Title: Online Commercial Arbitration in the United Kingdom: Prospects and Challenges based on recent developments after the introduction of the New ODR Platform
1.1 Introduction (This chapter will be expanded further in second half of the Paper)
ODR, or Online Dispute Resolution, is essentially a set of techniques, which are used in the resolution of disputes, which occur online. They employ both information and communication technology to automate and speed up the processing of information and overcoming the problems which arise from distances through remote communication. They typically involve a main online platform where all pertinent documents such as evidence, expert opinions, legal arguments etc. are uploaded before being stored, organized and finally made accessible to all relevant parties as well as a neutral third party. Distance communication via a web conference may also play its part, which eliminates the needs for all involved parties to actually meet. Additionally, ODR often uses sophisticated tools for the handling of the legal information relating to a specific case or to the legal and expert opinions.
This dissertation aims to opt for the case study approach in exploring how ODR has become important to the UK’s new generation of businesses and consumers. The reason the author has decided to focus succinctly on UK and EU law is due to a more recent controversy created by Brexit, whereas there is an expected period of uncertainty to follow, in the development of further ODR mechanisms in the UK. How, this will affect the over all response of the UK to taking dispute resolution to the online world, is something which is worth discussing in detail.
In order to explore the various themes promised by the title, the writer has formulated the following aims and objectives of the dissertation:
2.2 Aims and Objectives
- Evaluating the academic definition of ODR as understood under UK, International (UNCITRAL) and EU laws
- Evaluating its potential for development as a cost-saving tool for dispute resolution
- Evaluating the recent changes brought into the ODR platform by EU legislation the ‘new ODR Platform’
- Considering whether Brexit will affect the growth potential of ODR in the UK in the coming years
- Discussing the barriers to ODR becoming a primary method of dispute resolution in the future in the UK
This chapter/section still needs to be written up (1500 words)
ODR and its relation to ADR and Mediation under UK Law
There are several different kinds of ODR in existence but most, however, have been based on the traditional methods of ADR, Alternative Dispute Resolution, particularly those relating to arbitration, mediation and a combination of both. The more innovative and modern forms include blind bidding, mock online jury trials and automated assistance for negotiations. In terms of legal issues, arbitration is a type of private adjudication where the neutral arbitrator, or third party, is chosen and then paid for by those parties involved and makes an enforceable and binding recommendation as to how that particular dispute should find resolution. The arbitrator will typically decide on the case according to whatever authoritative standards are applicable to the relevant law but could also apply considerations, which are altogether more equitable. As opposed to litigation, the procedure employed to arrive at this award tends to be way more flexible and is typically determined by the parties themselves. The act of arbitration is actually governed by a specific, and legal, framework that has been set out in the 1996 Arbitration Act. Arbitration is the cornerstone of dispute settlements outside of the court and any agreements can be made between the parties either before the dispute has arisen or after but is binding for all parties. As an arbitration agreement must be made in writing a repeated question has been whether electronic contracts qualify as ‘writing’. In Section 5 paragraph 6 this question is answered as it includes agreements that are recorded by electronic means. Therefore, any agreement made via electronic communication must provide sufficient records to be deemed valid.
By contrast, mediation is not always based on standard legal arguments and is actually a voluntary process, which is not considered to be binding until all parties have reached an agreement. Therefore, it is not based on any legal framework. Mediation’s main form of regulations is the Mediation Directive 2008/52/EC, which in turn is implemented by the Cross‐Border Mediation (EU Directive) Regulations 2011/1133 and adheres to provisions within the Civil Procedure Rules which encourage mediation.
