Giuseppe Vettori – Professore Ordinario di Diritto Civile

 

Contract law today has a fundamental role. A political service that brings the Code and the Constitution close (1).

I will try to explain this idea, moving from the examination of some cases and problems on personal dignity, disparity of power, competition, trust and movement of goods.

To follow this line of thought, at least three questions must be assessed: we need (I) to shortly evaluate case law on the matter, (II) to examine the relevance of autonomy in the Italian and European Constitutions, (III) and to reflect on the role of contract law in the application of  constitutional principles and values.

 

I          The cases: (1) personal dignity (2) disparity of power (3) competition and social rights (4) trust and movement of goods

Let’s start from the first issue.

 

1         Personal dignity

The Italian Constitution, just like all post-war constitutions, includes inviolable social rights which, is know, are not subjective rights per se (2). The Constitutional Court, in Italy, uses the concept of personal dignity in different ways, depending on whether it wishes  to express the intangibility of every fundamental right or, rather, a personal social expectation (3).

The European legal framework is peculiar. The Charter of Fundamental Rights has incorporated the principle of indivisibility between social, economic and civil rights. According to Article II-111 of the Constitutional Treaty, rights must be respected and principles must be observed, in accordance with the respective powers of European institutions and Member States. And it is this distinction that we wish to examine by starting from specific case law (4).

The case on dignity (the Omega case) that we wish to examine is well-known. It deals  with the compatibility with European law of laser  games involving the simulated killing of people (5).

Omega was party to a franchising contract with an English company that produced the instruments for said game.

The Mayor of Bonn deemed said game contrary to public order. The Federal Court confirmed said negative judgment, but asked the European Court of Justice to evaluate the compatibility of the issue at hand with European law and to ascertain if the limits to economic freedom must be common to all States.

The Advocate General ascertained that all States, with the exception of Germany, considered dignity a constitutional principle, but not an actionable right (6).

Therefore, dignity is a general concept of public order that every State is free to evaluate (7), subject to the control of the European Union in the presence of a serious threat to fundamental collective interests (8), like in our case.

The Court of Justice confirmed this general interpretation. Thus the limit imposed by Germany was thus deemed in conformity with European law, and the principle needed to be  implemented.

 

2          The relevance of disparity of power

in the Courage case is equally important and well-known. In this case, an English Court asked if a party who had contracted a clause restricting competition, could claim compensation to the other party that had imposed the detrimental clause (9).

The national judge held that this claim was inadmissible, since a party to an illegal agreement could not benefit from his own illegal behaviour.

There followed resort to the European Court of Justice, which underlined that the protection cannot be excluded a priori according to European law, provided  the national judge considers the following points: the specific legal and economic context; the parties’ behaviour; and the eventual inferiority of one of the parties.

Therefore, the Court deemed the parties’ serious disparity of power a principle that had to be implemented by national judges.

 

3          Competition and social rights

The recent cases General Electric v Honeywell (Comm 3 July 2001 n 4064/89) (10) and Albany (case 67/96 of 21 September 1999) (11) and the recent sentence of 13 July 2006 (12) have affirmed several fundamental principles. In the first case, the European Commission privileged the existence of a plurality of businnes over the allocating efficency of the offer of goods on the market. In the second case, priority was given to social aims over competition rules. The td case recognised the right of every citizens to compensation, deriving from an agreement or practice prohibited by Article 81 of the Treaty. And ,according to the Court of Justice, the sabstantial an procedural regulation fell witin the competence of each State, in full respect of the principles of equivalence and effectiveness. These cases are expression of a system of market social economics (Article 1.3 of the Constitutional Treaty) that must be implemented 13).

 

4          Trust and movement of goods

The different approaches to the trust institution are indicative of a different regulation of the use and movement of goods, marked in Europe by the fracturing of codifications (14).

In 19^th century France, the abolition of feudal links led to the priority of consent, to the causal need and the typical nature of real rights. The German BGB created for the economic operator a simple, abstract and particularly certain model for the movement of goods, hinging on formal procedures going beyond pure consent (15). In the common law, not affected by codifications, historical continuity has always allowed for the fractioning of practices and uses of goods and their movement (16).

Besides, the Hague Convention (17) has been ratified by Italy, where there currently exists a legal regulation of the ‘atto di destinazione‘ (18). The Convention has not been ratified by Germany and France, where a legal regulation of ‘fiducie’(19) is being currently planned.

The need for uniformity is obvious. The Constitutional Treaty itself, in confirming economic freedom and fundamental rights within a Common Market, may allow to overcome the historical reasons which determined different legal realities in single States. It also may promote a new common principle on the transfer and movement of goods in Europe.

