Alternative dispute resolution for consumer disputes

Directive 2013/11/EU on alternative resolutions for disputes between traders and consumers ensures that EU consumers can submit their contractual dispute with an EU trader* over a product or service to an alternative dispute resolution (ADR) entity — a recognised body whose role is to resolve disputes by means of ADR procedures, i.e. without going to court.
It sets out binding quality requirements for ADR entities and procedures to ensure aspects such as transparency, independence, fairness and effectiveness.
Compliance is ensured by national competent authorities designated by EU countries.
It obliges traders to inform consumers about ADR when the former have committed or are obliged to use ADR and when they cannot bilaterally resolve a dispute with the consumer.

KEY POINTS

EU countries must ensure that all contractual disputes that arise from the sale of goods or provision of services — between consumers residing in the EU and traders established in the EU — can be submitted to an ADR entity. It applies to both online and offline sales and services.
The goal of this legislation is to ensure the proper functioning of the EU’s single market.

ADR offers consumers an affordable, simple and fast way of resolving disputes, such as when a trader refuses to repair a product or to make a refund to which a consumer is entitled.
ADR entities involve a neutral party, such as a mediator, ombudsman or complaints board, that attempts to resolve the dispute through an ADR procedure. Depending on the form of ADR procedure that a given ADR entity operates, the neutral party can either:
propose or impose a solution; or
bring the parties together to help them find a solution.

All ADR entities must meet binding quality requirements, guaranteeing that they operate in an effective, fair, independent and transparent way.

Each EU country must designate one or several competent authorities, which have national oversight over ADR entities and ensure their compliance with the quality requirements. The competent authorities establish national lists of ADR entities. Only disputes resolution entities that comply with the quality requirements can be included as ‘ADR entities’ in those lists.

Traders who agree or are obliged to use ADR must inform consumers about ADR on their websites as well as in their general terms and conditions. They must also inform consumers about ADR when a dispute cannot be settled directly between the consumer and the trader.

In the interest of transparency, EU countries must ensure that ADR entities’ websites provide clear and understandable information. This includes contact details and the types of disputes that these entities can deal with, as well as costs, average length and legal effect of the outcome of the ADR procedure. ADR entities must also make publicly available on their websites the annual activity reports containing information on the disputes that they have handled.

ADR entities must cooperate in the resolution of disputes within the EU. They must also exchange best practices among themselves and with national authorities about the settlement of disputes.

This directive applies to all market sectors, with the exception of health and higher education. It has applied since 8 July 2013. EU countries had to incorporate it into national law by 9 July 2015.

DOCUMENTS

Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) (OJ L 165, 18.6.2013, pp. 63-79)

Regulation (EC) No 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the regulation on consumer protection cooperation) (OJ L 364, 9.12.2004, pp. 1-11)

Successive amendments to Regulation (EC) No 2006/2004 have been incorporated in the original text. This consolidated version is of documentary value only.

Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests (OJ L 110, 1.5.2009, pp. 30-36)

Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters (OJ L 136, 24.5.2008, pp. 3-8)

A framework for collective redress (class actions)

SUMMARY OF:

Recommendation 2013/396/EU on common principles for injunctive and compensatory collective redress mechanisms in EU countries sets out a series of common non-binding principles for national collective redress* mechanisms.
The aim is to enable citizens and companies to enforce their rights granted to them under European Union (EU) law where these have been infringed.

These redress mechanisms should be available in different areas where EU law grants rights to citizens and companies, such as in consumer protection, competition, environmental protection and financial services.

KEY POINTS

The main principles are laid down in a European Commission recommendation, published in parallel with a communication which suggests that all EU countries introduce collective redress mechanisms based on agreed principles. These principles are as follows:

Claimants should be able to seek court orders to cease violations of their rights granted by EU law (‘injunctive relief’) and to claim damages for harm caused by such violations (‘compensatory relief’) in a case where a large number of persons are harmed by the same illegal practice.
Collective redress procedures must be fair, equitable, timely and not prohibitively expensive.

