EU Goes for ODR

The European Union is adopting regulations on alternative dispute resolution (ADR) and online dispute resolution (ODR), according to a press release and associated documents, including a draft ODR regulation. This is aimed at consumer e-commerce in particular.

I have not yet found in the documents answers to some questions that occur to me off the cuff. (The answers may be in there somewhere – feel free to provide via comments.)

  • Who pays? It appears to be taxpayer-funded, rather than relying on user fees. There is mention of a cost of 4.6 million Euros (annually?).
  • What law applies? This list has previously discussed the EU work on a single sales law and a ‘blue button’ device for web users to elect a common sales law.
  • What is the process? There will be coordinators and neutrals provided. Do they have a set progression from negotiation to mediation to adjudication, as the UNCITRAL ODR project has recommended? Will the mediator be barred from being the adjudicator?
  • How is the result enforced? The top-level documents appear to assume that once the dispute is ‘resolved’, everybody goes along. What happens if they don’t? 

A different order of question is how this may relate to the UNCITRAL project. Are the EU proposals consistent with the current direction of that work? Is it helpful to the UNCITRAL work for the EU to be voting in favour of ODR, or is it distracting from or subversive of the global thinking?

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  1. UNCITRAL has commented on earlier announcements by the EU of its plans to develop an ODR plan. The report of the May 2010 meeting of Working Group III (on ODR) said this:

    The Working Group took note of the ongoing work by the European Union, in particular, the proposed Directive on alternative dispute resolution for consumer disputes and amending Regulation and the proposed Regulation on online dispute resolution for consumer disputes. However, it was pointed out that the aim of the Working Group was to craft a global system which could be suitable for use by all the regions. (emphasis added)

    In response to some of my questions, a private correspondent has written:

    The EU platform would only deal with B2C cross-border e-commerce transactions within Europe. See Paras 10, 12 of resolution

    “If the contract is concluded for purposes partly within and partly outside the person’s trade (dual purpose contracts) and the trade purpose is so limited as not to be predominate in the overall context of the supply, that person should also be considered as a consumer.” Para 10 One wonders if a procedure designed for this kind of mixed-use contract would work in a system conceived of to operation for low value transactions? Perhaps parties to higher-value contracts would like more procedural protections.

    They also say “the right to an effective remedy and the right to a fair trial are fundamental rights … ODR procedures cannot be designed to replace court procedures and should not deprive consumers or traders of their rights to seek redress before the courts.” Para 19. I think ADR directive bars predispute submission of disputes to ADR/ODR. This is a matter of some debate before the ODR Working Group, as you probably know. See a description of the debate on Slaw.ca.

    From that standpoint, the EU is putting its ADR/ODR proposals in the context of Brussels (on inter-country enforcement) and Rome I (on court jurisdiction over consumer disputes) plus cross border small claims tribunals to enforce judgments. Applying these rules or the new ones may require determination of who is consumer in mixed use cases.

    How would this work outside Europe? Requiring that micro and small business outside Europe litigate disputes within Europe using European law would create a huge competitive advantage for European businesses. Would that be acceptable to non-European parties, or states?

    Another private correspondent has noted that the EU plans to build its multilingual platform for ODR in the next two years or so. For a possible accessible platform designed to work in the UNCITRAL process, see my Slaw column on the topic.

    Does any of this work make you wish that Canadian jurisdictions were more openly supportive of ODR? What support do you envisage before sending your clients into such a process? Should we all wait to see what comes of BC’s Civil Resolution Tribunal?

  2. John – I have been monitoring the progress of this legislation for some time, attending a committee hearing in Brussels, meeting with the UK representative, and contributing to the consultation process., with particular emphasis on the ODR element. To answer the questions raised:-

    1. Who pays? The website that will be built to receive in details of complaints being raised and refer out to the local provider is indeed to be funded by the EU. Neither the Directive nor the Regulation require use of ADR/ODR nor dictate the process.

    2. What law applies? None. The objective is to encourage ADR use and does not restrict to those narrower ADR processes that seek to go no further than to pre-empt how a court would decide the matter. Consumer law throughout Europe is of course fairly shared across the EU but the law will not necessarily dictate all outcomes, especially mediated ones.

    3. What is the process? The law does not dictate the process. Many of the ADR processes will be existing ones with more novel processes coming in under the ODR banner.

    4. How is the result enforced? Most consumer ADR in Europe is arbitration based such as to be binding on the retailer (usually by contracted opt-in by the retailer to an industry association led scheme) and non-binding on the consumer. Mediated solutions would likely result in binding contracts that can then be enforced under contract law.

    I note in your second comment , John you quote a contributor who says:-

    “The EU platform would only deal with B2C cross-border e-commerce transactions within Europe. ”

    Whilst that was indeed the case originally the final version of the ODR Regulation has now removed the cross-border qualification so it now applies to domestic as well as cross-border.

    I should also make clear that nothing in the law will require a retailer or consumer to participate in ODR. One of the problems I have raised with the Commission is that whilst it will require retailers to place a link to the EU ODR platform on its website, as the retailer will not be required to participate in ODR should a customer complain, this will generate false trust in the retailer by consumers. They will buy under that trust- then complain and complete the form on the EU site to which they are linked from the retailer site, only to then be told that the particular retailer does not agree t participate in ODR. I am pressing for the UK implementation of the Regulation to require the retailer to state alongside the link as to whether or not they agree to participate.