ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Package travel and linked travel arrangements (Directive 2015/2302)

1. PURPOSE OF THE DIRECTIVE

Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements, amending Regulation (EC) No 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC («Directive») aims at contributing to the proper functioning of the internal market and to the achievement of a high and as uniform as possible level of consumer protection by approximating certain aspects of the laws, regulations and administrative provisions of the Member States in respect of contracts between travellers and traders relating to package travel and linked travel arrangements

LEVEL OF HARMONIZATION: Article 4 provides that the Directive is a maximum harmonization Directive unless expressly stated otherwise in the Directive.

SCOPE: The Directive applies to packages offered for sale or sold by traders to travellers and to linked travel arrangements facilitated by traders for travellers. A “trader” is any natural person or any legal person, irrespective of whether privately or publicly owned, who is acting, including through any other person acting in his name or on his behalf, for purposes relating to his trade, business, craft or profession in relation to contracts covered by the Directive, whether acting in the capacity of organiser, retailer, trader facilitating a linked travel arrangement or as a travel service provider. In accordance with the definitions of the Directive:

• The Organiser is a trader who combines and sells or offers for sale packages, either directly or through another trader or together with another trader, or the trader who transmits the traveller’s data to another trader in accordance with Article 3(2)(b)(v)(2).
• A Retailer is a trader other than the organiser who sells, or offers for sale packages combined by an organiser.

A package in accordance with the Directive, means a combination of at least 2 different types of travel services for the purpose of the same trip or holiday provided that:

• those services are combined by one trader, including at the request of or in accordance with the selection of the traveller, before a single contract on all services is concluded; or
• irrespective of whether separate contracts are concluded with individual travel service providers, those services are:
• purchased from a single point of sale and those services have been selected before the traveller agrees to pay,
• offered, sold or charged at an inclusive or total price,
• advertised or sold under the term ‘package’ or under a similar term,
• combined after the conclusion of a contract by which a trader entitles the traveller to choose among a selection of different types of travel services, or
• purchased from separate traders through linked online booking processes where the traveller’s name, payment details and e-mail address are transmitted from the trader with whom the first contract is concluded to another trader or traders and a contract with the latter trader or traders is concluded at the latest 24 hours after the confirmation of the booking of the first travel service.

In relation to the definition of “travel service”, in accordance with Article 3(1), this may be either of the following:

• carriage of passengers;
• accommodation which is not intrinsically part of carriage of passengers and is not for residential purposes;
• rental of cars, other motor vehicles within the meaning of Article 3(11) of Directive 2007/46/EC of the European Parliament and of the Council (16), or motorcycles requiring a Category A driving licence in accordance with point (c) of Article 4(3) of Directive 2006/126/EC of the European Parliament and of the Council (17);
• any other tourist service not intrinsically part of a travel service within the meaning of points (a), (b) or (c);

In case the combination of travel services where not more than one type of travel service is combined with one or more tourist services as referred to in Article 3(1)(d) this is not a package in case the services of Article 3(1)(d):

(a)	do not account for a significant proportion of the value of the combination and are not advertised as and do not otherwise represent an essential feature of the combination; or
(b)	are selected and purchased only after the performance of a travel service as referred to in point 3(1)(a),(b) or (c) of point 1 has started;

 

PACKAGE TRAVEL CONTRACT: In accordance with the Directive, a package travel contract, is a contract on the package as a whole or, if the package is provided under separate contracts, all contracts covering travel services included in the package. In accordance with judgement C-400/00 the term covers trips which are organised by a travel agent following the request of and in accordance with the specifications of a consumer or limited group of consumers.

LINKED TRAVEL ARRANGEMENT: It is important to note that the Directive covers, in addition to packages, linked travel arrangements. Article 3(5) of the Directive interprets a linked travel arrangement as at least two different types of travel services purchased for the purpose of the same trip or holiday, not constituting a package, resulting in the conclusion of separate contracts with the individual travel service providers, if a trader facilitates:

(a)	on the occasion of a single visit or contact with his point of sale, the separate selection and separate payment of each travel service by travellers; or

 

(b)	in a targeted manner, the procurement of at least one additional travel service from another trader where a contract with such other trader is concluded at the latest 24 hours after the confirmation of the booking of the first travel service.

Where not more than one type of travel service as referred to in Article 3(1)(a),(b) or (c) and one or more tourist services as referred to in Article 3(1)(d) are purchased, they do not constitute a linked travel arrangement if the latter services do not account for a significant proportion of the combined value of the services and are not advertised as, and do not otherwise represent, an essential feature of the trip or holiday.

WHERE THE DIRECTIVE DOES NOT APPLY: According to Article 2(2), the Directive does not apply in the following circumstances:

(a)	packages and linked travel arrangements covering a period of less than 24 hours unless overnight accommodation is included;

 

(b)	packages offered, and linked travel arrangements facilitated, occasionally and on a not-for-profit basis and only to a limited group of travellers;

 

(c)	packages and linked travel arrangements purchased on the basis of a general agreement for the arrangement of business travel between a trader and another natural or legal person who is acting for purposes relating to his trade, business, craft or profession.

NATIONAL LAW: National law which relates to the rules of validity, formation or effect of a contract do not affect the Directive (Article 2(3)).

IMPERATIVE NATURE OF THE DIRECTIVE: Article 23 states that the nature of the Directive is imperative and a declaration by an organiser of a package or a trader facilitating a linked travel arrangement that he is acting exclusively as a travel service provider, as an intermediary or in any other capacity, or that a package or a linked travel arrangement does not constitute a package or a linked travel arrangement, shall not absolve that organiser or trader from the obligations imposed on them under this Directive. Also travellers may not waive the rights conferred on them by the national measures transposing this Directive.

 

2. SUBSTANTIVE PROVISIONS

2.1.                PROVISION OF INFORMATION

2.1.1.                     INFORMATION PRIOR TO THE CONCLUSION OF THE CONTRACT

By Article 5, the organiser and, where the package is sold through a retailer, also the retailer must provide the traveller with the standard information by means of the relevant form as set out in Part A or Part B of Annex I, in a clear, comprehensible and prominent manner:

(a)

the main characteristics of the travel services: (i) the travel destination(s), itinerary and periods of stay, with dates and, where accommodation is included, the number of nights included;   (ii) the means, characteristics and categories of transport, the points, dates and time of departure and return, the duration and places of intermediate stops and transport connections. Where the exact time is not yet determined, the organiser and, where applicable, the retailer shall inform the traveller of the approximate time of departure and return;   (iii) the location, main features and, where applicable, tourist category of the accommodation under the rules of the country of destination;   (iv) the meal plan;   (v) visits, excursion(s) or other services included in the total price agreed for the package;   (vi) where it is not apparent from the context, whether any of the travel services will be provided to the traveller as part of a group and, if so, where possible, the approximate size of the group;   (vii) where the traveller’s benefit from other tourist services depends on effective oral communication, the language in which those services will be carried out; and   (viii) whether the trip or holiday is generally suitable for persons with reduced mobility and, upon the traveller’s request, precise information on the suitability of the trip or holiday taking into account the traveller’s needs;

 

(b)	the trading name and geographical address of the organiser and, where applicable, of the retailer, as well as their telephone number and, where applicable, e-mail address;

 

(c)

the total price of the package inclusive of taxes and, where applicable, of all additional fees, charges and other costs or, where those costs cannot reasonably be calculated in advance of the conclusion of the contract, an indication of the type of additional costs which the traveller may still have to bear;

 

(d)	the arrangements for payment, including any amount or percentage of the price which is to be paid as a down payment and the timetable for payment of the balance, or financial guarantees to be paid or provided by the traveller;

 

(e)	the minimum number of persons required for the package to take place and the time-limit, referred to in point (a) of Article 12(3), before the start of the package for the possible termination of the contract if that number is not reached;

 

(f)	general information on passport and visa requirements, including approximate periods for obtaining visas and information on health formalities, of the country of destination;

 

(g)	information that the traveller may terminate the contract at any time before the start of the package in return for payment of an appropriate termination fee, or, where applicable, the standardised termination fees requested by the organiser, in accordance with Article 12(1);

 

(h)	information on optional or compulsory insurance to cover the cost of termination of the contract by the traveller or the cost of assistance, including repatriation, in the event of accident, illness or death.

