EU Commission considers online arbitration system for cross border consumer disputes

Out-Law News | 24 May 2011 | 12:05 pm | 3 min. read

E-commerce disputes should be settled by an online arbitration system instead of going to court, businesses have told the European Commission.

The Commission launched a consultation on alternative dispute resolution (ADR) in January to find ways to prevent disputes from going to court and has just published the responses to that consultation.

Many of the 220 respondents, which included businesses, existing ADR bodies; EU member countries; consumer associations, and lawyers said they would welcome an online system for dealing with cross-border disputes.

"This type of online scheme should apply to cross-border e-commerce, where there is an increasing number of complaints especially for low-value cases," the European Commission's summary of consultation responses said (8-page / 71KB).

Some business and lawyers expressed concerns about over-simplifying a system for complex industries where disputes may arise, and said that a central legal framework would have to be established for it to work, while consumer groups warned against the language difficulties that could arise in a pan-EU system, the summary of response said.

"A majority of respondents believed that a single entry point or umbrella organisations could be very useful to provide consumers with information on and guidance to the appropriate ADR scheme at both EU and national level," the summary said.

The Commission's summary said that most respondents were in favour of settling disputes out of court, but did not want to make it an obligatory part of complaints procedure.

"According to a large majority of respondents, imposing ADR as mandatory step before court may impinge on individual consumer's right to go to court. A few respondents considered that parties in judicial proceedings could be encouraged to use ADR for specific cases, notably for low-value complaints," the Commission's summary said.

Most respondents suggested that ADR schemes can improve their reputation by providing clear, transparent information on how they operate; by highlighting cost-effectiveness; by publishing outcomes, and by providing a central hub for information to redirect people to other dispute resolution options, the summary said.

"Independence and impartiality are unanimously considered the fundamental principles that ADR schemes should respect. Efficiency, transparency and interruption of prescription periods are considered equally important," the summary said.

Respondents said they want the European Consumer Centres Network (ECC-NET), the EU's consumer affairs body, to be improved to help direct consumers to the relevant regulator for their complaint, the summary said.

More communication is required to inform consumers about the dispute resolution options available to them, the summary said.

"The most efficient ways to promote ADR schemes among consumers mentioned by respondents were advertising campaigns explaining the main features of ADR schemes and the advantages of using them, including examples of best practices and success stories," the summary of responses said.

Businesses argued that firms should not be forced to pay for these adverts, and said that adverts were better positioned with public bodies, ECC-Net and regulators, the summary said. Logos could be created to signify membership to ADR schemes, it said.

Most respondents would prefer to keep a system for dealing with business-to-business complaints separate from consumer disputes, the summary said.

There was a differing consensus on how the European Commission could create laws for dealing with disputes involving more than one consumer, the summary said.

"Some respondents from businesses, legal practitioners and ADR schemes could accept ADR addressing mass claims, but this scheme should respect clearly identified conditions to guarantee effectiveness of the procedure," the summary said.

"A few contributions emphasised the need to have an 'opt-in' and confidential procedure. According to another contribution, outcomes of ADR procedures related to mass claims should be published. Some other business representatives considered that using ADR for collective claims contradicts the quick, simple and low-cost nature of ADR schemes," the summary said.

A mixture of business and public funding of ADR schemes is needed to keep the cost of going through a dispute as cheap as possible for the consumer, the summary said.

"ADR schemes should be basically free of charge or low cost for the consumer/claimant," the summary said.

"According to some respondents from consumers and businesses an initial administrative fee on the consumer would be justified where linked to a required technical expertise or to the high value of the dispute in some specific sectors. This could then be refunded to the consumer if the ADR outcome is in his favour," the summary said.

The European Commission's consultation closed in March. It is expected to propose new laws on alternative dispute resolution methods in November.