This book offers a new theoretical perspective on the relationship between market regulation and private law in the face of contemporary challenges, such as climate change, the digitalisation of the marketplace, and growing inequality in society, with significant practical implications for a wide range of areas. It focuses on European private law to explore the uneasy interplay between the instrumental public regulation of economic activity and traditional, interpersonal justice-oriented private law in the multilevel and heterarchical legal order of the European Union (EU). By drawing together different elements of what are at present often disparate discourses of market regulation and private law, the book develops an integrated analytical framework that could help us better understand the interaction between the two. The central argument advanced in the book is that market regulation and private law are two sides of the same coin that can be reconciled with each other.

This introductory chapter explains the background to this study and the research design. It begins with a brief account of the growing role of market regulation in the private law domain (Section 1.1). It then proceeds to identify the core questions that the collision between market regulation and private law gives rise to, which underlie the book (Section 1.2). The chapter further explains the novelty of this work in relation to existing literature on private law and regulation as well as its approach to the subject (Section 1.3). It concludes with an overview of the remaining chapters of the book (Section 1.4).

1.1 The Rise of Market Regulation in the Private Law Domain

Modern societies need well-functioning markets to survive and thrive. We purchase goods, book holiday accommodation, take out a loan, or invest our savings in the marketplace. Such transactions have been traditionally governed by private law. As the risks of betrayal and disappointment are nearly always present in the market, private law, notably contract and tort law, protects us against them through doctrines such as good faith in civil law systems, misrepresentation and undue influence in common law jurisdictions, and a duty of care in contract and tort in both legal traditions. These well-established private law concepts embodied in civil codes or the case law of civil courts may provide relief for the victims if the goods turn out to be defective, the accommodation does not match the description provided on the web, the loan cannot be repaid without undue difficulty, or the investments have not delivered the expected returns. A party whose private law right has been infringed typically has to institute proceedings in a civil court to vindicate it, using private law remedies, such as a claim for performance, a claim for damages, or a claim for the termination of the legal relationship. Private law thus primarily pursues justice between individuals, seeking to ensure the balance between the competing private interests, and typically operates ex post, that is, only after a breach of the standard when harm has already occurred.

This relatively simple conventional image of the law that has governed relations between private individuals since the nineteenth century, however, no longer fully reflects current reality in Europe. Although traditional private law remains applicable to our interpersonal interactions in the marketplace, since the second half of the twentieth century, it has increasingly coexisted with market regulation in shaping such interactions.Footnote ¹ In this context, market regulation is understood as a set of rules produced by states, as well as private actors within the framework set by the government, to control the operation of markets. Such rules often originate from contract and tort law and/or apply to the subject matter that is also being governed by traditional private law, including, for instance, product liability, misleading commercial practices or the financial firm’s duty of care towards its client. But the logic of market regulation in the private law domain is not the same as the logic of traditional private law. Unlike the latter, the former is not primarily concerned with what would be just and fair between the parties to a particular private law relationship. Market regulation affecting private law relationships is first and foremost designed to control the behaviour of participants in market transactions in the pursuit of various public goals, such as wealth maximisation and social justice (or distributive justice) in society as a whole. To achieve these broader policy objectives, public regulation of markets may seek to alleviate the market failure arising from the information asymmetries between participants in a particular market or redistribute wealth, power, or other goods among all the members of a particular society in a more equitable manner. Once the goal or outcome to be achieved has been identified, market regulation sets the standard of conduct required from market participants ex ante and backs it with an enforcement mechanism.

While for the enforcement of its standards, private law characteristically relies on claims brought by individuals, known as private enforcement, market regulation employs a much broader range of techniques to enforce its standards, which may include but are not limited to those of private law. What these techniques share in common is the leading role of the state and its agencies in monitoring compliance and enforcing the standards, known as regulatory enforcement (or public enforcement). For example, a regulatory standard that requires an investment firm to inform retail investors about the risks involved in options trading may be enforced not only by aggrieved investors through private law remedies but also by financial supervisory authorities using public law tools, such as administrative fines. In recent years, regulatory agencies (or administrative agencies) have even played a role in providing redress to victims of regulatory violations in mass damage cases, harnessing both public and private law tools for this purpose.Footnote ²

The growing involvement of the EU in private law relationships since the late twentieth century has given major impetus to the rise of market regulation in the traditional private law domain,Footnote ³ intensifying the collision between these two forms of legal discourse in the national legal systems of the Member States. Although the EU legislator has no general competence to harmonise private law as a whole, it has widely used private law concepts as instruments for achieving various policy objectives based on Article 114 of the Treaty on the Functioning of the European Union (TFEU) concerning the establishment and functioning of the internal market. Apart from the overarching goal of market integration, those objectives include, for instance, sustainable development, consumer or investor protection, and financial stability.

EU private law has developed in a piecemeal and uncoordinated manner across different sectors of the economy as a subset of market regulation. Since their early years, EU measures of legislative harmonisation in areas such as product liability,Footnote ⁴ unfair contract terms,Footnote ⁵ unfair trading,Footnote ⁶ consumer credit,Footnote ⁷ and investment services,Footnote ⁸ to name but a few, have been compared to islands in the ocean of national private law.Footnote ⁹ Although many such measures also have an interpersonal dimension conferring rights and remedies on private parties,Footnote ¹⁰ this dimension typically plays only a subsidiary role in the internal market project.Footnote ¹¹ The main question posed by the EU legislator has not been how to ensure interpersonal justice between private individuals in the marketplace, but rather how to make the internal market function better. The effectiveness and efficiency of the instruments used to achieve desired policy outcomes are key in this pragmatic setting.Footnote ¹² In order to ensure a more systematic approach to the harmonisation of private law, academic and policy efforts were made to reconcile the instrumental concerns of EU private law with the traditional concerns of national private law systems about interpersonal justice.Footnote ¹³ However, these efforts have failed so far.Footnote ¹⁴