 

Under the provisions of the Directive, for travel contracts concluded by telephone, the organiser, and where applicable, the retailer must provide the traveller with the standard information set out in Part B of Annex I, and the information set out in Article 5(1)(a) to (h).

Based on Article 5(2), where the package is of the type mentioned in Article 3(2)(b)(v), the organiser and the trader to whom the data are transmitted ensures that each of them provides, before the traveller is bound by a contract or any corresponding offer, the information set out in Article 5(1)(a) to (h) depending on the respective travel services they offer. The organiser also provides, at the same time, the standard information by means of the form set out in Part C of Annex I.

In accordance with Article 6(1), the organiser, and where applicable, the retailer shall communicate all changes to the pre-contractual information to the traveller in a clear, comprehensible and prominent manner before the conclusion of the package travel contract.

Where the organiser and, where applicable, the retailer has not complied with the information (as stated in Article 5(1)(c)) then Article 6(2) states that the traveller shall not bear those fees, charges or other costs.

BURDEN OF PROOF: The burden of proof that the information requirements have been complied with, is on the trader.

 

2.1.2.                     OTHER INFORMATION REQUIREMENTS CONNECTED WITH THE ORGANISED TRAVEL ARRANGEMENT

MANDATORY CHARACTER OF THE INFORMATION: According to Article 6(1), the information of Article 5(1)(a),(c),(d),(e) and (g) form an integral part of the package travel contract and cannot be altered unless the contracting parties expressly agree otherwise.

COPY OF THE CONTRACT AND REQUIREMENTS: Article 7(1) states that package travel contracts are in plain and intelligible language and, in so far as they are in writing, legible. At the conclusion of the package travel contract or without undue delay thereafter, the organiser or retailer shall provide the traveller with a copy or confirmation of the contract on a durable medium.

The traveller is entitled to request a paper copy if the package travel contract has been concluded in the simultaneous physical presence of the parties. In relation to off-premises contracts, a copy or confirmation of the package travel contract must be provided to the traveller on paper or, if the traveller agrees, on another durable medium.

By Article 7(2), the contract also includes the information of Article 5(1)(a) to (h) as well as the following information:

(a)	special requirements of the traveller which the organiser has accepted;

 

(b)	information that the organiser is: (i) responsible for the proper performance of all travel services included in the contract in accordance with Article 13; and (ii) obliged to provide assistance if the traveller is in difficulty in accordance with Article 16;
(c)	the name of the entity in charge of the insolvency protection and its contact details, including its geographical address, and, where applicable, the name of the competent authority designated by the Member State concerned for that purpose and its contact details;
(d)	the name, address, telephone number, e-mail address and, where applicable, the fax number of the organiser’s local representative, of a contact point or of another service which enables the traveller to contact the organiser quickly and communicate with him efficiently, to request assistance when the traveller is in difficulty or to complain about any lack of conformity perceived during the performance of the package;
(e)	information that the traveller is required to communicate any lack of conformity which he perceives during the performance of the package in accordance with Article 13(2);
(f)	where minors, unaccompanied by a parent or another authorised person, travel on the basis of a package travel contract which includes accommodation, information enabling direct contact with the minor or the person responsible for the minor at the minor’s place of stay;
(g)	information on available in-house complaint handling procedures and on alternative dispute resolution (‘ADR’) mechanisms pursuant to Directive 2013/11/EU of the European Parliament and of the Council (18), and, where applicable, on the ADR entity by which the trader is covered and on the online dispute resolution platform pursuant to Regulation (EU) No 524/2013 of the European Parliament and of the Council (19);
(h)	information on the traveller’s right to transfer the contract to another traveller in accordance with Article 9.

Article 7(3) states that where the package is of a type mentioned in Article 3(2)(b)(v), the trader shall inform the organiser of the conclusion of the contract leading to the creation of a package. The trader must also provide the organiser with the information necessary to comply with his obligations as an organiser. As soon as the organiser is informed that a package has been created, the organiser shall provide to the traveller the information referred to in Article 7(2)(a) to (h) on a durable medium.

INFORMATION TO BE PROVIDED PRIOR TO THE START OF THE PACKAGE: Article 7(5), states that prior to the start of the package, the organiser must provide the traveller with the necessary receipts, vouchers and tickets, information on the scheduled times of departure and, where applicable, the deadline for check-in, as well as the scheduled times for intermediate stops, transport connections and arrival.

BURDEN OF PROOF: The burden of proof that the information requirements have been complied with, is on the trader.

2.2.                OTHER OBLIGATIONS

2.2.1.                     CHANGES TO THE CONTRACT PRIOR TO THE START OF THE PACKAGE

TRANSFER OF THE PACKAGE TRAVEL CONTRACT TO ANOTHER TRAVELLER: According to Article 9, a traveller (“the transferor”) who gives reasonable notice prior to the start of the package (7 days are considered reasonable) in a durable medium that they will transfer the package travel contract to another person (“the transferee”), may do so provided that the transferee satisfies all the conditions applicable to that contract.

The organiser must then provide the transferor with proof of the additional fees, charges or other costs arising from the transfer of the package travel contract provided that these are reasonable and do not exceed the actual cost incurred by the organiser due to the transfer of the package travel contract.

Article 9(2) creates a joint and several obligation on the transferor and transferee for the balance due, and for any additional fees, charges or other costs arising from the transfer.

ALTERATION OF THE PRICE: Article 10 gives the right to increase the price only where the traveller has a parallel right of decrease. An increase in the price is possible only when the increase is a direct consequence of changes in:

(a)	the price of the carriage of passengers resulting from the cost of fuel or other power sources;
(b)	the level of taxes or fees on the travel services included in the contract imposed by third parties not directly involved in the performance of the package, including tourist taxes, landing taxes or embarkation or disembarkation fees at ports and airports; or
(c)	the exchange rates relevant to the package.

Also, in the case of an increase in the total price of the package of more than 8%, then the provisions of Article 11(2) and (5) of the Directive apply which provide for the modification of the terms of the contract (supra next 2 paragraphs).

The price increase shall be possible only if the organiser notifies the traveller clearly and comprehensibly of it with a justification for that increase and a calculation, on a durable medium at the latest 20 days before the start of the package.

In accordance with Article 10(5), in case of a price reduction, the organiser shall have the right to deduct actual administrative expenses from the refund owed to the traveller. At the traveller’s request, the organiser shall provide proof of those administrative expenses.

ALTERATION OF OTHER PACKAGE TRAVEL CONTRACT TERMS: Article 11(1) states that the organiser may not unilaterally change package travel contract terms unless (a)
the organiser has reserved that right in the contract; (b) the change is insignificant; and (c) the organiser informs the traveller of the change in a clear, comprehensible and prominent manner on a durable medium.

Articles 11(2) and 11(5) states that whenever an organiser prior to the start of the package is constrained to alter significantly any of the main characteristics of the travel services as referred to in Article 5(1)(a) or cannot fulfil the special requirements as referred to Article 7(2)(a), or proposes to increase the price of the package by more than 8 %, the traveller may within a reasonable period specified by the organiser:

(a)	accept the proposed change; or

 

(b)	terminate the contract without paying a termination fee.

If the package travel contract is terminated and the traveller does not accept a substitute package, the organiser shall refund all payments made by or on behalf of the traveller without undue delay and in any event not later than 14 days after the contract is terminated. (Article 11(5))

The organiser, in case of changes in the terms, must without undue delay inform the traveller in a clear, comprehensible and prominent manner on a durable medium of:

(a)	the proposed changes and their impact on the price of the package;

 

(b)	a reasonable period within which the traveller has to inform the organiser of his decision to accept a change or terminate the contract (and/or select another package);

 

(c)	the consequences of the traveller’s failure to respond within the period referred to point (b), in accordance with applicable national law; and

 

(d)	where applicable, the offered substitute package and its price.

In case the changes to the travel package result in a package of lower quality or cost, the traveller shall be entitled to an appropriate price reduction.

Finally, and in accordance with Article 11(5), in case that the consumer terminates the contract due to a change in its terms where the change is significant and in case the consumer does not accept another package, then the organiser must refund all payments made by or on behalf of the traveller without undue delay and in any event not later than 14 days after the contract is terminated.

