Seminar

Out-of-court resolution of consumer disputes

Sava Centar, Belgrade, 26-27 June 2013Dr Christine Riefa

Consumer law is only as good as its enforcement

• Consumer law strengthened in the EU in past decade

• However, when rights are not respected European consumers do not always obtain effective redress– Court proceedings expensive, time-consuming,

burdensome– Uncertain outcome – Consumers not always aware of their rights in the first

place

Cost of lack of adequate enforcement mechanisms

• Substantial proportion of consumers encounter problems when buying goods and services (1 in 5). Yet, despite strong laws, problems remain unresolved – Losses incurred by European consumers because

of unresolved problems is estimated at 0.4% of EU GDP.

– Cross border shopping detriment to consumer estimated between €500 million and €1 billion.

ADR and access to justice • Access to Justice is a human right in Europe– Access to justice and fair trial are guaranteed under Article

6 of the European Convention on Human Rights – Article 47 Charter of Fundamental Rights of the EU

provides for the right to an effective remedy and to a fair trial.

• Access to justice is an international preoccupation– UNCITRAL (UN Commission for International Trade Law) is

developing procedural rules on ODR – OECD report from 2006 highlight importance of cross-

border dispute resolution mechanisms.

Consumer dispute resolution landscape

Historical background to ADR/ODR legislation

Historical background to ADR/ODR legislation

2007 European

Small Claims Procedure

2007 European

Small Claims Procedure

2008 Mediation Directive

2008 Mediation Directive

Historical background to ADR/ODR legislation

Main features of Directive on ADR for consumer disputes

An ADR Directive – what for? • Achieve a high level of consumer protection• Voluntary basis – National legislation can impose mandatory

participation – But not a substitute to courts, but a viable alternative

• Harmonises quality requirements for ADR entities and ADR procedures in order to ensure that Consumers have access to high quality, transparent, effective, fair out-of-court redress mechanisms

Types of disputes subject to ADR Directive

Types of ADR solutions subject to ADR Directive

Obligations of Member States –facilitation & control of delivery

• Ensure availability of ADR entities– Sectorial – General

• Control information to consumers about ADR entities – Website information + durable medium, complaint forms,

protection of personal data• Discretion in disputes submitted to ADR – Can allow introduction of procedural rules allowing to

refuse to deal with a dispute– Can allow setting of monetary thresholds – but not in way which significantly impair consumer access

Six main principles applicable to ADR

Independence and impartiality• Appoint persons with necessary expertise, independence and

impartiality– Knowledge and skills of consumer disputes and general understanding of the law – Term of office of sufficient duration to ensure independence – Not subject to instructions from parties – Remuneration not linked to outcome of case – Disclosure of conflicts of interest (unless ADR entity = only one natural person) –

appropriate action taken if conflict of interest exists• Procedures where natural person is employed or remunerated

exclusively by Trader– Collegial body – Period of office of minimum 3 years – No work for paying entity or affiliation for 3 years after– Clear separation between ADR entity and Trader paying – budget independence

Transparency

Transparency – consumer information• Contact details• Compliance with Art 20(2) – notified and fulfilling criteria• Person in charge of ADR, method of appointment and length of mandate• Expertise , impartiality and independence if employed or remunerated by trader• Membership in ADR network for cross-border disputes • Type of disputes (including thresholds if applicable) • Procedural rules • Languages • Rules used for dispute resolution • Requirement to resolve issue amicably • Withdrawal from procedure • Costs • Average length of procedure • Legal effect of the outcome (binding / non-binding) • Enforceability

Transparency – Annual activity reports

• Number of disputes & types of complaints • Any systematic or significant problems that occur frequently and

lead to disputes between C and T (can include recommendations) • Rate of disputes ADR entity refused to deal with and % of types of

grounds for refusal • Analysis for disputes resolved with ADR entity employed or

remunerated by Trader• % of discontinued ADR procedures • Average time for dispute resolution • Rate of compliance with ADR decisions (if known)• Cooperation of ADR entities within networks for cross-border

disputes (if applicable).

