On February 1, 2016, the Amendment to Act No. 634/1992 Coll., on Consumer Protection (the “Amendment”) entered into force, implementing European Union directive No. 2013/11/EU on alternative dispute resolution for consumer disputes, which requires the member states of the European Union to ensure that consumers have access to a simple, efficient, fast, and low-cost way of resolving disputes arising from sales or service contracts.
To achieve this, the Amendment broadened the existing scope of dispute resolution options for customers by introducing a brand-new method of extrajudicial resolution for consumer disputes. The purpose of this article is to provide a brief overview of the new process of alternative dispute resolution (ADR) for consumer disputes and sum up the results of its first eighteen months.
The Amendment granted consumers the right to resolve disputes with traders residing or permanently based in any country of the EU out of court. In that regard, each trader must inform the consumer about the identity of the ADR provider that deals with the relevant consumer disputes in a clear, comprehensible, and easily accessible manner. Such information must also include the website of the ADR provider.
The motion to initiate ADR can be submitted up to one year from the day on which the consumer exercised the right forming the subject matter of the dispute for the first time. The resolution of each consumer dispute must then be reached within ninety days of the day the ADR provider received the motion. This term may be prolonged in difficult cases, but not for more than another ninety days. Consumers are entitled to withdraw their motions at any time. The parties to the ADR proceedings are not required to seek legal representation. Each party bears its own legal costs, while the proceeding itself is provided by the ADR provider free of charge. Each ADR provider sets out its own set of specific rules for its ADR proceeding.
The traders must closely cooperate with the ADR providers and provide them with the necessary assistance for the efficient resolution of consumer disputes. However, this obligation does not seem to entail the right of the ADR provider to request production of documents. The traders are required to submit their statements of facts relevant to the given consumer dispute within fifteen business days of being informed of the initiation of ADR proceedings.
The Czech Trade Inspection Authority (CTIA) generally deals with consumer disputes if there is no sector-specific ADR provider. According to their own records, in the period from February 1, 2016 to July 14, 2017 the CTIA alone received 4,400 motions from consumers initiating procedures concerning out-of-court resolutions of consumer disputes. Of these, 902 motions were rejected by the CTIA on legal grounds and in 262 cases the consumers withdrew their motions. The CTIA reached agreements between the parties in 1,262 cases. In 1,357 cases, the disputes came to an end by the expiry of the 90-day period (or the prolonged period in difficult cases) in which the resolution of each consumer dispute must be reached. Finally, 617 proceedings are still pending (as of July 14, 2017). In conclusion, the parties to the proceedings have reached agreements in nearly half of the disputes that were actually heard by the CTIA.
The areas exempt from the CTIA’s competence (i.e., with specific ADR providers) include the sectors of financial services, electronic communication, and postal services, as well as the electric, gas, and heating industries. Of particular interest to the readers of CEELM may be the fact that the Amendment also provides the ability to settle disputes between legal professionals and their clients, with the Czech Bar Association being the ADR provider. As of June 30, 2017, the Czech Bar Association has received 36 motions for initiation of ADR proceedings, and the parties have reached agreement in eight of those cases so far.
One of the goals of the Amendment was to decrease the amount of consumer disputes heard in court proceedings, easing the overload of cases faced by the courts. Taking into consideration the number of motions submitted during the past year and a half to the CTIA alone, we may be on track to achieving that goal.
By Petr Topka, Partner, and Tereza Suchankova, Trainee Lawyer, Rovenska Partners
This Article was originally published in Issue 4.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.