TERMINATION OF THE CONTRACT:

• FROM THE TRAVELLER: In accordance with Article 12, the traveller may terminate the package travel contract at any time before the start of the package. Where the traveller terminates the package travel contract under this paragraph, the traveller may be required to pay an appropriate and justifiable termination fee to the organiser. The package travel contract may specify reasonable standardised termination fees based on the time of the termination of the contract before the start of the package and the expected cost savings and income from alternative deployment of the travel services. In the absence of standardised termination fees, the amount of the termination fee must correspond to the price of the package minus the cost savings and income from alternative deployment of the travel services. At the traveller’s request the organiser shall provide a justification for the amount of the termination fees.

The only case where a charge cannot be imposed on the traveller, is in the case of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and significantly affecting the performance of the package, or which significantly affect the carriage of passengers to the destination. In such a case, the traveller is entitled to a full refund of any payments made for the package, but shall not be entitled to additional compensation.

• FROM THE ORGANISER: The Organiser also has the right to terminate the package travel contract and provide the traveller with a full refund of any payments made for the package in case the former is prevented from performing the contract because of unavoidable and extraordinary circumstances. In such case the organiser must notify the traveller of the termination of the contract without undue delay before the start of the package.
• In the case of contracts with a minimum number of passengers, the organiser must notify the traveller of the termination of the contract within the period fixed in the contract, but not later than:

(i)	20 days before the start of the package in the case of trips lasting more than six days;

 

(ii)	seven days before the start of the package in the case of trips lasting between two and six days;

 

(iii)

48 hours before the start of the package in the case of trips lasting less than two days;

 

In the abovementioned cases, the organiser must provide the traveller with a full refund of any payments made for the package but is not liable for additional compensation.

RIGHT OF WITHDRAWAL: The only case where a genuine right of withdrawal is mentioned is Article 12(5). The Article is not mandatory in nature but it states that:

“With respect to off-premises contracts, Member States may provide in their national law that the traveller has the right to withdraw from the package travel contract within a period of 14 days without giving any reason.”

2.2.2.                     PERFORMANCE OF THE PACKAGE

PERFORMANCE OF THE PACKAGE: By virtue of Article 13, the Member States ensure that the organiser is responsible for the performance of the travel services included in the package travel contract, irrespective of whether those services are to be performed by the organiser or by other travel service providers. Also, Member States may maintain or introduce in their national law provisions under which the retailer is also responsible for the performance of the package. In such case, Article 7 and 9-12 apply to the retailer.

TRAVELLER LIABILITY: According to Article 13(2) the traveller must inform the organiser immediately (without undue delay) in relation to any lack of conformity which he perceives during the performance of a travel service included in the package travel contract.

ORGANISER LIABILITY: In such a case, the organiser must remedy the lack of conformity, unless that is impossible or it entails disproportionate costs, taking into account the extent of the lack of conformity and the value of the travel services affected. In the last two instances, Article 14 applies. Otherwise, Article 13(4) is applicable which states that:

“if the organiser does not remedy the lack of conformity within a reasonable period set by the traveller, the traveller may do so himself and request reimbursement of the necessary expenses. It shall not be necessary for the traveller to specify a time-limit if the organiser refuses to remedy the lack of conformity or if immediate remedy is required.”

OTHER OBLIGATIONS: In accordance with Article 13(5), when a large number of a significant proportion of the travel services cannot be provided as agreed in the package travel contract, the organiser must offer, at no extra cost to the traveller, suitable alternative arrangements of equivalent or higher quality than those specified in the contract (if that is possible), for the continuation of the package, including where the traveller’s return to the place of departure is not provided as agreed. Where this results in a package of lower quality than that specified in the package travel contract, the organiser shall grant the traveller an appropriate price reduction.

The traveller reserves the right to reject the proposed alternative arrangements only if they are not comparable to what was agreed in the package travel contract or the price reduction granted is inadequate.

In the cases where the lack of conformity substantially affects the performance of the package and the organiser has failed to remedy it within a reasonable period set by the traveller, the traveller may terminate the package travel contract without paying a termination fee and, where appropriate, request, in accordance with Article 14, price reduction and/or compensation for damages.

Where the traveller rejects the proposed alternative arrangements or where the alternative arrangement is impossible, the traveller is allowed to a price reduction and/or compensation in accordance with Article 14 without terminating the package travel contract.

If the package includes the carriage of passengers, the organiser shall, in the cases referred to in the first and second subparagraphs, also provide repatriation of the traveller with equivalent transport without undue delay and at no extra cost to the traveller.

IMPOSSIBILITY OF RETURN: According to Article 13(7):

“If it is impossible to ensure the traveller’s return as agreed in the package travel contract because of unavoidable and extraordinary circumstances, the organiser shall bear the cost of necessary accommodation, if possible of equivalent category, for a period not exceeding three nights per traveller. Where longer periods are provided for in Union passenger rights legislation applicable to the relevant means of transport for the traveller’s return, those periods shall apply”

Article 13(7) does not apply to persons with reduced mobility, and any person accompanying them, pregnant women and unaccompanied minors, as well as persons in need of specific medical assistance, provided that the organiser has been notified of their particular needs at least 48 hours before the start of the package.

REDUCTION OF THE PRICE AND COMPENSATION: Article 14, provides for a reduction in the price and the compensation allowed by the consumer. The Member States shall ensure that the traveller is entitled to an appropriate price reduction for any period during which there was a lack of conformity, unless the organiser proves that the lack of conformity (a) is attributable to the traveller or (b) attributable to a third party unconnected with the provision of the travel services included in the package travel contract and is unforeseeable or unavoidable or (c) is due to unavoidable and extraordinary circumstances.

Where the lack of conformity is due to the fault of the organiser, then, under Article 14(2), the traveller shall be entitled to receive appropriate compensation from the organiser for any damage which the traveller sustains as a result of any lack of conformity. The compensation is made without undue delay.

In accordance with the case law of the ECJ, Article 14 allows the consumer the right to be compensated for any moral damage which is due to the lack of conformity or non execution of the organised trip from the organiser or the trader.[1]

According to Article 14(6), the limitation period for introducing claims under this Article must not be less than two years.

OBLIGATION OF THE ORGANSIER TO PROVIDE ASSISTANCE: Article 16 states that Member States ensure that the organiser gives appropriate assistance without undue delay to the traveller in difficulty, in the following ways:

(a)	providing appropriate information on health services, local authorities and consular assistance; and

 

(b)	assisting the traveller to make distance communications and helping the traveller to find alternative travel arrangements.

 

The same Article states that the organiser shall be able to charge a reasonable fee for such assistance if the difficulty is caused intentionally by the traveller or through the traveller’s negligence. It is to be noted however that such fee must not exceed the actual costs incurred by the organiser.

COMPLAINT MADE TO THE RETAILER: Article 15 states that Member States ensure that the traveller may address messages, requests or complaints in relation to the performance of the package directly to the retailer through which it was purchased. The retailer shall forward those messages, requests or complaints to the organiser without undue delay.

For the purpose of compliance with time-limits or limitation periods, receipt of the messages, requests or complaints referred to in the first subparagraph by the retailer shall be considered as receipt by the organiser.

2.2.3.                     INSOLVENCY PROTECTION

INSOLVENCY PROTECTION: Articles 17 and 18 refer to the protection of the traveller in the case where the organiser becomes insolvent.

Article 17 states that Member States ensure that organisers established in their territory provide security for the refund of all payments made by or on behalf of travellers insofar as the relevant services are not performed as a consequence of the organiser’s insolvency. If the carriage of passengers is included in the package travel contract, organisers shall also provide security for the travellers’ repatriation.

In case organisers are not established in a Member State but sell or offer for sale packages in a Member State, or they, by any means direct such activities to a Member State, they shall be obliged to provide the security in accordance with the law of that Member State.

NATURE OF THE GUARANTEE: According to case C-134/11, the scope of application of Article 17, includes the case where the insolvency of the organiser is also attributable to its own fraudulent behaviour.[2]

SCOPE OF THE GUARANTEE: The guarantee of Article 17(2) covers all costs which are  reasonably foreseeable and it also covers the amounts of payments made by or on behalf of travellers in respect of packages, taking into account the length of the period between down payments and final payments and the completion of the packages, as well as the estimated cost for repatriations in the event of the organiser’s insolvency.

Also, Article 17(3) states that regardless of the place of residence of the traveller, the place of departure or where the package is sold and irrespective of the Member State where the entity in charge of the insolvency protection is located, the traveller is offered with the same protection in relation to insolvency. It should be noted that the guarantee must cover the accommodation of the traveller prior to repatriation as well as any refunds for travel services which have not been performed without undue delay after the traveller’s request.

