were organised6. The principal commission, for the civil and commercial code, started its work in 1992. Today when we are discussing the future development of European private law and the result of the work done by the Study Group on a European Civil Code on a Common Frame of Reference 7 , the experiences of different European countries in modernising or reforming their national private law become highly valuable. The following brief overview of the main sources and influences in the legal drafting of the new Estonian contract law system concentrates only on some critical moments and conclusions.

1. The main influences - our own history and European private law

The relevant guidelines from 1992 in the decision on the legal continuity of the Republic of Estonia determined unambiguously the effect of the historical argument concerning legislation. The main effect entailed by such an approach was the justified ties with the German legal family facilitated by the historical argument of the legislator following regaining of independence8. It must be pointed out that the most important model from the era of the first independence was the draft Civil Code of 1939. It was an updated and simplified version of the Baltic Private Law Code (from 1864), which consisted of five books and had some significant implications derived from the most important classical private law codes of the beginning of the 20th century, such as the German and Swiss civil codes and the Austrian Law of Obligations, as well as legal acts of Scandinavian countries; the draft codes of Hungary, Czechoslovakia, and Poland; international conventions; and draft laws9. The draft from 1939 was prepared under the guidance of Professor Uluots for more than 15 years and could not be approved by the Estonian parliament because of the occupation in 1940. Through intensive discussions in the early 1990s, it became evident that the mere reintroduction of the old draft statutes from the 1940s would not serve the needs of the society and that the goal should be to create a new, modern, comprehensive civil code. Specifically, in the field of contracts and non-contractual obligations it was impossible to follow the old law. Influences from Soviet law were quite strong until 2002, when the new LOA replaced the old Soviet Civil Code from 1965. Here we have to remember that contract law was governed not by the principle of autonomy but by discretionary regulation, obligation to conclude a contract, and binding law. During the time of the Soviet Republic of Estonia, transactions between enterprises (there was no concept of legal person) were regulated by public-law-like rules on state procurement, there was no concept of real property, all land belonged to the state, and contracts between natural persons were restricted to items of personal and family use10. Changes in the legal system were revolutionary - they changed the entire way of thinking, understanding the role of law and justice in the society, the tasks of the lawyers, and the meaning of law generally. As the goal of civil law reform was set as creation of a completely new, modern and democratic civil law that meets the needs of a market economy, it influences also how lawyers think of law and understand it. In speaking about the influences from the recent past, we should recognise that the main purpose of the reform was to make a break from the past and build a new legal system, one based on principles common to all European countries and legal systems.

There were many important decisions made that influenced the reform of the system of Estonian private law. The most important of these was the choice of the Germanic family of law as the main model for the drafting of new laws 11 , but at the same time drafting of the acts was based on a comparative approach. The main goal was to draft an act that would outlive or at least easily cope with the inevitable unification process of private law in Europe. Here we have to refer to our past once again. In the explanatory memorandum of the draft, Professor Uluots wrote in 1936 that "Estonia is a country with a rich civil law past while its historical development has been excessively unique, consisting of elements that originate from ancient to modern era. This legacy had to be updated and supplemented." 12 One may see that these words are not outdated even today. There is a tradition of comparative research, searching for the best solutions from other legal systems and adapting them to our own legal traditions and culture - to our understanding of fairness, reasonableness, and needs of real life.

The fact that Estonia was cut off from the roots of its legal traditions had in that sense also some positive effects. As the new civil law was basically initiated with a blank slate, with no predetermined authorities, we were indeed offered a unique opportunity to realise all those unification and harmonisation ideas that most of Europe can only dream of13. A feature specific to the civil law reform in Estonia was the codification in step-by-step principles, starting with the most urgent subject matter in property law and concluding with the Law of Obligations Act in 2002. The first book - the Law of Property Act - came into force in 1993 in order to create a foundation for the emerging immovable property commerce14. The second book was the General Part of the Civil Code Act 15 (GPCCA), which represented a mixture of the Civil Code from 1965 and the principles derived from the draft Civil Code of 1939 16 and which was renewed in 2002. Then the Family Law Act 17 in 1995 and the Law of Succession Act 18 in 1996 followed. As a result of the monist system of Estonian private law, the imaginary Civil Code (five books as separate acts) applies to legal relationships between business and private individuals in a uniform manner19. It was decided that there would be no commercial code dealing with business transactions and no consumer code for consumer transactions. The Consumer Law Act has been in force since 1994 but from 2002 has consisted of reference to the LOA concerning private law relations. Now the LOA contains special rules and exceptions to general provisions that apply only to B-to-B or B-to-C contracts, mainly granting more freedom in contracts concluded in the course of professional or economic activities and providing restrictions and mandatory rules for consumer contracts.

During the preparatory phase, it was decided not to copy the law of any particular country20. Thus, the working group decided to select a particular type of legal system as its basic model and use other sources for better solutions (legal acts of Switzerland, the Netherlands, Denmark, France, Italy, and the Nordic countries)21. The basic model was the Germanic legal system, and the draft of the LOA was largely modelled on the German Civil Code (BGB) and particularly the draft proposing modification to the BGB (BGB-KE)22. In contrast, provisions on non-contractual liability were based extensively on provisions of the Swiss draft law23. The available court practice of the respective countries and the actual application of various provisions were taken into account. Because of time limits, no significant attention has been paid to issues such as the social consequences of innovations and their impact on the formation of legal culture or changes in it. In the understanding that any change can be effective only if it is assimilated into the deeper structures of law and social life, the commission intentionally...

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