This directive is applicable to all processes where two parties or more with a cross border dispute attempt to, on a voluntary basis and by themselves, reach an agreement amicably to solve their dispute with the assistance of the mediator. This is applicable to both commercial and civil law. The directive clearly states that mediation is in no way mandatory but neither does it prevent member states making it thus. Whilst the aim of the directive is to encourage the use of mediation it is only applicable to cross-border disputes. This is why so many members of the EU, not including the UK, have now extended its usage into domestic matters. The directive actively encourages a voluntary code of conduct for both mediators and in terms of training. It is also stated within the directive that member states should offer a provision for consent orders under their national laws unless such laws do not allow them to be enforceable. It offers mediation of a ‘without prejudice’ nature, thus preventing Any member state from sharing information which has arisen from, or is connection with, any mediation process to use as evidence in either court or within arbitration. The only exception to this is when it’s necessary in terms of overriding the considerations for public policy of the concerned member state. An example of this is ensuring the protection and looking after the best interests of, any children involved or to prevent any harm to the psychological or physical integrity of a person. Another is when the evidence is essential for the enforcement of the agreement. The mediation directive does, therefore, have a proviso in place for confidentiality but also permits member states to employ stricter rules. Within the UK this will usually be provided within the mediation agreement. Furthermore, it also provides that all limitation periods be extended during the period of mediation, and in the UK these regulations extend to 8 weeks after the mediation has ended. There is a long-standing authority in place where communications between litigants that have been made without prejudice are excluded as evidence on grounds of public policy.
The Costs and Penalties of Refusing Mediation/ADR in a world where ODR prevails
Another legal and important issue, which is relevant to ODR, is when we question to what extent is a party’s unreasonable refusal to participate in ADR and the subsequent consequences of that party due to being unable to recover their costs, even if the litigation is successful. Both parties and their advisers are under obligation to seriously consider ADR as a method of resolving their dispute. When the costs are assessed the court will always take into account any efforts, if any, which have been made either before or during the mediation to try and resolve their dispute. In a wide range of cases courts have held that a successful party cannot recover their costs due to the fact they have unreasonably refused to even consider participating in mediation. One example of this is the case of Dunnett v Railtrack where the court held that as the party turns down the chance of ADR when it was suggested by the court as part of the cases effective management then under rule 1.4 there could be uncomfortable consequences as far as costs were concerned. In the case of Shirayama Shokusan v Danovo, the court held that it possessed the jurisdiction to order both parties to undergo mediation despite the fact that one party had made allegations of dishonesty against the other. Even disputes, which involve complex, expert evidence, are not exempt in principal from the need to seriously consider mediation.
If any claim is considered to not have any prospects of success it may well be reasonable for that successful defendant to not agree to the offer by the claimant to partake in pre-trial mediation and they won’t be penalized in the recovery of costs. However, the high court finds that any party who at first agrees to take part in mediation then causes it to fail due to his unreasonable position within that mediation is realistically in the exact same position as a party who refused to mediate on unreasonable grounds. In Halsey v Milton Keynes NHS Trust certain criteria was set out by the Court of Appeal which are now used in order to determine when it is actually reasonable for parties to refuse to take part in ADR. In Walker v Wilsher it was confirmed that R v K does not apply to the criminal proceedings of CPR Rule 1.4 (2) (e) in that active case management does include encouraging all parties to find an alternative procedure of dispute resolution if the court considers it to be appropriate and is facilitating the use of such a procedure”.
These include factors pertaining to the nature of the absolute dispute and how suitable it is for mediation i.e.
- Whether or not there is any need for precedence on a specific point of law.
- The Strength of a case;
- Whether ADR has already been tried and proved to be unsuccessful on a previous occasion,
- Whether the costs of the mediation is found to be disproportionate to the actual claim,
- Whether or not the mediation will lead to a delay in the trial that is deemed unacceptable,
- Whether there is no reasonable prospect of mediation being successful
Furthermore, it held that the actual burden of illustrating that it was unreasonable to recover any costs in on that person who would be paying them and is alleging that the opposing party did not engage in the mediation.
Mediation can now be carried out via such online technologies as web platforms and remote communications including email, chat, web-conferencing, instant messenger etc. This is providing that both parties enjoy equal access to this technology and that there is no reason as to why identical cost penalties would be applied to a party’s refusal to engage in mediation online.
Is the agreement to participate in mediation/ADR binding where ODR operates?
