Alternative dispute resolution and fundamental rights

Alternative Dispute Resolution (ADR) includes mechanisms aimed at resolving conflicts without the direct intervention of a court. Extrajudicial procedures are defined by the EU as: ‘any method enabling a dispute to be resolved through the intervention of a third party that proposes or imposes a solution’.[1] [2] These procedures may be established by public authorities, professionals in the legal sector, professional bodies, or civil society organizations.

Originally, the EU did not enjoy express power in the area of ADR. It therefore applied soft law instruments, such as recommendations, to determine minimum-quality criteria of these schemes. 1 01 Subsequently, the EU has adopted a directive on aspects of mediation in civil and commercial matters, which includes requirements for mediation in cross-border disputes.[3] This directive encourages judges to promote mediation, and aims at ensuring a sound relationship between the mediation process and judicial proceedings, by establishing common rules.[4]

Moreover, several EU directives, such as the E-commerce Directive,[5] the Markets in Financial Instruments Directive (MiFID)[6] and the Consumer Credit Directive[7] encourage or require Member States to adopt adequate ADR schemes.

The Commission has also set up two networks to facilitate consumer access to ADR for cross-border complaints. A European Consumer Centres’ Network (EEC-Net)[8] directs consumers to an appropriate ADR scheme in another Member State and promulgates a consumer claim form. For financial services, a Financial Services Complaints Network (FIN-NET) of national ADR bodies deals with out-of-court cross-border complaints in the EU.[9] [10]

The advantage of such ADR procedures is that disputes are generally resolved more rapidly and are less costly than ordinary court procedures. They are often free for consumers or available at a modest cost and are settled within a short period of time.

However, recent studies on ADR have uncovered serious shortcomings in these procedures, 1 09 such as a lack of information regarding available out-of-court mechanisms, and insufficient independence of ADR schemes.[11] Although at the Member State level more than 750 ADR schemes exist there are gaps in the coverage, so that the availability to consumers varies substantially throughout the EU. They are also often voluntary, which may leave the individual consumer without sufficient means to obtain either a settlement or compliance on the part of the company.[12]

On the other hand, a compulsory use of specific ADR schemes may pose a barrier to the EU fundamental right of effective judicial protection under certain conditions. The ECJ recently had to decide on this issue in Alassini v Telecom Italia.[13] In this case, Italian provisions imposed the use of mediation as a mandatory condition for the admissibility of a claim before the courts, in certain disputes relating to telecoms services.

The ECJ held that the principles of equivalence and effectiveness do not preclude such legislation, provided, among other things, that the ADR procedure does not result in binding decisions or cause a substantial delay to bringing legal proceedings or involve significant additional costs.[14]

This case was also of particular constitutional importance, because the ECJ analyzed the principle of effective judicial protection from a wider human rights perspective. The ECJ stated that effective judicial protection: ‘is a general principle of EU law stemming from the constitutional traditions common to the Member States, which has been enshrined in Articles 6 and 13 of the ECHR and which has also been reaffirmed by Article 47 of the Charter of Fundamental Rights of the European Union’.

However, the Court held that in accordance with previous case law, these fundamental rights are not absolute, but can be restricted by measures of general interest, provided they are proportionate.[15] In this particular case, the Italian rules imposing a duty on the parties to attempt to find an amicable dispute resolution solution pursued legitimate objectives in the general interest, because they allowed a ‘quicker and less expensive settlement of disputes relating to electronic communications and a lightening of the burden on the court system’. Furthermore, the national legislation was proportionate since ‘no less restrictive alternative to the implementation of a mandatory procedure exists’.[16] Therefore, the ECJ decided that the Italian rules on mandatory mediation complied with the principle of effective judicial protection and were consistent with EU law.

This case shed light on the conditions under which mandatory national ADR procedures are likely to comply with EU law. Amongst others, they should suspend ‘the period for the time-barring of claims’ and be available free of charge or at low costs. Moreover, electronic means should not be the only means by which the settlement procedure may be accessed and interim measures should be possible in exceptional cases.[17]

The ECJ also emphasized the significant role of the quality requirements included in the Commission’s recommendations to promote consumer ADR,[18] which should be respected by Member States. Furthermore, the judgment highlighted that effective judicial protection is a general principle included in European fundamental rights, which may only be limited under specific circumstances. This case will provide some guidance for Member States on how to implement consumer ADR into their national system. At the same time, it remains to be seen to what extent the requirements established by the ECJ also apply to voluntary ADR schemes created by private parties.[19]

In a number of cases the ECJ also had to decide on the conflict between consumer protection included in Directive 93/13 on unfair terms and contractual arbitration clauses.

In Claro v Centro Movil, the standard contract terms of a company included the use of an arbitration tribunal to resolve disputes, raising issues of fairness.[20] The ECJ ruled that the national court was required to assess whether a contractual arbitration clause was void, even if the consumer had not raised the issue of unfairness in the arbitration proceedings, but only in the action for annulment. This was considered as a way of compensating the imbalance of power between the consumer and the company.[21] Arbitration clauses may not always be geared towards consumer protection, as they often include a waiver to go to court. Thus, a court procedure or different ADR options such as mediation or ombudsman schemes might sometimes be more favourable for consumers in terms of location or procedure.[22]

