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Consumer Dispute Resolution after The Lisbon Treaty: Collective Actions and Alternative Procedures

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Abstract

Access to justice remains a major challenge in EU consumer law, which has become more pressing with growing cross-border purchases, negatively affecting the common market. Moreover, a recent surge in supranational mass damages cases has highlighted market failures and the need for collective procedures. Under the Lisbon Treaty, new opportunities have arisen to close this civil justice gap. This article analyzes how the wider competences of the EU on access to justice can facilitate consumer redress, by putting special emphasis on the issue of the affordability of litigation, which has been so far underexplored. This work argues that collective procedures, combined with coherent out-of-court mechanisms and funding schemes, are key elements of an effective consumer dispute resolution system. In particular, specific cases and financing models are assessed, which have the potential to foster judicial protection of consumers.

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Notes

  1. Collective action or redress has been defined by the Commission as: “encompassing any mechanism that may accomplish the cessation or prevention of unlawful business practices which affect a multitude of claimants or the compensation for the harm caused by such practices.” See the European Commission Paper: “Towards a Coherent European Approach to Collective Redress: Next Steps,” SEC (2010) 1192, Brussels 5.10.2010, p. 4.

  2. Over two thirds of Europeans (71%) think it is harder to resolve complaints, when purchasing from providers located in other EU countries, Eurobarometer 2006 Special Report 252, p. 22.

  3. GA res 248, 39 UN GAOR (106th plen. Mtg), UN Doc A/Res/39/248 (1985).

  4. 2006 Eurobarometer Report 252, 44% of consumers are less confident when purchasing in another EU state.

  5. In the Eurobarometer survey 2006, 73% of consumers indicated that they would not bring their complaint to court because of the high litigation costs, the length (33%), and the procedural complexity (33%).

  6. Forty-one percent of consumers according to the Eurobarometer 2006 were not satisfied with the handling of the complaint, and around 50% unsatisfied consumers do not complain against a company.

  7. A Consumer Law Enforcement Forum project has been established in the EU that could improve the expertise of consumer interest groups in redress mechanisms, see http://www.clef-project.eu/cms/index.php.

  8. Eurobarometer survey 2006.

  9. In addition, only a small number of 17% consumers wish to bring a case before the courts, as a complaint is time-consuming and expensive, Eurobarometer 2006.

  10. Commission Green Paper of 16 Nov. 1993 on Access of Consumers to Justice and the Settlement of Consumer Disputes in the Single Market, COM (93) 576.

  11. Communication from the Commission, Action plan on consumer access to justice and the settlement of consumer disputes in the internal market, 14 February 1996, COM (96) 13.

  12. Directive 2003/8/EC of 27 January 2003, OJ L 26 of 31.01.03, to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid.

  13. Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European small claims procedure.

  14. J. Stuyck, E. Terryn and others, University of Leuven Study, ‘An analysis and evaluation of alternative means of consumer redress other than redress through ordinary judicial proceedings’, January 17. 2007 (hereafter Leuven Study 2007)"; And Replace footnote 22 into "Civic Consulting and Oxford Economics, Report on the ‘Evaluation of the effectiveness and efficiency of collective redress mechanisms in the European Union, commissioned by DG SANCO, (finalised 26.8.2008), pp. 42–44 (hereafter Collective Redress Study, 2008).

  15. Regulation 2006/2004 of 27 October 2004 on co-operation between national authorities responsible for the enforcement of consumer protection laws, OJ l 364, 9.12.2004.

  16. Directive 98/27/EC on injunctions for the protection of consumers’ interests (OJ L 166, 11.6.1998). This Directive has been modified subsequently and has been codified by Directive 2009/22/EC.

  17. See the European Commission’s Report concerning the application of Directive 98/27/EC Brussels, 18.11.2008 COM (2008) 756 final.

  18. ADR Recommendations 98/257/EC and 2001/310/CE; Directive 2008/52/EC of 21 May 2008 on mediation in civil and commercial matters; http://ec.europa.eu/internal_market/finservices-retail/finnet/index_en.htm.

