The Council adopts position on measures to facilitate dispute settlement

The Council adopted its negotiating mandate on a package of measures to adapt the Alternative Dispute Resolution (ADR) framework to the challenges of the digital world. Many consumers facing a disagreement with a business are reluctant to litigate because of the small amounts involved, long processing times or lack of confidence in the possibility of reaching a satisfactory solution. ADR mechanisms allow consumers to resolve their disputes with businesses before going to court.

The position of the Council covers the revision of the ADR directive and the regulation on the discontinuation of the online dispute resolution (ODR) platform. The legislative proposals aim to expand the scope of issues that can be resolved out of court, make ADR mechanisms easier, faster and more attractive for both consumers and companies.

The negotiating mandate adopted today limits the scope of the directive to contractual disputes and to the European territory. It proposes several measures to reduce the burden on all actors and empowers the Commission to replace the existing ODR platform with a new digital tool.

Dispute resolution tools adapted to the digital era

The Commission’s proposal expands the scope of the directive to include all dimensions of EU consumer protection laws and all kinds of companies, including non-EU traders. The revised directive aims to cover new kinds of unfair practices (e.g. interfaces and advertising that are manipulative, or geo-blocking mechanisms) that the current directive does not cover.

The Commission’s proposal protects the freedom of businesses to engage in ADR or go to court. But if a consumer asks for ADR, businesses will have to reply to a request by an ADR entity within 20 working days which will incentivise companies to engage in ADR. The Commission proposal provides for a number of measures to protect the most vulnerable consumers, including assistance with launching a case, translation aids and guidance throughout the procedure.

Council mandate

Scope of the directive

For reasons of legal certainty and to ensure effective implementation, the Council position limits the scope of the ADR directive to disputes stemming from a contract, rather than allowing it to include non-contractual disputes as proposed by the Commission. However, the mandate makes clear that contractual obligations include the stages before the conclusion of a contract (e.g. advertising, information provision) and after the end of a contract (e.g. use of digital content).

Reduced burden for ADR entities

When it comes to geographical scope, the Council position allows member states on their national legislation to decide on the application of ADR procedures to disputes with third-country traders. The objective of this measure is to preserve the effectiveness and practical functioning of the system and avoid disproportionate administrative and financial burden on ADR entities.

The negotiating mandate clarifies that ADR can be accessed in both digital and non-digital format, to maintain a high level of consumer protection. Furthermore, the mandate makes clear that companies will have to inform consumers in advance when non-high-risk automated systems (i.e. bots or artificial intelligence) are used in ADR decision-making processes, as is the case for high-risk systems covered by the Artificial Intelligence Act.

The Council position gives member states the flexibility to set the conditions for the bundling of cases at national level. This will allow the directive to be adapted to the different national systems for handling complaints.

The Council mandate extends the period in which traders must reply to a request by an ADR entity from 20 to 40 working days in the event of complex disputes or in exceptional circumstances. The consumer will have to be informed of the extension.

After that period, if the trader has not replied, the ADR entity can consider the trader to have refused to participate. Traders do not have to reply where their participation is mandatory, where ADR outcomes can be reached without their consent to participate, or where they have already committed to ADR contractually, since their reply is unnecessary in such cases.

Reporting obligations

The Council position delays the deadline for submission of the four-yearly report on the development and functioning of ADR entities from 9 July 2024 to 1 November 2024. This will give ADR entities more time to submit their reports to the competent authorities.

ODR platform

The Commission proposed discontinuing the ODR platform and replacing it with a digital interactive tool to ensure continuity. The Council mandate sets a deadline of three months after the entry into force of the revised ADR directive for the Commission to develop this tool. The Commission is also required to promote this tool and to provide its technical maintenance. Finally, the Commission will have to create a network of ADR contact points.

Transposition deadline

The negotiating mandate gives member states an additional year to set out all the necessary national legislative procedures. This additional year will also help other actors to adapt to the new requirements.

Next steps

The negotiating mandate agreed today formalises the Council’s position and provides the Council presidency with a mandate for negotiations with the European Parliament.

Background

According to the 2023 Consumer Conditions Scoreboard, 25% of consumers experience a problem worthy of complaint, but one third of them do not act. As a result, there are only 300 000 eligible disputes solved via ADR annually in the EU. According to the Commission’s impact assessment, this figure could be increased to 500 000 by extending the scope of ADR and the obligation on companies to respond to consumers complaints.

The Commission will maintain the current multilingual list of ADR entities. It has been awarding yearly grants to ADR entities to improve awareness raising and case management.

The Commission presented its proposals on 17 October 2023. The European Parliament adopted its first-reading positions on 13 March 2024.

Further information: Council of Europe