EU Proposes Online Dispute Resolution Law

by Ulrika Lomas, LawAndTax-News.com, Brussels

01 December 2011

The European Commission (EC) has unveiled a package of measures to ensure that European Union (EU) consumers can solve their problems with suppliers without going to court, and to create a single online platform which will allow the solving of contractual disputes entirely online.

It was said that, in 2010, one in five European consumers encountered problems when buying goods and services in the single market, but that, unfortunately, at this stage, out-of-court dispute resolution in the EU remains possible only for some business sectors or in some areas.

There are, currently, over 750 alternative dispute resolution (ADR) schemes in the EU. They work differently and have different names, for example, arbitration, mediation, ombudsmen and complaints boards. In some countries, they only cover specific consumer disputes, for example, for financial services, energy supply and transport. In a few countries, ADR covers all consumer disputes, and some others offer the entire process online – so-called online dispute resolution (ODR).

ADR for consumers is faster, cheaper and easier to use than court proceedings. It has been estimated that universal access to quality ADR across the EU would save consumers around EUR22.5bn (USD30bn) annually. The cost of unresolved consumer disputes is estimated at 0.4% of the EU's gross domestic product. This includes the money lost by European consumers due to problems when shopping from other EU countries, which is estimated between EUR500m and EUR1bn.

The EC therefore wants the new package of laws to help increase consumers’ confidence in the EU-wide single market, thus contributing to the growth of EU economy. A new proposed directive should ensure that all EU consumers will be able to resolve their disputes, regardless of the kind of product or service that the contractual dispute is about and regardless of where they bought it in the European single market (that is, at home or abroad).

Health and Consumers Commissioner, John Dalli, said: “Once adopted, the proposals that I am putting forward today, will help European consumers to use easy, quick and inexpensive ways to sort out their problems, wherever and however they purchase a product or service in the EU."

It is hoped that the directive on ADR will ensure that quality out-of-court entities exist to deal with any contractual dispute between a consumer and a business. Under the proposal ADR entities will have to meet certain quality criteria, that is, be well-qualified impartial, transparent, effective and fair.

Businesses will inform customers about the ADR entity which can deal with a potential contractual dispute with them, and that entity will resolve any dispute within 90 days.

On the other hand, the ODR regulation will create a EU-wide online platform, providing consumers and businesses with a single point of entry for resolving on-line the disputes concerning purchases made on-line in another EU-country. This single European point of entry will automatically send the consumer’s complaint to the competent national ADR entity, and facilitate the resolution of the dispute within 30 days.

Within the new laws, consumers will have access to an effective and inexpensive way of solving their disputes with traders, regardless of the goods or services that they buy, however they buy (online or offline), and wherever they buy in the EU (in their country or abroad), and consumers buying on-line from other EU countries will be able to solve their contractual disputes with EU traders entirely online.

For businesses, access to alternative dispute resolution will be key to managing customer relations and enhancing corporate image, and also to save the costs of litigation. All European out-of-court entities called to resolve disputes will meet the same criteria. They should be transparent, well-qualified, impartial, effective and fair.

The European Parliament and the EU Council have committed to adopting the dispute resolution package by the end of 2012 as a priority action in the Single Market Act. The package also completes one of the actions of the Digital Agenda for Europe.

After the adoption, EU member states will have 18 months to implement the ADR directive. This means that out-of-court ADRs should be available everywhere in the EU in the second half of 2014. The single EU-wide ODR platform will become fully operational six months after that deadline (in early 2015), as its operation requires the setting up and upgrading of out-of-court entities where needed.

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