Article 18(1) states that Member States shall recognise as meeting the requirements laid down in the Directive when an organiser provides such measures.

In relation to traders who facilitate linked travel arrangements, Article 19 states that they must provide security or the refund of all payments they receive from travellers insofar as a travel service which is part of a linked travel arrangement is not performed as a consequence of their insolvency. If such traders are the party responsible for the carriage of passengers, the security shall also cover the traveller’s repatriation. It is also important to note that the trader who facilitates linked travel arrangement is always responsible to inform the traveller that he:

(a)	will not benefit from any of the rights applying exclusively to packages under this Directive and that each service provider will be solely responsible for the proper contractual performance of his service; and

 

(b)	will benefit from insolvency protection.

In case that the trader does not do so, then the rights and obligations mentioned in Articles 9 and 12 as well as Article 13 to 16 apply.

Finally, in accordance with Article 19(4), a linked travel arrangement is the result of the conclusion of a contract between a traveller and a trader who does not facilitate the linked travel arrangement, that trader shall inform the trader facilitating the linked travel arrangement of the conclusion of the relevant contract.

3. OTHER GENERAL PROVISIONS

WHEN THE ORGANISER IS OUTSIDE THE EEA: In accordance with Article 20, where the organiser is established outside the European Economic Area, the retailer established in a Member State shall be subject to the obligations laid down for organisers in Chapters IV and V (i.e. Articles 13 to 18), unless the retailer provides evidence that the organiser complies with those Chapters.

LIABILITY FOR BOOKING ERRORS: By Article 21, a trader who has agreed to arrange the booking of a package or of travel services which are part of linked travel arrangements, he shall be responsible for the errors made during the booking process.

RIGHT OF REDRESS: Article 22 states that where an organiser or a retailer pays compensation, grants price reduction or meets the other obligations incumbent on him under the Directive, Member States shall ensure that the organiser or retailer has the right to seek redress from any third parties which contributed to the event triggering compensation, price reduction or other obligations.

4. OBLIGATIONS OF MEMBER STATES

In accordance with Article 25, Member States take all necessary measures to lay down and implement rules on penalties applicable to infringements of national provisions adopted pursuant the Directive. The penalties provided for shall be effective, proportionate and dissuasive.

 

5. OTHER RELEVANT PROVISIONS

In accordance with Article 27, Regulation (EC) No 2006/2004 is amended and in accordance with Article 29 Directive 90/314/EEC is repealed with effect from 1 July 2018.

[1] C-168/00 – Simone Leitner v. TUI Deutschland GmbH & Co. KG

[2]  C-134/11 Jürgen Blödel-Pawlik v. HanseMerkur Reiseversicherung AG

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ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Misleading and comparative advertising (Directive 2006/114/EC)

Directive 2006/114/EC of the European Parliament and of the Council, of December 12, 2006, on misleading and comparative advertising (“Directive“) aims to protect traders from misleading advertising and its unfair consequences and to define the conditions under which comparative advertising is permitted. The Directive repealed Directive 84/450/EEC as it had been amended but several of the latter’s provisions remained intact – the jurisprudence of Directive 84/450/EEC therefore remains relevant

This Directive is related to Directive 2005/29/EC on unfair commercial practices, which we have already analyzed in Chapter 3, with the difference that the latter protects consumers while the former protects businesses.

LEVEL OF HARMONIZATION: The Directive is of minimal harmonization  and applies to “advertisements” which are either (1) misleading, or (2) unlawful comparative advertising, or both.

INTERPRETATION OF ADVERTISING:  Based on the Directive, advertising is interpreted as «the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations». The scope of the above interpretation is relatively broad, and it has been decided that even metatags consisting of keywords either embedded in website code or entered into a search engine, constitute advertising within its meaning. Likewise, using a domain name is considered advertising.

The reason it became necessary to control such advertisements is to protect against distortions of competition at EU level.

PROTECTION OF PROFESSIONALS: As mentioned above, the Directive is intended to protect professionals (i.e. traders) from misleading advertising by other businesses – i.e. it applies to B2B relationships which are considered unfair commercial practices.  This is because, in relation to consumer protection, Directive 2005/29/EC on unfair commercial practices applies. The Directive clarifies that its purpose is to protect traders from misleading advertising and its unfair consequences for them,  thus setting the minimum objective criteria for determining an advertisement as misleading.

PROTECTION OF TRADERS AND CONSUMERS:  Regarding non-permitted comparative advertising, however, the provisions of the Directive apply not only to B2B relationships but also apply to B2C relationships – that is, where a trader directs comparative advertising to consumers. The way this is achieved is through article 6(2)(a) of Directive 2005/29/EC which states that any practice which creates confusion, including through comparative advertising, with products, trademarks, trade names and other distinctive features of a competitor, is misleading. In other words, the consumer must refer to article 4 of Directive 2006/114/EC to check whether the conditions of permitted comparative advertising are met.

The provision of article 4(a) of the Directive operates in a similar way in relation to B2B transactions. That is, the article in question, which states that comparative advertising which is misleading is not allowed, essentially refers to Directive 2005/29/EC and an examination of articles 6 and 7 concerning misleading commercial practices.

Therefore, the Directive:

“… will either provide conditions for such assessment under the UCPD for B2C transactions or impose additional requirements which are relevant for traders, mainly competitors, in B2B transactions.”

MEANING OF TRADER: Based on the Directive, “trader” is any natural or legal person who is acting for purposes relating to his trade, craft, business or profession and anyone acting in the name of or on behalf of a trader.

1.   MISLEADING ADVERTISING

 INTERPRETATION:  Misleading advertising under article 4(b) is:

«… any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor»

Based on article 3, in order to assess whether an advertisement is misleading, all its features are taken into account and in particular any information concerning:

«a)

the characteristics of goods or services, such as their availability, nature, execution, composition, method and date of manufacture or provision, fitness for purpose, uses, quantity, specification, geographical or commercial origin or the results to be expected from their use, or the results and material features of tests or checks carried out on the goods or services·

 

b)	the price or the manner in which the price is calculated, and the conditions on which the goods are supplied or the services provided ·

 

c)	the nature, attributes and rights of the advertiser, such as his identity and assets, his qualifications and ownership of industrial, commercial or intellectual property rights or his awards and distinctions..»

2.   COMPARATIVE ADVERTISING

WHAT IS COMPARATIVE ADVERTISING:  Comparative advertising based on the Directive is «any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor ».

PERMISSIBLE COMPARATIVE ADVERTISING:  The general perception as well as the course of jurisprudence to date, including the relevant Directive, is that comparative advertising is permissible. The reason given by the CJEU and the Directive is that it contributes:

“…in the objective presentation of the advantages of various comparable products and, therefore, in stimulating competition between suppliers of goods and services for the benefit of consumers, the conditions laid down for comparative advertising must be interpreted in the most favorable way.”

Indeed, consumers’ choices are widened when they are able to differentiate between goods – through this logic, it is legitimate to compare and promote product comparison through advertising.

At the same time, however, it must be ensured that comparative advertising is not used in a manner contrary to the rules of competition and unfairly or in a manner that affects the interests of consumers. That is, such advertising should be subject to rules that ensure transparency, prevent confusion and “motivate businesses to invest in the quality and image of their products”.

INTERPRETATION:  The broad interpretation of the concept of “comparative advertising” is intended to cover all forms of comparative advertising regardless of how the comparison is viewed – that is, whether it is directly or indirectly viewed. For example, where advertising refers to a type of product (even if no specific business or product is mentioned) that refers to a competitor, it is considered comparative advertising. This applies regardless of whether the reference concerns undertakings acting in concerto – i.e. together.

COMPETITIVE RELATIONSHIP:  From the above, it follows that it is necessary for a business, to be able to prove that it is a competitor of the advertiser, before making any claims against the advertised business.

Relevant is case C-381-05 where it was decided that for a case to fall within the Directive, there must be a competitive relationship between the advertiser and the business identified in the advertising message with reference to the products (goods or services) offered – that is, the existence of a relationship between businesses depends on the finding that the products they offer have some degree of substitutability – one for the other. To determine the existence of such a competitive relationship between products, the following shall be taken into account:

• the present state of the market and consumer habits as well as the possibilities of their evolution and the further potential for the substitution of products for one another which may be revealed by intensification of trade;
• the part of the Community territory in which the advertising is disseminated, without, however, excluding, where appropriate, the effects which the evolution of consumer habits seen in other Member States may have on the national market at issue and
• the particular characteristics of the product which the advertiser seeks to promote and the image which it wishes to impart to it.