All these cases evidence principles for which we must evaluate the role of contract law. The logical premise for this evaluation, is the assessment of the constitutional relevance of contract law.

 

II         The constitutional relevance of private autonomy

There are many theories on the relationship between contract and constitution. I will examine two in detail.

Some argue that the nexus between contract and constitution is a juridical construction: contract law, in fact, identifies itself with the market, whereas the Constitution is a political form based on a pact between citizens and institutions. The ensuing conclusion is clear-cut: the refusal of any kind of ethical role for private law, the need for a distinction between private and public spheres, and a strong role of politics (20).

This theory is in line with a given interpretation of the European Constitutional Treaty, according to which contractual autonomy is not regulated by the Treaty. Therefore, fundamental freedoms can be limited by European law only in instances where the European Union is specifically competent (21).

Others, however, conceive the relationship between contract and constitution in a different way. Their theory is based on the following presumptions. First of all, it is argued that pure autonomy does not exist; rather, it exists as shaped by the legal system, where the coexistence between constitutional principles and ordinary law determines, at least, two aspects of great relevance: (i) the softening of a clear distinction between the code and the constitution, on the basis of the public or private nature of the two texts; and (ii) the perception that the two systems are two sides of the same coin, ‘shares of a sole plan and of equal values that must be realized first on the political level, and later on the social one'(22). So, the order of legal sources confirms the priority of the constitution; but there has developed, by now, a wide awareness that the division between the two texts does not derive from refined theories, but from the economic and political evolution of society, as the role and rules of the market have shown in the last decades (23).

This is in line,  with the European Institutions if we follow a sharp doctrine which argues that the capacity to enact a law with full effect in Europe, does not and will not derive from a new sovereign State; but, rather, from a different obligation, similar to that developed with the State form (24).

A constitutional contract that binds the States, their constitutions and judges in a relationship that legitimates the existence of a common law and obliges judges to implement European law in a uniform way.

We thus need to determine the way in which said obligation on the part of judges has been and can be satisfied, and the distinction between principles and rules is still decisive in this respect.

 

III       Principles, rights and rules: the role of contract law

The classical distinction between principles, rights and rules was adopted when drafting the second part of the Constitutional Treaty (25). It was incorporated in Article II-111 to guarantee the certainty and binding effectiveness of the Constitutional Charter.

Article II-111 provides that rights must be respected while principles must be observed and promoted in accordance with the respective powers of European institutions and Member States. There follows the new formulation of Article II-112.5, ‘the provisions of this Charter […] shall be judicially cognisable  only in the interpretation of acts and in the ruling on their legality’ (26).

The reactions to this article have been very different.

Some argue that it limits judicial interpretation and prohibits the direct application of the Constitution. Critics evoke post-revolutionary institutions, such as the referé legislatif, and criticize the unjustified fear of a gouvernement des judges (27).

Others argue that said distinction is not so dramatic, provided it is well-meant. They believe that Article II-112.5 is intended to exclude the possibility of deriving direct consequences on subjective positions from the formulation of principles (not rights). So, principles are applicable only through the legislator and can be used by judges only to interpret laws and other European provisions, and to decide on their constitutionality. This, it is argued, is in line with Italian constitutional practices (28).

My impression is that, in this matter, the role of contract law, which I shall now specify, is very important.

It is doubtless  that case law based on principles is plastic and adaptable according to the modes of a complex society; however, there are clear and precise limits.

For the principle to operate, there is the need for a rule provided by the legislator or constructed by the judge, who must reduce the principle to factis species that contains the historical fact and its consequences. Said activity is not an act of interpretation and does not create a new Law, (because ‘the case returns in Law if a relevant principle exists’) (29). Rather, it is ‘a constructive reasoning on the case, made of interferences and deductions of a varied nature'(30). The judge does not invent new rights, but ‘discovers’ or ‘reveals’ the parties’ rights and obligations, passing a judgement that must consider many sources to be implemented in the case (31).

This method must be put into practice with the contribution of juridical sciences in all their components. I will try to give some summary indications.

• A constitutional principle (not a right) cannot lead directly to a subjective actionable position without any other basis (32).

• A principle, to be such, must draw from external sources. To avoid deviating elements, such as the absolute, the sacred, ideologies (33), one needs to focus on the relevance of the fact, drawing from a plurality of sources.

• The judges of different States now refer to the Charter of Fundamental Rights – as yet deprived of a juridical value – also for the protection of social rights (34).

• This is very important, especially for Article 47 (now Article II-107 of Constitutional Treaty) which reproduces a general principle of European law, which has been in use for twenty years. It demands the implementation in Europe of a right of effective remed. A principle that the Court of Justice considers fundamental both for civil and social rights (35).

