Consumer rights: Parliament adopts new rules for out-of-court dispute resolution

Alternative dispute resolution allows consumers and traders to resolve consumer disputes quickly and inexpensively without going to court

New measures to improve the participation of traders and raise consumer awareness

Third-country traders can also participate in resolution procedures

The updated rules aim to increase consumer awareness and encourage greater business participation in out-of-court dispute solutions.

Alternative dispute resolution (ADR) involves impartial, out-of-court bodies, such as conciliators, mediators, arbitrators, the ombudsmen and complaints boards, helping consumers and companies resolve issues amicably, in a fair and low-cost manner.

The new rules, confirmed by Parliament on Tuesday, modernise the existing ADR rules for the digital economy, making it easier to resolve cross-border disputes and streamlining procedures for both consumers and businesses.

Scope and third-country traders

The rules clarify the scope of the ADR framework to consumer rights disputes stemming from a contract, including issues that occur before the contract (e.g. advertising and information provision) and after it ends (e.g. use of digital content).

Considering that two out of five online transactions made by EU consumers are with traders established in third countries, the rules now allow for these traders to participate in ADR procedures.

Boosting participation and ensuring trader accountability

Unless specific EU law or national legislation imposes trader participation in out-of-court dispute resolution, businesses will continue to be free to decide whether to participate in alternative dispute resolution or not. To boost trader and consumer participation, member states should put in place measures encouraging out-of-court settlements, for example through information campaigns, certificates or financial incentives. In doing so, they should pay particular attention to sectors with a high number of consumer complaints, especially the transport and tourism sectors, including air passenger rights.

The text introduces a duty for traders to respond whether they intend to engage in the proposed procedure when a consumer requests ADR intervention (where trader participation is not already mandatory). This period should not exceed 20 working days (30 in complex cases). A lack of a response will be treated as a refusal, allowing cases to be closed.

Streamlining and user-friendly information

The new measures allow ADR entities to bundle together similar cases against the same trader (with consumer consent), leading to faster and more coherent procedures. Member states shall ensure ADR entities maintain websites where consumers can easily find information on such procedures, as well as submit and track their complaints online.

While automation can help speed up decision-making in dispute resolution, this must be transparent, and participants should be informed in advance about its use. To make ADR procedures more attractive and accessible for consumers, they should ideally be free of charge or their cost should at least not exceed nominal fees.

Competent authorities will be tasked with monitoring the effective functioning and activities of ADR entities and their compliance. Whereas ADR contact points will have to be set up to assist, provide information and facilitate communication between involved parties.

Quote

Parliament’s rapporteur Laura Ballarín Cereza (S&D, ES) said: “This revision marks an important step forward for consumers’ rights, establishing a fair and effective ADR system. Extending the scope to cover third countries, greater transparency, and the introduction of clear response deadlines will make the dispute resolution process more accessible and trustworthy. The legislation also encourages member states to make the participation of high-complaint sectors like airline carriers mandatory. I look forward to its swift transposition and enforcement across the EU.”

Background

If a consumer has a problem with a product or service that they bought, for example if a trader refuses to repair a product or issue a refund, they have the option to settle the dispute out of court using an alternative dispute resolution procedure, a low-cost and simple alternative to court procedures. Each year, approximately 300,000 eligible disputes between consumers and traders are handled by ADR entities, with resolution rates ranging from 17% to 100% across the EU. Despite this, ADR uptake remains low, due in part to low consumer awareness, low trader engagement, coverage gaps, high costs and complex procedures in some member states.

Next steps

The directive will enter into force 20 days after its publication in the EU Official Journal. The provisions will start to apply 32 months after publication.