Collective redress systems should be based on the ‘opt-in’ principle. Under this principle, potential claimants who have not directly expressed their consent are not members of the group and therefore, may not benefit directly from a favourable outcome of the collective redress proceedings.

There should be procedural safeguards to avoid abuse of collective redress systems such as:
a ban on punitive (i.e. excessively high) damages and interest;
entities representing claimants should not be profit-making;
a ban on the payment of contingency fees to lawyers.
The losing party is required to pay the winning party’s legal costs.

The judge has a key role in the collective litigation* to effectively manage the case and must be vigilant against any possible abuses.
Claimants should be able to settle the case by means of collective consensual dispute resolution mechanisms (i.e. procedures whereby parties reach consensus on a solution).

BACKGROUND

Collective redress facilitates access to justice by those whose rights have been violated by one and the same entity. It allows them to enforce their rights collectively where they would not have done on an individual basis because of the cost or the time that it entails.EU countries were invited to apply these principles no later than 26 July 2015.

The EU framework for collective redress complements the existing mechanisms at EU level namely:

the European Small Claims Procedure,
the directive on alternative dispute resolution,
the directive on certain aspects of mediation in civil and commercial matters, or
the directive on actions for damages under national law for infringements of competition law.
For more information, see:

Judicial redress – collective redress on the European Commission’s website.

DOCUMENTS

Commission Recommendation 2013/396/EU of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law (OJ L 201, 26.7.2013, pp. 60–65)

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: ‘Towards a European Horizontal Framework for Collective Redress’ (COM(2013) 401 final, 11 June 2013)

Solving consumer–trader disputes arising from online shopping

Regulation (EU) No 524/2013 on online dispute resolution for consumer disputes aims to create an online dispute resolution (ODR) platform (website) at EU level.
Consumers and traders will be able to use the platform to resolve disputes when they have a problem with a product or service that they have bought anywhere in the European Union (EU).It has applied since 9 January 2016.

KEY POINTS

The complaint procedure involves both parties and the mediationbody (alternative dispute resolution (ADR)) they agree to use. These bodies — some of which operate online — offer a neutral party such as an ombudsman or mediator. Their job is to propose or impose a solution or to bring the parties together so they can find a solution.

The entire procedure can be handled quickly online, so most disputes should be settled within 90 days.

ODR platform

The European Commission will develop, operate and maintain the ODR platform. It will be launched in January 2016 and will be:

an interactive and user-friendly website;
open to any customer or trader in the EU;
available in all EU official languages;
free of charge.

The platform has several functions. These include offering an electronic complaint form, informing the respondent party about the complaint, identifying national mediation bodies and electronic case management.

Each EU country must designate one ODR contact point, hosting at least two ODR advisers. The Commission will also set up a network of ODR contact points.

Once the electronic complaint form has been submitted to the ODR platform, the platform will quickly contact and seek a response from the respondent party. It will also transmit the complaint to the mediation body that the parties agree to use. If the mediation body agrees to deal with the dispute, it will strive to resolve the dispute quickly and inform the ODR platform of the results of the procedure.

Alternative dispute resolution

The ODR platform can be accessed through the Your Europe portal. It will also be connected to all the national mediation bodies that have been set up and notified to the European Commission, in line with the EU alternative dispute resolution (ADR) directive. The ODR regulation and ADR directive were both adopted in May 2013. The ODR platform is accessible to consumers and traders since 15 February 2016.

DOCUMENTS

Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR) (OJ L 165, 18.6.2013, pp. 1–12)

Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) (OJ L 165, 18.6.2013, pp. 63–79)

Commission Implementing Regulation (EU) 2015/1051 of 1 July 2015 on the modalities for the exercise of the functions of the online dispute resolution platform, on the modalities of the electronic complaint form and on the modalities of the cooperation between contact points provided for in Regulation (EU) No 524/2013 of the European Parliament and of the Council on online dispute resolution for consumer disputes (OJ L 171, 2.7.2015, pp. 1–4)

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