• This principle leads, in some cases, to the overcoming of the distinction between civil law – that puts rights before actions – and common law – centred on the principle ‘ubi remedium ibi jus’. This allows to build the rule most suited to the substantial and procedural profile of the parties’ interests (36).

This is the role of contract law: to implement constitutional principles and values through the construction of rules. The cases we examined before evidence these indications.

• The respect of dignity can potentially affect the validity of contract through public order, and can determine the lawfulness of conduct through good faith and the theory of tort.

• The disparity of power will have to assume relevance through new remedies on a European and national level. The use of presumptions and the burden of proof, depending on the single details of the case, are essential (37).

• Competition law specifies the rules governing the legality of undertakings and conducts on the market, according to one’s choice of political economics (38). Contract law must define actions and remedies protecting businesses, consumers and citizens (39).

• The trust develops in the remedial ambit. Contract law must construct in Europe common rules within a common system for the use, the destination and transfer of goods.

In all these cases, we have to identify the bases on which actionable subjective positions can be founded, which must be fixed, once again, in the careful comparison between principles and rules.

 

IV        The hedgehog and the fox

To underline the deep difference between thinkers, writers and men in general, Isaiah Berlin (40) quotes Archilocus: the fox knows many different things, while the hedgehog knows a very important one.

All individuals who refer everything to a central vision fall within the category of the hedgehog.

All individuals who pursue many goals, without necessarily placing them in a unitary vision, fall within the category of the fox.

Like all reductive classifications, this partition can become artificial; yet, as Berlin says, it cannot be completely excluded. ‘Like all distinctions that have some element of truth, it offers a perspective for an authentic examination’.

Therefore, the distinction between rules and principles is a very useful distinction to accompany legal reasoning in a complex society that needs flexibility, but also great responsibility in the ius dicere.

NOTE:

(1) For further information G. Vettori, Diritto dei contratti e Costituzione europea. Regole e principi ordinanti (Milano: Giuffrè, 2005) 1 et seq; G. Vettori (ed), Contratto e Costituzione in Europa (Padova: 2005) 231 et seq.

(2) G. Alpa, ‘Dignità. Usi giurisprudenziali e confini concettuali’ La Nuova giurisprudenza civile commentata 1997, 415; M. Lucani, ‘Diritti sociali eintegrazione europea’ Politica del diritto 2000, 367 seq; M. Panebianco, ‘Bundesverfassungsgericht, dignità umana e diritti fondamentali’ Diritto e società 2002, 151 et seq.

(3) A. Ruggeri / A. Spadaio, ‘Dignità dell’uomo e giurisprudenza costituzionale’ Politica del diritto 1991, 343 et seq.

(4) S. Gambino, ‘Diritti fondamentali europei e Trattato Costituzionale’ Politica del diritto 2005, 3 et seq.

(5) Case 36/02 [2004] ECR I-09609 (ECJ).

(6) See the conclusion by the Advocate General Six-Hackl of 18 March 2004 sp n 82-91, where it is said that the European legal system is aimed at guaranteeing the respect of human dignity as a general principle of law; while in Germany, as recalled by the Advocate General, the principle of the respect of human dignity is considered an autonomous fundamental right. See also the Court of Justice sentence n 34.

(7) The ECJ says that ‘the notion of public order in the European context, being in particular the justification of a derogation from the free performance of services, must be interpreted restrictively, so that its scope cannot be unilaterally determined by each member States without the control of European institutions’. See n 30. After all, the decision specifies that ‘a restrictive measure issued by the authority of a member State does not need to correspond to a conception shared by all Member States as to the mode of protection of a fundamental right or the legitimate interest in question’ n 37.

(8) Case 260/89 ERT [1991] ECR I-2925 (ECJ); case 274/89 Connolly v Commisione [2001] ECR I-1611, 37 (ECJ); case 94/00 Moquette Frères [2002] ECR I-9011, 25 (ECJ); case 112/00 Schmidberger [2003] ECR I-5659, 71 (ECJ).

(9) Case 453/99, 20 September 2001, foro italiano 2002 iv c 75; see Vettori, Diritto, n 1 above, 163 et seq.

(10) Comm CE 3 luglio 2001, n 4064/89, Giur Comm 2002, II, 285, ed ivi C. Osti / R. Pardolesi, ‘La decisione della Commisione CE sul caso General Electric / Honeywell, 311 et seq; see also G. Rossi, ‘Prefazione’, in W. Hutton, Europa vs. America, trad it (Roma: 2003) 13, where there is a description of the sharp difference in antitrust law between American and European regulations.

(11) See in part S. Giubboni, Diritti sociali e mercato. La dimensione sociale dell’integrazione europea (Bologna: Il Mulino, 2003) 168 et seq; S. Giubboni, ‘Social Insurance Monopolies in Community Competition Law and the Italian Constitution: “Practical” Convergences and “Theoretical” Conflicts’ European Law Journal 2001, 69 et seq.