CRITERIA OF COMPARATIVE ADVERTISING:  However, in order to allow comparative advertising, the following conditions must be cumulatively fulfilled in their entirety:

«a)

it is not misleading within the meaning of Articles 2(b), 3 and 8(1) of this Directive or Articles 6 and 7 of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (‘Unfair Commercial Practices Directive’) (7);.

 

b)	it compares goods or services meeting the same needs or intended for the same purpose;

 

c)	it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;

 

d)	it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor;

 

e)	for products with designation of origin, it relates in each case to products with the same designation;

 

f)	it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;

 

g)	it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name;

 

h)	it does not create confusion among traders, between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor..»

OBJECTIVITY:  An interesting case in the field of comparative advertising and the way objectivity is examined in relation to article 4(c) of the Directive, is case C-562/15 Carrefour Hypermarchés. In that case, Carrefour company (which operates various stores – including hypermarkets, supermarkets and other smaller stores), launched a television advertising campaign entitled “Lower Price Guarantee” in which it quoted comparative prices of other competing chains and offered consumers as refund, double the price difference in the event that they found any of the specific products at a lower price in a store other than Carrefour. What had been done, however, was that Carrefour had compared products of the Carrefour supermarket (and not of its smaller stores) with the smaller chain stores of its competitors – with the result that the price of Carrefour products was clearly lower.

Examining the issue, the CJEU stated that, as a general rule, article 4(c) of the Directive does not require that the category or size of the stores in which the products whose prices are compared are sold be similar. Also, comparing the prices of similar products sold in stores of a different category or size is permissible and does not oppose fair competition or the interests of consumers  provided, however, that (1) the conditions of article 4 are met and (2) the advertisement compares prices objectively and is not misleading.

Where, however, the stores whose prices have been obtained are members of chains each of which has a range of stores of different sizes and categories, and the advertiser compares the prices of stores of a larger size or higher category in his chain with those recorded in stores of a smaller size or lower category of competitive chains, without this element appearing in the advertisement, this may distort objectivity.

Similarly, an objective comparison cannot be made where, what is being compared is price, while the products being compared have different qualities without these qualities being mentioned in the advertisement.

MISLEADING ADVERTISING:  Regarding article 4(a) of the Directive, the CJEU decided that comparative advertising is misleading where, in any way, by act or omission, it misleads consumers it is addressed to and influences their economic behaviour or, for these reasons, it harms a competitor.  It is important to mention that, although the CJEU recognized that under article 7 of Directive 2005/29/EC, restrictions on the medium in which the advertisement is shown may be taken into account for whether there is a misleading omission, in such circumstances, these limitations did not justify the omission of essential information about store differences.  That is, the information should not only be clear, but should also be included in the advertising medium itself.

DESIGNATION OF ORIGIN:  In relation to article 4(e), and products with a designation of origin, case C-381-05 is relevant  where the question was whether beer could be compared to champagne. It was decided that for products that do not have a designation of origin, any comparison with products that have a designation of origin is not prohibited.

TRADEMARKS:  With reference to article 4(d) and (f) – (h) and the use of trademarks, it should be noted that comparative advertising that makes reference to competitors’ trademarks is permissible, given that it complies with the provisions of the Directive.

However, it is impermissible (especially in relation to articles 4(f) – (h)) to use trademarks, brands or other distinguishing marks of a competitor to promote the advertiser’s products. Nor is it permissible for someone to copy a competitor’s mark and state above that the product (which the mark represents) is an imitation, since in this way he effectively usurps and unfairly benefits from the reputation of the mark.

METATAGS:  Also of interest is the use of competitor brand metatags to attract consumers to websites. Such practice may be considered trademark infringement – but is there a way for it to be considered permissible comparative advertising?

The answer seems to be negative since it is difficult for the advertiser to be able to convince that the use of competitor metatags is not misleading and/or that it is not taking unfair advantage of the competitor’s trademark.

3.   ROLE OF MEMBER STATES

Based on article 5 of the Directive MSs should provide appropriate and effective means to combat misleading advertising and enforce compliance with the provisions on comparative advertising in the interest of traders and competitors. Such means include:

• Right to take legal action against the said advertisement or
• File a complaint against the advertisement before an administrative authority which is competent to either decide on the complaint or refer the matter to the competent court.

EXERCISE OF RIGHTS BY ORGANIZATIONS: The above rights are exercised by anyone with a legal interest including organizations.

MSs may also decide that before a court or administrative body can take up a dispute, other existing means of dealing with complaints should first be resorted to, including means such as voluntary control of such advertising by independent bodies.

APPEAL BY A CODE OWNER:  Also, the MSs can decide whether appeals can be brought separately or jointly against a number of traders in the same economic sector and whether these appeals can be brought against a code owner, if the code in question promotes non-compliance with any legal provisions.  According to the Directive, a “code owner” is:

“…any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it.”

The MSs, in accordance with article 5(3), are required to confer on the courts or administrative authorities powers under which they may, when they consider such measures necessary and, taking into account all the interests involved and in particular the public interest: order the cessation of misleading advertising or unauthorized comparative advertising, or initiate the appropriate legal proceedings for this purpose or, if the misleading advertisement or unauthorized comparative advertising has not yet been published, but its publication is imminent, prohibit it or initiate the relevant legal proceedings to ban this publication even if actual damage or harm, fraud or negligence on the part of the trader is not proven. Based on the same article, the MSs should ensure that the measures referred to in this paragraph can be taken within the framework of an expedited procedure, either with temporary or final effect.

In addition, in order to eliminate the continuing effects of misleading advertising or unlawful comparative advertising, the cessation of which has been ordered by a final decision, the MSs may confer on the courts or administrative authorities powers under which they may require the publication of the decision (in whole or in part in such form as they deem fit) and/or require the publication of a remedial statement.

Administrative bodies should, among other things, justify their decisions.

PROOF OF CLAIMS:  Under article 7, MSs should confer powers on courts or administrative authorities to require the advertiser to provide evidence of the accuracy of the factual claims contained in the advertisement, if deemed necessary on the basis of the data of the specific case and taking into account the legitimate interests of the advertiser and in the case of comparative advertising to require that the advertiser present these evidence in a short period of time and in the event that he does not do so or where the claims are inaccurate, then these are considered inaccurate.

RIGHTS OF MSs:  Based on article 8(1), MSs may adopt provisions which provide greater protection to traders and competitors against misleading advertising (but not comparative advertising as far as the comparison is concerned).

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ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Distance marketing of Financial Services to Consumers (Directive 2002/65/EC)

1. PURPOSE OF THE DIRECTIVE

Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (the “Directive”) aims at approximating the laws, regulations and administrative provisions of the Member States concerning the distance marketing of consumer financial services.

Distance contract is any contract concerning financial services concluded between a supplier and a consumer under an organised distance sales or service-provision scheme run by the supplier, who, for the purpose of that contract, makes exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.

LEVEL OF HARMONIZATION: The Directive is a maximum harmonisation Directive as explained in paragraph 13 of the preamble. It is important however to note that in relation to the information requirements which should be given to the consumer, the MS in accordance with article 4(2) may maintain or introduce more stringent provisions on prior information requirements when the provisions are in conformity with Community law.

IMPERATIVE NATURE OF THE PROVISIONS OF THE DIRECTIVE: In accordance with article 12 of the Directive, Consumers may not waive the rights conferred on them by this Directive. Also MSs must take the measures needed to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract, if this contract has a close link with the territory of one or more Member States.

SCOPE OF THE DIRECTIVE: In accordance with article 1 of the Directive, this applies to distance marketing of consumer financial services. In the case of contracts for financial services comprising an initial service agreement followed by successive operations or a series of separate operations of the same nature performed over time, the provisions of this Directive apply only to the initial agreement. In case there is no initial service agreement but the successive operations or the separate operations of the same nature performed over time are performed between the same contractual parties, then articles 3 and 4 apply only in relation to the first operation. Where, however, no operation of the same nature is performed for more than one year, the next operation will be deemed to be the first in a new series of operations and, accordingly, articles 3 and 4 shall apply.