  19. See the Study on ADR in the EU, by Civic Consulting, 16 October 2009.

  20. The Green Paper on Consumer Collective Redress, p. 6 and Civic Consulting Report on the Effectiveness and Efficiency of Collective Redress, 2008, pp. 42–44 (Collective Redress Study, 2008).

  21. Collective redress exists in Austria, Bulgaria, Estonia, Denmark, Finland, France, Germany, Lithuania, the Netherlands, Portugal, Spain, Sweden, the UK, and Italy.

  22. For example, representative collective procedures exist in Austria, Estonia, France, Germany, Greece, the Netherlands, Romania, Slovakia, and the UK.

  23. With the Directive 98/27/EC on injunctions for the protection of consumers’ interests, (OJ L 166, 11.6.1998) injunction procedures have become mandatory under EU law. As a result, every Member State provides now for an injunction procedure to protect the collective interests of consumers. See the European Commission’s Report concerning the application of Directive 98/27/EC Brussels, 18.11.2008 COM (2008) 756 final.

  24. Member States with group actions are Bulgaria, Denmark, Lithuania, the Netherlands, Portugal, Spain, Sweden, and the UK.

  25. In the Netherlands, only authorised associations can initiate such procedures to propose a settlement, while in Denmark, only the Ombudsman can apply the opt-out option.

  26. The German Capital Markets Test Case Act (also called Capital Markets Model Case Law), in force since 1 November 2005, introduced test cases for investors who have sustained loss through false, misleading, or undisclosed information relating to public capital markets.

  27. See the Civil Procedure Rules on test claims 19.15 at the webpage of the Ministry of Justice (accessed in 2009): http://www.justice.gov.uk/civil/procrules_fin/contents/parts/part19.htm#IDA4FF5B.

  28. Usually, a test case requires different individuals with overall similar claims against the same defendant.

  29. The same, however, is true for group actions with an opt-in procedure.

  30. In order to improve the effectiveness of the KapMug, it has been suggested to introduce opt-in mechanisms and further extend the reversal of the burden of proof for causation to the defendant.

  31. On average, the value claimed was between € 10 000 and € 99 000, with some countries also including cases of more than € 5 million, the average individual consumer claim represented a value between € 100 and 999, with France, Spain, Germany, and Austria representing the largest number of cases.

  32. EU Collective Redress Study, 2008, p. 41.

  33. Dexia WCAM decision, Amsterdam Court of Appeals 25 January 2007, LJN:AZ 7033.

  34. This settlement procedure was made possible by legislation that went into effect in the Netherlands in July 2005—the Dutch Act on Collective Settlement of Mass Damages.

  35. In this case, investors were compensated for losses suffered after a decrease in the value of Shell securities and allegedly incorrect information by the company of its oil and gas reserves. https://www.royaldutchshellsettlement.com/Documents/en/RDS_Notice.pdf (viewed 10.01.2011).

  36. For example, in a Swedish Electricity Case, the Swedish Consumer Ombudsman filed a case for about 7 000 consumers against a company which supplied electricity under a fixed price contract. The price actually charged for the new supply of electricity was considerably higher than the price previously agreed upon with the company, Oe 522-05 Court of Appeal.

  37. The association invested considerable financial means: about 21 employees and € 300 000.

  38. A more successful example took place in 2004, against an overcharging telecommunication company in Portugal, which affected about 3 million consumers. The compensation to these consumers was largely in kind and non-monetary, Proc. 781/95; Comarca de Lisboa, 5° Juízo Cível, 1ª Secção.

  39. Swedish travel agency case T 1281-07 B./E., filed in March 2003 in Stockholm (T 3515-03), (2007.04.01).

  40. See Bezirksgericht für Handelssachen Wien (BGHS), Case 17 C 1148/04d that was brought in 9.12.2004.

  41. In these circumstances, consumers may be excluded from actions taken by a consumer organization or a public body. E.g., the Danish Ombudsman stressed that under the current regime, it is very difficult to represent consumers outside the country of their residence or to defend the rights of foreigners who have suffered a loss from a company located abroad; see the Danish Consumer Ombudsman Office, 2007, available at: http://www.forbrug.dk/english/dco/dcopressreleases/news/collective-redress/ (accessed 01.02.2009).

