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European Parliament Evolves ADR

by Colin Rule
July 2012

  • Novo Justice Blog by Colin Rule

    Colin Rule

    “The Committee on Internal Market and Consumer Protection voted this morning on Reports concerning the Alternative Dispute Resolution (ADR) and the Online Dispute Resolution (ODR). ODR is an alternative dispute resolution process aided by online technology. This can help solve disputes especially for online purchases, where the consumer and the trader are often located far from each other. The aim of these instruments is to ensure impartial, transparent and effective means which can help consumers resolve disputes with trades in the case of both cross-border and domestic e-commerce transactions, without going to court.

    "Consumers and traders, especially the smaller ones, feel insecure when carrying out cross-border transactions online. They’re missing out on the potential of the Single Market because they don’t know where to turn to for help if they encounter a problem. ODR will give them confidence to buy and sell throughout the EU, thereby providing better choice for the consumer and a larger market for the trader", said the European Parliament’s Rapporteur for the ODR, Róza Thun MEP.
    "The Alternative Dispute Settlement (ADS) is a fast, affordable and effective way to solve problems. A European network of settlement points will be available for consumers which will boost confidence in the Single Market. European companies can also profit", said Hans-Peter Mayer MEP.
    The Alternative Dispute Resolution is an out-of court instrument where the entities involve neutral parties (e.g. a conciliator, mediator, ombudsman, complaints board etc.), who help them to resolve disputes in the case of problems with products or services which they have bought. Online Dispute Resolution on the other hand will allow consumers and traders, who are located far from each other, to handle their disputes online, via an interactive, free of charge website, available in all official languages of the EU. The ADR and the ODR offer cheap and quick solutions, in the languages of the parties involved, as opposed to court proceedings, which are often expensive, time-consuming and burdensome. This will help consumers seek compensation and take full advantage of the Single Market.”

    Here are the key developments, according to my friend Vincent:

    “- Directive will apply to both offline and online sales and services, including provision of digital content [Recital 7]

    - Directive will only apply for consumers against traders disputes, and not vice versa [Recital 7 and Art 1]

    - Directive will apply to both domestic and cross-border disputes [Art. 2]

    - Directive will be a minimum harmonization one [Art 2]

    - Variety of ADR procedures – they can facilitate a solution, propose a solution or even impose a solution [recital 11a and Art. 2]

    - Under strict supervision and conditions of additional transparency and independence, allowed are “procedures before dispute resolution entities where the natural persons in charge of dispute resolution are employed by or receive any form of remuneration exclusively from the trader or professional or business association of which the trader is a member” [recitals 12 and 12a and Art. 2]

    - Introduction of a definition of an “ADR procedure”, clarifying that arbitration procedures are not included in it, and adding a requirement for ADR entities to be notified to the Commission by a competent national authority [recital 11 and Art. 4]

    - Additional rules on access to ADR, particularly the possibility for MS to allow ADR entities to refuse to deal with a case on procedural grounds, e.g. time limit has expired; case has been considered by another ADR entity; consumer has not addresses the trader prior to initiating the ADR procedure [Art. 5]

    - Encouraging consumers to address the trader before referring a compliant to an ADR entity [recital 23c

    - “Nominal” fees (instead of “moderate”) for ADR services are allowed, at MS discretion, and private funding of ADR entities is encouraged [recitals 20 and 21e and Art. 8]

    - Timeframe – 90 days from the moment when ADR entity receives complete complaint file; extendable only in complex cases and parties have to be informed of extension [recital 19 and Art. 8]

    - An agreement to submit a dispute to ADR procedure is not binding on the consumer if it was concluded before the dispute has materialized and if it deprives the consumer of the right to go to court [recital 21b and Art. 9a]

    - If ADR procedure is of the kind which imposes the solution, it is only binding if both parties were informed of it in advance and specifically accepted it [recital 21b and Art. 9a]

    - If ADR procedure imposes a solution, this solution cannot deprive the consumer of protection of mandatory rules of ADR entity’s Member State, or, in case of cross-border disputes, of consumer’s Member State, where such protection is provided for by Art. 6 Rome I [recital 21c and Art. 9b]

    - Consumers should be informed in a clear and comprehensible manner if a trader is covered by ADR scheme [recital 22 and Art. 10]

    - Encouraging establishment of pan-European ADR entities, covering traders from several MS [recital 14]

    - Emphasizing the importance of ADR confidentiality [recital 16a]”

    Looks like we’re getting closer to passage…



    Biography


    Colin Rule has worked at the intersection of technology and conflict resolution for the last two decades. He is CEO of Modria.com, an online dispute resolution service provider in Silicon Valley, and a non-resident Fellow at the Center for Internet and Society at Stanford Law School. From 2003 to 2011, he served as eBay and PayPal's first director of Online Dispute Resolution, designing and implementing systems that now resolve more than 60 million disputes each year. Mr. Rule is the author of Online Dispute Resolution for Business, published by Jossey-Bass in September 2002. He has presented and trained around the world for organizations including the U.S. Department of State, UNCITRAL, the International Chamber of Commerce, and the CPR Institute for Dispute Resolution, as well as teaching at UMass-Amherst, Stanford, Southern Methodist University, and Hastings College of the Law. He has written and been interviewed extensively about the Internet since 1999, with columns and articles appearing in ACResolution, Consensus, Dispute Resolution Magazine, and Peace Review. He holds a master's degree from Harvard University's Kennedy School of Government in conflict resolution and technology, a B.A. in peace studies from Haverford College, and he served as a Peace Corps volunteer in Eritrea from 1995-1997.



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