Consumer Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) refers to various mechanisms for resolving disputes without court involvement. ADR provides a simple, fast, and cost-effective way to settle disputes between consumers and traders outside the judicial system.
Since consumers are generally considered the “weaker” party in a contract, their financial resources and other means for effective dispute resolution are often significantly lower than those of a trader. In many cases, the value of the purchased goods is relatively small, which discourages consumers from pursuing legal action through the standard civil court process. To balance the power dynamics between contract parties, ADR offers a more suitable dispute resolution mechanism for consumers.
ADR procedures in the European Union can take various forms and may be referred to by different names, such as mediator, arbitrator, ombudsman, conciliation committee, etc.
To ensure ADR availability across the EU, the Directive on Consumer Alternative Dispute Resolution (ADR Directive) came into effect on July 8, 2013.
Member State Responsibilities
EU member states are required to ensure that consumers can submit disputes involving a trader operating in their country to an appropriate ADR entity. This guarantees the availability of ADR procedures across all market sectors and in all EU countries.
An ADR entity is a neutral structure (institution or individual) established for long-term operation, meeting specific quality criteria to resolve disputes between traders and consumers outside the court system. The resolution process may involve:
- Bringing both parties together to facilitate a settlement
- Proposing a solution
- Determining a resolution
Eligibility for ADR
Disputes can be submitted to an ADR entity if:
- The trader operates within the European Union
- The consumer resides within the European Union
- The dispute relates to contractual obligations arising from a sales or service contract, whether online or offline, in any economic sector
Each EU member state must create a list of ADR entities operating within its jurisdiction that meet the quality criteria outlined in the ADR Directive.
Trader Participation & Legal Obligations
The ADR Directive does not mandate that traders must participate in ADR procedures or that ADR decisions must be legally binding on traders if a consumer files a complaint. However, individual EU member states may establish national laws requiring traders to participate in ADR procedures.
Obligation to Inform Consumers
If a dispute arises, it must be easy for consumers to identify which ADR entity is competent to handle their complaint and whether the trader will participate in the resolution process.
If a trader voluntarily agrees to participate in ADR or is legally required to do so under national regulations, they must:
- Provide information about the ADR entity on their website
- Include details in their general terms and conditions