Cross-border Small Claims in the EU

The proposed Regulation is predominantly a written judicial procedure based on standard forms available in all EU official languages.  The Regulation deals with claims under €2,000 in value arising in cross-border disputes within the EU, and it provides for the direct enforcement of contested decisions in any of the Member States without the need for going through mutual recognition of judgments. I submit that in order to be efficient, the new procedure will need to rely on Online Dispute Resolution (ODR) technology.

 

1. The Birth of Regulation

 

The Amsterdam Treaty empowered the Community to adopt measures in the field of judicial co-operation in civil matters with cross-border implications, insofar as this is necessary for the proper functioning of the internal market. In March 2005 the European Commission issued a proposal for the new European procedure, which, in spite of significant amendments, found general support from the European Economic Social Committee and the European Parliament. In May 2007 the European Council adopted the common position without introducing major changes. The European Council agreed with majority of the modifications made by the European Parliament, while maintaining the seminal issues of the Commission’s proposal.[1]  The Regulation is expected to be implemented in the courts of all Member States, with the exception of Denmark, at the start of 2009.

 

2. Scope of the Regulation

 

The Regulation covers civil and commercial matters. This includes not just consumer disputes, but a range of civil claims such as personal injury compensation, disability discrimination and unequal access to services. There are a number of exceptions to the Regulation given existing deep differences among Member States. These are matters related to revenue, customs, administrative matters, status or legal capacity of natural persons, property rights outside of a matrimonial relationship, wills and succession, maintenance obligations, tenancies of immovable property (except actions on monetary claims), violations of privacy and rights relating to personality (including defamation), insolvency, employment law and social security.

 

Under the Regulation, claims cannot exceed €2,000 in value (excluding interest) and legal costs. This economic threshold has been criticised by the UK Government and the European Economic and Social Committee, as well as many other organizations in the UK, which defined this threshold as an ‘unrealistic low limit’ taking into account the possibility of ending with ‘disproportionate legal costs’ for claims that are just above this monetary threshold.^[2] Nonetheless, the European Parliament decided to maintain the initial threshold in the belief that increasing the monetary limit may risk the efficiency of the procedure because the higher the monetary limit the more complex the procedure may become.  This appears to be a good decision, at least for the first few years of its existence. Thus, it could be expected that the success of the Regulation will determine its further implementation for higher claims and in other new areas, even outside the civil and commercial law realm.

 

3. ICT in the Regulation

 

Currently, information and communications technology is not used extensively in the majority of the judicial procedures of the EU. However, all reports from the Member States revealed that their domestic small claims procedures are easily adaptable to the use of ICT. In fact, some Member States have already introduced, at least in part, online judicial procedures; such as the case of the Online Small Claims in Ireland, and the Online Money Claim in England and Wales.

 

The use of the Internet and ICT reduces barriers in access to justice by simplifying court formalities and lowering costs. Another major advantage of the Internet and ICT is the provision of information in a fast and centralised way, which is useful in a judicial procedure with an international dimension. In this regard the European Parliament has introduced informative web links for parties involved in the European small claims procedure.[3] The claim form and the answer form are standard documents which will be available online, a requirement that will further facilitate access to the European procedure.

 

The objective of the Regulation is the creation of a cost efficient procedure applicable to small value claims in cross-border disputes.  This objective can only be achieved by using a written procedure, assisted by electronic forms such as emails and videoconferencing as foreseen by the proposed Regulation. Additionally, the Regulation allows the use of new technologies in transferring information and evidence between the courts of the different Member States. However, it will be the Member States who will decide, through their own regulations, which specific means of communication are acceptable in their courts.  Given that the Regulation is a proposal for a regulation and not a directive, it is arguable whether it leaves too many aspects to the discretion of Member States, which could call into question the legal certainty expected from a European regulation. This, on one hand, risks the emergence of some degree of procedural disharmony within the EU. On the other hand, this approach seeks to comply with the principle of subsidiarity, and to promote the use of ICT. Therefore, it can be expected that, in due time, electronic communications will reach every possible and reasonable aspect of the judicial procedure to assist in the resolution of online as well as off-line disputes.

