Recommendation on the Principles

Commission Recommendation on the principles applicable to the bodies responsible

for out-of-court settlement of consumer disputes

(98/257/CE)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community and in particular

Article 155 thereof,

Whereas the Council, in its conclusions approved by the Consumer Affairs Council of

25 November 1996, emphasised the need to boost consumer confidence in the functioning

of the internal market and consumers’ scope for taking full advantage of the

possibilities offered by the internal market, including the possibility for consumers to

settle disputes in an efficient and appropriate manner through out-of-court or other

comparable procedures;

Whereas the European Parliament, in its Resolution of 14 November 1996 (European

Parliament Resolution on the Commission Communication “Action plan on consumer access

to justice and the settlement of consumer disputes in the internal market” of

14 November 1996, OJ No C 362, 2.12.1996, p. 275), stressed the need for such

procedures to meet minimum criteria guaranteeing the impartiality of the body, the

efficiency of the procedure and the publicising and transparency of proceedings and called

on the Commission to draft proposals on this matter;

Whereas most consumer disputes, by their nature, are characterised by a disproportion

between the economic value at stake and the cost of its judicial settlement; whereas the

difficulties that court procedures may involve may, notably in the case of cross-border

conflicts, discourage consumers from exercising their rights in practice;

Whereas the “Green Paper on the access of consumers to justice and the settlement

of consumer disputes in the single market” (COM(93) 576 final of 16.11.1993) was the

subject of wide-ranging consultations whose results have confirmed the urgent need for

Community action with a view to improving the current situation;

Whereas the experience gained by several Member States shows that alternative

mechanisms for the out-of-court settlement of consumer disputes – provided certain

essential principles are respected – have had good results, both for consumers and firms,

by reducing the cost of settling consumer disputes and the duration of the procedure;

Whereas the adoption of such principles at European level would facilitate the

implementation of out-of-court procedures for settling consumer disputes; whereas, in the

case of cross-border conflicts, this would enhance mutual confidence between existing

out-of-court bodies in the different Member States and strengthen consumer confidence in

the existing national procedures; whereas these criteria will make it easier for parties

providing out-of-court settlement services established in one Member State to offer their

services in other Member States;

Whereas one of the conclusions of the Green Paper concerned the adoption of a

Commission Recommendation with a view to improving the functioning of the ombudsman

systems responsible for handling consumer disputes;

Whereas the need for such a Recommendation was stressed during the consultations on the

Green Paper and was confirmed during the consultation on the “Action Plan”

Communication (Action Plan on consumer access to justice and the settlement of consumer

disputes in the internal market, COM(96) 13 final of 14.2.1996) by a very large majority

of the parties concerned;

Whereas this Recommendation must be limited to procedures which, no matter what they

are called, lead to the settling of a dispute through the active intervention of a third

party, who proposes or imposes a solution; whereas, therefore, it does not concern

procedures that merely involve an attempt to bring the parties together to convince them

to find a solution by common consent;

Whereas the decisions taken by out-of-court bodies may be binding on the parties, may

be mere recommendations or may constitute settlement proposals which have to be accepted

by the parties; whereas for the purposes of this Recommendation these various cases are

covered by the term “decision”;

Whereas the decision-making body’s impartiality and objectivity are essential for

safeguarding the protection of consumer rights and for strengthening consumer confidence

in alternative mechanisms for resolving consumer disputes;

Whereas a body can only be impartial if, in exercising its functions, it is not subject

to pressures that might sway its decision; whereas, therefore, its independence must be

guaranteed without this implying the need for guarantees that are as strict as those

designed to ensure the independence of judges in the judicial system;

Whereas, when the decision is taken by an individual, the decision-maker’s

impartiality can only be assured if he can demonstrate that he possesses the necessary

independence and qualifications and works in an environment which allows him to decide on

an autonomous basis; whereas this requires the person to be granted a mandate of

sufficient duration, in the course of which he cannot be relieved of his duties without

just cause;

Whereas, when the decision is taken by a group, equal participation of representatives

of consumers and professionals is an appropriate way of ensuring this independence;

Whereas, in order to ensure that the persons concerned receive the information they

need, the transparency of the procedure and of the activities of the bodies responsible

for resolving the disputes must be guaranteed; whereas the absence of transparency may

adversely affect the rights of the parties and cause misgivings as to out-of-court

procedures for resolving consumer disputes;

Whereas certain interests of the parties can only be safeguarded if the procedure

allows them to express their viewpoints before the competent body and to acquaint

themselves with the facts presented by the opposing party and, where applicable, the

experts’ statements; whereas this does not necessarily necessitate oral hearings of

the parties;

Whereas out-of-court procedures are designed to facilitate consumer access to justice;

whereas, therefore, if they are to be effective, they must remedy certain problems

associated with court procedures, such as high fees, long delays and cumbersome

procedures;

Whereas, in order to enhance the effectiveness and equity of the procedure, the

competent body must play an active role which allows it to take into consideration any

element useful in resolving the dispute; whereas this active role is all the more

important when, in the framework of out-of-court procedures, the parties in many cases do

not have the benefit of legal advice;

Whereas the out-of-court bodies may decide not only on the basis of legal rules but

also in equity and on the basis of codes of conduct; whereas, however, this flexibility as

regards the grounds for their decisions should not lead to a reduction in the level of

consumer protection by comparison with the protection consumers would enjoy, under

Community law, through the application of the law by the courts;

Whereas the parties are entitled to be informed of the decisions handed down and of

grounds for these decisions; whereas the grounds for decisions are a prerequisite for

transparency and the parties’ confidence in the operation of out-of-court procedures;