This is another commonly asked legal question, which arises from whether, and how, clauses in contract to enter mediation to resolve a dispute is legal and binding to all parties. Under the laws of England, the traditional position is that any agreement relating to further negotiations is ill defined and is therefore not considered to be legally binding. However, when giving specific reference to the mediation in the case of Cable & Wireless v IBM UK, there was a pre‐dispute clause within the agreement for the submission of disputes to mediation to be enforced and the court delayed proceedings until all parties had referred their disputes to the mediation procedure at CEDR.As this clause referred specifically to a recognized procedure, the obligations of the parties were certain making the clause enforceable. Where online mediation is concerned no conflict exists between Article 6 ECHR, the right to a fair trial, as settlement within mediation is a voluntary choice and must be agreed by all parties. Therefore, these parties never lose their right to fair trials unless the mediation process will cause an extraordinary delay. There are several additional considerations, which could arise when business – consumer contracts contain ADR clauses. If the contract is a standard term non negotiable contract the consumer can say that that the ADR clause is unfair and not binding to the consumer under the Unfair Contract Terms Directive 93/13/EC. This area of the law is currently under revision under the Consumer Rights Bill). The EU’s Court of Justice had to rule on this very question in Halsey v Milton Keynes General NHS Trust, Rosaalba Alassini and upheld that the online mediation clause was enforceable if a certain number of conditions were met;
- Online mediation does not cause any substantial delays
- That online mediation be inexpensive
- When online mediation suspends the limitation period
- The right to bring such an action before the courts is maintained
- All parties have an equal and fair access to the online mediation
- Interim measures such as injunctions are not excluded
The case concerning implementation of Article 34 from the Universal Service Directive 2002/22/EC, the imposition of an obligation of member states to offer ADR for certain disputes that exist between providers of communication providers and their customers including ODR was implemented in Italy as mandatory mediation prior to the lodging of the claim in court, and was challenged by the consumers.
Therefore, as far as online mediation procedures for consumers are concerned it must be taken into account that some may not have easy Internet access and/or cannot use online facilities so they should be offered either an offline alternative or be provided with support in order to overcome these difficulties.
The Validity of a Pre-Dispute Arbitration Clause Within Consumer Agreements
The question of how valid pre-dispute clauses are in online arbitration raises many different issues and it is important, therefore, to make the distinction between the ODR procedures, which are based on mediation, and those, which are based on arbitration. As we have already mentioned previously, in terms of validity arbitration clauses must be in writing or be provided as a sufficient record. Additional requirements will arise in terms of both mandatory arbitration and other adjudication processes rather than voluntary arbitration, which is based on such an agreement. As arbitration awards are binding with a res judicata effect, this arbitration forecloses on the access to the courts, thus giving rise to a potential conflict in terms of rights to a fair trial. Therefore, arbitration is typically based on such an agreement, which all parties have entered into voluntarily. This then raises further questions relating to the validity of the arbitration agreement of which one of the parties is the consumer who might not be fully aware of the arbitration’s nature. Hence, there are certain restrictions pertaining to the validity of these pre-dispute arbitration clauses within consumer agreements, particularly when they are contained in the standard terms. Under the laws of the EU, the Unfair Contract Terms Directive 93/13/EC lists an arbitration clause within a standard consumer contract as a term that is potentially unfair. The EU Court of Justice has previously held on several occasions that if the national court holds the pre-dispute arbitration clauses to be unfair the award must become null and void. This is the case even if the consumer failed to raise the terms unfair nature during arbitration as the consumer may not be aware of their rights or were deterred from enforcing them due to the costs involved.
When it comes to deciding whether or not an arbitration clause, or the other standard contract terms within consumer contracts, is unfair is very much dependent on whether it will cause a significant imbalance in the obligations and rights of the consumer and be of detriment to them in terms of good faith. This also depends on the exact circumstances of case, which will be determined by the national court. In England, the arbitration agreement is concluded with the consumer, whether pre-dispute or post-dispute, when it is considered as being unfair, therefore rendering it enforceable. Under English law, if the claim is not in excess of £5000.30, section 90 of the Arbitration Act 1996 clearly stipulates that provisions for consumers apply to legal and natural persons, a company for example, who obtains services and good for purposes outside of its trade, profession or business. Thus, under this English law, if the disputed amount is not more than £5000 any arbitration clause becomes automatically non-binding on consumers. Therefore, there is no need to apply any of those tests laid out in Directive 93/13/EC, as implemented within the UK by the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083).
