Update of ADR rules on the horizon

By GR Stocks on Unsplash

Today the European Commission announced their proposal to modernise ADR rules in Europe, in line with the digitalisation agenda (New measures to simplify the resolution of disputes out of court and boost consumer rights). This follows from the 2023 Consumer scoreboard results showing continued low numbers of consumers proceeding with enforcing their rights (1/4 of consumers experiences a significant consumer problem, but 1/3 of them does not complain for reasons related to time, cost and low confidence). The key points of the new plan to address these issues are: 

• Abolition of ODR (see for the proposal for a new regulation repealing ODR here) - currently the ODR platform facilitates ca 200 cases per year in the EU, which the Commission perceives as not justifying the costs of keeping this platform open and costs of business having to comply with ODR Regulation obligations (e.g. providing a link to ODR platform and assuring appropriate communication channels). The plan is to replace the ODR platform with 'user-friendly digital tools' assisting consumers in choosing a redress option.
• Broadening of the scope of ADR - it will no longer be necessary that a dispute stems from a concluded contract between the parties. This will allow encompassing all EU consumer law, incl. pre-contractual issues especially pertinent to online environment, e.g. misleading advertising and deceptive design, access to services and unjustified geoblocking. It aims also to start facilitating procedures against non-EU traders (although they as well would need to voluntarily join the scheme).
• Providing for additional consumer advice in accessing and during ADR process - to be delivered by designed bodies, e.g. European Consumer Centres Network. This could consist of translation, explanation of consumer rights, ADR procedures, etc.
• Removing some of the burdens for traders to encourage their uptake of ADR participation - e.g. reducing information obligations for traders. Additionally, ADR entities will ask traders whether they intend to participate in ADR when a consumer raises a complaint, which traders will need to answer in 20 days. This is aimed at prompting traders to (re-)consider their ADR participation.
• Removing some of the burdens and costs for ADR entities - e.g. reducing their reporting obligations (from every year to every 2 years, and requiring a more condensed report); facilitating bundling of cases with similar elements (although only upon consent of relevant consumers).
• Improving transparency - e.g. when a dispute is resolved through automated means, parties may request review by a natural person.

Additionally, the European Commission recommends online marketplaces to align their dispute resolution systems to European ADR principles, especially effectiveness, fairness, independence, expertise, impartiality, and transparency. See here for the Recommendation on quality requirements for dispute resolution procedures offered by online marketplaces and Union trade associations C(2023) 7019 final.

See for the new proposal for amending ADR Directive here. Additional information on the whole ADR review is here.

‘General terms and conditions’ means ‘general terms and conditions’ – provision of information in C‑380/19

Case C‑380/19 (available here) concerned DAÄB – a German cooperative bank – and the way that it provides mandatory information to consumers. According to Article 13 of the Alternative Dispute Resolution (ADR) Directive, traders are obliged to inform consumers about the ADR entity by which the trader is covered, when the trader commits to or is obliged to use those entities to resolve disputes with consumers. According to the same provision, traders are obliged to provide this information on their website ‘when one exists’. In addition, ‘if applicable’, this information must be included in the general terms and conditions of contracts between the trader and the consumer. The problem in this case revolved around the fact that DAÄB’s terms and conditions (available on its website) do not include information on its willingness or obligation to take part in a dispute resolution procedure. That information appears, however, in another tab on DAÄB’s website, as well as in another document that is sent to the consumer when a contract is concluded. This document lists the services and prices offered by DAÄB. Besides, although DAÄB operates a website, it does not conclude any contracts with consumers via that website. The referring court therefore questioned the meaning of the terms ‘when one exists’ and ‘if applicable’ present in Article 13 of the ADR Directive. The court asked the CJEU whether the trader must provide the information regarding ADR on its website even if it does not use it to conclude contracts and, if so, whether it is sufficient that the trader provides the relevant information somewhere else on the website rather than on the terms and conditions available.

The CJEU claimed that the terms used by the legislator are unambiguous: if the trader has a website, the information must be provided on that website (para 24). Besides, the information must not only be provided on the website but specifically in the terms and conditions when they are available (para 29). To support this conclusion, the CJEU invoked the terms used in other language versions of the ADR Directive (such as the Polish, Spanish, English, Portuguese, Dutch and Italian – para 24). Therefore, the duty to inform present in Article 13 is not correctly performed if the trader provides the relevant information somewhere on its website or in a separate document but not in the terms and conditions, like the case in question. Furthermore, the CJEU invoked the Consumer Rights Directive to raise a point regarding the moment in time when the information should be provided to the consumer. According to the CJEU, a joint interpretation of Article 13(2) of the ADR Directive and of Article 6(1)(t) of the Consumer Rights Directive dictates that it is not sufficient that the consumer receives the information regarding ADR simply at the time of the conclusion of the contract, regardless of whether it is in the general terms and conditions or in another document. To ensure a proper understanding of the information and to protect the free formation of consent, the consumer must be given this information ‘in good time before the contract is concluded’ (para 33).