2. SUBSTANTIVE PROVISIONS

2.1.              INFORMATION PRIOR TO THE CONCLUSION OF THE DISTANCE CONTRACT

In accordance with article 3, a Consumer, in good time before he is bound by any distance contract or offer, must be provided with information concerning the supplier, the financial service, the distance contract and the redress procedures (i.e. information relating to whether or not there is an out-of-court complaint and redress mechanism for the consumer that is party to the distance contract and, if so, the methods for having access to it etc). For example, in relation to the financial service, the consumer must be informed in relation to the description of the main characteristics of the financial service, the total price to be paid by the consumer to the supplier for the financial service including all related fees, charges and expenses, and all taxes paid via the supplier or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it. Where relevant notice indicating that the financial service is related to instruments involving special risks related to their specific features or the operations to be executed or whose price depends on fluctuations in the financial markets outside the supplier’s control and that historical performances are no indicators for future performances, notice of the possibility that other taxes and/or costs may exist that are not paid via the supplier or imposed by him, any limitations of the period for which the information provided is valid, the arrangements for payment and for performance and any specific additional cost for the consumer of using the means of distance communication, if such additional cost is charged.

In accordance with article 3(2), the above information must be provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the principles governing the protection of those who are unable, pursuant to the legislation of the MSs, to give their consent, such as minors.

INFORMATION IN CASE OF VOICE TELEPHONY COMMUNICATIONS: In accordance with article 9(3), in cases of voice telephony communications information such as the identity of the  supplier and the commercial purpose of the call initiated by the supplier shall be made explicitly clear at the beginning of any conversation with the consumer as well as the identity of the person in contact with the consumer and his link with the supplier and a description of the main characteristics of the financial service. The existence or absence of a right of withdrawal in accordance with Article 6 and, where the right of withdrawal exists, its duration and the conditions for exercising it, including information on the amount which the consumer may be required to pay on the basis of Article 7(1). The supplier shall inform the consumer that other information is available on request and of what nature this information is. In any case the supplier shall provide the full information when he fulfils his obligations under Article 5.

Information on contractual obligations, to be communicated to the consumer during the pre-contractual phase, shall be in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if the latter were concluded.

2.2.    INFORMATION/RIGHTS CONNECTED WITH THE CONTRACT FORMATION

WITHDRAWAL: Articles 6 and 7 refer to the right of consumers to withdraw from a contract. In accordance with Article 6, the consumer has at his disposal 14 days to withdraw from the contract without any penalty and without having to provide reasons for such withdrawal. The period of 14 days is extended to 30 calendar days in the case of distance contracts relating to life insurance covered by Directive 90/619/EEC and personal pension operations. The period for withdrawal begins to run from the day of the conclusion of the distance contract (and in relation to life assurance, from the time when the consumer is informed that the distance contract has been concluded) or from the day on which the consumer receives the contractual terms and conditions and the information in accordance with Article 5, whichever took place last.

Member States, in addition to the right of withdrawal, may provide that the enforceability of contracts relating to investment services is suspended for the period during which the right of withdrawal is effective.

In accordance with article 6(2), the right of withdrawal does not apply in the following cases:

“(a) financial services whose price depends on fluctuations in the financial market outside the suppliers control, which may occur during the withdrawal period, such as services related to:

– foreign exchange,

– money market instruments,

– transferable securities,

– units in collective investment undertakings,

– financial-futures contracts, including equivalent cash-settled instruments,

– forward interest-rate agreements (FRAs),

– interest-rate, currency and equity swaps,

– options to acquire or dispose of any instruments referred to in this point including equivalent cash-settled instruments. This category includes in particular options on currency and on interest rates;

(b) travel and baggage insurance policies or similar short-term insurance policies of less than one month’s duration;

(c) contracts whose performance has been fully completed by both parties at the consumer’s express request before the consumer exercises his right of withdrawal.”

Also, article 6(3), states that MSs may provide that the right of withdrawal has no application in the following instances:

“(a) any credit intended primarily for the purpose of acquiring or retaining property rights in land or in an existing or projected building, or for the purpose of renovating or improving a building, or

(b) any credit secured either by mortgage on immovable property or by a right related to immovable property, or

(c) declarations by consumers using the services of an official, provided that the official confirms that the consumer is guaranteed the rights under Article 5(1).

This paragraph shall be without prejudice to the right to a reflection time to the benefit of the consumers that are resident in those Member States where it exists, at the time of the adoption of this Directive.”

Article 6(6) states that the deadline for sending a withdrawal notice by the consumer shall be deemed to have been observed if it is dispatched before the deadline expires.

It is important to note that if to a distance contract of a given financial service another distance contract has been attached concerning services provided by the supplier or by a third party on the basis of an agreement between the third party and the supplier, this additional distance contract shall be cancelled automatically, without any penalty, if the consumer exercises his right of withdrawal.

In the case of payment of the service provided before withdrawal, Article 7 applies. The said Article states that when the consumer exercises his right of withdrawal he may only be required to pay, without any undue delay, for the service actually provided by the supplier in accordance with the contract. The amount payable shall not exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract.  In no case may such amount be construed as a penalty. Furthermore, the supplier may not require the consumer to pay any amount unless he can prove that the consumer was duly informed about the amount payable within the withdrawal period. However, the supplier may not require such payment if he has commenced the performance of the contract before the expiry of the withdrawal period without the consumer’s prior request.

In accordance with Article 7(4), the supplier shall, without any undue delay and no later than within 30 calendar days, return to the consumer any sums he has received from him in accordance with the distance contract, (except for amounts paid during the withdrawal period). Under Article 7(5), the consumer shall return to the supplier within 30 calendar days from the day that the consumer dispatches the notification of withdrawal, any sums and/or property he has received from the supplier.

PAYMENT BY CARD: By Article 8, the consumer may request the cancellation of a payment where fraudulent use has been made of his payment card in connection with distance contracts and in the event of such fraudulent use, to be re-credited with the sum paid or have them returned.

UNSOLICITED SERVICES: Except in the cases of implicit renewal of the distance contract, MSs must prohibit the supply of financial services to a consumer without a prior request on his part, when this supply includes a request for immediate or deferred payment. Also, a consumer is exempt from any obligation in the event of unsolicited supplies and the absence of a reply not constituting consent.

UNSOLICITED COMMUNICATIONS: Article 10 states that the use by a supplier of automated calling systems without human intervention (automatic calling machines) or fax machines, shall require the consumer’s prior consent. In the same way, if individual communications are allowed with the consumer through another means of distance communication, a prior consent of the consumers concerned must be obtained or they may be used only if the consumer has not expressed his manifest objection.

UNFAIR CONTRACT TERMS: In accordance with Article 15, any contractual term or condition providing that “the burden of proof of the respect by the supplier of all or part of the obligations incumbent on him pursuant to this Directive should lie with the consumer” shall be an unfair term.

3. OBLIGATIONS/RIGHTS OF MEMBER STATES

SANCTIONS:  Article 11 of the Directive, provides that MSs shall provide for appropriate sanctions in the event of the supplier’s failure to comply with national provisions adopted pursuant to this Directive. Also, MSs may, in case of breach of the above provisions, allow the consumer to cancel the contract at any time, free of charge and without penalty. These sanctions must be effective, proportional and dissuasive.

JUDICIAL AND ADMINISTRATIVE REDRESS: In accordance with Article 13, MSs ensure that adequate and effective means exist to ensure compliance with this Directive in the interests of consumers. The means include provisions whereby one or more bodies, as determined by national law, may take action in accordance with national law before the courts or competent administrative bodies to ensure that the national provisions for the implementation of the Directive. Such Bodies are public bodies or their representatives; consumer organisations having a legitimate interest in protecting consumers and professional organisations having a legitimate interest in acting.

It is important to note that in accordance with Article 13(3), MSs shall take the measures necessary to ensure that operators and suppliers of means of distance communication put an end to practices that have been declared to be contrary to this Directive, on the basis of a judicial decision, an administrative decision or a decision issued by a supervisory authority notified to them, where those operators or suppliers are in a position to do so.

OUT-OF-COURT REDRESS: Article 14 provides for the promotion of the setting up or development of adequate and effective out-of-court complaints and redress procedures for the settlement of consumer disputes concerning financial services provided at distance. They should also encourage the bodies responsible for out-of-court settlement of disputes to cooperate in the resolution of cross-border disputes concerning financial services provided at distance.

4. OTHER PROVISIONS

The Directive also provides for specific amendments. Based on articles 17, 18 and 19, Directive 90/619/EEC, Directive 97/7/EC and Directive 98/27/EC are amended respectively.

