The ADR Directive and the ODR Regulation

On 18 June 2013 Directive 2013/11/EU, (“the ADR Directive”) and Regulation (EU) No 524/2013 ("the ODR Regulation”) were published in the Official Journal of the European Union. They enter into force on 8 July 2013. These measures are a significant step towards the re-balancing of civil redress systems and the recognition of the importance of non-court resolution of consumer disputes, which EJF has long promoted. Links to the texts of these two legislative instruments are attached.

ADR Directive

The ADR Directive requires Member States to create their own alternative dispute resolution systems to cover all disputes initiated by an EU consumer against a trader in their territory relating to on-line and off-line sales and service contracts, domestic as well as cross-border.

The underlying concept behind the ADR Directive is that as an alternative to litigation, to improve the internal market by encouraging cross-border trade, there should be EU-wide access by consumers in every Member State to ADR entities which, in combination, comprehensively cover all business sectors in every territory, and which comply with a number of quality criteria. Such qualified ADR entities will then be listed by competent authorities within each Member State, and by the Commission. Inclusion in the list will therefore be a guarantee to a consumer anywhere in the EU that the ADR entity has the requisite characteristics to ensure an independent, impartial, transparent, effective, fast and fair resolution of the dispute in question. 

ODR Regulation

The ODR Regulation sets out the terms upon which the Commission and Member States will establish and run an on-line portal, the “ODR platform”, for the handling of disputes relating to on-line sales or service contracts. The ODR platform will handle domestic and cross-border disputes, and not only consumer to business, but also, where the domestic law permits business to consumer disputes to be resolved through ADR, disputes initiated by the trader.

Implementation

The ADR Directive must be implemented by 9 July 2015. The ODR Regulation applies from 9 January 2016 but certain provisions in it apply earlier. One of these is Article 6 which applies from 8 July 2013, and which requires the Commission to test the ODR platform for technical functionality and user-friendliness by 9 January 2015.

Implementation will be a challenge especially in those Member States with no or minimal ADR systems in existence. The Commission has established a Working Group with experts from each country to facilitate implementation and create guidelines for implementation, which are due to be published by January 2014

ADR Directive 2013/11/EU

ODR Regulation No 524/2013

Adoption of the European Commission’s package on Collective Redress

On 11 June 2013 the European Commission issued its long-awaited policy on collective redress. This included a Communication on Collective Redress, explaining the Commission’s thinking on policy, a Recommendation stating that every Member State should introduce a collective litigation mechanism and setting out common principles, and a draft Directive on competition damages. The Recommendation and the Directive are seen by the Commission as a package.

The collective litigation mechanisms prescribed by the Recommendation are intended to allow multiple claimants in “mass harm situations” arising from infringements of EU law to obtain an injunctive or compensatory remedy. Such mechanisms must take into account the legal traditions of the relevant Member State but must include a common set of principles which are set out in the Recommendation. These principles are essentially safeguards against abuse. They will be familiar to EJF members as being ones we have promoted over many years, though some have been watered down by the Commission. They include:

Encouragement of ADR as means for providing redress;

Stipulation of criteria for standing of representative entities to conduct representative actions;

Opt-in (unless duly justified by reasons of sound administration of justice);

Preliminary court certification before admission as a collective action, filtering out unmeritorious claims;

The ‘loser pays rule’;

No punitive damages and damages to be compensatory only;

Controls on funding and a court case management power to stay insufficiently funded cases, or cases where there is a conflict between funder and claimant;

The Recommendation takes the form of a horizontal framework; in other words collective mechanisms are to be available for all EU law infringements, not just anti-trust or other sector-specific applications.

Although the Recommendation is by its nature a legal but non-binding act (Article 288 TFEU), Member States have been given two years to put the mechanisms in place and implement the recommended principles. The Commission will then assess whether further (potentially legislative) action is required, four years after the publication of the Recommendation, to strengthen its horizontal approach.  Some Member States will consider they have already implemented the recommendation and even exceeded its requirements. Other Member States will be starting from scratch. 

The proposed Directive on competition damages does not address collective redress. Instead it deals with establishing a common set of other modalities of competition litigation for breaches of Article 101 and 102 TFEU and their national equivalents: disclosure of evidence,   and limits on such disclosure by immunity recipient, limitation, alternative dispute resolution, joint and several liability, the availability of the pass-on defence, presumption of overcharge, and quantification of harm. It is intended that the proposal, if adopted, will facilitate bringing private competition damages actions within and across European jurisdictions.

 Whilst the Recommendation published by the Commission will not require further legislative action, the proposed Directive will now undergo the co-decision legislative procedure in the European Parliament and the Council. Once a final text is adopted, Member States will have two years to implement it in their legal systems.

European Commission Directive on Competition Damages

European Commission Directive on Competition Damages

European Commission Communication on Collective Redress

European Commission Communication on Collective Redress

European Commission Recommendation on Collective Redress

Commission Recommendation on Collective Redress