(12) Case 295/04 and 298/04, 13 July 2006, unified proceedings.

(13) G. Vettori, ‘Contratto e concorrenza’ Rivista di diritto privato 2004, 765 et seq.

(14) R. Sacco, Introduzione al diritto comparato (Torino: Giappichelli, 1980) 89 et seq; R. David / C. Jauffret-Spinosi, I grandi Sistemi Giuridici contemporanei (Padova: 1994) 304 in part 308. ‘Just like the principle of contractual freedom is natural in the European Continent, so the principle whereby property can be freely dismembered is natural for the English Jurist’. See also F.H. Lawson / B. Rudden, The Law of Property (Oxford: Clarendon Press, 1986).

(15) P. Grossi, Il dominio e le cose (Milano: Giuffrè, 1992), ed ivi in part ‘La proprietà e le proprietà nell’officina dello storico’ 603.

(16) Lawson / Rudden, n 14 above and U. Mattei, Regole sicure. Analisi Economico-Giuridica Comparata per il Notariato (Milano: Giuffrè, 2006) 234 et seq.

(17) M. Lupoi, Trusts (Milano: Giuffrè, 2001).

(18) G. Vettori, ‘Atto di destinazione e trust: prima lettura dell’art. 2645 ter’ Obbligazioni e Contratti 2006, 775 et seq.

(19) A. Neri, ‘La via francese al recepimento del trust: un nuovo progetto di legge sulla fiducie’ Trusts, 2006, 69 et seq.

(20) M. Barcellona, ‘La buona fede e il controllo giudiziale del contratto’, in S. Mazzamuto (ed), Il Contratto e le tutele (Torino: Giappichelli, 2002) 305 et seq.

(21) A. Pace, ‘Costituzione europea e autonomia contrattuale’, in Vettori (ed), Contratto, n 1 above, 17 et seq.

(22) P. Caroni, Saggi sulla storia della codificazione (Milano: Giuffrè, 1998) 51 et seq.

(23) S. Rodotà, ‘Un codice per l’Europa ? Diritti nazionali, diritto europeo, diritti globali’, in P. Cappellini / B. Sordi (ed), Codici: Una riflessione di fine millennio (Milano: Giuffrè, 2002) 541 et seq and P. Grossi, Codici: qualche conclusione fra un millennio e l’altro, 579 et seq.

(24) M. Fioravanti, ‘Il Trattato costituzionale europeo: una nuova tappa del processo costituente in Europa’, in Vettori (ed), Contratto, n 1 above, 3 et seq.

(25) G. Zagrebelsky, ‘Diritto per: valori, principi o regole?’ Quaderni fiorentini 2002, 865.

(26) Gambino, n 4 above, 38 et seq.

(27) A. Pizzorusso, ‘Una Costituzione “ottriata”‘, in E. Paciotti (ed), La Costituzione europea (Roma: Meltemi, 2003) 47.

(28) V. Onida, ‘Il problema della giurisdizione’, in E. Paciotti (ed), n 17 above, 137.

(29) Zagrebelsky, n 25 above, 887.

(30) Zagrebelsky, n 25 above, 888.

(31) Zagrebelsky, n 25 above, 888.

(32) See Onida, n 28 above, 133.

(33) E. Gliozzi, ‘Postmodernismo giuridico e giuspositivismo’ Rivista trimestrale di diritto e procedura civile 2006, 801 et seq; Zagrebelsky, n 25 above.

(34) A. Celotto / G. Pistorio, ‘L’efficacia giuridica della Carta dei diritti fondamentali dell’Unione europea (rassegna giurisprudenziale 2001-200)’ Giurisprudenza italiana 2005, 427 et seq.

(35) N. Trocker, ‘L’art. 47 della Carta dei diritti fondamentali dell’Unione Europea e l’evoluzione dell’ordinamento comunitario in materia di tutela giurisdizionale dei diritti’, in G. Vettori (ed), Carta europea e diritti dei privati (Padova: 2002) 381 et seq; G. Vettori, ‘Giustizia e rimedi nel diritto europeo dei contratti’ Europa e diritto privato 2006, 59.

(36) Trocker, n 35 above, 386 et seq; G. Vettori, ‘Libertà di contratto e disparità d potere’ Rivista di diritto privato 2005.

(37) Vettori (2006), n 35 above.

(38) M. Motta, Competition Policy (Cambridge: Cambridge University Press, 2004).

(39) Vettori, n 13 above.

(40) I. Berlin, Il riccio e la Volpe (Milano: 1998) 69.