Should the disputed amount exceed £5000 the significant imbalance test will come into play on a case-by-case basis in order to assess whether or not the arbitration clause is binding for the consumer. There is a list of examples of so called unfair terms, known as a grey list, in the annex to the directive which includes the excluding and hindering of the consumers rights to take legal action. The English courts have applied a fair test in respect of arbitration clauses by finding them to be fair following professional advice to the consumer. Under the latest European laws arbitration can only be offered to those consumers who agree to go to arbitration following their dispute.
ODR and International Laws
The world of electronic, or e, commerce is experiencing a continuing upward trend of growth, bring with it a constantly changing landscape of contractual practices. To keep abreast of the evolving disputes which may come before them, legal professionals are having to develop not only their analytical spirit but also rigorously apply known and proven concepts to this digital phenomenon.
Submitting any disputes within the realms of electronic commerce to the standard types of arbitration, which are, practiced offline, or in a traditional ADR, alternative dispute resolution, manner will immediately raise problems. A few popular questions are whether, the parties involved can engage in properly via electronic channels at all? How will they furnish the electronic evidence needed to support their claims? Online methods of dispute resolution give rise to further difficulties. How could an arbitration that is exclusively electronic be organized so the litigants do not have to be present? Can awards be made through electronic means? How will such rules sit with local laws of participating jurisdictions?
There are already numerous sources of commercial arbitration on an international scale and additionally, there is a vast array of regulations which need to be consulted in order to answer those questions which relate to arbitration disputes arising from electronic commerce. For the purposes of this paper however, we are mainly concerned with such international sources as the 1958 New York Convention or the numerous model laws covered by UNCITRAL; United Nations Commission on International Trade Law, including those on electronic commerce and arbitration, national sources must also be taken into account. This is due to the fact that, in practice, these laws will influence the eventual outcome of any arbitral tribunal.
In order to illustrate this we will be looking as the recent adaptations to the many national laws of arbitration, as well as those case laws relevant to electronic commerce. As noted liberally elsewhere in this work, our country of Focus is UK/EU. Internationally, many of the institutions, which have offered electronic arbitration, have emerged in the past but such experimental projects as ‘Cybertribunal’ disappeared just as quickly as they appeared. Based on this concern, it becomes pertinent that once a dispute arises practitioners must carefully scrutinize the rules belonging to the chosen institution.
UNCITRAL and ODR
The draft procedural rules of UNCITRAL envisage a procedure that is in three stages;
- Assisted/automated negotiation/s between parties without a neutral human present which may include techniques such as blind-bidding
- Recommendations that lead to such self-enforcement mechanisms as trust marks, those, which require securities posting, facilitating payment award etc. and arbitration leading to enforceable decisions.
If negotiation does not resolve the dispute with a period of ten calendar days that procedure automatically moves onto the next stage; conciliation. If this then fails the dispute escalates to the final stage; adjudication.
The scope of the application of draft rues covers both low value consumer and commercial disputes, which have arisen from cross border, e-commerce transactions whereby traditional methods of dispute resolutions are not viable. Under such rules, any business will be able to submit both complaints and counterclaims against a consumer, which may relate to either feedback reviews or the unpaid delivery of services or goods.
