11 January 2016

Online Dispute Resolution - What Businesses Need to Know

Tom Martin Solicitor

In the last few months, the government has proposed and implemented a raft of reforms focusing on online dispute resolution (ODR) for consumer disputes. Tom Martin takes a look at what the recent EU legislation means for business.

There is currently a noticeable shift away from the long, costly and public process of litigation in favour of solving disputes quickly and quietly by way of Alternative Dispute Resolution (ADR). In recent months, the government has proposed and implemented a raft of reforms, one of which being the European Union Regulation (EU) 524/2013 on online dispute resolution for consumer disputes.

The Regulation provides for the creation of an EU-wide Online Dispute Resolution (ODR) platform; which facilitates a quick, cost-effective and impartial process for resolving disputes out-of-court. It is specifically designed to aid consumers who have entered into contracts for goods or services online. The platform will consist of a multi-lingual website forming a single point of entry for online consumers seeking to resolve a dispute.

The Regulation came into force on 9 January 2016 and contains a number of requirements for businesses operating in one or more EU member state. So what do businesses need to do to comply with the Regulation?

The necessary steps are set out in Article 14 of the Regulation. In brief, they include:

  • Any trader must provide a link to the ODR platform on their website. This must be easily accessible to consumers. If an offer of ADR is made by email, the link should also be in the email.

  • The email address of the business must be shown on the website.

  • Should businesses be obliged under UK law to use specific ADR entities to resolve disputes, they must still inform consumers about the possibility of using the ODR platform.

  • Any terms and conditions should also contain information about the ODR platform, and the possibility of using it in a dispute.

Should such a dispute arise, and the consumer opts to use the ODR platform, what is the process involved?

  • Firstly the consumer fills out the relevant forms setting out the grounds for dispute. If filled in completely this is sent by the ODR platform to the respondent.

  • The two parties must then exchange information and, if possible, agree on an ADR entity to handle the dispute. If they cannot agree the complaint goes no further using the platform.

Whilst this may seem like a simple way of avoidance, it should be borne in mind that in a national dispute, costs penalties can be imposed by the Court for unreasonable refusal to engage in ADR. Parties should also consider the publicity and costs of going to Court.

  • Businesses should be mindful that they may be required, whether by law or by their own terms and conditions, to enter into a specified form of ADR and/or to use a specified ADR entity when a dispute arises. This should be made clear to the consumer.

  • If the complaint is to be continued the ODR platform will transfer the matter to the ADR entity.

Each member state will appoint an ODR contact who will be responsible for supporting complaints through the ODR platform. However, in the government consultation on this Regulation, it was agreed that the ODR contact will have discretion as to whether or not a dispute is dealt with through the platform between two parties resident in the UK. Use of the platform will only be mandatory in cross-border disputes, so whether this will have much impact in practice is up for debate. Nevertheless, it is still necessary to maintain compliance with the Regulation.

Whilst the success of this initiative and its impact on consumer disputes remains to be seen, the Regulation highlights the increased role of ADR, particularly in consumer disputes, and reminds both businesses and consumers that there can be considerable advantages to settling disputes outside of the courts.

As always, if you find yourself in need of legal advice about dispute resolution, please do contact a member of our disputes team and they will be able to help.

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