In the meantime, the islands of EU private law have further spread across the ocean of national private law, covering a variety of markets for goods and services, including the old ones, such as consumer goods and financial services,Footnote ¹⁵ as well as the new ones resulting from privatisation, such as telecommunications, energy, and transport.Footnote ¹⁶ They have also grown larger and larger in response to the new challenges faced by the EU, such as the global financial crisis of 2007–2008,Footnote ¹⁷ the rapid growth of the digital economy,Footnote ¹⁸ as well as natural resource scarcity and climate change.Footnote ^19, Footnote ²⁰ On such islands, market regulation and private law are closely intertwined.Footnote ²¹ EU private law has also become increasingly complex and fragmented, particularly as a result of the introduction of various categories of market participants, such as ‘average consumer’,Footnote ²² ‘vulnerable consumer’,Footnote ²³ ‘retail client’Footnote ²⁴ or ‘recipient of the service’,Footnote ^25, Footnote ²⁶ the standardisation of goods and services by public and private bodies,Footnote ²⁷ as well as the experimentation with various enforcement techniques.Footnote ²⁸

The EU legislator has been particularly keen to promote the regulatory enforcement of EU private law.Footnote ²⁹ It has required Member States to establish regulatory agencies across various fields, including product safety, unfair contract terms, unfair trading, and financial services, and to equip them with minimum administrative powers,Footnote ³⁰ including, in some instances, powers to provide redress to victims of mass violations of EU private law.Footnote ³¹ In some areas, such as road safety, investment services, or insurance, extensive public supervisory regimes have emerged at the EU level, which also include substantive rules affecting private law relationships, such as a ban on defeat devices in motor vehicles or the financial firms’ duties of care towards their clients.Footnote ³² Moreover, in certain sectors, regulatory agencies have been set up at the EU level. The three European Supervisory Authorities (ESAs) for financial markets – the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA) – are a notable example.Footnote ³³ Conversely, in competition law, which has traditionally been enforced by competition authorities through administrative law means, the EU legislator has actively sought to foster private enforcement. Following the recognition of an individual right to claim damages for breach of EU competition law by the Court of Justice of the European Union (CJEU),Footnote ³⁴ it has brought antitrust damages within the ambit of EU private law, harmonising both substantive and procedural rules to ensure that victims can receive compensation.Footnote ³⁵

To enable the public and private enforcement of EU regulatory rules, Member States have implemented such rules not only in private law but also in public law, or in both. Furthermore, while private law remedies traditionally seek to correct the wrong committed by one individual against another and thus primarily aim at compensation, within the EU scheme of market regulation, such remedies may also serve as a deterrent against violations of regulatory standards. In areas ranging from competition to unfair contract terms in consumer contracts and consumer credit, the CJEU has recognised the deterrent function of private law remedies, including damages, in dissuading potential wrongdoers from committing infringements.Footnote ³⁶ This recognition has spurred the creation of dissuasive private law remedies akin to administrative law sanctions in national legal systems.Footnote ³⁷ Moreover, when national administrative agencies engage with remedial issues, they are concerned with both deterrence and compensation, challenging a strict institutional separation between regulatory and private enforcement based on the key function of each.Footnote ³⁸ The discourse of market regulation thus permeates national public and private laws, revealing a close link between standard-setting and enforcement and coexisting uneasily with traditional private law discourse.

While the EU’s regulatory grip on the private law domain has progressively tightened over the years, the increasing use of new technologies, such as artificial intelligence (AI) and blockchain, in the marketplace has posed particular challenges for the existing regulatory regimes that govern relations between private parties. On the one hand, the digital economy has the potential to drive innovation and inclusive growth, provided that the ability of the private sector to innovate is not stifled by public regulation at the EU or national level. It is not always clear, however, whether, and, if so, how the regulatory regimes currently in place can effectively operate without jeopardising technology-enabled innovation. Many jurisdictions across the EU and the globe have sought solutions to this problem in experimental legal regimes, notably regulatory sandboxes.Footnote ³⁹ The latter provide for a controlled environment in which firms may experiment with new products and services under the supervision of a regulatory agency. Such regimes have emerged in a wide range of sectors, such as financial services (e.g. for digital wallets), transport (e.g. for autonomous cars), and energy (e.g. for smart meters). The EU also promotes the use of regulatory sandboxes, as evidenced, for instance, by the introduction of ‘AI regulatory sandboxes’.Footnote ⁴⁰ To create a safe space for innovation, regulatory sandboxes enable close collaboration between public and private actors in the course of an experiment.Footnote ⁴¹ Regulatory agencies may not only offer compliance guidance to participating firms but also temporarily relax or disapply regulatory standards that would otherwise be fully applicable to them, thus alleviating regulatory burden. In so doing, they seek to balance the traditional regulatory objectives, such as financial stability and consumer or investor protection, with promoting innovation. However, the outcome of this balancing act bears not only on the public interests concerned but also on the private interests of the individuals who may be affected by the experiment.

On the other hand, the digital economy results in an even greater imbalance of power between businesses and consumers than in the analogue economy, underlining the need for more rather than less public regulation and for adjusting existing regulatory regimes to the online marketplace. In particular, the digital environment enables companies to collect and share personal data based on consumer behaviour so as to create and constantly update consumer profiles. The latter, in turn, are used to shape what consumers see and how they make choices online. To most consumers, the technological infrastructure that supports personalised marketing techniques, such as personalised pricing, remains a black box.Footnote ⁴² As consumers are generally unable to understand how this digital architecture works, the existing regulatory regimes that seek to protect certain categories of market participants, such as ‘average consumer’ and ‘vulnerable consumer’,Footnote ⁴³ may not be well-equipped to tackle the structural problem of the ‘digital asymmetry between traders and consumers’Footnote ⁴⁴ or that of the consumers’ ‘digital vulnerability’.Footnote ⁴⁵ New regulatory rules may be needed to protect all digital consumers against data exploitation strategies.

