EU laws on cross-border business could impact on sales made online and may cause legal chaos, business leaders in the UK have been warned by the CBI.

Smaller companies, especially those trading online, may have to put non-UK business on the backburner. This is because under EU proposals a UK company selling abroad as a UK investment opportunity may have to comply with the laws of all 27 member countries, rather than domestic rules.

Under the prevailing regime, companies selling goods and services are subject to their domestic law when undertaking a transaction. But if the European Commission’s changes go through and become law, the seller would have to comply with the rules in the buyer’s country.

“The whole area needs to be re-examined before a legal quagmire adversely affecting UK saving and investment and trading abroad ensues,” said CBI deputy director-general John Cridland.

“The proposed legislation was sold as a simple legal tidying-up exercise when the Commission embarked on the process, but it has turned into a major operation.”

He continued: “It will produce substantive new laws and turn accepted cross-border trade principles on their head.

“This will leave UK businesses with three options: spending time and money on researching law in each of the EU member states; taking a chance and carrrying on; or stop trading altogether.”