Online Dispute Resolution Expansion in the EU

December 13, 2011

On 29 November, the European Commission published a proposal on Alternative Dispute Resolution (ADR) and Online Dispute Resolution (ODR). This has set the stage for a significant increase in the use of these out-of-court dispute resolution processes for consumer disputes within the EU.  Based on an initial reading of the proposal, the Commission envisages technology, and more specifically the Internet, as the key channel for delivering services to users.

ADR, ODR and e-commerce

ADR is a well established collection of processes and techniques for resolving disputes while avoiding litigation. Although the techniques vary across culture and region, modern ADR is generally understood to involve forms of negotiation, mediation, conciliation or arbitration.  ODR, on the other hand, is a much newer collection of processes that represents the convergence of ADR and information technology.  Like ADR, it incorporates any combination of negotiation, mediation, conciliation, arbitration and other decision-making processes. But it often relies on technology, most frequently the Internet, to facilitate its processes, and the emphasis is placed on simplicity, speed and low costs.  

ODR has been used in recent years to resolve consumer disputes within the private sphere, but it has not yet become a mainstream practice endorsed by governments.  Major private institutions such as PayPal have become big users of ODR, with their systems handling 60 million disputes annually.  Yet, ODR has remained a relatively marginal practice that has failed to keep pace with the rapid growth in e-commerce. Even within Europe, where e-commerce growth has lagged behind some other regions, more than half of people in the UK, Denmark, Norway and the Netherlands reportedly bought goods or services over the Internet in 2010.[1] Yet in the same year, only 5% of European consumers used any ADR process to resolve a dispute.[2]  Similarly, only 9% of businesses reported ever using ADR.  This phenomenon has continued despite the fact that ODR represents an affordable and simple way to resolve disputes that arise out of online transactions.  For consumers, ODR can provide redress for problems when court is not a viable option. For traders, it could increase trust, improve reputation and allow for rapid and fair handling of complaints, unpaid invoices and other unwelcome business distractions.

New ADR and ODR Proposal for EU Consumers

The use of technology facilitated ADR, and more specifically ODR, will now become more common-place in the EU, at least with respect to disputes arising out of consumer transactions.  In a communication released with its proposal, the Commission cites expanded use of ADR and ODR as a means of ‘promoting access to swift, cheap and effective dispute resolution through alternative dispute resolution procedures as [a] means to empower consumers and put them at the heart of a single market’.[3] According to the proposal, all EU consumers will have access to ADR processes that begin with online complaint submission and information exchange processes by the latter half of 2014. All consumers and traders engaging in cross-border online transactions within the EU will have access to a single online platform that will facilitate the full resolution of disputes through ODR sometime in 2015.    

The proposal consists of the following elements:

1.      a proposed Directive on consumer ADR for effective, impartial and transparent ADR schemes for consumer disputes; and

2.      a proposed Regulation on consumer ODR, requiring creation of an online platform for resolving consumer disputes arising from cross-border online purchases in the EU.

The ADR Directive

In the Commission’s communication released with the proposal, the ADR Directive is said to address three problems identified by earlier consultations and studies. The three problems are:

(a)    gaps in the coverage of ADR entities at both sector-specific and geographical level;

(b)    lack of awareness and insufficient information preventing consumers and businesses from using ADR entities; and

(c)    variable quality of ADR: a significant number of ADR entities are not in line with the core principles laid down by the two Commission Recommendations.[4]

The ADR Directive aims to ensure that all consumer complaints can be submitted to an ADR entity and that disputes arising from cross-border transactions can be more easily resolved.[5]  To meet the new obligations, Member States may create new ADR entities or use existing ADR entities, so long as their activities comply with the Directive’s requirements.    

The scope of the ADR Directive is limited to disputes between consumers and traders within the EU, regardless of whether they are of a domestic or cross-border nature.  Traders will be permitted to bring complaints against consumers in the proposed system, meaning the Directive does not have a strict consumer complaint or consumer protection focus. So called ‘closed’ dispute or complaint-handling systems administered by or financed by traders appear to be excluded from the scope.  Interestingly, ‘direct negotiation’ between a consumer and trader also appears to be excluded – although this may be a matter of interpretation since party-to-party negotiation is a common feature of many ADR systems. 

As for the type of ADR, the focus is on mediation but the door also appears to be left open for out-of-court adjudicative processes that could include hearings before complaint boards, arbitration and conciliation.

The envisioned approach will rely heavily on information technology channels. Duly accredited ADR providers (called ‘ADR entities’ in the proposal) must have a web site to allow submission of complaints online. Parties must also be allowed to exchange information electronically. Although there is a separate regulation specifically addressing ODR, these information technology requirements arguably bring the subject matter of the proposed Directive within the definition of ODR, at least with respect to the initial phases of the dispute resolution process.