Effectiveness

Fairness

Fairness in non-binding ADR

• Ability to withdraw from procedure at any stage• Before agreeing to ADR solution, information

about: – Choice of agreeing or following proposed solution– ADR solution does not preclude court proceedings – Court decision may lead to different outcome– Legal effects of the ADR solution

• Time to reflect before agreeing to ADR solution• Prescription period extended to include ADR

procedure (Art 12).

Liberty

Legality in binding ADR

• No solutions imposed by an ADR entity shall result in the Consumer being deprived of the protection afforded to him by the provisions that cannot be derogated from by agreement by virtue of the law where the consumer is habitually resident.

Framework for effective ADR

Consumer Information • Consumers needs to know ADR exist to use it – wide

dissemination strategy adopted• Obligation on traders to inform consumers about ADR

entity (ies) that cover them when trader committed or obliged to commit to ADR – Information in clear and comprehensible manner

• Assistance for consumers in cross-border disputes (ECC-Net centre or other body)

• List of ADR entities well publicised by ADR entities, ECC-Net and other bodies, encourage consumer associations, trade associations to disseminate

• Information about how to access ADR

Cooperation

• To improve provision, cooperation and exchanges between ADR entities enshrined in the Directive

• Cooperation between ADR entities and national enforcement authorities also essential (including information exchange)

Role of competent authorities • Each MS designates at least one competent authority

– When multiple authorities, designate one single point of contact• Information to be notified to competent authority

– Key info about ADR entity (including reasoned statement on why entity qualifies and complies with quality requirements)

• Role of competent authority – Assess if ADR entity qualifies and fulfils all quality requirements – List all ADR entities notified and fulfilling the conditions & makes list

public– Notifies list to the EU Commission – Ensures compliance of ADR entities and acts if one no longer fulfil the

requirements– Reports every 4 years on development and functioning of ADR entities

ADR in practice

ADR in Europe today

• 750 ADR systems in place for the resolution of consumer disputes

• 95 consumer ADR systems in the UK • Significant increase in last 5 years • Gaps in coverage subsist (ADR Directive seeks to

address them) • Awareness of ADR amongst consumers and

traders is low

Main models of ADR in Europe

Sequencing of dispute resolution pathways

Case study – consumer ADR in the UK

• Consumer ADR highly developed in the UK • Squatter of ADR models (no uniform model) • Mostly sectorial ADR (95 schemes across 35

sectors)• Main challenges: – Variability – Visibility

Case study – Consumer ADR in the Netherlands

• Unified system and well-established structure – The Consumer Complaint Commission– ADR processes overseen by Independent

Foundation of Complaint Commissions • High visibility • Sectorial variations

• Separate structure for Financial services (KiFiD)

ADR mix in the UK

• CEDR Dispute Group

• Ombudsman Services • FOS (Financial

Ombudsman Service)

• Legal Ombudsman

• Travel ABTA Code & Scheme

• OFT Consumer Code Approval Scheme (11 schemes from motor vehicles to carpets! )

Financial Ombudsman Servicehttp://www.financial-ombudsman.org.uk

• 1. Complain to bank, insurance company or finance firm – 8 weeks to react – FOS can help by contacting business for the consumer and

present their complaint• 2. Ask FOS to look at unresolved complaint – Fill in complaint form – Call to get assistance with filling in the form

• 3. FOS deals with complaint – investigation to decision

Financial Ombudsman Servicehttp://www.financial-ombudsman.org.uk

• Funding? – Not government funded – Levy on industry required by law (from £100 to

£30,000 depending on size of firm) – Case fees paid for by traders

• Compliance with 6 principles? – Independence guaranteed (necessary as paid by

trader)

Case Study – consumer ADR in Slovenia

• Limited arrangements for consumer ADR• Some mediation in business sectors as well as

general consumer arrangements • Some court driven initiatives (small claims and

mediation) • Main challenges: – Critical mass (small population) – Problems of cost and duration

Any questions? Christine.riefa@brunel.ac.uk

Key bibliography

• Christopher Hodges, Current discussions on consumer redress: collective redress and ADR, ERA Forum (2012) 13:11-33.

• Hodges, Benöhr, Creutzfeldt-Banda, Consumer ADR in Europe, Civil Justice Systems, Hart, Beck, Nomos 2012.

• Cortes, Online Dispute resolution for consumers in the European Union, Routledge 2011.