Details – expert information

ADR/Ombudsman & Regulatory Redress

We are supporting the implementation of more efficient and effective out-of-court settlements, in particular advanced Ombuds Schemes as well as Regulatory Redress and any hybrid combinations.

These have the advantage to combine more functionalities than court procedures can do. They should be pursued first in settlement. Best practices also show that no costly intermediaries are involved. Important factors are early capturing of disputes with feedback loops, digitalization of processes as well as cultural change towards learning and preventing/improving.

Dispute Resolution Schemes

In view of the preexisting diversity in the EU Member States the 2013 ADR directive for consumer disputes (2013/11/EU) has left it open for each country to choose between the many types of Alternative Dispute Resolution (ADR). For solving consumer disputes there are more and more schemes and models. Such as mediation, conciliation, ombudsmen, arbitration or complaints boards.

In addition to ADR the term Consumer Dispute Resolution (CDR) is used as well. In general, there is considerable evolution in ADR and CDR schemes across the EU. To deliver collective consumer redress is a question of system design, i.e. schemes and procedures. Comparing different schemes, the most advanced innovations seem to come from consumer ombudsmen. This scheme is more effective in delivering both individual and collective redress than others.

Increasing efficiency and effectiveness

Generally, techniques of out-of-court settlement can go beyond the situation where a court takes a decision. The decision may be about law or may be about fairness or practice. Ombudsmen link to regulators as well as courts. There is typically a permanent and strong channel of communication between an ombudsman and sectoral regulators.  

Courts or arbitration deliver mainly one function, dispute resolution incl. collective redress. The positive impact of CDR Ombudsmen schemes is based on the delivery of further functions such as

  • Information and advice/triage to consumers
  • Information to businesses
  • Investigating complaints
  • Platform for mediation between parties
  • Aggregation of individual claims
  • Making a decision
  • Aggregating data, feedback, intervention with businesses & regulators
  • Publication of information & improving wider learning

These elements explain why Ombudsmen are the leading model of CDR. They typically have a wide range of functions. They operate as part of the system of market regulation as well as the national system of dispute resolution. In this context, it is easy to recognize why Consumer Ombudsmen provide advantages over courts and arbitration-only ADR schemes.

Consequently, evaluation criteria of Collective Redress mechanisms should be:

  • Speed of identification of a mass issue
  • Ease of ability to identify relevant consumers and to contact or refund them
  • Ease of access by consumer (user-friendliness)
  • Cost of consumers (procedure access, obtaining redress)
  • Duration of process
  • Total transactional costs
  • Costs of intermediaries/process
  • Delivery of full redress
  • Regulatory outcome: change of behavior/learning, reducing risk of recurrence

Academic research shows that Ombuds-Schemes and Regulatory Redress has proven to be most effective in Europe. [1]

[1]C Hodges and S Voet, ‘Delivering Collective Redress, New Technologies’ (Hart, 2018), P.298

Co-operations Cross-border

Often in critical and highly regulated economic sectors, such as financial services and energy, resolution schemes have been installed early on. This means enforcement without turning to the traditional court system. In addition, providers of dispute resolution from different member states have been cooperating closely in different sectors, [1] e.g.

  • FiN-NET for the Financial Services Industry
  • NEON for the Energy Sector
  • ECC-NET Travel has been recently created for the transport sector

Those networks allow to share mutual experience and best practice as well as to acknowledge the risks and shortcomings specific to the sector.

Future challenges

The lack of visibility, the high diversity of ADR, ODR, Ombudsmen models and the different ways how they operate are leading to consumer confusion. It is a challenge to the development of consumer dispute resolution.

This threatens to undermine levels of consumer trust in those good quality CDR schemes that already exist. Cross-border issues are aggravating the situation. Progress can be made by aggregating, e.g. via one website and a consistent architecture of bodies. Covering national and cross-border structures. Another important point remains the integration of residual CDR schemes.

Lack of business coverage. There remains an unsolved problem of how to attract many small and medium-sized businesses (SMEs) to join the existing ADR bodies, in other words, national ADR structures lack residual ADR coverage.

Sharing of data remains fundamental. Learning and preventative actions can only be done through sharing of (anonymous) dispute data. This relates to the point of architecture. Aggregation of sectorial data, cross-sectorial data and cross-border data. As well as to the point of coverage. The development of artificial intelligence and machine learning could help overcome specific barriers and biases, and further develop the habit of seeking compromises through a neutral third party and perhaps allow more people to benefit from it.

A sound certification process of out-of-court settlement schemes would support also the perception of trust and neutrality.

In general, it is imperative that further steps are taken to harmonize CDR landscape and architectures on the ground, for the improvement of both national and cross-border dispute resolution and markets.

It is time to focus on improving behaviour, culture, performance and outcomes. Pathways need to be as simple as possible and integrate relevant steps at the right time. should also be easily identifiable by users and guide them.

All elements need to be regarded as part of a single holistic system. This would lead to integrating courts, tribunals, ADR, Ombudsmen and other structures. Avoiding different and uncoordinated systems based on ineffective/inefficient fragmentation.

This technique refers to the concept of an intervention through a public authority. This could relate to competition or regulatory issues but also cover the question of redress. Activities can range from pure influencing behaviour to approval or strict enforcement/coercion.

This means that public authorities can e.g. either use encouraging techniques (e.g. nudging) or time-out periods to achieve changes in behaviours and/or timely implementation of redress.

Public authorities may approve, agree to place or recommend redress arrangements. This mechanism could stimulate parties involved to propose a redress arrangement. Advantages are speed and closure but also avoiding sanctions as well as reputation damage.

Another possibility could be to bring collective redress to court. The immediate power would be to order payment of redress.

There are also mixed types possible. In this case, boundaries between Ombuds entities and public authorities are blurred. Examples exist in the Nordic States (Denmark, Finland, Norway and Sweden). Here the Consumer Ombudsman is the principle national enforcement officer. Enforcement power is then one element of the toolbox.

[1] C Hodges and S Voet, ‘Delivering Collective Redress, New Technologies’ (Hart, 2018), P.153-161

Current research

Journal of Consumer Policy - Collective Redress The Need For New Technologies - Prof. Christopher Hodges, Oxford University [Only accessible for EJF Members]

Abstract - After many years of debate on collective redress, the European Commission has proposed to introduce a representative mechanism to be controlled by public bodies and consumer associations that satisfy certain criteria. However, the Commission has only considered a single mechanism (the litigation-based class or representative action), which is in fact “old technology.” There are several other mechanisms that deliver collective redress—new technologies.

Argumentation support

Solving the Conflicting Collective Claims Cross-Border Conundrum [Only accessible for EJF Members]

The proposed Directive on Representative Actions doesn’t specify how to deal with cross-border cases involving parallel court proceedings in Europe. This document explains to what extent a system of Consolidating Qualified Representative Entities (CQRE) connected via a claims registry could address this issue.

EJF Approach and Procedural Landscape [Only accessible for EJF Members]

Overview of key parameters and various schemes of out-of-court and in-court settlements to consider in the Procedural Landscape.

In the context of the EU Commission's Draft on Representative Actions as part of the “New Deal for Consumers” misses an opportunity to design a central ADR body, or to encourage first-use of a plethora of available non-court redress systems. Instead it institutionalizes an EU wide representative court procedure for damages derived from the Injunctions Directive.

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