Consumer rights have received further support with the announcement that the UK will adopt the proposed Directive on Alternative Dispute Resolution (ADR Directive) and a Regulation on Online Dispute Resolution (ODR Regulation). Anita Phillips, a professional support lawyer in our London office,  looks at the role the legal profession will have to play in ensuring its success. This article was first published on Lexis Library/Lexis PSL on 10 May 2013.

What is the background to the ADR Directive?

The ADR Directive is part of a suite of measures intended to improve consumer choice and protection within the EU. The European Parliament has recognised that ensuring simple, efficient, fast and low-cost ways of resolving consumer disputes through ADR should preserve business relationships and improve confidence in the single market. The European Parliament has also acknowledged that the provision and quality of ADR services across the EU is fragmented and inconsistent.

The ADR Directive seeks to promote ADR in the consumer sphere by encouraging the use of approved ADR entities that ensure minimum quality standards. The intention is to increase the use of ADR specifically in respect of consumer/business relationships (eg goods and services, in particular those sold online). The critical point is that the ADR Directive only applies to complaints made by consumers against traders/businesses. It does not apply should a trader wish to complain about a consumer (eg if they fail to pay). Equally, it does not apply to trader-to-trader grievances.

A second resolution has been passed in conjunction with the ADR Directive which will put in place software to encourage and facilitate resolution of disputes via online ADR (the Online Dispute Resolution (ODR) Regulation).

Under the ODR Regulation, the European Commission will establish an ODR platform in the form of an interactive website offering a single point of entry for consumers and traders seeking to resolve disputes out of court. Consumers, or traders (providing national law does not prevent them from doing so), will be able to initiate ADR in relation to domestic or cross-border online transactions (offline transactions and trader-to-trader disputes are excluded) by submitting a form and attaching documents. The ODR platform will link to national ADR entities who receive the complaint electronically and seek to resolve the dispute through ADR, using the ODR platform exclusively if they wish.

Both the ADR Directive and the ODR Regulation will enter into force 20 days after their publication in the Official Journal of the EU. The ADR Directive should apply in all member states within two years of its entry into force, and the ODR platform will be available shortly thereafter.

What are the key features of the ADR Directive?

The ADR Directive applies to the out-of-court resolution of domestic and cross-border disputes concerning contractual obligations between a trader established in the EU and a consumer resident in the EU through the intervention of an ADR entity which proposes or imposes a solution or facilitates settlement between them.

ADR entities must maintain up-to-date websites with relevant information and enable consumers to submit complaints online.

Whilst it does not oblige member states to create specific ADR entities in each retail sector, they must ensure that ADR entities are impartial and provide transparent information about their services, offer their services at no or nominal cost to the consumer, and hear and determine complaints within 90 days of referral.

What challenges does the Directive throw up?

There are already a wide range of ADR institutions/entities in existence across Europe, and it may prove challenging for member states to monitor their performance under the ADR Directive.

Traders who commit to using ADR entities/the ODR platform to resolve disputes with consumers must put their details/links on their websites or in their Terms and Conditions. This will also need to be policed at the national level.

In relation to the ODR platform, there will likely be teething problems as (among other things), pursuant to the ODR Regulation, the ODR platform must be user-friendly, identify the correct ADR entity to deal with the dispute and translate the complaint into the correct language for the respondent party and the ADR entity. It must also ensure strict confidentiality and protect personal data. Many businesses already have online grievance systems and software in place so, to ensure take-up, the Commission must ensure the ODR platform is more user-friendly and better marketed than what individual traders are offering.

Like so many forms of ADR, use of ADR entities and the ODR platform require consensus of the parties. As such, agreement will be needed by both consumer and trader before ADR can be attempted. The ADR Directive merely provides that traders should be encouraged as far as possible to participate in ADR procedures. This may limit the practical application of both the ADR Directive and ODR platform.

What does the ADR Directive mean for lawyers?

Lawyers need to be aware that the ADR Directive and ODR Regulation are coming and should be advising their clients accordingly. They have an important role to play in promoting (and policing) them, as the success of the ADR Directive and ODR platform will be measured by reference to public use.

The Jackson ADR Handbook–published in April 2013 as part of Lord Justice Jackson’s package of civil litigation costs reforms–includes some discussion of these pan-European developments. The editorial board clearly recognised a need to communicate such news to lawyers, judges and the public at this stage.

What action should lawyers be taking in light of this Directive?

In the short term, very little will change, but lawyers should be keeping an eye on the national implementation plans via the Ministry of Justice in case the ADR Directive is implemented earlier than mid-2015. At the very least, lawyers should diarise to revisit this in early 2015 and bring themselves up to speed on what is happening at both a national and pan-European level in terms of implementation.