Whereas in accordance with Article 6 of the European Human Rights Convention, access to

the courts is a fundamental right that knows no exceptions; whereas since Community law

guarantees free movement of goods and services in the common market, it is a corollary of

those freedoms that operators, including consumers, must be able, in order to resolve any

disputes arising from their economic activities, to bring actions in the courts of a

Member State in the same way as nationals of that State; whereas out-of-court procedures

cannot be designed to replace court procedures; whereas, therefore, use of the

out-of-court alternative may not deprive consumers of their right to bring the matter

before the courts unless they expressly agree to do so, in full awareness of the facts and

only after the dispute has materialised;

Whereas in some cases, and independently of the subject and value of the dispute, the

parties and in particular the consumer, as the party who is regarded as economically

weaker and less experienced in legal matters than the other party to the contract, may

require the legal advice of a third party to defend and protect their rights more

effectively;

Whereas, in order to ensure a level of transparency and dissemination of information on

out-of-court procedures in line with the principles set out in the Recommendation and to

facilitate networking, the Commission intends to create a database of the out-of-court

bodies responsible for resolving consumer disputes that offer these safeguards; whereas

the database will contain particulars communicated to the Commission by the Member States

that wish to participate in this initiative; whereas, to ensure standardised information

and to simplify the transmission of these data, a standard information form will be

made available to the Member States;

Whereas, finally, the establishment of minimum principles governing the creation and

operation of out-of-court procedures for resolving consumer disputes seems, in these

circumstances, necessary at Community level to support and supplement, in an essential

area, the initiatives taken by the Member States in order to realise, in accordance with

Article 129a of the Treaty, a high level of consumer protection; whereas it does not go

beyond what is necessary to ensure the smooth operation of out-of-court procedures;

whereas it is therefore consistent with the principle of subsidiarity,

RECOMMENDS that all existing bodies and bodies to be

created with responsibility for the out-of-court settlement of consumer disputes

respect the following principles:

I. Principle of independence

The independence of the decision-making body is ensured in order to guarantee the

impartiality of its actions.

When the decision is taken by an individual, this independence is in particular

guaranteed by the following measures:

  • the person appointed possesses the abilities, experience and competence, particularly in

    the field of law, required to carry out his function;

  • the person appointed is granted a period of office of sufficient duration to ensure the

    independence of his action and shall not liable to be relieved of his duties without just

    cause;

  • if the person concerned is appointed or remunerated by a professional association or an

    enterprise, he must not, during the three years prior to assuming his present function,

    have worked for this professional association or for one of its members or for the

    enterprise concerned.

When the decision is taken by a collegiate body, the independence of the body

responsible for taking the decision must be ensured by giving equal representation to

consumers and professionals or by complying with the criteria set out above.

II. Principle of transparency

Appropriate measures are taken to ensure the transparency of the procedure. These

include:

1. Provision of the following information, in writing or any other suitable form, to

any persons requesting it:

  • a precise description of the types of dispute which may be referred to the body

    concerned, as well as any existing restrictions in regard to territorial coverage and the

    value of the dispute;

  • the rules governing the referral of the matter to the body, including any preliminary

    requirements that the consumer may have to meet, as well as other procedural rules,

    notably those concerning the written or oral nature of the procedure, attendance in person

    and the languages of the procedure;

  • the possible cost of the procedure for the parties, including rules on the award of

    costs at the end of the procedure;

  • the type of rules serving as the basis for the body’s decisions (legal provisions,

    considerations of equity, codes of conduct, etc.);

  • the decision-making arrangements within the body;
  • the legal force of the decision taken, whereby it shall be stated clearly whether it is

    binding on the professional or on both parties. If the decision is binding, the penalties

    to be imposed in the event of non-compliance shall be stated, as shall the means of

    obtaining redress available to the losing party.

2. Publication by the competent body of an annual report setting out the decisions

taken, enabling the results obtained to be assessed and the nature of the disputes

referred to it to be identified.

III. Adversarial principle

The procedure to be followed allows all the parties concerned to present their

viewpoint before the competent body and to hear the arguments and facts put forward by the

other party, and any experts’ statements.

IV. Principle of effectiveness

The effectiveness of the procedure is ensured through measures guaranteeing:

  • that the consumer has access to the procedure without being obliged to use a legal

    representative;

  • that the procedure is free of charges or of moderate costs;
  • that only short periods elapse between the referral of a matter and the decision;
  • that the competent body is given an active role, thus enabling it to take into

    consideration any factors conducive to a settlement of the dispute.

V. Principle of legality

The decision taken by the body may not result in the consumer being deprived of the

protection afforded by the mandatory provisions of the law of the State in whose territory

the body is established. In the case of cross-border disputes, the decision taken by the

body may not result in the consumer being deprived of the protection afforded by the

mandatory provisions applying under the law of the Member State in which he is normally

resident in the instances provided for under Article 5 of the Rome Convention of 19 June

1980 on the law applicable to contractual obligations.

All decisions are communicated to the parties concerned as soon as possible, in writing

or any other suitable form, stating the grounds on which they are based.

VI. Principle of liberty

The decision taken by the body concerned may be binding on the parties only if they

were informed of its binding nature in advance and specifically accepted this.

The consumer’s recourse to the out-of-court procedure may not be the result of a

commitment prior to the materialisation of the dispute, where such commitment has the

effect of depriving the consumer of his right to bring an action before the courts for the

settlement of the dispute.

VII. Principle of representation

The procedure does not deprive the parties of the right to be represented or assisted

by a third party at all stages of the procedure.

THIS RECOMMENDATION is addressed to the bodies responsible for the out-of-court

settlement of consumer disputes, to any natural or legal person responsible for the

creation or operation of such bodies, as well as to the Member States, to the extent that

they are involved.

                        author

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