UK business leaders have warned proposed laws to regulate cross-border trade could seriously hit online retailers if they are forced to comply with domestic law in the buyer’s country, as well as their own.

CBI Deputy Director-General John Cridland called on European Union (EU) policymakers to urgently review the contract legislation, known as Rome I, before it goes to the European Parliament for debate this week.

Under the proposals a UK firm selling its goods and services to consumers across the EU would no longer be secure in the knowledge that it is broadly governed by domestic English law.

The CBI is among other business groups arguing that the EU is bringing in major new law without any look at the costs and complication.

Mr Cridland said: "The proposed legislation was sold as a simple legal tidying-up exercise when the European Commission embarked on the process but has turned into a major operation. It will produce substantive new law and turn accepted cross-border trade principles on their head.

"Yet the Commission has not carried out any regulatory impact assessment and, despite serious concerns by business, shows no indication of doing so. The practical impact is likely to be immense for firms who trade across the EU.

"Businesses will have three choices: spend time and money getting to grips with the varied and conflicting legal regimes of each member state they trade with; chance their arm that their processes will meet the required standards; or, most worryingly, stop trading with some countries altogether."

Simon James, partner at law firm Clifford Chance LLP and chairman of the CBI's Working Group of Rome I, said: "The existing rules work well in practice. If approved, the Commission's proposals will introduce uncertainty and confusion at considerable cost both to European businesses and consumers.”