In November 2011 the European Commission explained their desire for new legislation relating to both alternative dispute resolution (“ADR”) and online dispute resolution (“ODR”). The relevant Directives have recently been approved by the European Parliament and from 2015 the new rules will become effective. The aim of the changes, according to business law experts, is to provide clarity and efficiency with regard to consumer disputes, especially when disputes are of a cross-jurisdictional nature. In research published in 2010 when the changes were being considered, it was found that 1 in 5 EU consumers had problems when making purchases and that the introduction of these new measures would save consumers over €20 billion, with a €3 billion saving to businesses within the EU.
Alternative Dispute Resolution
The Consumer Directive relating to ADR will require all Member States to have adequate ADR procedures in place and ensure that these procedures are available to cover any contractual dispute. These procedures are not simply limited to a few sectors of the market, but must be in place in all market sectors with the exception of education and health. In addition to this, the methods of ADR being used must be of a certain standard, and be impartial, transparent and fit for purpose. There are a number of different providers of ADR in the United Kingdom which usually use an arbitrator or an ombudsman, and therefore they will need to ensure that they meet the new requirements if they do not already do so. In addition, companies selling products or services will also be required to detail the availability of ADR procedures not only at the time of purchase but also if and when a problem arises.
Online Dispute Resolution
With regard to ODR, the new rules include the creation of online capabilities which link the various ADR procedures adopted by each national entity. The aim is for there to be clear and efficient procedure in place for all disputes which arise as a result of a transaction that has taken place online. This procedure will be free, and will be available in a number of different languages. The new platform will act as a portal through which consumers can submit a complaint about an online dispute. The portal will then notify the concerned parties, and the parties will then use an agreed ADR provider in order to attempt to resolve the dispute. The ADR provider will also have access to the portal, and it is through this portal that they will initially be alerted to dispute and provided with the specific details.
It is clear from the above that although new regulations cover both ADR and ODR, the two areas are linked. The new rules will become effective 20 days after their publication in the Official Journal of the EU, at which point member states would have two years to ensure that the ADR changes were complied with in anticipation of the new ODR platform. The new ODR platform will work alongside ADR entities who will be subjected to the new ADR reform, and it is clear that there will be a lot more transparency and process in place for consumers.
However, the changes have been subject to much debate, and the UK government have previously vouiced concerns about how beneficial the new rules will be. The concern is that they are heavily weighted in favour of the consumer, and that this will lead to a considerable cost to businesses whilst not delivering the amounts of savings that the European Commission has suggested.
The Department for Business, Innovation and Skills (BIS) have stated that this distortion has come about as a result of inaccurate averages of the cost of a complaint being used meaning that the benefits will be much lower in value than expected. Although there has been support for the new frameworks, another concern is the fact that it was simply a management tool which passes on relevant contact information and is not a tool that will allow the online settlement of disputes. Further, certain member states who currently have robust ADR procedures do not feel that the changes will provide any increased protection to consumers or otherwise and new rules could create even more confusion at a time when fewer and fewer individuals have access to legal advice to even understand the rules let alone the laws that apply to them due to the savage legal aid cuts..