In keeping with the attempt to address the third problem identified by the Commission, much of the ADR Directive is concerned with ensuring an appropriate quality of ADR services. Specific measures address expertise, impartiality and avoidance of conflicts of interest on the part of ADR entities. The notion of transparency is also addressed by ensuring users have access to a range of information about the ADR entities, including their financing sources and the types of disputes they are competent to handle. Transparency requirements also cover publication of the ADR entities’ rules of procedure, the languages used, the costs, the approximate length of the process and the legal effect of the outcome. On the subject of length, the ADR Directive sets a target of resolution within 90 days with the option to extend this period for more complex disputes.

The goal of effectiveness is enumerated by several provisions emphasising accessibility for users, including specific requirements of no cost or low costs in terms of fees. The fee issue is one that will test the ability of ADR to evolve and adapt to meet the expectations of the characteristic low-value high-volume consumer-user. While ODR proponents typically accept that out-of-court dispute resolution processes ought to be offered at a low fee or no fee to consumer users, at least in proportion to the amount in contention for lower-value disputes, the more traditional ADR providers have historically focused on the thoroughness and completeness of the dispute resolution process, which invariably adds cost. Because many well-established dispute resolution professionals charge a substantial hourly rate for their services, it remains to be seen whether they will attempt to transform their business models to meet the new demands of the low fee consumer dispute resolution context, or whether entirely new ADR and ODR providers will simply move in to fill the demand. In this era of resource scarcity for governments, it should not be assumed that public funds will be available to bridge the gap between traditional ADR fee pricing and the demand for low cost services.    

The issue of fairness is another matter addressed by the ADR Directive. Generally, each party must be permitted to express its views and to hear those from the other side.  A written (in some form) outcome must also be made available to the parties stating the grounds on which the outcome was based.

The fairness provisions include one particular requirement that may receive some attention in other cross-border consumer ODR system design work currently under way before the United Nations Commission on International Trade Law (UNCITRAL), where so-called ‘pre-dispute arbitration’ is still a matter of contention.  The pre-dispute arbitration issue concerns arbitration agreements made at the time a consumer is completing his or her purchase of a good or service. These agreements often purport to prohibit the consumer from seeking ‘other forms of redress’, such as proceedings in domestic courts or remedies available under the purchaser’s consumer protection legislation, if a dispute arises. For policy reasons aimed at consumer protection, some jurisdictions take the position that pre-dispute clauses are void. In the absence of a valid pre-dispute clause, it would appear necessary to secure the agreement of a consumer to proceed to arbitration only once the dispute has arisen. This position is not supported by jurisdictions who favour pre-dispute clauses and who assert that the consumer should not have the option to pursue other redress if they agreed to arbitration at the time of purchase. The ADR Directive appears to support the former position, prescribing that, if an ADR process includes a ‘suggested solution’ to a dispute, the consumer must be informed that he or she has the choice as to whether or not to agree to a suggested solution.[6] It also requires that the consumer be informed that the suggested solution ‘may be less favourable than an outcome determined by a court applying legal rules’.  The right to seek independent advice before agreeing or rejecting the suggested solution is also specifically required in the ADR Directive.

Further provisions outline ‘Information and Cooperation’ requirements aimed at improving awareness of ADR. In addition to ensuring consumers are aware of ADR entities and the way to contact them, the proposal requires Member States to facilitate consumer access to information about ADR entities in other Member States and requires ADR entities to cooperate in the facilitation of cross-border disputes.  ADR entities are also required to cooperate with bodies that enforce consumer protection legislation.  Lastly, Member States must encourage ADR entities to participate in networks of cross-border ADR entities to facilitate and strengthen these processes within the EU.

The ADR Directive also sets out a range of other governance responsibilities that fall to Member States and ADR entities in relation to ongoing monitoring and compliance.  ADR entities must report on dispute volumes, the number of cases discontinued, the average time to resolution, compliance rates (if known) and other relevant matters that could serve to identify recurring problems in the consumer context. A final set of provisions includes a requirement for Member States to create and impose penalties for infringements of the ADR Directive. 

The ODR Regulation

The proposed ODR Regulation sets out to create an EU-wide system, referred to as an ‘ODR platform’ for resolving cross-border online consumer and trader disputes. The regulation tasks the Commission with establishing this virtual structure and takes the sensible approach of requiring a single point of entry for all ODR disputants by way of the platform, while also allowing for different ODR providers (called ‘ODR entities’ in the proposal) to provide the actual dispute resolution services. By its nature, the service will be delivered through an Internet-based channel.  The ODR platform will be available at no cost to users.   

According to the proposal, the dispute resolution process begins with an online complaint form on the ODR platform’s web site in all official EU languages.  The platform will then propose one or more competent ODR entities to handle the dispute, along with information about fees, if any, the language or languages in which the process will be conducted and the expected length of time involved. Once the appropriate ODR entity is selected, the platform will facilitate transmission of the dispute accordingly.