1.2 Research Questions

The intensifying collision between the discourses of market regulation and private law within the EU multilevel system of governance involves a complex interplay between various actors, including legislators, regulatory agencies, and courts, in standard-setting and enforcement, and generates potential for tensions between different public and private interests. The role of traditional private law and national civil courts in the areas subjected to legislative harmonisation at the EU level, and in the pursuit of regulatory objectives generally, is a case in point. For example, the standard information about an insurance-based investment product provided by an insurance company under the public supervisory regime of the Solvency II Directive and the implementing national public law may not suffice to enable a non-professional policyholder to understand the risks associated with this complex financial product. To ensure interpersonal justice and individual fairness, therefore, a civil court may be inclined to raise the standard of protection ex post and impose additional information duties on the insurance company in national private law above its ex ante regulatory obligations in EU private law.Footnote ⁴⁶ In doing so, however, the court would reduce legal certainty and undermine the harmonisation of the conduct of business rules for financial firms in the pursuit of the EU’s internal market. The application of traditional private law may become even more problematic if the insurance-based investment product at issue was developed by a financial technology (FinTech) company within a regulatory sandbox and caused damage to the non-professional policyholder in the testing phase when the otherwise applicable regulatory information obligations were temporarily disapplied. The company’s liability for breach of its private law information duties towards the policyholder may sit uneasily with the public concern about product innovation and legal certainty. At the same time, however, the denial of a private law remedy to the policyholder harmed by the company’s experimental product could jeopardise interpersonal justice and individual fairness.

The role of private law and civil courts in the context of the green transition is especially tricky. In the absence of the relevant public regulation at the EU level, civil courts may foster sustainable development in public interest litigation between private parties under national private law. A well-known example of this is the Shell case in which the Hague district court ordered Royal Dutch Shell to reduce the CO₂ emissions of the Shell group as well as its suppliers and consumers by 45 per cent in 2030 compared to its emissions levels in 2019.Footnote ⁴⁷ The court derived this obligation from the company’s duty of care in tort towards the residents of the Netherlands and the inhabitants of the Wadden region, interpreting this general private law clause in the light of their rights to life and respect for private and family life enshrined, among others, in Articles 2 and 8 of the European Convention on Human Rights (ECHR). Although the aforesaid specific reduction obligation was ultimately not upheld on appeal,Footnote ⁴⁸ the Shell case shows that courts may be inclined to strike a new balance between the competing interests of the present and future generations, integrating the instrumental goal of sustainable development into private law, while at the same time raising concerns about the lack of democratic legitimacy to do so.

Where the EU legislator has adopted the relevant public regulation, however, this regulation may limit the courts’ ability to promote sustainable development through private law by giving priority to some other public interests. For instance, when it comes to the buyer’s contractual remedies in the case of nonconforming goods, the Consumer Sales Directive 2019Footnote ⁴⁹ precludes national legislators or courts from prioritising a repair of a defective good over its replacement to foster sustainable consumption. Such a hierarchy of remedies would be incompatible with this EU measure, which primarily seeks ‘to strike the right balance between achieving a high level of consumer protection and promoting the competitiveness of enterprises’.Footnote ⁵⁰ In addition, national courts may be reluctant to allow regulatory standards with a European origin to affect the content of traditional private law concepts, such as mistake or misrepresentation. For example, in many Member States, unfair trading law has traditionally been regarded as public law regulating the behaviour of market participants.Footnote ⁵¹ Until the recent insertion of the private law remedies into the Unfair Commercial Practices Directive,Footnote ⁵² therefore, ‘green claims’ by traders creating the impression that their products or services are ‘environmentally friendly’, ‘ecological’ or ‘sustainable’ could be considered to be misleading under national public law, but not under national private law.Footnote ⁵³ Accordingly, the victims of unfair commercial practices in the jurisdictions concerned could not avoid the contracts concluded as a result of such practices for mistake or misrepresentation, which in turn undermined not only interpersonal justice but also the ability of national private law to contribute to the green transition.

Furthermore, the involvement of regulatory agencies in private law matters alongside civil courts is also fraught with frictions. Regulatory agencies have traditionally been charged with the pursuit of the public interest. And yet, justice for many individuals who have suffered damage as a result of a regulatory violation may never be realised without the agency’s intervention. This is particularly true of mass damage cases, where consumers often incur only minor damage, while filing a lawsuit may be complex and costly.Footnote ⁵⁴ For instance, without being able to rely on the decision of a competition authority establishing a violation of EU competition law or related evidence collected in the public enforcement process, it is virtually impossible for the consumers who have become victims of a cartel to prove the existence of a cartel in civil proceedings against the infringer.Footnote ⁵⁵ The success of a private enforcement action for damages by aggrieved consumers under the Antitrust Damages Directive thus depends on the effectiveness of a regulatory enforcement action by a competition authority. To detect a cartel, competition authorities in turn rely on leniency programmes that grant immunity from administrative fines to cartel members who blow the whistle on illegal price fixing. The success of private damages claims in the pursuit of interpersonal justice, however, may jeopardise the public enforcement mechanism, as cartel members may be less willing to apply for leniency. Alternatively, to protect the interests of aggrieved consumers, the competition authority itself may get involved in redress. But yet again, such a prospect is likely to discourage leniency applications.

Moreover, where damages for breach of antitrust rules are awarded in addition to the imposition of a punitive fine, the combined effect of all enforcement could be unfair to the infringer, particularly if the damages awarded in civil proceedings not only serve to compensate the aggrieved individuals but also to deter future violations of regulatory standards.Footnote ⁵⁶ The pursuit of deterrence by all means possible in the regulatory domain may thus undermine interpersonal justice and individual fairness in the private law domain. The private interests of wrongdoers, however, may not be the only interests at stake in this scenario. After all, the cumulation of private law remedies and administrative sanctions may also lead to overdeterrence, which in turn may have a chilling effect on the firms’ willingness to innovate, invest, and engage in vigorous competition.Footnote ⁵⁷ In the absence of any coordination between regulatory agencies and civil courts, therefore, both the public and private interests that EU and national private law seek to protect could be in jeopardy.