A more recent judgment, Asturcom Telecomunicaciones v Rodriguez Nogueira,[23] concerned the enforcement of an arbitration award. In this case, an arbitration clause had been included in a mobile phone contract of a Spanish telecommunications company. The ECJ ruled that under these circumstances, a national court ‘is required, where it has available to it the legal and factual elements necessary for that task, to assess of its own motion whether an arbitration clause in a contract concluded between a seller or supplier and a consumer is unfair, in so far as, under national rules of procedure, it can carry out such an assessment in similar actions of a domestic nature’.[24] Furthermore, the ECJ stressed that Article 6 of the directive on unfair terms, which provides that unfair contract terms should not be binding on the consumer, is to be regarded as having equal standing to national rules of public policy rank.[25]

As a result of these cases,[26] the national courts have to become active under certain conditions and act of their own motion to verify the potential unfairness of standard terms or to annul an arbitration award if it is based on an unfair contract clause. [27]

  • [1] See: .
  • [2] Recommendation 98/257/EC on the principles applicable to the bodies responsible for theout-of-court settlement of consumer disputes, OJ L 115, 17.04.1998, p. 31; Recommendation2001/310/EC on the principles for out-of-court bodies involved in the consensual resolution ofconsumer ADR, OJ L 109, 19.4.2001, p. 56.
  • [3] Directive 2008/52/EC on mediation in civil and commercial matters, OJ L 136,24.5.2008, p. 3.
  • [4] See more on consumer ADR in I. Benohr, ‘Alternative Dispute Resolution for Consumersin the EU’ , in C. Hodges, I. Benohr, & N. Creutzfeld-Banda (eds), Consumer ADR in Europe(Oxford: Hart Publishing, 2012), pp. 1-23.
  • [5] Directive 2000/31/EC,OJ L 178, 17.7.2000.
  • [6] Directive 2004/39/EC, OJ L 145/1, 30.4.2004.
  • [7] Directive 2008/48/EC, OJ L 133, 22.5.2008.
  • [8] See: .
  • [9] See: .
  • [10] Study on the use of ADR in the EU, Civic Consulting, 16 October 2009, pp. 9-11, andAnnex of the EU ADR consultation for an overview of the existing ADR schemes, pp. 164-324; theLeuven Study (n 22), p. 159.
  • [11] In 2009, only 3% of European consumers who did not get a satisfactory reply from the tradertook their case to an ADR scheme; Eurobarometer Report 282, ‘Consumer attitudes towardscross-border sales and consumer protection’, published March 2010, p. 20.
  • [12] See the ADR consultation paper by the European Commission,note 22: .
  • [13] Joined Cases C-317/08 to C-320/08, Alassini and others v Telecom Italia [2010] ECR I-2213.
  • [14] Joined Cases C-317/08 to C-320/08, Alassini and others v Telecom Italia [2010] ECR I-2213,para. 67.
  • [15] Joined Cases C-317/08 to C-320/08, Alassini and others v Telecom Italia [2010] ECR I-2213,para. 63.
  • [16] Joined Cases C-317/08 to C-320/08, Alassini and others v Telecom Italia [2010] ECR I-2213,para. 65.
  • [17] Joined Cases C-317/08 to C-320/08, Alassini and others v Telecom Italia [2010] ECR I-2213,paras 53-9; see also J. Davies & E. Szyszczak, ‘ADR: Effective Protection of Consumer Rights?’(2010) 35(5) Eur. L. Rev., pp. 695-706.
  • [18] The ECJ clarified the legal effect of Recommendation 98/257, stating that while recommendations are not binding and are not capable of creating rights, ‘Member States should take accountof them when establishing ADR procedures and national courts must take them into considerationin order to decide disputes brought before them’. Joined Cases C-317/08 to C-320/08, Alassini andothers v Telecom Italia, [2010] ECR I-2213, para. 63; see also Case C-28/05, Doktor and Others [2006]ECR I-5431, para. 40.
  • [19] See more on consumer ADR in N. Reich, ‘Legal Protection of Individual and CollectiveConsumer Interests’, in H.-W. Micklitz, N. Reich, & P. Rott (eds.), Understanding EU ConsumerLaw (Mortsel: Intersentia, 2009).
  • [20] Case C-168/05, Elisa Maria Mostaza Claro v Centro Movil Milenium SL [2006] ECR I-10421.
  • [21] The consumer often lacks legal knowledge and has limited power to change contractualarbitration clauses.
  • [22] N. Reich, ‘More Clarity after Claro?’ (2007) 1 Eur. Rev. Contract Law, pp. 42 et seq.
  • [23] Case C-40/08, Asturcom Telecomunicaciones SL v Cristina Rodriguez Nogueira [2009] ECRI-9579.
  • [24] Case C-40/08, Asturcom Telecomunicaciones SL v Cristina Rodriguez Nogueira [2009] ECR 2009I-9579, para. 59.
  • [25] Case C-40/08, Asturcom Telecomunicaciones SL v Cristina Rodriguez Nogueira [2009] ECRI-9579, para. 52.
  • [26] See also the recent Case C-137/08, VB Penzugyi Ltzing Zrt. v Ferenc Schneider, 9 November2010, report not yet published, paras 46-9 and Case C-243/08, Pannon GSM Zrt. v ErzsebetGyorfi [2009] ECR I-4713; K. Sein (2011), ‘Protection of Consumers against Unfair Jurisdictionand Arbitration Clauses in Jurisprudence of the European Court of Justice’, (2011) vol XVIII Juridica International.
  • [27] More in B.U Graf & A.E. Appleton, ‘ECJ Case C 40/08 Asturcom—EU Unfair Terms LawConfirmed as a Matter of Public Policy’, (2010) 28(2) ASA Bulletin, p. 417.
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