The proposal goes on to set out requirements for the actual processing of disputes as well. For example, ODR entities must inform parties of their respective rules and fees and, if parties agree to use the platform, must conclude the process within a 30-day period. This 30-day period is noticeably shorter than the ADR Regulation’s 90-day period, which presumably reflects a belief that disputes arising from online transactions can be resolved more quickly than their offline equivalents. At a minimum, it may recognize that ODR is intended to be faster than offline ADR.  In spite of these and other enumerated procedural requirements, ADR entities are still afforded some discretion to develop their own rules of procedure for resolving disputes, provided they comply with the ODR Regulation. 

The ODR Regulation tasks the Commission with responsibility for the ODR platform in terms of operations, administration and security, storage and use of personal data. The Commission also carries responsibility for creating a database to store information gathered from the disputing parties. Several provisions set out requirements concerning access and use of personal data. Further measures set out requirements relating to confidentiality and security.

The ODR platform will also serve as a two-way information medium for users.  On the information provision side, it will publish information about ADR and will offer statistics about the outcomes of disputes handled by various ODR entities. On the information collection side, it will serve as a data and information gathering channel through which parties will provide feedback about the ODR entity which handled their dispute as well as about the functioning of the platform itself. 

To further support the ODR process, the ODR Regulation requires the creation of a network of ‘ODR Facilitators.’ This network will be responsible for facilitating communication between the disputants and competent ODR entities, for making consumers aware of alternative forms of redress when no resolution can be obtained through the platform, and for informing parties about the advantages and disadvantages of procedures offered by the ADR entities.  The facilitators will also provide annual activity reports and will encourage integration of ODR activities across Member States.


The European Parliament and the EC Council expect to adopt the package by the end of 2012. Once adopted, Member States will have to implement the ADR Directive within 18 months, suggesting a fully operational date sometime in 2014.  The ODR Regulation is expected to be fully operational sometime in 2015.[7]

The Commission also plans to launch information campaigns to promote awareness of these new processes and to stimulate interest in ADR among consumers.[8] These efforts will apparently be carried out in collaboration with national consumer organisations in EU Member States. To stimulate interest and participation from traders, the Commission will encourage national and EU business associations and organisations to hold topical conferences and workshops. Information around ADR and ODR, along with consumers’ rights, will also be distributed to businesses, with a focus on SMEs.[9]  To properly equip those charged with delivering the new services, national ADR organisations will receive information about the quality requirements set out by the proposal.[10]

Summary – Shifting the Dispute Resolution Paradigm

The Commission’s proposal represents a bold statement on the need for an accessible, well-designed and integrated system for resolving consumer disputes in the EU. If implemented successfully, it could lead to significant new dispute resolution options and other trust building mechanisms for consumers and traders and, in turn, more consumer-driven economic activity across the EU’s single market. 

For the ADR and ODR communities, it will almost certainly prove to be one of the bigger developments in recent years. It could also serve to precipitate a transformation of ADR from its process-reliant, principled model into a faster, simpler and more results-oriented variant specifically designed for low-value consumer transactions. 

It will also provide a fertile testing ground for the theory that technology-facilitated ADR, commonly known as ODR, will become the next wave in dispute resolution.  If any tensions should emerge between these (at times) divergent approaches, they will not last long given the pace of technology. As we continue to become more dependent on IT and the Internet for all things, including commerce, the development of technology-based dispute resolution processes is inevitable.   

For consumers, increased access to ADR will also inevitably prove to be a benefit. For the EU, the proposal will bring ADR and ODR to consumers in the short term. It should also precipitate larger scale justice transformation towards non-court, technology supported and user-focused dispute-resolution processes in the long term.  Indeed, technology is well placed to be the catalyst to bring about this badly needed transformation. If the Commission’s proposal stays on track, this change will now formally be under way in the EU. 

Darin Thompson holds a legal counsel position with the Dispute Resolution Office, Justice Services Branch of the Ministry of Attorney General in British Columbia, Canada. Darin is a justice reform enthusiast with a keen interest in technology-based justice service channels. He is a member of the Canadian Delegation to the UNCITRAL Working Group III on Online Dispute Resolution as well as a collaborator on British Columbia’s own ODR initiatives. Darin curates a Tumblog called nexsyslegal. His social media streams can be found at  

[1] ‘The Future of the Internet Economy: A Statistical Profile’ Organization of Economic Cooperation and Development, June 2011 update at p. 13

[2] Eurobarometer (EB) 342, p. 184, quoted in the Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2 at p. 2.

[3] Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2, p. 2 .

[4] Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2 at p. 6 .

[5] Proposal for a Directive of the European Parliament and of the Council on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) {SEC(2011) 1408} {SEC(2011) 1409} at p. 3

[6] Proposal for a Directive of the European Parliament and of the Council on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) {SEC(2011) 1408} {SEC(2011) 1409} at Article 9

[7] ‘Consumers: Commission puts forward proposals for faster, easier and cheaper solutions to disputes with traders’ European Commission – Press Release, November 29, 2011 , .

[8] Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2 at p. 9

[9] Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2 at p. 10

[10] Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, COM(2011) 791/2 at p. 10