The main aim of the UNCITRAL initiative is the establishment of a normative ODR framework, which is both internationally trusted and accepted. This project is both ambitious and far reaching and will establish a brand new paradigm in terms of e-commerce dispute resolution akin to the matter in which the Uniform Dispute Resolution Procedure, which ICANN adopted, has altered the entire paradigm for those disputes arising from conflicts between domain names and/or trademarks. In the establishment of this framework, UNCITRAL drafted procedural rules intended for use in conjunction with these four documents that are attached as annexes;
- The guidelines and the minimum requirements for all online dispute resolution platforms/providers/administrators,
- The guidelines and the minimum requirements for all neutrals
- Substantive legal principles for the resolution of disputes
- Enforcement on a cross‐border basis
The ADR Directive has imposed obligations on the UK to make sure that there is a provision for online out-of-court settlements in place for all manner of consumer complaints in all the sectors with the exception of higher education and healthcare service providers. This gives consumers many more redress options against businesses without having to appear in court. This applies to all manner of cross-border and domestic contractual disputes whereby a trader is established within the EU and the consumer is also a resident of the union. However, it does exclude the handling of complaints, which the trader has established, direct negotiations between the trader and the consumer and judicial settlement.
The participation of businesses in ADR remains voluntary in the majority if economic sectors but businesses have to state which of the ADR procedures they are taking part in and, whenever a dispute arises, state whether or not they are participating in ADR. Additionally, all online businesses must carry a link to their preferred ODR platform. The ADR process has to be accessible online and it must be either low cost or free for the consumer. Furthermore, there minimum standards of quality attached to the ADR Directive for all certified ADR’s which will be monitored by national and competent authorities and they will be listed on a European ODR platform which has been administered since January 2016 by the European Commission. These certified ADR’s could refuse with such disputes as those deemed to be vexatious or frivolous or those where the consumer refused to contact the trader first or when they have been submitted over a year after the dispute first arose.
The ODR platform has been established on the ODR regulations and effectively operates as a portal that allows consumers to file disputes that arise from online e-commerce and these complaints are redirected to the concerned online business. Should the business be contractually or legally willing or obliged to participate within a certified ADR body?
If the business is legally or contractually obliged or willing to participate in a certified ADR body, then the business response, together with the ODR regulations allows traders to bring complaints against consumers depending on whether the laws of the country in which the consumer resides allows this. The BIS has already stated that this option will not apply to the UK, thus all complaints here will flow in only one direction; from consumer to business.
The concerned ADR body will use an available case management tool either within the ODR platform or it’s own technology in order to conduct online ADR procedures. Whatever the final outcome it must be reported back to the relevant ODR platform. The ODR’s main role is to increase the awareness of the ADR processes as well as providing ODR technology, which is user friendly. The main aim of this is to make cross border redress even more accessible to those parties involved in the dispute. In doing so, this platform had to provide electronic translation functions, which are supported by the kind of human intervention to assist ADR entities and parties to exchange relevant information. Every EU member state had to designate a set contact point containing not less than two ODR advisers, who will more than likely be drawn from the various national European Consumer Centers. These contact points have the capabilities of providing all parties with both information relating to the submission of the actual complaint along with the ADR processes available to them. They also offer information to parties about the other methods of redress available in cases whereby the dispute cannot be resolved by this platform. Within the UK these contact points focus on disputes of a cross-border nature but there is also support in place for domestic disputes courtesy of helpdesks to assist businesses and consumers in the identification of the relevant ADR bodies needed.
Recent Developments Relating to Online Selling and ODR in the EU
A European ODR platform is now in place as of January 2016. This platforms intention is to be used by consumers and online retailers to settle disputes. This new ODR platform provides a faster, simpler, cheaper and more efficient way for the settlement of cross border disputes within the EU.
A few years ago the European Council and Parliament adopted regulation number 524/2013 in terms of online dispute resolution for all consumer disputes. This ODR regulation has significant importance in developing alternative online dispute resolutions between traders and consumers within the EU. E-commerce is the worlds fastest growing market and offers customers across the globe the chance to purchase services and products from anywhere else in the world via their Internet connection. That said, only a fraction of all online consumer transaction actually takes place across national borders. According to the policy makers in Europe, the main reason for the relatively slow uptake in cross border e-commerce sales is the lack of efficient methods with which to settle any cross-border disputes that may occur.
Given that the financial threshold needed to initiate court proceedings is pretty high, alternative ADR methods including mediation and arbitration are deemed better suited to solving these disputes. The policy makers are of the opinion that most national ADR schemes are incomplete or fragmented, and the first steps toward better organization and structuring of these is via the directive on the consumer ADR (Directive 2013/11/EU). Additionally, and in specific relation to Online ADR, better known as ODR, they have adopted, among others, the ODR regulation that introduced the ODR Platform that was both developed, and is operated, by the European Commission.