The tensions arising from the collision between market regulation and private law, as illustrated by these examples, require new analytical frames for identifying and balancing the competing public and private interests involved in our interpersonal interactions in the marketplace in the light of the values that lie at the core of each form of legal discourse. The central question underlying this book, therefore, is: How can market regulation and private law be reconciled? This question has relevance beyond the context of European private law, which is understood here in a broad sense as the law governing relations between private parties at the EU level (i.e. EU private law) and the national level of the current and former EU Member States (i.e. national private law). But the developments outlined earlier make European private law an ideal laboratory to look for the answer, focusing on the interplay between EU and national private law. The overarching question here becomes how EU private law as a subset of market regulation and traditional national private law should interact in order to enable reconciliation between them.

To pursue this line of investigation, it is helpful to separate the two main issues. The first concerns the impact of regulatory discourse on traditional private law discourse. How, and to what extent, does and should the prevailing logic of EU private law inform national private law? The second issue is the mirror image of the first one and concerns the impact of traditional private law discourse on regulatory discourse. How, and to what extent, does and should the prevailing logic of traditional national private law shape EU private law? These issues are intimately connected in practice and must therefore be considered together when conceptualising the relationship between market regulation and private law. The conceptual separation of the issues merely serves to clarify what is at stake in different patterns of this relationship and the difficult trade-offs between the conflicting values that have to be made to reconcile the two discourses. To address these key issues, the book focuses on five major themes at the cross-section of EU and national law, as well as public and private law, that reflect the tensions between public and private interests described earlier and range over standard-setting and enforcement. Each theme concerns a particular facet of the relationship between market regulation and private law and is defined by further positive and normative questions about what this relationship is and should be.

The first theme is the relationship between regulatory standards and private law norms. This theme may be defined by the following questions: How does traditional private law respond and should respond to regulatory law? In particular, do regulatory private law standards with a European origin influence open-ended national private law norms, such as the principle of good faith or a duty of care? If so, to what extent? Can a firm be simultaneously in compliance with its regulatory duties but in breach of its private law duties, as in the earlier example of an insurance-based investment product? Do national legislators and/or civil courts embrace harmonised substantive and remedial rules, or do they tend to shield traditional private law from such rules, as the above-mentioned example of misleading ‘green claims’ suggests? And how should national private law norms ultimately relate to EU private law standards? Is the tension between the two in regulated markets inevitable, or can they coexist with each other in harmony? While this inquiry focuses on the relationship between EU and national private law in standard-setting, this relationship also profoundly affects the private enforcement of EU private law. After all, if EU private law standards do not have any effect in national private law, aggrieved individuals will not be able to enforce them. The private enforcement of EU private law thus depends on the responsiveness of traditional national private law systems thereto.

The second theme of the book revolves around the relationship between regulatory enforcement powers and private law remedies, notably private damages, within the operation of regulatory agencies. How does the regulatory enforcement mechanism respond and should respond to the traditional concern of private law to remedy the harm caused by an unlawful act? In particular, what role do regulatory agencies, which have conventionally been concerned with deterring regulatory violations in the public interest, play in providing compensation to aggrieved individuals for mass violations of EU private law, as in the above-mentioned example of cartel damages? Do such agencies become directly involved in redress matters, harnessing novel administrative powers that enable them to deliver redress, akin to traditional private law remedies? Do they facilitate redress indirectly, using traditional administrative law tools? Or do they tend to shy away from remedial issues altogether? To the extent that regulatory agencies engage with such issues, do they coordinate their activities with conventional dispute resolution bodies, notably civil courts? And how should regulatory enforcement powers relate to traditional private law remedies? Can deterrence and compensation be reconciled within the regulatory enforcement mechanism? The extent to which regulatory enforcement is and should be concerned with the private law approach to remedies is thus central to this investigation. The answers to these questions will ultimately determine whether regulatory enforcement could provide a viable alternative to private enforcement in mass damage cases, opening a new pathway for victims of large-scale EU private law violations to obtain redress.

The third theme concerns the interface between the regulatory and private enforcement of rules affecting private law relationships when the two enforcement mechanisms exist alongside each other. While it has been widely recognised in the legal as well as law and economics literature that both public and private enforcement are needed in EU private law,Footnote ⁵⁸ the example of cartel damages discussed earlier serves to illustrate that the coexistence of these enforcement mechanisms may cause considerable frictions that could weaken each of them and the enforcement system as a whole. The deployment of public and private enforcement in the context of one and the same regulatory violation, therefore, raises difficult questions about the relationship between the two. In particular, do these enforcement mechanisms operate in parallel without regard for each other? Or is there some coordination between the two? If so, to what extent does it occur and how does it manifest itself? Are there specific rules of substantive and/or procedural law at the EU or national level that deviate from general private law or civil procedure law to facilitate such coordination? Where such rules exist, how are they applied by regulatory agencies and/or civil courts when enforcing regulatory standards? And how should regulatory and private enforcement relate to each other so as to ensure both deterrence and compensation? This theme thus focuses on the uneasy coexistence between the two enforcement mechanisms and on the ways to align them with one another, taking into account regulatory and private law considerations. In this respect, it also differs from the previous one, which is concerned with the issue of whether regulatory enforcement as such could play a role in providing redress. But in practical terms, the two themes are connected with one another, since the engagement of regulatory authorities with private law remedies could affect how both regulatory and private enforcement operate and, in some cases, even remove the need to rely on these traditional enforcement mechanisms altogether.

The fourth theme of the book is the relationship between experimental regulatory regimes, notably regulatory sandboxes, and private law. The general question here becomes whether, and, if so, to what extent, traditional private law applies and should apply to a regulatory sandbox within which a participating firm enjoys some regulatory relief when its innovative product or service is being tested. In particular, can a sandbox participant be held liable for the damage caused by the product or service in the course of the experiment? Can the liability of that participant be triggered by the breach of traditional private law norms, such as duties of care in contract or tort, during the time when the regulatory equivalents of those norms were relaxed or waived, as in the example of an insurance-based investment product discussed earlier? If so, can the experimental regulatory environment in which damage has occurred influence the application of private law rules? More specifically, should civil courts take this environment into account when deciding disputes between sandbox participants and aggrieved individuals, and, if so, to what extent? These questions highlight an inherent tension between regulatory discourse and traditional private law discourse in the context of business innovation, enabling us to explore how they interact and should interact in the face of rapid technological change.