  42. Green Paper on Consumer Collective Redress, European Commission, 27.11.2008 COM(2008) 794 final, p. 4.

  43. It is likely that EU consumers would be more willing to become involved in cross-border purchases if procedures were set up to ensure adequate redress, whatever the country of purchase of their goods or services.

  44. Case C-453/99 Courage v Crehan Ltd. [2001], ECR I-6314, para. 26.

  45. Joined Cases C-295/04-298/04 Manfredi v Lloyd Adriatico Assicurazioni SpA [2006] ECR I-6619, para. 61.

  46. On 2 April 2008, the Commission adopted a White Paper on Damages Actions for Breach of the EC Antitrust Rules COM(2008) 165, and on 19 Dec. 2005, a Green Paper COM (2005) 672.

  47. Case 168/05, Elisa Marıa Mostaza Claro v Centro Movil Milenium SL [2006] ECR I-10421; Case 40/08, Asturcom Telecomunicaciones v Cristina Rodrıguez Nogueira [2009] ECR I-9579.

  48. Consumer strategy 2007–2013, 13.3.2007, http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/320.

  49. See the ADR and collective redress mechanisms studies in the EU http://ec.europa.eu/consumers/redress_cons/collective_redress_en.htm#Studies (viewed 3.1.2011).

  50. The Green Paper on Consumer Collective Redress, Brussels, 27 November 2008, COM (2008) 794, p. 7.

  51. Consultation paper: http://ec.europa.eu/consumers/redress_cons/docs/consultation_paper2009.pdf.

  52. The Commission proposes 10 points, including financing of actions and the provision of satisfactory redress, see: http://ec.europa.eu/consumers/redress_cons/collective_redress_en.htm.

  53. “Towards a Coherent European Approach to Collective Redress: Next Steps,” Joint information note by Reding, Almunia and Dalli, European Commission, SEC (2010) 1192, Brussels, 5 Oct. 2010.

  54. Case 33/76, Rewe-Zentralfinanz and Rewe-Zentral AG v Landwirtschaftskammer für das Saarland [1976] ECR 1989, para. 5.

  55. For example, see Case 14/83, von Colson and Kamann v Land Nordrhein-Westfalen, [1984] ECR 1891, para. 23.

  56. Case 222/84, Johnston v Chief Constable of the Royal Ulster Constabulary [1986], ECR 1651; see also inter alia Case 222/86 Union Nationale des Entraineurs et Cadres Techniques Professionnels du Football (UNECTEF) v Heylens and Others [1987] ECR 4097.

  57. Art. 65 EC further stated, inter alia, that measures could be taken “(…) (c) eliminating obstacles to the good functioning of civil proceedings, if necessary by promoting the compatibility of the rules on civil procedure applicable in the Member States.”

  58. Cross-border collective redress proceedings can also pose new challenges for private international law that would need to be addressed by EU law. See for example: Danov (2010).

  59. The EU Leuven Study shows that possible savings could range between 46% and 99%, p. 63; some cases in Austria have also demonstrated savings by using collective redress actions.

  60. Regarding “collective justice,” see Micklitz 2007b, p. 17.

  61. See the Collective Redress Study, 2008, p. 10.

  62. E.g., in the USA, some cases have rendered companies more responsible and diligent towards consumers, enhancing information.

  63. Product scandals in Europe, such as the contaminated blood scandal and BSE, lowered public opinion with regard to EU consumer protection, and called into question the traditional public regulatory system.

  64. E.g., the Dutch Act on Collective Settlement of Mass Damages requires a court approval of settlements.

  65. Example of differences between US and EU collective redress mechanisms include jury participation, pre-trial discovery, punitive damages, contingency fees, relaxed standing and opt-out actions in the USA, and the “loser pays” principle and preference to opt-in procedures in the EU.