In order that we all have a clear understanding of these new rules the ODR Regulation and the ADR Directive need to be read together. For the purposes of this piece however we are concentrating solely on the ODR Platform and how it affects online traders.
The ODR Platform
The 2016 ODR Platform became operational on the 9th January and became accessible to both traders and consumers on the 15th February. Its salient features are as follows:
- It is both multilingual and interactive having been specifically designed to assist those consumers with a complaint about either the services or good they have purchased online.
- When agreeing to the ODR traders or consumers have to complete the electronic complaint form that is available on the ODR Platform.
- The parties will then decide which ADR entity is most competent in settling their contractual disputes. ADR entities are those bodies which comply with the binding requirements of quality that have been established within the ADR Directive as well as being included in national listings of ADR Bodies.
- The chosen ADR entity will handle the entire case online with an income being reached within 90 days. The legal values of the ADR entity’s decision is dependent on which form of ADR has been selected; arbitration, conciliation, mediation etc.
Compliance with the new ODR mechanisms
Traders established in the EU/UK and who are engaging in the online sale of goods or services with consumers must inform those consumers about the existence of this ODR Platform and make clear how this can be used to resolve any disputes. In order to further evaluate the functioning of the ODR structure the fact that, legally, it has the following requirements must also be kept in mind;
- An electronic link directly to this ODR platform must be placed on your website/s along with an email address for contact. This link must be easily located for consumers. If you are a trader who makes commercial offers via email to consumers similar information must be included in those emails.
- This information will also be part of the general t’s and c’s applicable to the service contracts and online sales which take place on your website.
- However, traders do have a get out clause, as ultimately they cannot agree to the ADR entity handling the dispute. As stated previously, BOTH parties must agree for it to become method of resolution.
The aims of the new ODR Platform: an evaluation
This new regulation has been called a baby step towards the tackling of the practical issues that have to be addressed in order for cross border trade to flourish. It aims to ease one of the major legal difficulties concerning online consumers; what can they do when services don’t match up to their description or goods arrived damaged?
The single digital market in the EU aims to encourage the building of confidence and trust among consumers when they buy online from sellers in other European states from their own. The EU Commission very much hopes that by launching this platform they are providing consumers with a practical tool to resolve and subsequent issues arising from an online purchase without having to involve the courts as well as removing the location and language barriers.
The main intention of the ODR Platform is that consumers will be able to enforce their own rights in terms of low value claims. Being able to avoid the courts will also me a more attractive option for those traders who have to consider their online reputations and want to maintain good relations with their customers. The easy access, along with the removal of all language concerns, should be enough to encourage more consumers to buy from overseas, as they will do so safe in the knowledge that should an issue arise they have the power to resolve it relatively easily.
The ODR Platform Process
The new ODR Platform follows a very simple process;
- The complainant, be it the consumer or the trader, completes the electronic complaint form.
- The platform then transmits this complaint to the other party and invites the to propose the ADR entity
- Once both parties have agreed on the ADR entity the ODR platform automatically transmits the complaint to the entity
- Once the ADR entity agreed to handle the dispute they deal with it entirely online and reach their outcome within 90 days
Parties also have access to the free case management tool and can use this if they prefer. The ADR procedure can be conducted in any of the EU’s 23 official languages through the ADR body that is compliant with all the necessary requirements of quality that is set out in Chapter ll of this Alternative Dispute Resolution Directive (2013/11/EU). One clear obstacle in the successful resolution of a dispute is the parties need to agree on the ADR entity. Should they fail to agree, or the chosen identity turns down the dispute, the complaint cannot proceed any further.