While this is a short and straightforward case, it is interesting for several reasons. First, the CJEU once again showed that the different language versions are relevant in the interpretation of EU law (see also, for example, case Amazon EU). Second, the CJEU seems to assume a unified and rather formal notion of general terms and conditions. It seems that general terms and conditions in the sense of the ADR Directive are only those terms that are included in a document titled ‘general terms and conditions’. There are other possible interpretations, such as the one adopted by the Regional Court of Düsseldorf regarding this case, which considered that terms and conditions can consist of different documents, regardless of their designation. Finally, the CJEU introduced a discussion on the timing of the provision of information and it distinguished between information to be provided before the conclusion of the contract and information to be provided upon the conclusion of the contract. These two moments are often left undistinguished in practice.

Underused consumer ADR and ODR platforms - Commission's report

Some of our readers may be interested in the report that the European Commission has published this week assessing the functioning of the ADR/ODR systems for consumers across the EU. Whilst remaining positive about the ADR/ODR options for consumers, the Commission expresses mild concern about the fact that these dispute resolution platforms remain underused. The reports conclusion mentions as problematic: 

• ADR awareness and perceptions (e.g. awareness is lower in SMEs than in large retailers; consumers consider ADR as biased towards traders or as traders' customer care service; traders worry about ADR being biased towards consumers);
• The navigability of national ADR landscapes (e.g. if a Member State has a large number of certified ADR entities, there is lack of clarity to which of them to turn to, and sometimes due to their specialisation consumers may need to seek full dispute resolution with more than one entity at the same time);
• Traders' uptake of ADR (on average, 1 in 3 retailers is willing to use ADR at the moment);
• Workflow on the ODR platform (e.g. the fact that the dispute will not be referred from an ODR platform to an ADR entity unless the parties agree on the ADR entity hinders the dispute resolution; currently, the ODR platform is perceived as not providing sufficient information on consumer rights and redress options).

The Commission intends to further encourage traders to refer their disputes to ADR/ODR platforms, promoting their use in special campaigns, as well as by organising the second ADR Assembly in 2020. It also indicates in the report best practices on improving the awareness of ADR/ODR platforms in various countries, as well as on how to clarify the ADR landscape (read the full report here).

A New Deal for Civil Justice? The New Deal for Consumers and the Justiciability of EU Consumer Rights

The Centre for the Study of European Contract Law (CSECL) holds its annual conference on Thursday 11 and Friday 12 April 2019 at the University of Amsterdam.

The 2019 CSECL conference revolves around the New Deal for Consumers that was proposed by the European Commission on 11 April 2018. It focuses on issues of civil justice that the New Deal aims to address – and, crucially, the question it appears to raise. A particular focus will be on the interaction and tension between different functions of enforcement mechanisms in consumer law, as well as the public and private interests involved at different levels. What or whom is the New Deal for?

For the provisional programme, click here. 

The conference will bring together researchers and practitioners interested in (the future of) European private law, civil procedure, consumer law and, possibly, others with a more general interest in the enforcement of EU law and EU constitutional law.

Keynote speakers:

• Prof. Colin Scott, University College Dublin
• Dr. Eva Storskrubb, Uppsala University

Arbitration and effective consumer protection: a field of tension

The judgment of the EU Court of Justice (Grand Chamber) of 6 March 2018 in Slovak Republic v Achmea (C-284/16), a case concerning investor-state arbitration under a bilateral investment treaty (BIT), has raised a dust. The CJEU found that arbitration clauses common to almost 200 BITs between EU Member State violate EU law. The judgment is likely to have far-reaching consequences for intra-EU investment arbitration; it has even been called a "death sentence" for autonomous arbitral tribunals.

For consumer lawyers, the CJEU's findings as regards the relation between arbitral tribunals and State courts will be of special interest. A recurring issue in the context of unfair terms control is whether and to what extent judicial review of arbitral awards - in particular the arbitration clause on which they are based - is still required. Mostaza Claro and Asturcom are two well-known cases in this respect. They both pertain to the scope of the national court's power / obligation to assess of its own motion (i.e. ex officio) the unfairness of the arbitration clause, either in annulment proceedings or at the enforcement stage. Judicial review and ex officio control play a key role in the effective protection of consumers under Directive 93/13.