  66. See also Collective Redress Study, 2008, p. 12.

  67. Study on the use of ADR in the EU, Civic Consulting on 16 October 2009, (ADR Study, 2009), p. 11.

  68. See europa.eu/legislation_summaries/consumers/protection_of_consumers/l32031_en.htm.

  69. Recommendation 98/257/EC on the principles applicable to the bodies responsible for the out-of-court settlement of consumer disputes, OJ L 115, 17.04.1998, p. 31; Recommendation 2001/310/EC on the principles for out-of-court bodies involved in the consensual resolution of consumer ADR, OJ L 109, 19.4.2001, p. 56.

  70. Directive 2008/52/EC on mediation in civil and commercial matters, OJ L 136, 24.5.2008, p. 3.

  71. Directive No 2000/31/EC; OJ L 178, 17.7.2000.

  72. Directive No 2004/39/EC; OJ L 145/1, 30.4.2004.

  73. Directive No 2008/48/EC; OJ L 133, 22.5.2008.

  74. See also the Services Directive No 2006/123/EC; OJ L 376, 27.12.2006.

  75. See http://ec.europa.eu/consumers/redress_cons/index_en.htm.

  76. See http://ec.europa.eu/internal_market/finservices-retail/finnet/index_en.htm.

  77. ADR Study, 2009, p. 9 and Annex of the EU ADR consultation for an overview on the existing ADR schemes p. 164 to 324; Leuven Study, 2007, p. 159.

  78. In 2009, only 3% of European consumers who did not get a satisfactory reply from the trader took their case to an ADR scheme, Eurobarometer No 282, p. 20.

  79. See the ADR consultation paper by the European Commission, note 22 http://ec.europa.eu/dgs/health_consumer/dgs_consultations/ca/docs/adr_consultation_paper_18012011_en.pdf.

  80. Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213.

  81. Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213, para 67.

  82. Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213, para. 63; see also the settled case law: Case C-28/05 Doktor and Others [2006] ECR I-5431, para. 75.

  83. Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213, para 65.

  84. Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213, para 53–59.

  85. 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 account of them when establishing ADR procedures and national courts must take them into consideration in order to decide disputes brought before them.” Joined cases C-317/08 to C-320/08, Alassini and others v. Telecom Italia, [2010] ECR I-2213, para. 63.

  86. C-168/05 Claro v Centro Movil Milenium SL [2006] ECR I-10421.

  87. The consumer often lacks legal knowledge and has limited power to change contractual arbitration clauses.

  88. Case C-40/08, Asturcom Telecomunicaciones SL v. Cristina Rodríguez Nogueira [2009] ECR I-9579.

  89. Case C-40/08, Asturcom Telecomunicaciones SL v. Cristina Rodríguez Nogueira [2009] ECR I-9579, para. 59.

  90. Case C-40/08, Asturcom Telecomunicaciones SL v. Cristina Rodríguez Nogueira [2009] ECR I-9579, para. 52.

  91. See also the recent Case C-137/08, VB Pénzügyi Lízing Zrt. V Ferenc Schneider, of 9 November 2010, report not yet published, para. 46–49 and Case C-243/08, Pannon GSM Zrt. v Erzsébet Sustikné Győrfi, [2009] ECR I-4713.

  92. See the 2010 ADR consultation paper by the European Commission, http://ec.europa.eu/dgs/health_consumer.

  93. E.g., unfamiliar ADR systems and hearings are inconvenient in cross-border cases, ADR Study, 2009, p. 339.

  94. ECC-Net Publication, Cross-border Dispute Resolution Mechanisms in Europe—Practical Reflections on the Need and Availability, 2009, pp. 10–11 and 57–58, e.g., the data showed that only 500 out of 11 500 complaints from 2007 and 2008 could be transferred to ADR schemes.

  95. Commission (EC) “Proposal for a Directive on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR),” COM (2011) 793/2, final, 29 November 2011.

  96. Commission (EC) “Proposal for a Regulation on online dispute resolution for consumer disputes (Regulation on consumer ODR),” COM (2011) 794/2, final, 29 November 2011.