The fifth theme underlying this book is the potential of fundamental rights to reconcile the discourses of market regulation and private law. While in the past, fundamental rights and private law were considered to be far apart, at present, private law has been increasingly influenced by such rights.Footnote ⁵⁹ In many European legal systems, fundamental rights enshrined in national constitutions and international instruments, such as the right to life (Article 2 ECHR) and the right to private and family life (Article 8 ECHR), tend to create strong magnetic fields across the entire body of law, including private law, as the Shell case, noted earlier, illustrates. EU private law is not immune from the effect of fundamental rights either. EU measures in the field of private law, as well as national measures that fall within its scope, must be in conformity with the EU fundamental rights, notably those enshrined in the Charter of Fundamental Rights of the European Union (EUCFR). What role do our fundamental rights play in the context of the interplay between market regulation and traditional private law? In particular, can fundamental rights reinforce the regulatory dimension of private law, redirecting it to the pursuit of public goals? If so, to what extent do the outcomes of private law adjudication in individual cases tend to reflect trends in the development of market regulation? Conversely, can fundamental rights help to align the instrumental market regulation of private law relationships with the traditional private law concern about interpersonal justice? And, if so, does the judicial interpretation of regulatory measures in the light of fundamental rights tend to interfere with or reinforce such measures? Focusing on the meta-level of legal discourse, these questions add another dimension to the investigation of the interface between market regulation and private law.

1.3 A New Perspective on the Relationship between Market Regulation and Private Law

To address the questions outlined earlier, this book aims to construct an integrated analytical framework that could further our understanding of the intricate relationship between market regulation and private law and enable reconciliation between them in European private law. The book thus seeks to contribute to existing literature on market regulation and private law by offering a new holistic perspective on these two forms of legal discourse. Reconciliation as an outcome implies an improvement in the relationship between parties, ideas, or discourses formerly at odds with one another. This book argues that to reconcile market regulation and private law is to enable them to work in tandem, while acknowledging their distinctive characteristics and, where necessary, making trade-offs between the competing values that underpin them.

The proposed perspective on the interaction between market regulation and private law has not been explored in regulatory and legal scholarship before. The relevant literature on the role of private law in the marketplace can be broadly divided into three major categories: the instrumental accounts of private law, the interpersonal justice accounts of private law, and what may loosely be described as the ‘mixed’ accounts of private law. Those who endorse an instrumental account of private law regard private law as merely or primarily an instrument used by the government in the pursuit of the public interest. The origins of the instrumental conception of private law can be traced back to the American legal realism movement in the first half of the twentieth century. According to legal realists, public values, such as distributive justice, are embedded not only in public law but also in private law, and the distinction between these two fields of law is therefore unjustified.Footnote ⁶⁰ For Duncan Kennedy, for instance, this means that private law theory should expose hidden distributive motives in private law doctrines.Footnote ⁶¹ More recently, Katharina Pistor’s work has revealed that general private law, particularly English law and the law of the State of New York, plays a key role in the uneven distribution of wealth in society and undermines democracy across the globe.Footnote ⁶²

The instrumental account of private law also infuses the dominant strand of regulatory scholarship that views the law, including private law, as just another regulatory tool for achieving various collective goals alongside other measures, such as taxation. The conventional wisdom underlying the otherwise competing theories of regulation holds that public regulation should serve the public interest.Footnote ⁶³ According to the public interest theories of regulation, legislators and others responsible for the design and implementation of regulation are supposed to pursue collective goals with the aim of promoting the general welfare of society. These theories can be further subdivided into those that articulate regulatory goals in terms of economic efficiency (the ‘economic version’ of public interest theory)Footnote ⁶⁴ and those that include other political goals, such as social justice (the ‘political versions’ or ‘non-economic conceptions’ of public interest theory).Footnote ⁶⁵ What both versions of public interest theory have in common is that they explain and justify public regulation of private law relationships in terms of the common good rather than interpersonal justice and are concerned with effective problem-solving.

The predominant justification for regulatory intervention in the private law domain so far has been provided by the ‘economic version’ of public interest theory advanced in law and economics scholarship. This strand of the literature views regulation as a correction of market failures, notably information asymmetries between market participants, which increases society’s general welfare and is thus in the public interest. According to Anthony Ogus, for example, while many instances of market failure are remediable by private law, private law cannot always provide an effective solution. In his words, ‘[w]here, then, “market failure” is accompanied by “private law failure” … there is a prima facie case for regulatory intervention in the public interest’.Footnote ⁶⁶ Many law and economics scholars also contend that the traditional private law rules themselves should be designed to pursue the public interest in an efficient allocation of resources.Footnote ⁶⁷

While the (private) law instrumentalists in legal and regulatory scholarship diverge with respect to the public values, notably, economic efficiency or social justice, that guide or should guide private law, they all converge to reduce private law to a vehicle of the public interest without a meaningful dimension of interpersonal justice. On this instrumental view of private law, the latter is regarded as any other type of legal regulation of the economy, and interpersonal justice considerations as such are considered irrelevant. Yet, in my view, focusing on the public interest alone, the instrumental accounts of private law cannot entirely account for the rise of market regulation in the private law domain and deal with the uneasy relationship between EU and national private law. In particular, the ‘economic version’ of public interest theory does not wholly explain and justify the growing role of regulatory agencies in the core business of civil courts, that is, the provision of redress to aggrieved private individuals.Footnote ⁶⁸ In ignoring the traditional private law concern about interpersonal justice, therefore, the instrumental accounts of private law do not enable new ways of thinking about the interplay between public regulation of horizontal relations and traditional private law or reconciliation between these two forms of legal discourse.

