Alternative dispute resolution (ADR) is a term used to refer to various mechanisms of dispute resolution without involving court. Alternative dispute resolution is a simple, quick and non-expensive way how to solve disputes between consumers and traders out of court.
As a consumer is supposed to be the ‘weaker’ of the contract parties, his or her financial potential and other resources for efficient dispute solution are not comparable to those of a traders. Goods of an insignificant value are often delivered, which withholds the consumer to solve the dispute in overall civil procedural procedure in court. In order to balance the options of the contract parties to solve the occurred disagreement, alternative dispute resolution is a more convenient to a consumer mechanism of dispute solution.
Alternative dispute resolution procedures may take place in various ways in the European Union – conciliator, mediator, arbitrator, ombudsperson, complaint examination committee etc.
In order to ensure possibilities of alternative dispute resolution in entire European Union, on July 8, 2013 came in force Directive on alternative dispute resolution for consumer disputes (Directive on consumer ADR) that was to be transposed into the normative acts of the Member States by July 9, 2015.
The Member States are obliged to ensure that the disputes where a trader is involved that performs business activities in the respective Member State may be submitted in a relevant alternative dispute resolution entity. Thereby it is ensured that alternative dispute solution procedures are possible to be applied in all the market sectors and all the Member States.
An alternative dispute solution entity is a neutral structure (an institution or a natural person) that is established on a durable basis according to certain quality criterions and its purpose is to solve out of court disputes between traders and consumers by applying any of the alternative dispute resolution procedures:
- Bring together the involved in the dispute parties in order to try to reach a settlement;
- Suggest a solution;
- Determines a solution.
Such disputes are to be submitted to the Alternative dispute resolution entities if
- The trader performs the business activities in the European Union.
- The consumer lives in the European Union.
- The dispute is related to the contractual liabilities (both regarding online and offline contracts) that follow from the sales contracts or service contracts in all the sector of economy.
Each Member State shall establish a list of the dispute resolution entities that are created in their territory and conform to the quality criterions in accordance with the Directive on consumer ADR.
The Directive does not provide that the participation of traders in the alternative dispute resolution procedures is mandatory and that outcome of such procedures is binding to a trader if a consumer has filed a complaint against them, yet the Member State may provide in its national normative acts that the participation of traders in such procedures is mandatory.
Obligation to inform
In case a dispute occurs it is necessary that the consumer may determine without delay in the competency of which ADR entities examination of the particular complaint belong and learn whether the respective trader will participate in the dispute resolution procedure.
In case the trader has agreed to employ or it is the trader’s obligation (in accordance with the normative acts of the Member State) to employ a certain alternative dispute resolution entity in order to solve disputes with the consumers, it is the trader’s obligation to provide information regarding such entities on its website as well as in its overall conditions.
Alternative dispute resolution in Latvia
In Latvia the Directive on consumer ADR is transposed into such normative acts:
- Law on the out of Court Solution of the Consumer Disputes
- Consumer Rights Protection Law.
On July 9, 2015, entered in force the Law on the out of Court Solution of the Consumer Disputes the purpose of which is to establish single requirements to the entities of the out-of-court disputes and to ensure consumers with a possibility to realise and protect their lawful rights by applying independent, objective, transparent, efficient and just out of court resolution of the disputes.
A trader or a service provider is obliged to participate in out of court dispute resolution. An entity of out-of-court disputes may not refuse to examine a dispute if a trader or a service provider has not replied to a consumer’s application or does not reply to the out-of-court dispute entity’s request.
The Consumer Rights Protection Centre establishes and maintains a list of the out-of-court dispute entities. The list is available on this website:
Out-of-court dispute entities in Latvia:
- Commission of Resolving Consumer Disputes acting under the Consumer Rights Protection Centre;
- Private out-of-court dispute entities;
- Institutions that resolve disputes according to the law.
Requirements to the out-of-court dispute entities:
Out-of-court dispute entities must conform to certain quality criterions that guarantee their efficient, just, independent and transparent activities:
- Elaborates the regulations for a dispute resolution process according to the provisions of the normative acts.
- Maintains a website and ensures a possibility to submit a complaint online as well as provide information regarding the conditions of the procedure that regulate resolution of a dispute, and the reasons due to which it is possible to refuse to examine a dispute according to the normative acts.
- Ensures examination of a dispute within 90 days from the date when all the documents related to the dispute resolution have been received.
- Obligation to examine cross-border disputes including disputes to which Regulation on consumer ODR applies.
- Dispute resolution is free of charge or available for a reasonable pay.
- Dispute resolution is available to the parties without any obligation to engage a lawyer or a legal adviser.
Result of dispute resolution
According to the normative acts or the regulations of dispute resolution an out-of-court dispute entity may:
- offer a dispute solution;
- determine a dispute solution;
- bring together the dispute parties in order to facilitate an agreement between a consumer and a trader or a service provider.
Obligation to inform
A trader or a service provider in its website or contract conditions informs a consumer on one or more dispute entities (included in the list of Consumer Rights Protection Centre website) that solve disputes in the respective sector. A trader or a service provider must also provide website address of the out-of-court dispute entity.
Commission of Resolving Consumer Disputes
Since March 1, 2016 a new out-of-court dispute entity has been active – Commission of Resolving Consumer Disputes.
Commission of Resolving Consumer Disputes is an independent collegiate authority that on the basis of a consumer’s application solves a dispute between a consumer and a trader or a service provider. The operations of the Commission are ensured by the Consumer Rights Protection Centre.
The Commission in examination of a certain dispute is constituted by not less than three persons one of whom is the chairperson of the Commission, and representatives of the consumer rights protection societies and of the trader’s societies in equal numbers.
A dispute is examined in a written proceedings without the parties participating; resolution of a dispute is free of charge for the parties of a dispute.
The Commission takes a decision in a way of recommendation. The decision of the Commission is to be voluntarily executed within 30 days from the date of it entering in force. On the website of the Consumer Rights Protection Centre, the current information regarding non-execution of the Commission decisions is published.
More detailed information on the operation of the Commission is available on the website of the Consumer Rights Protection Centre: