ODR in the EU: Goals, issues & framework (2/3)

By Kim Panti

This blog post series is part of an assessment for The Global Lawyer at Monash University where Kim currently studies. It was originally published on Linkedin

In my previous post, I introduced the concepts of e-commerce, ODR and cross-border disputes. In this post, I will analyse the interplay between the three, and the effectiveness of ODR on parties as a resolution to their disputes, with reference to the existing framework and legislation in Europe.

To recap the previous post, the benefits of ODR include its cost-effectiveness in allowing parties to resolve their dispute. It does this through ODR providers who facilitate negotiation between the parties in order to identify the issue and come to an agreement. It provides convenience, as ODR is readily available at any time, from anywhere. This is especially beneficial for parties who are geographically separated and cannot afford to travel to meet and discuss settlement. Parties also receive the outcome with a click of a button without waiting for periods of time, unlike traditional litigation.

ODR in Europe

The European Commission’s governing framework for ODR is composed of a directive called the ADR (Alternative Dispute Resolution) Directive, a Regulation, and an ODR Platform. The Directive applies to ODR as well as ADR in providing a resolution of cross-border disputes, particularly in ‘ensuring access to simple, efficient, fast and low-cost ways’ of dispute resolution. The Directive also accepts that ADR has ‘not been correctly established’ in all Member States as it is not available throughout the Union. There are disparities between ADR provisions across the Union where ADR may differ in its effectiveness and procedures. This potentially disadvantages traders who belong to States which lack appropriate ADR procedures as traders from States with better ADR procedures might be reluctant to engage with them.

Article 1 outlines the scope of the Directive, which applies to traders and consumers in the Union engaging in contractual obligations for sales and services contracts, with some exceptions outlined in Article 2. Article 3 outlines the goals of the Directive to facilitate ‘harmoni[s]ed ADR entities and ADR procedures’ which provides consumers with a ‘high quality, transparent, effective, and fair out-of-court’ dispute mechanism. The Regulation makes similar points and reiterates the ability for consumers to ‘feel confident’ with their online transactions. This document also highlights the ability of individuals to engage with others and not be bound by borders or barriers. It identifies the online sphere as a contributor to the internal market, and thus dispute resolution mechanisms should be improved to provide easier transactions for consumers and traders within the Union. Lack of mechanisms is again reiterated and in Recital 22, a holistic ODR platform for all Member States to use has been suggested, each with a national point of contact.

This ODR platform has been accessible since 15 February 2016 is available in 23 languages of the European Union. Its website outlines that disputants can lodge a complaint on the portal, agree on the dispute resolution body within 30 days, be informed within 3 weeks whether that chosen dispute resolution body can handle that complaint, and if all stages passed, be provided with the outcome and result of the complaint.

The European Commission concluded that the platform’s first year of operation was successful, with over 160,000 visitors each month, over 2000 complaints on average per month, and 44% of the overall complaints lodged were successfully solved through negotiation between consumers and traders. However, only 2% of the 85% of complaints lodged before 30 days reached ADR, with 4% withdrawn before reaching that stage, and with 9% refused by the traders. However, even if this is a low number, the report states that 40% of the complaints which closed resulted in a bilateral settlement. The report also suggested that the figures for refusal of traders and withdrawal of complaints could be because parties had reached settlement outside of ADR or offline.

Does ODR in practice reflect the goals of the Directive?

The goal of the Directives may seem aspirational, and the Commission’s report perhaps too optimistic about the current course of ODR. The goal that aims to balance Member States’ national jurisdictions with the EU framework as well as international trade law is particularly ambitious. Professor Julia Hörnle reiterates that the problem with cross-border transactions is finding the ‘appropriate forum’ for individuals to settle their dispute. She identifies that there is an unequal bargaining power between the consumer and trader as consumers agree to the terms and conditions and are left to initiate the complaint against the trader if there is conflict.

Transparency, a key goal in the Directive, can also be problematic because it may conflict with public policy that surrounds consumer contexts. For example, the parties’ right to privacy may conflict with the public’s right to access certain information. Even if information is made secure under this platform, with only the parties knowing how they have chosen to resolve their dispute, Hörnle suggests that in malpractice cases that the public has a right to know. She further states that the development of e-commerce will only be achieved through publishing these decisions. This would allow for the development of precedent, which will inform consumers about their rights as well as the relevant issues that they need to consider when engaging in e-commerce transactions.

Hanriot adds that concerns regarding enforceability could be addressed by private mechanisms such as trustmarks and ratings, which would provide an incentive to traders to comply with the outcome. Feedback systems, for example, where purchasers can leave a rating evaluating their experience with a trader are highly influential upon the trader as it can impact their sale price and yearly profits.

ODR provides an avenue for solving cross-border disputes. However, whilst there are clear strengths in its low-costs, transparency, convenience and availability, there are also issues in how ODR, at least in the European context, is able to meet its goals.

About Kim Panti

Kim Panti is a penultimate Arts/Law student at Monash University and is currently part of the Law Ambassador program. Connect with Kim on Linkedin.

Featured image by Soroush Karimi on Unsplash

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