EU mulls out-of-court consumer dispute system

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The European Commission is considering introducing an EU-wide alternative dispute resolution (ADR) system to prevent consumers from having to go to court to settle disputes with companies. But consumer groups warned the move must not detract attention from plans to introduce judicial collective redress.  

The EU executive launched a public consultation on setting up an ADR system in Europe yesterday (18 January).

Towards cheaper and quicker dispute resolution

By ensuring easier, faster and cheaper out-of-court resolution of disputes between customers and traders, the Commission hopes to boost the confidence of consumers when shopping in the EU's single market.

Commission officials said alternative dispute resolution costs the consumer less than 50 euros to use and can resolve disputes within weeks.

But not all EU countries have ADR schemes in place, nor are they accessible for all sectors of the economy.

ADR is only available in six regions in Portugal, for example, for example, while in the Netherlands, ADR for air travel is only applicable to national carrier KLM Royal Dutch.

"All EU consumers should have at their disposal a simple, quick and inexpensive way to resolve their disputes with traders," said EU Health and Consumers Commissioner John Dalli, launching the consultation yesterday.

"I invite all interested parties, including citizens, to participate in this online consultation," Dalli added.

Alternative dispute resolution schemes offer consumers a means of settling out-of-court disagreements with traders when they have a problem with goods or services.

ADR is a non-judicial means of resolving disputes and as such requires a neutral third party, such as an arbitrator or mediator, who either proposes a solution or brings the parties together to help them find a solution. 

However, 40% of retailers in the EU do not know about alternative dispute resolution and in 2009 just 3% of consumers and 9% of retailers used ADR schemes.

Indeed, traders are wary of engaging in ADR: just 6% are members of schemes, the majority of which (64%) remain voluntary.

Companies often fail to comply with decisions reached via ADR as they are non-binding, leading the Commission to include the establishment of an EU-wide system in its work programme for 2011. 

The results of the consultation, which closes on 15 March, will shape upcoming legislative proposals on ADR which the EU executive expects to publish in November. 

"The purpose of the consultation […] is to lead to an initiative which will ensure that consumers feel more confident in the single market [and] feel safer shopping cross-border, and that the burden on national courts is reduced," said Commissioner Dalli.

Although there are at least 750 alternative dispute resolution schemes in the EU, according to Commission estimates, consumers cannot always get the help they need and the losses incurred by those who experience problems constitute 0.3% of Europe’s GDP.

In Europe ADR is primarily used to resolve disputes in the financial services, travel and tourism, and telecommunications sectors.

The Commission argues that "the need for ADR schemes is becoming pressing," given the fact the number of Europeans who shop on the Internet is continually growing but the percentage of cross-border online transactions remains low (8%).

The EU executive puts this down to a lack of confidence in shopping abroad among EU consumers, 71% of whom believe that resolving problems is more difficult outside of their home country.

Consumer groups sceptical

Consumer groups, meanwhile, warned that ADR must not detract attention from the EU's plans to introduce judicial collective redress for European consumers.

"An ADR is one form of redress which is cheap and can be efficient, but there is a huge lack of awareness about it among consumers, an unfortunate lack of participation by business and a lack of enforcement of the rules," Monique Goyens, director-general of European consumer organisation BEUC, told EURACTIV.

"The lack of proper redress mechanisms for cross-border purchases is a significant hurdle for consumers, which needs to be overcome by the EU," Goyens said.

"The Commission should invest its energies in providing EU consumers with the right redress tools, ADR being one. However, this should not detract attention from judicial collective redress, which more effective, efficient and is long overdue," she added.

The Commission is expected to launch a consultation in 2011 on establishing a collective redress system for European consumers.

 

The European Commission uses the term ADR (Alternative Dispute Resolution) refer to schemes available to help consumers resolve disputes with traders when they have a problem with goods or services.

ADR is non-judicial and requires the appointment of a neutral third party to help settle disputes. It is mainly used for individual cases, but can also deal with several individual cases when they are similar, according to the Commission.

ADR does not cover businesses' customer complaint handling systems, amicable settlements directly between a consumer and a trader, or mediation processes within the judicial system. 

Two existing EU Recommendations on ADR establish minimum guarantees that ADR schemes ought to respect, while Directives related to specific sectors, like energy and telecommunications, also oblige or encourage member states to set up ADR systems.  

  • 15 March: Public consultation on ADR closes.
  • Late spring 2011: Public hearing on ADR in European Parliament.
  • November 2011: Commission to table legislative proposals on ADR.
  • By end 2011: Commission to hold public consultation on collective redress. 

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