In contrast, the interpersonal justice accounts of private law, which started to emerge in the second half of the twentieth century in response to instrumentalism, reject the latter as a misunderstanding of the idea of private law and the nature of justice that it supports.Footnote ⁶⁹ They emphasise the distinctive character of private law that sets it apart from public law by reason of its attachment to interpersonal justice. On this view, private law is designed to dispense justice between two private persons, focusing on the criteria originating in the relationship between the parties and not on the pursuit of economic efficiency, social justice, or other public goals. In the context of tort law, Ernest Weinrib, for example, argues that in requiring tortfeasors to compensate their victims, private law is concerned with corrective justice that links the doer and the sufferer of the same harm and that excludes the imposition on this relationship of any independent policy considerations.Footnote ⁷⁰ In his view, private law thus embodies a special morality which is non-instrumental in nature. It is therefore to be understood not as a mechanism for increasing or redistributing social wealth but as a juridical enterprise with its own structure and rationality.

A similar account of private law is presented by Peter Benson in the context of contract law.Footnote ⁷¹ He develops a juridical conception of contract as a transfer of rights between the contracting parties as free and equal persons. Contract law, he argues, is categorically distinct from and independent of other domains – moral, economic, and political – of liberal society. In Benson’s words, ‘[c]ontract law – from its principles of formation to those governing fairness and remedies – is complete within its own framework and …, within its purely non-distributive and transactional values, it can answer the main contractual issues that are essential to establishing, interpreting, and enforcing contractual relations’.Footnote ⁷² Accordingly, distributive principles can only indirectly constrain individual transactions governed by contract law, without directly displacing or derogating from the contract law’s own internal principles of what he calls ‘transactional justice’.Footnote ⁷³

By focusing on the characteristics of private law as an autonomous legal discourse, the interpersonal justice accounts of private law demonstrate that the values that underpin private law are not exactly the same as the instrumental concerns of public law and regulation. These accounts highlight the salience of interpersonal justice as a cornerstone of private law. In denying that social justice and other collective goals have direct relevance to private law discourse, however, this strand in the literature does not entirely reflect the reality of private law at present. We have noted earlier that private law has been increasingly used as an instrument for the pursuit of European market integration and other policy goals, leading to its collision with market regulation. The interpersonal justice accounts of private law alone, therefore, cannot make sense of this trend or address the pervasive tensions between public and private interests that arise as a result.

The ‘mixed’ accounts of private law in turn broadly seek to find the middle ground between the instrumental and interpersonal justice accounts of private law in the EU or national context. What connects these very different accounts is that while acknowledging that private law has been influenced by instrumentalist considerations and used for regulatory purposes, they reject the view that private law can be regarded as merely another instrument of government, like any other kind of public regulation. In the context of national private law, Claus-Wilhelm Canaris, for instance, argues that since Aristotle, contract law has rightly been considered to be the domain of corrective justice, as it would simply make no sense to proclaim the principle of private autonomy, which entails freedom of contract, on the one hand, and to make it subordinate to the imperative of an equitable distribution across society, on the other hand.Footnote ⁷⁴ In his view, the parties are bound by the requirements of distributive justice only in exceptional cases when the state intervenes in private law relationships, such as employment relationships, to limit freedom of contract.Footnote ⁷⁵ Peter Cane contends that ‘corrective justice provides the structure of tort law within which distributive justice operates’, making tort law ‘a mixed corrective and distributive institution’.Footnote ⁷⁶ Franz Bydlinki insists that modern private law embodies a weak version of corrective justice.Footnote ⁷⁷ According to it, if one were to ignore the regulatory dimension of a particular private law norm beyond the relationship between the parties, the application of this norm should still lead to the outcome that would be justified in terms of justice between the parties alone. In Hugh Collins’s view, the collision of private law with public regulation in the context of adjudication in both civil and common law systems leads to the ‘productive disintegration’ of traditional private law reasoning, forcing the latter to reinvent itself in response to social and economic concerns.Footnote ⁷⁸ That account leaves us, in the words of Collins in his later work, ‘with a picture of an intellectually confused institution of private law, in particular contract law, a hybrid that combines the oil of interpersonal justice with the vinegar of welfarist interventions’.Footnote ⁷⁹

Dissatisfied with the intellectual confusion arising from the characterisation of private law as a hybrid, some theorists seek to reconcile regulatory discourse with traditional private law discourse at the meta-level of the abstract values that lie at the core of the legal system as a whole.Footnote ⁸⁰ Hanoch Dagan and Avihay Dorfman, for instance, identify some of the ideals of liberal theories of social justice, such as individual autonomy and substantive equality, as providing the moral basis for interpersonal justice in private law and use these ideals in turn to account for or criticise existing private law rules.Footnote ⁸¹ In transplanting such public values into private law, these authors do not apply them in the manner of the private law instrumentalists. Instead, they harness them to support the understanding of private law as the realm of what they term ‘relational justice’, which focuses on our interactions as private individuals rather than as subjects of state institutions. Similarly, some other scholars consider private law as the concretisation of fundamental rights in the particular context of horizontal relations between private individuals.Footnote ⁸² On this view, fundamental rights underpin all areas of law, including private law, but they have distinct articulations in public and private law.

In the context of EU private law, the regulatory function of private law has been particularly widely noted, but embraced to varying degrees.Footnote ⁸³ Hans Micklitz, for instance, argues that the instrumental use of private law by the EU has led to the creation of ‘European regulatory private law’.Footnote ⁸⁴ This hybrid legal field transforms private autonomy into regulated autonomy, using mandatory private law rules as a device for achieving particular policy goals.Footnote ⁸⁵ In Micklitz’s view, European regulatory private law is also underpinned by its own conception of justice concerned with securing access to the internal market for EU citizens, which he defines as ‘access justice’.Footnote ⁸⁶ At the same time, however, Micklitz does not claim that access justice should be understood as an exhaustive theory of private law justice in the EU. According to him, this new conception of justice, which he has developed in the transnational context of a regulated economy beyond the nation-state, does not replace well-established conceptions of justice in national legal systems.Footnote ⁸⁷ This reasoning appears to suggest that access justice at the EU level could be complemented by interpersonal justice at the Member State level.