The regulation will apply to those traders who are established in the EU and who engage in online service contracts or sales. Both these concepts are broadly defined within the regulation. The definition of “established within the EU” is in accordance with the Directives Article 4 (2). This definition includes those traders who have their central administration, statutory seats or places of business, including branches, agencies or any other aspect of their business within the EU. This is an intentionally broad definition and the catch all term of ‘any other aspect’ means that any US companies who have a physical presence within the EU are also covered by the regulations. The definition of ‘service contracts or online sales’ covers any service or sales contracts for services or good which are offered by a trader including the online marketplaces where purchases are completed over the Internet or by such other electronic means as emails or telephone sales. In short, they cover every service or goods that the consumer has ordered by electronic means.
The majority of the directive that is implemented within the UK is via the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (SI 2015/42) (2015 Regulations) In the same ilk as the ODR, the use of this ADR is not compulsory except when the trader is a member of a trade association whereby the rules or laws insist that the trader must use the ADR services. These traders have to provide both the name and website URL of the relevant ADR entity within their terms and conditions as well as on their website/s.
Traders under obligation to use these ADR entities in order to resolve any disputes with their consumers under the regulations of 2015 must also inform their consumers of the existence of the ODR platform and provide and electronic link to it from their website and also include it in any email offers as well as within their terms and conditions. This platform does not replace standard complaints procedures and the EU Commission is still encouraging both consumers and trader to try and solve their disputes amicably. Neither does it replace the consumers right to take the trader to court should they wish to, although it is pretty unlikely that a consumer would choose to go down the costly and lengthy court route if this alternative is readily on offer.
A look at the current EU E-commerce and consumer laws and their link to ODR
The EU consumer laws strive to achieve a very high level of protection for their consumers and at the same time remove the barriers preventing market integration right across the EU with the focus being on stimulating cross-border trading. The first attempt the EU commission made at harmonizing this approach was back in October 2011 when they forwarded their proposal for a CESL; Common European Sales Law. This was an optional legal system for those who traded online across the borders of the EU states. However, as it was not mandatory saw it being rejected as being flawed. In 2015, the Consumer Rights Act consolidated the existing consumer laws within England and Wales whilst also introducing several changes to the domestic laws, which include the rights relating to all digital content, ahead of developments within the EU. The EU Commission, after abandoning CESL, proposed in December 2015 to introduce two new directives containing maximum measures relating to harmonization and addressing those key criticisms of CESL. These directives also focused on other consumer remedies, one of the areas that were highlighted in consultations on online trading barriers following CESL’s demise. These directives harmonize such areas as the hierarchy of the remedies that are available to consumers as well as the minimum period allowable for reversing the burden of proof on goods, which were found to be defective on delivery.
However, legal chances and focusing on the harmonization of national laws is not an online sales panacea, and further simplification would be a welcome step. The practicalities of making a website available in several different languages. Issue of cross border sales tax and VAT, cultural differences and delivery costs are all deemed to be as important as the legal remedies being put in place to stimulate cross border e-commerce in the EU.
The affect on EU e-commerce from new ADR and ODR rules
Member states within the EU are now required to implement the new rules regarding the procedures for resolving disputes between e-commerce consumers and traders out of court. Back in 2013, the EU introduced two new laws which intended making the resolution of disputes much easier for customers based in the EU. These were;
- The ADR Directive 2013/11 on the alternative dispute resolution for all consumer disputes
- The ODR Regulation 524/2013 relating to online dispute resolutions
July of 2015 marked the cut off date for the ADR Directive to be implemented and certain obligation of EU Member States of the ODR Regulation.
International commerce, including the free movement of goods across EU boundaries gives consumers many advantages including a wider range of cheaper products and disadvantages such as traders being in different legal jurisdictions and easily held accountable for defective goods or substandard services. The ever-expanding e-commerce marketplace also brings new and increasingly complex challenges for all consumers including the filing and resolution of complaint with online merchants who are not located in their home country. Both of these directives aimed to remove the barriers stopping the free movement of goods, which existed due to variance of ADR procedures available in the EU member stated. The EU aims to provide a constant level of protection for consumers and ADR procedures right across the union. The introduction of the ADR Directive and ODR Regulation will give consumers more confidence when they buy from merchants outside of their own country, thereby opening up the EU market even more.