Source: 24x7newscast.com

In the Netherlands, the discussion about arbitration in consumer cases has recently resurfaced. The modus operandi of e-Court, an online platform offering digital dispute resolution, appeared to be contrary to EU (consumer) law.[*] First, the independence of e-Court was questionable: its main clients were health insurance companies who brought claims against consumer-debtors on a large scale. Secondly, consumers were not given a realistic choice between arbitration or litigation before a State court. Thirdly, the procedure was so short that consumers hardly had any time to defend themselves. Fourthly, undefended claims were automatically awarded by an algorithm (a 'robo-judge'). This 'robo-judge' did not seem to exercise unfair terms control. Fifthly, judicial review of e-Court's awards turned out to be limited, which could be problematic in light of the case law of the CJEU.

The example of e-Court shows tension between the 'efficiency' of alternative (out-of-court) dispute settlement and the effective (judicial) protection of consumers. In Achmea, the CJEU emphasised the importance of State courts in ensuring the full application of EU law and the judicial protection of the EU rights (and freedoms) of individuals. Insofar as an arbitral tribunal may be called on to interpret or to apply EU law, while it is not a court or tribunal of a Member State and thus not part of the judicial system, its awards must be subject to judicial review in order to ensure that questions of EU law which the tribunal may have to address can be submitted to the CJEU for a preliminary ruling. The CJEU also recalled that requirements of efficient arbitration proceedings may justify the judicial review of arbitral awards being limited in scope, provided that the fundamental provisions of EU law can be examined in the course of that review. The right to an effective remedy before a court of law (Article 47 of the EU Charter of Fundamental Rights), which includes the right of access to court, is such a provision.

Achmea may not be a "death sentence" for commercial arbitration in general, but as far as the application of EU law is concerned State courts - and, through preliminary references, the CJEU - have the final say. This could have implications for the assessment of arbitration clauses in consumer contracts as well.


[*] For our Dutch readers, click here for more background information. A debate about the 'robo-judge' of e-Court is organised at the University of Amsterdam on 22 March 2018 (programme in Dutch). 

Mediation may be mandatory but should be free to withdraw from and of lawyers - CJEU in Menini and Rampanelli (C-75/16)

Yesterday the CJEU issued also the first judgment on the new ADR Directive in the case of Menini and Rampanelli (C-75/16). We have previously commented on the AG Saugmandsgaard Øe's opinion (First case on new ADR Directive...) and the CJEU agreed with the AG's assessment that the new ADR Directive does not preclude Italy to prescribe mandatory mediation procedure, as long as parties retain the right to access the judicial system. The "voluntary nature of the mediation lies, therefore, not in the freedom of the parties to choose whether or not to use that process but in the fact that 'the parties are themselves in charge of the process and may organise it as they wish and terminate it at any time'" (par. 50). The right to access the judicial system would be guaranteed if e.g. the outcome of the ADR procedure is not binding on the parties and if the limitation periods do not expire during such a procedure (par. 56). However, as currently the Italian mediation procedure requires consumers to use legal services (which is contrary to Art. 8(b) of ADR Directive, see par. 64) and does not allow them to withdraw from the mediation process unless they demonstrate the existence of a valid reason for such a withdrawal, these features of the mediation procedure are in breach of the ADR Directive. The latter function makes ADR procedure binding to an extent (see par. 57 and 67 on the necessity of free withdrawal from the ADR procedure at any stage).

The CJEU in providing this answer left a lot of questions posed by the national court unanswered. It left it to the national court to determine whether "an application to have an order for payment set aside and an application for a stay of provision enforcement associated with that measure constitute a complaint by a consumer, of an independent nature in relation to the order for payment proceedings instituted by a trader working in credit..." (par. 42). The ADR Directive applies only if the ADR procedure has been initiated by the consumer.

First case on new ADR Directive - Menini and Rampanelli (C-75/16)

AG Saugmandsgaard Øe issued the first opinion in a case concerning interpretation of the new ADR Directive (2013/11/EU) and its relation to the Mediation Directive (2008/52/EC).

An Italian bank obtained a court order against two consumers for payment of a debt balance owed under a current account credit agreement. Consumers appealed against the payment order, claiming that the bank repeatedly gave them credit to invest in purchasing shares - shares in the bank itself or in other companies belonging to the same group - disregarding the consumers' modest income and presenting the investments as safe. Italian law requires consumers to engage in a mandatory mediation procedure before the appeal becomes admissible, which national provisions the Italian courts consider as compliant with the Mediation Directive but possibly contrary to the new ADR Directive.