  97. Commission (EC) “Communication by the European Commission on Alternative Dispute Resolution for consumer disputes in the Single Market,” COM (2011) 791, final, 29 November 2011, p. 2. See Study on the use of Alternative Dispute Resolution in the European Union of 16 October 2009, http://ec.europa.eu/consumers/redress_cons/adr_study.pdf, pp. 56–63, 112–115, and 120–121.

  98. Commission (EC) “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),” COM (2011) 793/2, final, 29 November 2011, 4.

  99. The 2010 report of the European Consumer Centre's Network indicates that more than half of complaints (56.3%) received by the ECC-Net were linked to e-commerce transactions. However, out of the 35 000 cross-border complaints received by ECC network in 2010, 91% could not be referred to an ADR scheme in another Member State as no suitable ADR scheme existed (ec.europa.eu/consumers/ecc/docs/2010_annual_report_ecc_en.pdf).

  100. Commission (EC) “Proposal for a Regulation of the European Parliament and of the Council on online dispute resolution for consumer disputes (Regulation on consumer ODR),” COM (2011) 794/2, final.

  101. The compliance by ADR schemes with the obligations set out in this Regulation will be monitored by the competent authorities to be established in the Member States, in accordance with the Directive on consumer ADR.

  102. Funding difficulties is one reason for the limited use of collective redress in the Member States, Leuven Study, 2007, p. 267.

  103. Directive 2003/8/EC of 27 Jan. 2003, OJ L 26 of 31.01.03, to improve access to justice in cross-border disputes by establishing minimum common rules relating to legal aid for such disputes.

  104. Speech by V. Reding, Vice-President of the European Commission responsible for Justice, Fundamental Rights and Citizenship: “Legal aid: a fundamental right for citizens to access justice,” CCBE-ERA conference Brussels, 26 November 2010.

  105. See the report of the Civil Justice Council in the UK on improved Access to Justice, Funding Options and Proportionate Costs, 2007, Appendixes, n. 26 et seq.

  106. See: http//europa.eu.int/comm./consumers/redress/acc-just/index-en.htm.

  107. In contrast, legal-aided clients might be treated with less importance because of the lower compensation and might be represented by more inexperienced lawyers.

  108. See also Civil Justice Council, The Future Funding of Litigation—Alternative Funding Structures, Access to Justice through the Development of Improved Funding Structures, 2007, p. 68 et seq.

  109. Section 58 of the Courts and Legal Services Act of 1990 in the UK.

  110. As litigants are often unable to fund the insurance premiums, the solicitor sometimes funds the premium, or a loan is obtained from a bank.

  111. On average, lawyers charge between 25% and 50% of the damages awarded to the client; see the Civil Justice Council Report in the UK on improved Access to Justice, Funding Options and Proportionate Costs, 2007, Appendixes, n. 26 et seq.

  112. Case MGN Ltd v United Kingdom—39401/04 [2011] ECHR 66 18/01/2011.

  113. Case MGN Ltd v United Kingdom—39401/04 [2011] ECHR 66 18/01/2011, para. 219.

  114. E.g., in the above quoted Austrian Case 17 C 1148/04d, filed in 9.12.2004 Bezirksgericht für Handelssachen Wien the consumer organization was funded by a bank, which also assumed the financial risk of losing the case.

  115. See http://www.hkclic.org/en/topics/consumer_complaints/channels_for_consumer_complaints/q2.shtml (2009).

  116. A Supplementary Legal Aid Scheme in Hong Kong also provides legal assistance to individuals who do not qualify for ordinary legal help, funded by a loan from the Lottery. If a litigation case is successful, the legal aid scheme receives a reimbursement from damages of 6–10%, in addition to the costs that are recovered from the unsuccessful party. See the webpage of the Legal Aid Department in Hong Kong: http://www.lad.gov.hk/english/las/fcic.htm.

  117. For more information, see http://www2.consumer.org.hk/claf/briefe.pdf (accessed in 2009).

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Correspondence to Iris Benöhr.

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Benöhr, I. Consumer Dispute Resolution after The Lisbon Treaty: Collective Actions and Alternative Procedures. J Consum Policy 36, 87–110 (2013). https://doi.org/10.1007/s10603-012-9202-0

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