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ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Credit agreements for consumers (Directive 2008/48/ EC)

1. PURPOSE OF THE DIRECTIVE

Directive 2008/48/ΕΚ of the European Parliament and of the Council of 23rd April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC («The Directive») aims at  harmonising certain aspects of the laws, regulations and administrative provisions of the Member States concerning agreements covering credit for consumers. A credit agreement is an agreement whereby a creditor grants or promises to grant to a consumer credit in the form of a deferred payment, loan or other similar financial accommodation.

HARMONISATION LEVEL: According to article 22, the Directive is a maximum harmonisation directive. However, based on paragraph 10 of the preamble of the Directive, Member States (“MSs”) may apply provisions of this Directive to areas not covered by its scope. Therefore, based on case C-602/10, a national measure is permissible irrespective whether it includes in its substantive scope consumer credit contracts whose object is the granting of consumer credit secured by immovable property[1] (see below Article 2(2)(a)).

SCOPE OF APPLICATION: The Directive applies to credit contracts with the exception of contracts concluded for the continuous provision of services or for the supply of goods of the same type, according to which the consumer pays in installments the price for the said services or goods during their provision (article 3). Also, based on article 2(2), it does not apply in the following cases:

«(a)	credit agreements which are secured either by a mortgage or by another comparable security commonly used in a Member State on immovable property or secured by a right related to immovable property;

 

(b)	credit agreements the purpose of which is to acquire or retain property rights in land or in an existing or projected building;

 

(c)	credit agreements involving a total amount of credit less than EUR 200 or more than EUR 75 000;

 

(d)	hiring or leasing agreements where an obligation to purchase the object of the agreement is not laid down either by the agreement itself or by any separate agreement; such an obligation shall be deemed to exist if it is so decided unilaterally by the creditor;

 

(e)	credit agreements in the form of an overdraft facility and where the credit has to be repaid within one month;

 

(f)	credit agreements where the credit is granted free of interest and without any other charges and credit agreements under the terms of which the credit has to be repaid within three months and only insignificant charges are payable;

 

(g)	credit agreements where the credit is granted by an employer to his employees as a secondary activity free of interest or at annual percentage rates of charge lower than those prevailing on the market and which are not offered to the public generally;

 

(h)

credit agreements which are concluded with investment firms as defined in Article 4(1) of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (9) or with credit institutions as defined in Article 4 of Directive 2006/48/EC for the purposes of allowing an investor to carry out a transaction relating to one or more of the instruments listed in Section C of Annex I to Directive 2004/39/EC, where the investment firm or credit institution granting the credit is involved in such transaction;

 

(i)	credit agreements which are the outcome of a settlement reached in court or before another statutory authority;

 

(j)	credit agreements which relate to the deferred payment, free of charge, of an existing debt;

 

It is important to mention that according to the decision C-127/15, where a debt collection agency intervenes to collect the existing debt, and the agency requires the consumer to repay the total amount of the specific credit and to pay interest or costs that are not was foreseen in the original agreement on the basis of which the credit in question was granted, does not fall within the exemption of Article 2(2)(j) of the Directive – i.e. it is covered by the Directive.[2]

(k)	credit agreements upon the conclusion of which the consumer is requested to deposit an item as security in the creditor’s safe-keeping and where the liability of the consumer is strictly limited to that pledged item;

 

(l)

credit agreements which relate to loans granted to a restricted public under a statutory provision with a general interest purpose, and at lower interest rates than those prevailing on the market or free of interest or on other terms which are more favourable to the consumer than those prevailing on the market and at interest rates not higher than those prevailing on the market.»

There are also specific credit agreements where specific provisions of the Directive apply. These specific credit agreements are as follows:

• Credit agreements in the form of overdraft facility. Such a credit agreement is an explicit credit agreement whereby a creditor provides a consumer with funds in excess of the current balance of the consumer’s current account.[3]
• Credit agreements in the form of overruning. Such a credit agreement is where there is a tacit acceptance of overdraft whereby the creditor makes available to a consumer funds in excess of the current balance of the consumer’s current account or the agreed overdraft facility.[4]

The MSs have the right to exclude or limit the validity of the Directive to specific credit agreements which are concluded by an organization which is established for the mutual benefit of its members, does not generate profits for persons other than its members, fulfils a social purpose by virtue of internal legislation, receives and manages the savings of its members and provides them with credit and provides credit based on a total annual effective interest rate that is lower than those prevailing in the market or subject to a ceiling determined by national law and whose members can only be the persons residing or working in a particular area or the employees and retired former employees of a particular employer, or persons who meet other criteria defined by national law as a basis for the existence of a common link between the members.

 

2. SUBSTANTIAL PROVISIONS

2.1.   INFORMATION/LIABILITIES PRELIMINARY TO THE CONCLUSION OF THE CREDIT AGREEMENT

2.1.1.                INFORMATION IN ADVERTISING

Based on Article 4, any advertisement concerning credit agreements which indicates an interest rate or any figures relating to the cost of the credit to the consumer shall include standard information. The information in question is as follows:

«(a)	the borrowing rate, fixed or variable or both, together with particulars of any charges included in the total cost of the credit to the consumer;

 

(b)	the total amount of credit;

 

(c)	the annual percentage rate of charge; in the case of a credit agreement of the kind referred to in Article 2(3), Member States may decide that the annual percentage rate of charge need not be provided;

 

(d)	if applicable, the duration of the credit agreement;

 

(e)	in the case of a credit in the form of deferred payment for a specific good or service, the cash price and the amount of any advance payment; and

 

(f)	if applicable, the total amount payable by the consumer and the amount of the instalments»

TOTAL AMOUNT OF CREDIT: Based on the Directive (article 3(l)) the total amount of credit  means the ceiling or the total sums made available under a credit agreement. According to case C-377/14, the total amount of credit may not include any of the amounts intended to meet the commitments entered into under the relevant credit agreement, such as administrative costs, interest, commissions, and any other type of fee payable by the consumer. The irregular inclusion, in the total amount of the credit, of amounts that are incidental to the total cost of the credit for the consumer will necessarily result in the determination of the APR at a lower level, given that its calculation depends on the total amount of the credit. Therefore, the total amount of credit and the amount that the consumer actually withdraws constitute the amounts made available to the consumer, with the result that the amounts used by the creditor to cover the costs associated with the relevant credit are excluded and which in fact are never made available to that consumer. [5]

EXCEPTION: In cases where the national legislation requires that the advertisement mentions the APR, then it is not necessary to provide any other information.

However, where there is a mandatory additional service related to the credit agreement (i.e. insurance) the cost of which cannot be determined in advance, then the fact that the additional service is mandatory should be stated.

2.1.2.                PRE-CONTRACTUAL INFORMATION

Article 5 refers to the obligation of the creditor/credit intermediary to provide the consumer in good time and before he is bound by any credit agreement with the standardized European Consumer Credit Information. This information is referred to in Annex II and includes information related to the identity and contact details of the creditor/credit broker, key features of the credit product, the cost of the credit, other important legal aspects and finally, additional information in the case of marketing financial services from distance. Additional detailed reference to the said information is made in article 5(1) of the Directive.

In the case of voice telephony communications, the description of the main characteristics of the financial service includes part of the information referred to in Article 5(1).

With regard to contracts concluded at the consumer’s request using a means of distance communication, which does not allow the provision of the information provided for in Article 5(1), (such as voice telephony), the creditor provides the consumer the complete pre-contractual information based on the form for the “standardized European Consumer Credit Information” immediately after the conclusion of the credit agreement.

The consumer should be given a free copy of the draft credit agreement whenever he requests it.

Based on Article 5(5)  in the case of a credit agreement under which payments made by the consumer do not give rise to an immediate corresponding amortisation of the total amount of credit, but are used to constitute capital during periods and under conditions laid down in the credit agreement or in an ancillary agreement, the pre-contractual information required under article 5(1) shall include a clear and concise statement that such credit agreements do not provide for a guarantee of repayment of the total amount of credit drawn down under the credit agreement, unless such a guarantee is given.

With respect to specific credit agreements (such as credit agreements with overdraft facilities) MSs may provide the information referred to in Annex III instead of that in Annex II. Article 6 states what this information is.