First, the AG Saugmandsgaard Øe had to ascertain whether the dispute in this case would be covered by the scope of the ADR Directive, in general. Art. 2(2)(g) of this Directive excludes from its scope complaints and claims brought by a trader against consumers, as the purpose of the Directive is to grant consumers' access to ADR and not to traders. However, in the current case by lodging an appeal and raising claims of improper / invalid credit being given to them, consumers seem to be making new claims, additional to the ones brought by the trader previously, which is ultimately for the national courts to determine. This could qualify this situation as one where consumers' right to benefit from ADR procedures should be safeguarded and thus makes the CJEU competent to look into this case (paras. 41-42).

The AG Saugmandsgaard Øe does not agree with the referring Italian court that in the given case there is necessarily a conflict between provisions of these two directives. However, if such a conflict existed then she concludes Mediation Directive's provisions would prevail, as Recital 19 of ADR Directive constitutes an express derogation, taking into account the already established framework specific for mediation in cross-border disputes (para. 63).

An important observation regards the scope of uniformity of ADR procedures in the Member States. the AG Saugmandsgaard Øe observes that the ADR Directive is a minimum harmonisation measure that aims at establishing certain harmonised quality requirements for the evaluation of consumer complaints against traders. It does, however, not require harmonisation of the whole ADR procedure in all sectors thereof (para. 67). This means, that if in Italy there is a requirement of mandatory mediation for banking and other financial disputes, such a special requirement would not be per se incompatible with the ADR Directive. This assessment is not changed if one considers provisions of Art. 1 and Recital 49 of the ADR Directive, which seem to suggest that mediation should have a voluntary character for the consumer, at least. The AG Saugmandsgaard Øe refers to the interpretation of the voluntary nature of the mediation procedure as established under the Mediation Directive, which means that parties are in control of the procedure and can organise it how they want. This does not prevent Italian law from making such a procedure a pre-requirement to enter into judicial process (paras. 72-74). Moreover, if according to Mediation Directive the use of mediation could be made mandatory for cross-border disputes, but under ADR Directive this would have been prohibited for national disputes - this difference could not be easily justified (para. 77). In order, however, not to restrict consumers' access to judicial dispute resolution, the outcomes of such mandatory mediation procedures should not therefore be binding on the parties and allow for granting provisional measures, in accordance with the conditions previously set out for settlement procedures in Alassini and Others (paras. 82-86). 

While the Italian mediation procedure seems to comply with the requirements set so far in EU consumer law for ADR procedures, it does also prescribe a mandatory use of legal services for consumers, which is expressly prohibited by Art. 8(b) of the ADR Directive (para. 89). Moreover, it requires that if parties withdraw from the mediation without valid grounds, they should be penalised. This again does not comply with consumer protection as set out  by the ADR Directive, which requires that withdrawal for consumers is free at any stage and can occur on purely subjective grounds (para. 94). In these two regards, it seems that the Italian law will need an adjustment (or flexible interpretation by national courts, e.g. acknowledging that valid grounds may include consumer dissatisfaction).

Cláusulas suelo: the aftermath (Real Decreto-ley 1/2017)

In the aftermath of the judgment of the EU Court of Justice on Spanish 'floor clauses' (cláusulas suelo) of 21 December 2016, reported by us here, the Spanish government has issued a 'Royal Decree' which establishes an extrajudicial mechanism for the swift resolution of disputes concerning these clauses: Real Decreto-ley 1/2017 (full text available here, in Spanish). According to the Decree, it is foreseeable that the CJEU's judgment will lead to an increase in claims of affected consumers, who demand repayment of the amounts overpaid by them on the basis of 'floor clauses' in their mortgage contracts. The Decree's aim is to facilitate consumers and credit institutions to settle any claims by reaching an agreement about the amount to be paid back. The Decree also seeks to prevent high costs for the administration of justice.

Article 3 of the Decree obliges credit institutions to implement a (free) system for alternative dispute resolution, which is voluntary for consumers and allows them to file a request for repayment. The credit institution then must calculate the amount to be repaid and make an offer to the consumer within three months after the request has been filed. If this does not result in an agreement, the consumer may still go to court. This is not only the case if the consumer rejects the offer, but also if the credit institution rejects the consumer's request, or if the three-month period expires without an offer having been made or without the offered amount having been paid to the consumer. During the three-month period, however, neither party may bring a judicial action. Credit institutions must ensure that consumers are aware of the availability of this ADR system.