 

Colin Rule envisages that one day there will be a computer sitting on the judge’s chair.[4] It might be difficult to imagine a computer holding a gavel and fairly resolving legal disputes, but that reasoning it is not so surprising if we take into account how the Internet and artificial intelligence have evolved in the last decade and, more importantly, how it will evolve in the next decade.  Moreover, there is little doubt that in the next few years some of us will receive an e-mail stating: ‘You have been sued in the small claims court’. We are clearly in the middle of technological progress. During this evolutionary process it would be advisable neither to impose the use of technology nor to discourage it, taking into consideration all types of individuals and their needs. Users without Internet access or with a limited knowledge of ICT should not be discriminated against by being forced into using an unfamiliar electronic means. But neither should the law constrain those courts or litigants who feel confident in using ICT tools and could then benefit from them. Hence, it is regretted that the Regulation has missed the opportunity to exhort the use ICT into legal procedure in a way that makes it more efficient and accessible to the litigants. However, its use should be mandatory only for the courts, and not for the litigants without ICT skills, as it could create new barriers in access to justice.

 

4. Online Dispute Resolution

 

Article 9.4 of the Regulation states that ‘whenever appropriate, the court or tribunal shall seek to reach a settlement between the parties.’ The English Small Claims Track has taken a more direct approach by stating in its leaflet that litigants should consider the use of ADR, to the extent that if it is refused unreasonably by one party the judge in his discretion may impose legal fees on that party whether or not he succeeds in his legal claims.[5]

 

The use of ADR can also be complemented by ICT in order to deal more cost-effectively with cross-border and low value disputes. When a dispute resolution procedure is carried out largely relying on ICT, it is referred to as Online Dispute Resolution (ODR). Presently, ODR has proven to be an effective tool for resolving small value claims amongst consumers, as well as many others, such as those arising from the Internet or involving parties geographically distant (eg domain names disputes).

 

The most famous provider dealing with low value disputes online is SquareTrade, which offers two levels of ODR to eBay users: assisted negotiation and online mediation.[6] To date, over two million disputes across 120 nations in 5 different languages have been resolved using this platform.[7] The negotiation process is carried out without human intervention. Parties use electronic forms designed to help them identify the main problems and possible solutions.  This is achieved with software tools that rely on patterns, use multiple choice boxes, limit the free text complaining of the users, encourage proposals for agreement, set deadlines, and even shape the tone of exchanges by using automated web-communications based on the information given by the disputants. This software is the key element of the process because it takes over some of the expertise of mediators. In practice, it has proven to be very effective – 80% of cases settled through the use of online assisted negotiation.[8] However, in those cases where parties cannot reach an agreement through the negotiation, they can request SquareTrade to assign a mediator, who proposes impartial settlements. 

 

Accordingly, the use of ADR and ODR can complement the Regulation. If this is done appropriately (by informing the parties and by means of imposing legal fees on a party if participation in ODR or ADR is unreasonably refused), it may encourage litigants to settle their disputes in a faster and more efficient manner. It would not be unrealistic to think that ODR will change the way disputes will be resolved in the future, and move from being an alternative method to a primary method for resolving many disputes.

 

Conclusion

 

The proposed Regulation is a written procedure that offers European citizens with cross-border disputes a new option for access to justice. This article suggests that the Regulation, if appropriately assisted with ICT tools, has the potential to increase the effectiveness of redress mechanisms across the European Union. However, the potential of this proposal may be limited by the lack of adequate provisions supporting ADR and ODR. Extrajudicial methods, such as online negotiation and online mediation, have proven to be a more cost efficient and faster solution for low value claims, as well as other claims such as those arising from the Internet or involving one party outside the EU. Therefore, I conclude by regretting that clear provisions facilitating and encouraging the use of ADR and ODR have not been included in the Regulation. 

 

Pablo Cortés is a Ph.D. candidate (IRCHSS scholar) at University College Cork (Republic of Ireland) under the supervision of Professor Steve Hedley.