Other authors, by contrast, contend that interpersonal justice should play a meaningful role not only in national private law but also in EU private law.Footnote ⁸⁸ Martijn Hesselink, for example, identifies the rights of withdrawal, unfair terms control, and remedies for nonconformity of goods as the main pillars of EU private law, notably consumer law.Footnote ⁸⁹ In his view, although these rules are regulatory in nature in that they facilitate consumer access to the market, they also govern the relationship between a particular buyer and a particular seller.Footnote ⁹⁰ EU private law should therefore be justifiable not only in terms of access justice but also in terms of interpersonal justice. In a similar vein, Stefan Grundmann argues that EU contract law, which he primarily regards as market regulation (or ‘public good regulation’), is equally concerned with both public and private interests, reflecting Habermas’s idea of the symbiosis of public and private autonomy as two pillars of a societal order.Footnote ^91, Footnote ⁹² For Grundmann, this implies that, as a matter of EU law, the violations of the harmonised contract-related rules that form part of a public supervisory regime should give rise to private rights of action in national legal systems.Footnote ⁹³

While these mixed accounts of private law point to the need to reconcile market regulation and private law, they do not systematically examine the various facets of the collision between these two forms of legal discourse in European private law and possible ways of aligning them in standard-setting and enforcement. In particular, the existing accounts that embrace the hybridisation between market regulation and private law do not comprehensively elucidate whether, and, if so, to what extent traditional private law norms are influenced or should be influenced by regulatory standards relating to the same subject matter; whether, and, if so, to what extent regulatory agencies engage or should engage in the provision of redress to private individuals; whether, and, if so, how private enforcement is or should be aligned with regulatory enforcement; whether, and, if so, to what extent private law is or should be applicable within a regulatory sandbox; and what role fundamental rights could play in this context. Those theories that identify the common values underlying market regulation and private law do not provide exhaustive answers to these questions either. Seeking to reconcile the regulatory and private law discourses at the meta-level of the legal system as a whole, these theories have the potential to bring them closer together. Yet, they do not fully explain how market regulation and private law currently interact across different sectors of the economy and how they should interact when their traditional concerns about the public interest and interpersonal justice, respectively, clash with each other in a specific context, such as civil litigation arising from alleged greenwashing, the enforcement of competition law, or the application of private law within a regulatory sandbox for FinTech firms. Furthermore, the mixed accounts of private law diverge on whether reconciliation between market regulation and private law should be sought at the EU and/or national level, leaving many questions about the respective roles of European and national legislators, courts, and regulatory agencies in this context unanswered.

This book fills this gap in the literature with a systematic account of both the actual and the desirable interplay between market regulation and private law within the EU multilevel system of governance. It draws on the instrumental, interpersonal justice, and mixed accounts of private law, as well as the experiences of the EU and national legal systems across different areas subjected to harmonisation and beyond, to develop a new holistic analytical framework for analysing the relationship between market regulation and private law as two distinct but closely interrelated forms of legal discourse. This analytical framework is designed to improve our understanding of how public regulation of private law relationships and traditional private law relate to each other at the EU and national levels and to provide a roadmap to reconciliation between them in European private law. It is the product of assessing market regulation through the traditional private law lens, on the one hand, and assessing traditional private law through the regulatory lens, on the other, along descriptive and normative lines. The proposed framework reflects elements of the current legislative, judicial, and administrative practices at the European level and the national level of the current EU Member States (such as Belgium, France, Germany, and the Netherlands) as well as one former EU Member State (i.e. the United Kingdom) across a wide range of areas governed by EU private law (such as product safety, antitrust, unfair trading, unfair contract terms, consumer sales, digital services, AI, corporate sustainability due diligence, and financial services, notably payments, credit, and investment) and allows us to examine these practices.

The book is therefore an interdisciplinary and comparative endeavour at the intersection of law and regulation that seeks to bring together a range of different perspectives from legal and regulatory scholarship, as well as from a variety of areas within the discipline of law itself, in particular EU law, constitutional law, economic law, private law, and legal theory. In order to be able to assess market regulation through the traditional private law lens and private law through the regulatory lens, it combines doctrinal and comparative legal research with insights from regulatory governance studies, notably economic theory, into why and how to regulate the markets, and how to enforce regulatory standards, and encompasses representative examples from both civil and common law jurisdictions as well as from both cross-sectoral and sector-specific EU harmonisation regimes.Footnote ⁹⁴ The book advances this novel two-dimensional analysis of market regulation and private law in a bid to uncover how interpersonal justice and other values underlying traditional private law can feed into regulatory discourse and how distributive justice and other public goals pursued by public regulation can influence private law discourse. This analysis also serves to illuminate how market regulation and private law could combine their respective strengths in safeguarding public and private interests in the marketplace and how the tensions between these interests could be addressed. Furthermore, the book draws out some of the key practical implications for the EU and national actors involved in European private lawmaking and enforcement.

By offering this holistic perspective on market regulation and private law, the book acknowledges the ongoing hybridisation between these two forms of legal discourse and attempts to make sense of it by reconceptualising their relationship to each other. The integrated approach adopted in the book, however, does not imply that the distinction between the prevailing logic of market regulation and that of traditional private law becomes completely irrelevant. It is submitted that reconciliation requires a comprehensive view of the distinctive characteristics of and values behind each form of legal discourse, with both market regulation and private law trying to grasp and relate to one another. As Armin von Bogdandy once remarked when exploring contemporary European public law, ‘any observation of hybridity requires an understanding of the individual components that render something hybrid; a hybrid car is a car that uses a combustion engine and an electric motor, and a mule is a cross between a horse and a donkey’.Footnote ⁹⁵ In my view, this is also true for contemporary European private law as a hybrid of market regulation and traditional private law. As noted earlier, to reconcile market regulation and private law in this area is to enable them to work in tandem, while acknowledging their distinctive characteristics and, where necessary, making trade-offs between the competing values that underpin them.