In addition, Article 4 of the Decree stipulates that, in case court proceedings are initiated after the conclusion of the out-of-court procedure, the credit institution can only be ordered to pay costs if the consumer has rejected the offer and obtains a more favourable judgment in court. A similar rule applies if the credit institution commits itself to pay a certain amount before submitting a defence: it can only be ordered to pay costs if the judgment is more favourable.

The Decree has already been criticised for not being specific enough as to the substantive right to repayment. It only defines the general scope (Article 2), but leaves the question what constitutes an unfair term for lack of transparency open to interpretation. The methods of calculation of amounts and interests are left entirely for the credit institutions to decide. Therefore, the Decree may induce litigation when parties ask the courts for further guidance. Moreover, it is unclear to what extent consumers' right to effective judicial protection - safeguarded by Article 47 of the EU Charter of Fundamental Rights - is limited and whether such a limitation is justified (cf. Alassini, C-317/08). The regulation of costs in Article 4, in particular, could be problematic from the perspective of access to court. It might deter consumers to go to court and compel them to accept the credit institution's offer.

In the next few months, we will see how effective the Degree will be in practice.

Océano meets Francovich (part II): CJEU judgment on State liability and unfair terms

presov.virtualne.sk

Today the EU Court of Justice rendered its judgment in Case C-168/15 (Tomášová; available here in several languages). We reported on this case earlier (see our blog post 'Oceano meets Francovich: AG Wahl on state liability and unfair contract terms'). It concerns the question of State liability for the violation of EU law by a national court.

Ms. Tomášová, a consumer from Slovakia, alleged that the district court of Prešov, in pending proceedings for the execution of an arbitral award, had failed to examine ex officio the potential unfairness of contract terms in consumer credit agreements between her and Pohotovost' s.r.o., which included an arbitration clause. She claimed damages from the Slovakian Republic, because the enforcement of the arbitral award against her was based on an unfair term. Now, two crucial details here are that - according to the Slovakian court seized of the matter, the same district court of Prešov - execution proceedings had not been terminated yet and Ms. Tomášová had not made use of the possibility to claim restitution of the unduly paid amounts. The district court asked the CJEU, in short, (i) whether State liability arises if not all legal remedies made available by the law of the Member State have been exhausted and (ii) whether there is a sufficiently clear and serious breach of Community law in the present case. In its preliminary reference, the district court emphasised "the absolute inactivity" of Ms. Tomášová in the arbitral procedure and the ensuing execution proceedings. It also asked the CJEU about the relationship of compensation for damages on the one hand and unjust enrichment on the other, probably because Ms. Tomášová held both the Slovakian Republic and Pohotovost' liable. 

AG Wahl: balance between effective protection of rights derived from EU law and State liability? 

Advocate-General Wahl concluded, perhaps unsurprisingly, that it follows from the CJEU's case law (in particular, Köbler, Traghetti del Mediterraneo and Târșia) that State liability is limited to infringements of EU law by national judicial authorities whose decisions cannot be remedied in a higher instance. Decisive is whether the court involved is the court in final instance which has given a final and binding decision, so that the violation of EU law can no longer be remedied. Then, State liability may arise. AG Wahl observed that in the present case, a legal remedy seemed to be available against the decision in the execution proceedings, in any case for the party seeking enforcement. In her turn, Ms. Tomášová could have tried to annul the arbitral award. Therefore, AG Wahl stated that it was not possible to establish with certainty that the court involved - the district court of Prešov - would be a court in final instance, as long as a final and binding decision had not been given in the main dispute about the execution of the arbitral award. In other words, Ms. Tomášová's action for damages was premature. In AG Wahl's view, consumers do not enjoy special protection in this respect. 

The balance between the effective protection of rights derived from EU law and State liability is nevertheless a delicate one. AG Wahl's reasoning to conclude that the breach of EU law in the present case was not sufficiently serious, another condition for State liability, is not entirely convincing. For example, he puts forward that the court involved in the execution proceedings does not have all factually and legally relevant information before it to perform an ex officio examination of contractual terms. It can be contested that, while such an examination at the enforcement stage may not be desirable, it may be the only way to ensure the effectiveness of the Unfair Contract Terms Directive; see also AG Szpunar's opinion in Case C-49/14 (Finanmadrid), para. 62: "[A]s an exception and for lack of a better solution, where national procedural rules make no provision for such a review at any earlier stage, the onus is on the court with responsibility for enforcement to ensure that it takes place in the last resort." 

CJEU: the court involved could not have known...