The ODR Regulation is in line with the ADR Directive in that it only applied to those traders who are established within the EU and to consumers who reside in the EU. In addition to trader’s information requirements under the ADR Direction, ODR Regulations require online traders to display their email addresses on their websites to act as a first point of contact as well as being the aforementioned link to the ODR Platform.
How The New Rules Have Been Implemented Across The EU
While the deadline for the implementation of these new rules under the ADR Directive was the 9th July 2015 it was illustrated within the UK regulations that not all EU countries would hit this deadline. In contrast to this however Belgium has long been the forerunner and adopted the ADR Directive back in April of 2014. The new rules in Belgium go beyond all the minimum requirements of the Directive in respect of the requirements pertaining to become an ADR entity. Under these new laws, Belgium has created their own COS; Consumer Ombudsman Service to deal solely with residual claims as well as acting as an umbrella framework to handle other ADR services within the sectors of railways, telecoms, energy, insurance, postal and financial services.
Both the ODR Regulation and the ADR Directive will enable all EU consumers to resolve claims and disputes more easily and it is hoped that this unified EU approach to consumer-based disputes will bring about the desired results. Additionally, both the Directive and the Regulation provide for the nominal cost or free use of the ADR or ODR procedures, further enforcing the EU’s aims of encouraging the free movement of all goods between its member states.
The main problem remains however that apart from a few provisional requirements relating to information for online merchants, using these new procedures is not mandatory and the procedures do not apply to those traders who are established in countries outside of the EU but sell to consumers within its boundaries.
How ODR will affect the Legal Profession
The Law Society issued new advice to solicitors on how their duties have changed and must now be fulfilled under the Directive and Regulation. It states that all solicitors must, on reaching the end of the first tier of the complaints process, provide the information on the Legal Ombudsman, as this is the statutory solicitors complaints scheme as well as informing the client on such durable mediums as;
- Not being able to settle the complaints with the client
- The name and website URL of the ADR approved body which is competent to handle the complaint as long as both parties want to use the scheme
- Whether they are intending to use that particular ADR approved body
The Law Society also highlights later in the advice that solicitors need to note that whilst they are required to provide the necessary information about ADR approved bodies they are not required to actually submit the complaints to the body. The obligation within the ADR Directive and the government regulations is to only give information and not to agree to the actual use of this approved ADR.
Impact of the Brexit on ODR
The implementation of the new ODR platform within Europe looked all set to revolutionize cross border trading and dispute resolving between EU member states. However, what bearing this will have on traders and consumers within the UK following Brexit is open for debate. The current legislation clearly states that these new rules only apply to traders and consumers within the EU, and the UK will have neither once all the I’s have been dotted and T’s crossed. Will Europe bend their rules so the UK remains included in this legislation or will they be forced to go it along and bring in their own ODR platform and ADR entity’s? Granted, there are already several
L of the latter in place but these were set up to fit in with the EU laws, and how and if they can manage productively under their own steam remains to be seen over the coming months leading up to the day the UK finally wave goodbye to Europe and go it alone.
The biggest impact is, of course, on the population of the relevant consumers. As we have mentioned several times, the new ODR platform in Europe applies ONLY to EU members. Citizens of Iceland, Norway and Switzerland are already unable to use it and as the UK is one of the biggest online market places in the world never mind Europe, this short-lived assurity and support isn’t going to be around for very long.
There are many differing views on how the Brexit has played out for the legal professionals and the business community in the UK.Those who have championed Brexit from day one, and forever proclaimed that the 23rd June would be ‘Independence Day’ have already said that the UK will be better off without being bound by the rules of the Directive or the Regulation. Quite how it seems to have been missed off the agenda as nobody seems to be able to answer how the ongoing steps to invoke and apply the New ODR set up by the EU law will continue to be utilized by the UK citizens. This period of uncertainty is very important for looking at the realities of cheap, effective and fast dispute resolution and how the UK might be missing one of the best opportunities to do the same.
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Picardi v Cuniberti  EWHC 2923 (QB), para 102;
Mylcrist Builders Ltd v Mrs G Buck  EWHC 2172 (TCC),
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