1.4 Chapter Overview

We begin by constructing a theoretical framework within which we will analyse the interaction between market regulation and private law. Chapter 2 (Setting the Scene) explores the meaning of each concept in the context of multilevel and heterarchical European private law, and maps a complex legal matrix in which our interactions in regulated markets occur. It outlines the distinctive rationalities and characteristics of traditional private law as a state-backed bastion of interpersonal justice, and those of EU private law as a subset of market regulation beyond the nation-state. These two different accounts of private law reveal conflicts between the core values that underpin EU and national private law and that inform their interface, reflecting intense academic and policy debates. The chapter identifies three such dichotomies: the one between the pursuit of the pan-European common good and interpersonal justice, the one between legal certainty and individual fairness, and the one between uniformity and diversity. These dichotomies highlight major tensions between public and private interests in the areas subjected to EU harmonisation and beyond and are therefore particularly relevant for our analysis of the relationship between market regulation and private law. The chapter also reveals that the interaction between these two forms of legal discourse can be viewed as a spectrum (or a continuum) that ranges from almost none to fairly extensive. It identifies three possible models of the relationship between EU and national private law on this spectrum, which include separation, substitution, and complementarity, and conceptualises the role of fundamental rights in this context.

Building on this theoretical framework, we then turn to our central question of how market regulation and private law can be reconciled and seek to answer it, delving into the five major themes in European private law outlined in Section 1.2. Chapter 3 (Regulatory Standards and Private Law Norms) explores the relationship between regulatory standards and private law norms, focusing on how national private law at present responds and should respond to market regulation with a European origin. It develops three models of the relationship between EU regulatory standards and private law norms relating to the same subject matter – separation, substitution, and complementarity – and discusses their key characteristics, manifestations, and implications. This analysis highlights that each of the models strikes a balance between the competing considerations differently, putting more or less weight on the pursuit of the common good or interpersonal justice, legal certainty or individual fairness, and uniformity or diversity. The chapter also assesses these models in terms of their potential to reconcile EU regulatory standards with traditional private law norms.

The discussion in Chapter 4 (Regulatory Enforcement Powers and Private Law Remedies) turns to regulatory enforcement. We examine how regulatory agencies deal with and should deal with the issue of private law remedies for regulatory violations. The chapter focuses on the actual and desirable role of national and European regulatory agencies, which typically use administrative law means to deter regulatory breaches, in providing compensation to aggrieved individuals for mass violations of EU private law. It presents three models of the relationship between regulatory enforcement powers and private law remedies, notably damages, within the operation of administrative agencies – separation, complementarity, and substitution – and elucidates their main characteristics, manifestations, and implications. Each model is analysed in terms of its potential to reconcile the pursuit of the public interest in deterring regulatory violations with a traditional private law concern to ensure interpersonal justice by compensating their victims. The models also reflect and address the tension between uniformity and diversity in the remedial domain.

Chapter 5 (Regulatory Enforcement and Private Enforcement) in turn unpacks how regulatory and private enforcement interact and should interact when both can be deployed in the context of the same regulatory violation. Following a now-familiar pattern, it constructs three models of the relationship between these enforcement mechanisms – separation, substitution, and complementarity – and explains their main characteristics, manifestations, and implications. The chapter also assesses the potential of each model to strike the right balance between deterrence in the name of the public interest and compensation in the name of interpersonal justice, as well as between uniformity and diversity in the enforcement of EU private law.

Chapter 6 (Regulatory Sandboxes and Private Law) turns to the recent development of experimental legal regimes and explores the relationship between regulatory sandboxes and private law. Given that within such sandboxes the participating firms may benefit from regulatory relief, the chapter considers whether, and, if so, to what extent traditional private law remains and should remain applicable to their activities during the experiment. Yet again, it develops three models of the relationship between regulatory sandboxes and private law – separation, substitution, and complementarity – and considers their key characteristics, manifestations, and implications in the context of European private law. The chapter reveals the tension between, on the one hand, fostering technology-enabled innovation, legal certainty, and uniformity and, on the other hand, realising interpersonal justice and individual fairness while leaving room for diversity, and assesses each model in terms of its potential to reconcile these competing considerations.

While the previous chapters explore possible ways of reconciling market regulation and private law at the level of these discourses, Chapter 7 (Fundamental Rights as a Bridge between Market Regulation and Private Law) examines such ways at the meta-level of the legal system as a whole, focusing on fundamental rights. It takes stock of the case law of national, international, and supranational courts on the horizontal effect of fundamental rights and explores the potential of such rights to contribute to reconciliation between market regulation and private law. The chapter shows that fundamental rights can play a double role in this context. On the one hand, fundamental rights can reinforce the regulatory dimension of private law, prompting courts to rebalance the interests of the parties to private law relationships in the light of public virtues. On the other hand, fundamental rights can allow courts to bring regulatory measures in line with the traditional private law reasoning focused on individual preferences and interpersonal justice. In both instances, courts may step beyond what the EU or national legislators intended to achieve through public regulation in terms of reorienting private law relationships towards the common good or enhancing interpersonal justice. Fundamental rights thus serve as a two-way bridge between market regulation and private law.

In Chapter 8 (Conclusion: The Path to Reconciliation between Market Regulation and Private Law), we bring together the separate lines of inquiry developed throughout the book to present an integrated analytical framework for analysing the relationship between market regulation and private law within the EU multilevel system of governance and beyond. This novel framework sets out three main models of this relationship and elucidates their key strengths and weaknesses. Drawing on these findings, the chapter reveals how regulatory discourse and traditional private law discourse can mutually influence each other in a way that enables reconciliation between them, and provides a road map to such reconciliation in standard-setting and enforcement. My argument is that market regulation and private law are two sides of the same coin that can be reconciled with each other. The book closes with some final reflections on the topic and directions for future research.