The new Directive on ADR for disputes between consumers and professionals

by Stefano Biondi

Categories: Consumer Law
Typology: Articles

The new Directive on ADR for disputes between consumers and professionals

On March 12, 2013, the EU Parliament and Council have adopted the legislative resolution “on the proposal for a directive of the European Parliament and of the Council on alternative dispute resolution for consumer disputes, which establishes new rules and principles regarding access to ADRs in controversies regarding contracts between consumers and professionals. The directive applies both to cross-border and domestic transactions, and shall be fully operational by 2015.

Interestingly, the preamble considers as “deplorable” the fact that EU Member States, regardless of the recommendations of the Union, have done little to develop ADRs and their accessibility by citizens and consumers.

In the preamble, the Directive clarifies that its aim is that of improving the standard of protection of consumers, so as to increase their confidence in the market, thus supporting the demand of goods and services. In this respect, harmonizing the legislation of the member states is a necessary condition to avoid the fragmentation of the single market and improve competitiveness, with a view of promoting economic growth.

In order to achieve these results, the preamble provides, inter alia, that ADR procedure should normally end by 90 days from the reception of the relevant documentation, except in exceptionally complex circumstances. Moreover, it is clarified that access to ADR techniques should either be free of charge for consumers or should have an accessible price. Parties are informed that they may seek legal advice but they are not obliged to be represented by a lawyer during the proceedings.

The main points

Scope of application

In the first place, it must be clarified that, in case of clash between any of the Directive’s provision and other EU legislative instrument, the former should prevail, unless otherwise stated (the main exception is obviously Directive 2008/52/EC on mediation). This means that the Directive replaces pre-existing instruments in this field, and represents the new standard regulatory  framework for ADRs between consumers and professionals.

The Directive applies to controversies promoted by consumers against professional providers of goods and services (they do not apply, by converse, to controversies promoted by professionals against consumers).

 The Directive does not apply to (art. 2):

- procedures before dispute resolution entities where the natural persons in charge of dispute resolution are employed or remunerated exclusively by the individual trader, unless Member States decide to allow such procedures as ADR procedures under this Directive and the requirements set out in Chapter II, including the specific requirements of independence and transparency set out in Article 6(3), are met;

- procedures before consumer complaint-handling systems operated by the trader;

- non-economic services of general interest; disputes between traders;

- direct negotiation between the consumer and the trader; attempts made by a judge to settle a dispute in the course of a judicial proceeding concerning that dispute;

- procedures initiated by a trader against a consumer;

- health services provided by health professionals to patients to assess, maintain or restore their state of health, including the prescription, dispensation and provision of medicinal products and medical devices;

- public providers of further or higher education

Impartiality of bodies providing ADR services

Pursuant to art. 6, the bodies before which the procedure takes place must be independent and impartial, therefore persons in charge of ADR must: (i) possess the necessary knowledge and skills in the field of alternative or judicial resolution of consumer disputes, as well as a general understanding of law; (ii) be appointed for a term of office of sufficient duration to ensure the independence of their actions; (iii) be remunerated in a way that is not linked to the outcome of the procedure.

In addition, ADR entities must make publicly available on their websites, or on a durable medium upon request, clear and easily understandable information on: (i) their contact details, including postal address and e-mail address; (ii) the expertise, impartiality and independence of the natural persons in charge of ADR, if they are employed or remunerated exclusively by the trader; (iii) the procedural rules governing the resolution of a dispute and the grounds on which the ADR entity may refuse to deal with a given dispute; (iv) any preliminary requirements the parties may have to meet before an ADR procedure can be instituted, including the requirement that an attempt be made by the consumer to resolve the matter directly with the trader; (v) whether or not the parties can withdraw from the procedure; (vi) the average length of the ADR procedure; (vii) the legal effect of the outcome of the ADR procedure, including the penalties for non-compliance; (viii) the enforceability of the ADR decision.

Liberty of the parties to choose to use ADR and/or to accept its outcome

States do not have any obligation to mandate recourse to ADRs, but the directive does not preclude this possibility, provided that access to national justice systems is available if the outcome of the procedure is not satisfactory. In addition, recourse to ADR may be subject to conditions pertaining to time limitation, value (minimum or maximum) of the claim, and can be precluded if the complaint is vexatious or has already been considered by another ADR procedure.

National law may or may not aim at imposing a binding solution through the ADR procedure

If the procedure simply aims at proposing a solution, member states should ensure that: (a) The parties have the possibility of withdrawing from the procedure at any stage if they are dissatisfied with the performance or the operation of the procedure, and shall be informed of that right before the procedure commences. Where national rules provide for mandatory participation by the trader in ADR procedures, this point shall apply only to the consumer; (b) The parties, before agreeing or following a proposed solution, are informed that they have the choice as to whether or not to agree to or follow the proposed solution participation in the procedure does not preclude the possibility of seeking redress through court proceedings, and that the proposed solution may be different from an outcome determined by a court applying legal rules; (c) the parties, before agreeing to or following a proposed solution, are informed of the legal effect of agreeing to or following such a proposed solution; (d) the parties, before expressing their consent to a proposed solution or amicable agreement, are allowed a reasonable period of time to reflect (art. 9, §2)

By contrast, in ADR procedures which aim at resolving the dispute by imposing a solution, Member States shall ensure that the solution imposed may be binding on the parties only if they were informed of its binding nature in advance and specifically accepted this. Specific acceptance by the trader is not required if national rules provide that solutions are binding on traders (art. 10, §2).

Finally, it is worth recalling that the Commission encourages the cooperation between ADR entities that deal with cross-border disputes and encourages the creation of networks between them (art. 16).

Commentary

The new Directive has been welcome as a step forward in the protection of consumers across the European Union. From now on, they will have an opportunity to bring many small claims, that most would have regarded as not worth pursuing before national courts, to be considered by an impartial body in a reasonable time.

However, it has to be said that ADR techniques appear to work more effectively when the justice system is also efficient, because the two each other: thus, while the attempt of the Union to improve consumer protection through ADRs should be appreciated, this does not exempt Member States’ legislators from making the necessary reforms to provide effective remedies also in  “ordinary” courts, because recourse to ADRs cannot be used as the only tool to reduce the backlog of pending cases

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