The CJEU begins the present judgment with restating its case law on State liability for the violation of EU law by national judicial authorities. It then moves on to reiterate that there is a sufficiently clear and serious breach of EU law when the court involved fails to apply the applicable law and the CJEU's existing case law on the matter. In this respect, the CJEU refers to, inter alia, its famous judgment in the Océano case. In addition, the CJEU had said in 2006 (Case C-168/05, Mostaza Claro) that "the nature and importance of the public interest underlying the protection which the Directive confers on consumers" justifies "the national court being required to assess of its own motion whether a contractual term is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier" (para. 38). However, it was not until 2009 that the CJEU acknowledged the obligation of the national court to examine of its own motion the unfairness of contractual terms of its own motion, where it has available to it the legal and factual elements necessary for that task (Case C-243/08, Pannon). In the present judgment, the CJEU is careful not to undermine its subsequent case law on this obligation, in particular Asturcom (2009) and Pohotovost' (2010 and 2014). 

Yet, the CJEU jumps a little too fast to the conclusion that the fact that the decisions at issue in the present case date from 15 and 16 December 2008 precludes a sufficiently serious breach. The application in the Asturcom case dates from 5 February 2008, and thus predates those decisions. The present case was brought before the district court of Prešov, which had to rule upon the enforcement of the arbitral award. Regardless of Ms. Tomášová's inactivity or passivity, it must have been obvious to the court that the arbitral procedure resulting in the arbitral award was based on an agreement including an arbitral clause. Arguably, the court could have known that it might be required, when hearing an action for the enforcement of an arbitral award made in the absence of the consumer, to examine of its own motion whether the arbitration agreement was unfair term to the detriment of the consumer. It could be argued that the court could at least have considered to request a preliminary ruling itself, especially if it is possibly the court in final instance (cf. paras. 26 and 41 of AG Wahl's opinion, referring to Article 267(3) TFEU). Apparently, the CJEU does not want to burn its fingers on assessing whether the court involved was indeed a court in final instance, perhaps because it was not obvious from the case file whether or not all legal remedies available at the national level had already been exhausted (cf. para. 25 of AG Wahl's opinion). 

Last but not least, the CJEU considers that the rules for the compensation of damage as a consequence of a violation of EU law are determined by national law, subject to the principles of equivalence and effectiveness. For Ms. Tomášová, all hope is not lost: if it is true that the execution proceedings have not been terminated yet and/or if she can still challenge the validity of the arbitral award, she might be able to get her money back - whether in the form of damages or restitution.

Handbook on access to justice in Europe

In partnership with the European Court of Human Rights (ECtHR), the EU Agency for Fundamental Rights (FRA) has published a handbook which highlights and summarises the key principles in the area of access to justice, in particular those developed under Article 47 of the EU Charter of Fundamental Rights (EUCFR) and Articles 6 and 13 of the European Convention on Human Rights (ECHR). The handbook is meant to raise awareness and knowledge about the different avenues available to access justice.

Access to justice is a core fundamental right according to the EUCFR and a human right under the ECHR. Access to justice enables parties whose rights have been infringed to effectively enforce their rights and obtain a remedy. The handbook provides an accessible summary and analysis of the relevant case law of the EU Court of Justice and the ECtHR, supplemented by – where available – national jurisprudence, on key topics in the area of access to justice.

With respect to consumer law, the handbook refers to EU initiatives on ADR in the field of consumer protection, as well as specific remedies for consumers.

ODR-Platform online

The Online Dispute Resolution (ODR) platform is now available online.

The platform serves as a single contact point to direct consumers and traders to available dispute resolution bodies for consumer disputes in all EU countries. The availability of such bodies is a must following the implementation of the ADR Directive. Given that some countries are delayed with a view to the implementation of the Directive, the platform currently only provides information on some of the Member States.

The platform only covers disputes arising out of online sales.

Have a look!

Conference and publication on consumer ADR and ODR

The Centre for Socio-Legal Studies of the University of Oxford will hold the Fourth Annual Civil Justice Conference on ADR and ODR on 18-20 April 2016. The conference programme is organized around three themes: implementation (of the ADR Directive); trust (in ombudsman); justice (the potential of consumer ADR to deliver justice). The full provisional programme is available here, and the link to registration here.

Our readers interested in this area of EU consumer law may wish to know that a special issue of the European Review of Private Law (vol. 24 issue 1) on Access to Justice and Consumer ADR is soon to be published.

German Parliament passes Act on consumer ADR

The German Parliament has passed its respective Act – Verbraucherstreitbeilegungsgesetz (VSBG) – implementing the requirements of the ADR-Directive with a slight implementation delay on 3 December 2015. Please access the relevant documents here.

In the next step the Act still needs to be approved by the Federal Council (Bundesrat). It is expected to enter into force by April.

Importantly, Germany is stricter than the Directive when it comes to forbidding ADR bodies that are close to traders or trade associations (§ 1(2) VSBG). It is in line with the Directive when it comes to such requirements as low/now costs for consumers (§ 23 VSGB stipulates the few instances in which consumers may be charged a fee). Consumers do not have to contract a lawyer to represent them before an ADR body. Where no special board exists, there will be a general board to collect the remaining cases (§ 29 VSBG). With the view to financing emphasis is put on the trader side. It is acknowledged that the outcome of an ADR procedure may differ from that of a court judgment ( § 16(1) III. VSBG). 

German small claims procedures in the civil courts are generally said to be working rather well compared with other European countries. The two systems can, therefore, be regarded as competitors. It remains to be seen how successful consumer ADR enforcement will be in Germany. As of now there is only a scattered ADR landscape. With the implementation it will be overarching: For every consumer problem access to an ADR is now guaranteed.

European consumers are a step closer to resolving their disputes online

In 2013 the Commission adopted the ADR Directive and the ODR Regulation. These acts aimed at creating opportunities for European consumer to resolve their disputes out-of-court in a simple, fast and low cost manner, covering online and offline, domestic and cross-border disputes (see our summaries here). Online out-of-court dispute resolution is made possible by the ODR Regulation that foresees the establishment of the EU-wide online platform. The platform is to help consumers solve their disputes online that arise from online sales or service contracts by directing the dispute to the appropriate national ADR entity (established base on and/or complying with the requirements of the ADR Directive in Member States) and providing additional services such as translation. The ADR entities should already be in place (the latest from the 9 July 2015), and the ODR platform is to become operational on 9 January 2016. In order to ensure uniform conditions for the implementation of the ODR Regulation, the Commission has recently adopted an implementing act. The Commission Implementing Regulation 2015/1015 sets out the modalities for: 1) the electronic complaint form, 2) the exercise of the functions of the ODR platform and 3) the cooperation between the ODR contact points in Member States. With this act European consumers came a step closer to resolving their disputes online.

Conference: Legal Resolution of Mass Disputes

The University of Haifa, Faculty of Law (Israel) will organize an international conference on Legal Resolution of Mass Disputes, taking place 26-27 November 2015. Panels will discuss class actions, collective redress, transnational class actions, ADR and ODR, legal representation and the social impact of collective disputes. Speakers come from Asia, Europe, the UK and the US. See the programme and register for the conference here.

Conference regarding upcoming implementation of the ADR directive in Germany

Renowned scholars discussed the current plans of the German government (see draft) regarding the implementation of the ADR directive at Humboldt University Berlin last Friday (see conference program).

The ADR directive whose implementation is due by July 2015 sets out minimum requirements for ADR bodies in the European Union. These include: no/low fees for consumers, no need to involve lawyers, fast and purely written procedures. Germany in essence plans to follow these criteria. Whereas the Directive allows for schemes where the decision-maker is “employed or remunerated exclusively by the individual trader“ under certain additional conditions, Germany opted out of this option. This does, of course, not exclude for such bodies to exist. However, they cannot be part of the new consumer ADR network. The directive, furthermore, leaves various options as to how binding the results of such dispute resolution can be made. According to the draft document Germany decided against a system of binding awards. The consumer can always go to court, too. Whereas consumers incur no (or only low) fees, traders may be charged. The overarching ADR network will be provided for any dispute involving a European consumer against a German trader. The individual boards can go further than that in their scope. They could, for instance, also offer settlement in cases that are initiated by traders against consumers or traders against traders and relax the requirement of German residence. The participants questioned in how far ADR will be successful in Germany given a rather well-working court system even for small claims. 

The consultation phase for the draft document is soon to expire after which a final legislative proposal will be produced that then needs to go through the parliamentary process.

What will the future bring? The new consumer programme 2014 - 2020

With some delay, the EU announced its priorities in consumer law for the period from 1st January 2014 to 31st December 2020.  The consumer programme takes the form of a Regulation based on Art 169 TFEU and explains how the Union will complement, support and monitor the Member States' policies. This is mainly achieved through financing actions taken either by national authorities or thirds, such as consumer organisations, e.g..

