Brussels: Europe and the Arabs
The Council of the European Union today adopted its negotiating position on a package of measures to adapt the alternative dispute resolution (ADR) framework to the challenges of the digital world. According to a statement issued by Brussels, many consumers who are in dispute with a company refuse to resort to litigation because of the small amounts involved, long procedure times or lack of confidence in the possibility of reaching a satisfactory solution. Alternative dispute resolution mechanisms allow consumers to settle their disputes with companies before going to court.

The Council position covers the revision of the Alternative Dispute Resolution Directive and the Regulation on the suspension of the Online Dispute Resolution (ODR) platform. The legislative proposals aim to expand the range of cases that can be resolved out of court, and to make alternative dispute resolution mechanisms easier, faster and more attractive for both consumers and businesses.

The negotiating mandate adopted today defines the scope of the Directive on contractual disputes and on European territory. It proposes several measures to reduce the burden on all actors and enables the Commission to replace the current alternative dispute resolution platform with a new digital tool.
Dispute resolution tools adapted for the digital age
The Commission’s proposal extends the scope of the Directive to cover all aspects of EU consumer protection law and all types of businesses, including non-EU traders. The revised Directive aims to cover new types of unfair practices (e.g. manipulative interfaces and advertising, or geo-blocking mechanisms) that are not covered by the current Directive.
The Commission’s proposal protects the freedom of businesses to engage in alternative dispute resolution or to go to court. However, if a consumer requests alternative dispute resolution, businesses will have to respond to a request from an alternative dispute resolution entity within 20 working days, which should incentivise businesses to engage in alternative dispute resolution. The Commission’s proposal provides for a number of measures to protect the most vulnerable consumers, including assistance in bringing a case, translation assistance and guidance throughout the procedure.
Scope of the Directive
For reasons of legal certainty and to ensure effective implementation, the Council’s position limits the scope of the ADR Directive to disputes arising from a contract, rather than allowing it to include non-contractual disputes as the Commission had proposed. However, the mandate clarifies that contractual obligations include the stages preceding the conclusion of the contract (e.g. advertising, providing information) and after the end of the contract (e.g. use of digital content).

Reducing the burden on ADR entities
When it comes to geographical scope, the Council position allows Member States to decide in their national legislation whether to apply ADR procedures to disputes with traders from third countries. The aim of this measure is to maintain the effectiveness and practicality of the system and to avoid a disproportionate administrative and financial burden on ADR entities.

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

The Council position gives Member States the flexibility to determine the conditions for aggregation of cases at national level. This would allow the Directive to be adapted to different national complaint handling systems.

The Council’s decision extends the period within which traders must respond to a request from an ADR entity from 20 to 40 working days in the case of complex disputes or in exceptional circumstances. The consumer will have to be notified of the extension.

After that period, if the trader does not respond, the ADR entity can consider the trader to have declined to participate. Traders do not have to respond where their participation is mandatory, where ADR outcomes can be reached without their consent to participate, or where they have already committed to ADR by contract, as their response is not necessary in such cases.

Reporting obligations
The Council’s position postpones the deadline for submitting the quarterly annual report on the development and operation of ADR entities from 9 July 2024 to 1 November 2024. This would give ADR entities more time to submit their reports to the competent authorities.
Online dispute resolution platform
The Commission has proposed to discontinue the online dispute resolution platform and replace 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 Alternative Dispute Resolution Directive for the Commission to develop this tool. The Commission is also required to promote the tool and provide its technical maintenance. Finally, the Commission is to set up a network of ADR contact points. The negotiation mandate gives Member States an additional year to put in place all the necessary national legislative measures. This additional year will also help other actors adapt to the new requirements. The negotiation mandate agreed today formalises the Council’s position and gives the Council Presidency a mandate for negotiations with the European Parliament. According to the Consumer Conditions Scoreboard 2023, 25% of consumers have a problem worth complaining about, but a third of them do not act. As a result, only 300,000 eligible disputes are resolved through ADR each year in the EU.

According to the Commission’s impact assessment, this figure could be increased to 500,000 by expanding the scope of alternative dispute resolution and by requiring companies to respond to consumer complaints. The Commission will maintain the current multilingual list of ADR entities. It has been awarding annual grants to ADR entities to improve outreach and case management. The Commission presented its proposals on 17 October 2023. The European Parliament adopted its positions in first reading on 13 March 2024.