The EU has adopted new legislation on dispute resolution: the Directive on Alternative Dispute Resolution (ADR) and the Regulation on Online Dispute Resolution (ODR). The legislation is aimed at supporting the internal market and improving legal protection for consumers by eliminating lengthy and cost-intensive court proceedings.

Entry into force slated for summer 2013

The ADR Directive and the ODR Regulation were adopted by the European Parliament on 12 March 2013; the EU Council approved the two legal acts on 22 April 2013. The legislation is expected to enter into force in summer 2013. Member States will then have two years' time to transpose the Directive into national law. The Regulation is directly applicable, i.e. it need not be transposed into national law first.

The ADR Directive mandates the establishment of broad-based ADR entities for financial services as well. In legal terms, this is supposed to be achieved by establishing harmonised quality requirements: the Member States must meet certain minimum requirements laid down by the Directive, but may also introduce rules that go beyond these. ADR entities will handle both domestic as well as cross-border disputes. They must be independent and be able to act at their discretion. Their staff must demonstrate dispute resolution skills and abilities. Each Member State shall designate a national authority to be responsible for licensing ADR entities. No decision has been reached yet as to which authority that will be in Germany.

Transparency

One focus of the Directive is the issue of transparency. For example, ADR entities are required to provide comprehensive information on their websites about the ADR procedure and to allow for complaints to be filed online. Traders are also required to alert consumers to the option of using ADR in their standard terms and conditions, on their websites and whenever complaints are filed. The ADR procedure is generally to be free of charge for consumers and not to last longer than 90 days.

The ODR Regulation supplements the ADR Directive with respect to procedural aspects. It authorises the EU Commission to create an online platform for disputes, which will transmit complaints submitted to it to the competent ADR entity.

Three questions on ADR/ODR: “Win-win situation for consumers”

Interview with Dr Burkhard Lehmann, head of the BaFin department for Consumer and Investor Protection and Particular Legal Issues

What impact will the implementation of the ADR Directive and the ODR Regulation have in Germany?

With its tight network of alternative dispute resolution (ADR) entities, Germany is already in good shape. The ADR entities in the financial sector already meet most of the requirements under the ADR Directive. The process will now become even more transparent, because providers are now required to offer consumers information in their standard terms and conditions and on their websites. This is a win-win situation for consumers, who can now rely on ADR entities even more than was previously the case. This is because the ADR entities must now meet specific qualifications and requirements for their independence.

What does this mean for supervision and consumer protection?

Initially this means greater legal certainty and confidence, because the ADR and ODR legislation establishes minimum standards, for example, with respect to the mediators' independence. This functions to strengthen the ombudsman system and raise the level of consumer protection in Germany. Traders will benefit from this as well, by the way, because consumers will regain more confidence in the financial market.

How can BaFin do its part?

BaFin has always been responsible for collective consumer protection and this will continue to be a top priority for it in the future. This includes its active involvement in ADR issues. It organises periodic meetings for ombudspersons in Germany's financial sector to foster the exchange of ideas and experiences in the interest of consumers and investors. BaFin itself also operates an arbitration board for disputes under the Investment Act (Investmentgesetz – InvG). At present it is still not clear how the new EU rules will affect BaFin and its arbitration board.