The consumer programme details four main objectives (Art 3): product safety (I), consumer information and education, and support of consumer organisations (II), rights and redress (III) and enforcement (IV). The short Regulation (only 19 articles) as well as its Annexes elaborate these objectives and the types of actions to be taken. Although not directly granting rights to consumers, the Regulation is an important indicator of the EU's current view on and future priorities in consumer law.  

Impact of the new ADR and ODR rules

Today the ECC-NET holds its annual conference in Dublin during which the impact and the implementation of the forthcoming ADR and ODR legislation will be discussed. (ECC-Net annual conference: EU consumers could save 22.5 billion euro) The Irish European Consumer Centre commissioned a report "The Implication of the Proposed ADR Directive for the Resolution of Consumer Disputes in Ireland" which is available online on their website.

"According to recent research, losses experienced by cross-border shoppers are estimated at EUR 425 million per annum. The European Commission has estimated that if EU consumers can rely on well-functioning and transparent ADR for their disputes, both national and cross-border, they could save around €22.5 billion a year, corresponding to 0.19% of EU GDP. The ADR Directive and ODR Regulation when implemented will allow business to consumer disputes to be settled fast, effectively and cheaply without going to court. Effective ADR offers both business and consumers a win-win situation encouraging consumers to spend secure in the knowledge that if something goes wrong it is easy for them to access redress while business will avoid the costs of going to court". said Dr. Ann Neville (Director of ECC Ireland)

New ADR rules finally approved

As we had anticipated at the end of 2012, last Tuesday the Parliament approved the proposed ADR directive and ODR regulation. The instruments, whose negotiation took almost one and a half year, will enter into force 20 days after their publication in the OJ. After that, their implementation will be partially left to the Member States, who have to ensure the availability of ADR bodies for every business sector, at no or nominal cost to the consumer. 

In the meantime, a EU-wide platform for the on-line resolution of disputes arising from internet transactions will be set up, which should be available to consumers in their mother language and "direct" their claims to the appropriate ADR body. 

The proposals received wide support in the Parliament, where they were approved with over 600 favourable votes. This mirrors the Commission's high expectations with regard to the potential of a fully operational, EU-wide ADR network, which will now have a chance to be put to a test.

Are some consumers more equal than others?

In case of a dispute arising from a contract you concluded as a consumer, would you (and: should you) want to have your day in court? Or can your interests be served equally well or maybe even better in arbitration proceedings?

In a recent working paper on 'Arbitration and Access to Justice', Omri Ben-Shahar (University of Chicago Law School) addresses these questions from a law & economics perspective. On the basis of examples concerning product liability, health care, information duties and accommodations for disabilities, he argues that in certain circumstances 'open access' policies may unintentionally have the effect of poor, less sophisticated consumers subsidising access to justice for wealthier consumers. This may be the case if:

'(1) Wealthier sub-groups [of consumers] are more likely to enjoy the benefits of open access; and
(2) Poorer sub-groups pay a share for the funding of the open access that exceeds their proportional benefits.'

The overall results are summarised as follows:

'Mandatory arbitration clauses in consumer contracts are widely regarded as problematic because they limit consumer’s access to judicial forums, to fair procedures, and potentially to any kind of remedy. But rather than looking at consumers as a group, I examine which sub groups of consumers are affected by this limitation more than others. I argue that in most circumstances, access to courts benefits the elite, not the weak. It is a species of open-access policy that has an unintended regressive effect. Paradoxically, rules that limit the use of pre-dispute arbitrations clauses hurt, rather than protect, weaker consumers, as they mandate a regressive reallocation. I also consider the role of class actions, and whether weak consumers are potentially the indirect beneficiaries of class action litigation. This argument has theoretical merit, but it, too, is limited in ways that are often unappreciated.'

The paper offers a very interesting and refreshing view on, in Ben-Shahar's words, the 'seductive logic of the access-to-justice advocacy'. This is of importance for European consumers, too, for instance with regard to the proposal for a Common European Sales Law. As regards the EU context, nevertheless, the conclusion of the paper puzzles me somewhat, insofar as it criticises the 'access justice' model for European private law proposed by Hans Micklitz. If 'access justice' (not to be confused with 'access to justice') is understood as aiming at creating a legal framework that provides weaker consumers with real possibilities to participate in the European internal market, then I have difficulty seeing why a well-designed law of remedies reflecting this concept of justice would necessarily be at odds with Ben-Shahar's conclusions. This is of course not to say that the current practice of European consumer law complies with theoretical insights in all respects... As for mandatory arbitration proceedings for consumers, however, I think that for instance the CJEU's preliminary ruling in the Alassini case might be considered to be in line with both the economic and social justice arguments named here, as well as with fundamental rights argumentation.