EXEMPTIONS FROM THE PRE-CONTRACTUAL INFORMATION REQUIREMENTS: Article 7 states that, Articles 5 and 6 shall not apply to suppliers of goods or services acting as credit intermediaries in an ancillary capacity. This is without prejudice to the creditor’s obligation to ensure that the consumer receives the pre-contractual information referred to in those Articles.

Whether a person is considered a credit intermediary in the context of an ancillary capacity has been explained in case C-127/15. In that case, it was mentioned that based on Article 3(f) of the Directive, the credit intermediary is a natural or legal person who does not act as a creditor and who, in the context of his commercial, business or professional activity and for remuneration which may be monetary or have any other agreed form of financial consideration, proposes or offers credit agreements to consumers, assists consumers by undertaking preparatory work for entering into credit agreements, or concludes credit agreements with consumers on behalf of the creditor. The intermediary in question is subject to the obligations to provide information to consumers provided for in articles 5 and 6 of the Directive. However, according to Article 7, suppliers of goods or services who act as credit intermediaries in an ancillary capacity are not subject to this obligation. That is, where their activity (the provision of credit) is not the main purpose of their commercial, business or professional activities then they have no obligation to provide information.

In cases where a debt collection agency acting on behalf of a creditor to conclude a credit agreement payable in instalments for an overdue amount, under which the consumer undertakes to repay the total amount of the credit and to pay interest and costs, must be classified as a credit intermediary except if the provision of that service is not the main purpose of its trade, business or professional activities. But it is for the national Court to ascertain (on the basis of all the facts of the case) whether the particular agency acts as a credit broker in general or in the context of an ancillary activity.[6]

 

2.1.3.                OBLIGATION TO ASSESS THE CREDITWORTHINESS OF THE CONSUMER

Based on Article 8 of the Directive, Member States ensure that, before the conclusion of the credit agreement, the creditor assesses the consumer’s creditworthiness on the basis of sufficient information, where appropriate obtained from the consumer and, where necessary, on the basis of a consultation of the relevant database. They must also ensure that if the parties agree to change the total amount of credit after the conclusion of the credit agreement, the creditor updates the financial information at its disposal concerning the consumer and assesses the consumer’s creditworthiness before any significant increase in the total amount of credit.

It is noted that the above article allows creditors to rely only on the information provided by the consumer to check his creditworthiness, given that this is sufficient and that simple statements are accompanied by supporting documents. In addition, the creditor is under no obligation to carry out systematic checks of the information provided by the consumer.[7]

 

2.2.   BURDEN OF PROOF

The burden of proving the fulfillment of the obligations imposed by articles 5 and 8 of the Directive was examined in case C-499/13. In that case, it was decided that the provisions of the Directive are opposed to a national provision according to which the consumer bears the burden of proof of the non-fulfillment of the obligations imposed by articles 5 and 8. Nor is it possible to have a standard term of the contract which states that the consumer accepts that the creditor has properly fulfilled its pre-contractual obligations and in that way shift the burden of proof to the consumer.[8]

 

2.3.   INFORMATION OBLIGATIONS ASSOCIATED WITH THE CREDIT AGREEMENT

INFORMATION INCLUDED IN THE CREDIT AGREEMENT: Article 10 of the Directive states that credit agreements shall be drawn up on paper or on another durable medium and all parties shall receive a copy. The credit agreement does not need to be drawn up in a single document if it is drawn up in writing or on another durable medium.[9]

DURABLE MEDIUM: The reference to a “durable medium” is a reference to a medium which should ensure the consumer, in a manner analogous to a document, that he will be in possession of the required information to be able to view, if such need is presented, his rights. Critical elements, in this regard, are that the consumer can store the information addressed to him personally, ensure that its content will not be altered, and that it can be both accessed for as long as needed and reproduced exactly as they have.[10] A key question is whether the medium is a medium resistant to time. If it is, then it is more likely to be considered as a durable medium than not. Therefore, some websites can be characterized as time-resistant media.[11] Such are the cases when the website provides the user with the possibility to store information addressed to him personally, in such a way that he can then consult it for a period of time proportional to the purpose it serves, as well as reproduce it exactly as it is. In addition, in order for a website to be considered a “time-resistant medium” within the meaning of this provision, any possibility of unilateral modification of its content by the payment service provider or by any other professional entrusted with the management of the website must be excluded.[12]

Based on the article 10(2), the credit agreement specify in a clear and concise manner:

«(a)	the type of credit;

 

(b)	the identities and geographical addresses of the contracting parties as well as, if applicable, the identity and geographical address of the credit intermediary involved;

 

(c)	the duration of the credit agreement;

 

(d)	the total amount of credit and the conditions governing the drawdown;

 

(e)	in case of a credit in the form of deferred payment for a specific good or service or in the case of linked credit agreements, that good or service and its cash price;

 

(f)

the borrowing rate, the conditions governing the application of that rate and, where available, any index or reference rate applicable to the initial borrowing rate, as well as the periods, conditions and procedures for changing the borrowing rate and, if different borrowing rates apply in different circumstances, the abovementioned information in respect of all the applicable rates;

 

(g)	the annual percentage rate of charge and the total amount payable by the consumer, calculated at the time the credit agreement is concluded; all the assumptions used in order to calculate that rate shall be mentioned;

 

(h)	the amount, number and frequency of payments to be made by the consumer and, where appropriate, the order in which payments will be allocated to different outstanding balances charged at different borrowing rates for the purposes of reimbursement;

 

According to case C-42/15, this article has the meaning that the credit agreement is not required to specify each payment that the consumer must make by mentioning a specific date, as long as the terms of this agreement make it possible for the consumer to easily specify and with certainty the dates of payments.[13]

(i)	where capital amortisation of a credit agreement with a fixed duration is involved, the right of the consumer to receive, on request and free of charge, at any time throughout the duration of the credit agreement, a statement of account in the form of an amortisation table.

 The amortisation table shall indicate the payments owing and the periods and conditions relating to the payment of such amounts; the table shall contain a breakdown of each repayment showing capital amortisation, the interest calculated on the basis of the borrowing rate and, where applicable, any additional costs; where the interest rate is not fixed or the additional costs may be changed under the credit agreement, the amortisation table shall indicate, clearly and concisely, that the data contained in the table will remain valid only until such time as the borrowing rate or the additional costs are changed in accordance with the credit agreement;

It is noted that the credit agreement which has a fixed duration and on the basis of which the capital is repaid by installments, is not required to specify exactly, in the form of an amortisation table, the part of each installment intended for the repayment of the capital. In fact, in case such obligation was imposed by national legislation, this would be considered as contrary to the provisions of the Directive.[14]

Based on Article 10(3), the above statement of account is provided whenever the consumer requests it, free of charge during the credit agreement.

(j)	if charges and interest are to be paid without capital amortisation, a statement showing the periods and conditions for the payment of the interest and of any associated recurrent and non-recurrent charges;
(k)	where applicable, the charges for maintaining one or several accounts recording both payment transactions and drawdowns, unless the opening of an account is optional, together with the charges for using a means of payment for both payment transactions and drawdowns, and any other charges deriving from the credit agreement and the conditions under which those charges may be changed;

 

(l)	the interest rate applicable in the case of late payments as applicable at the time of the conclusion of the credit agreement and the arrangements for its adjustment and, where applicable, any charges payable for default;

 

(m)	a warning regarding the consequences of missing payments;

 

(n)	where applicable, a statement, that notarial fees will be payable;

 

(o)	the sureties and insurance required, if any;

 

(p)

the existence or absence of a right of withdrawal, the period during which that right may be exercised and other conditions governing the exercise thereof, including information concerning the obligation of the consumer to pay the capital drawn down and the interest in accordance with Article 14(3)(b) and the amount of interest payable per day;

 

(q)	information concerning the rights resulting from Article 15 as well as the conditions for the exercise of those rights;

 

(r)	the right of early repayment, the procedure for early repayment, as well as, where applicable, information concerning the creditor’s right to compensation and the way in which that compensation will be determined;

 

(s)	the procedure to be followed in exercising the right of termination of the credit agreement;

 

(t)	whether or not there is an out-of-court complaint and redress mechanism for the consumer and, if so, the methods for having access to it;

 

(u)	where applicable, other contractual terms and conditions;

 

(v)	where applicable, the name and address of the competent supervisory authority.»

Where the credit agreement provides for an overdraft facility the information specified is less. This is contained in article 10(5) of the Directive.

INFORMATION CONCERNING THE BORROWING RATE : Based on the article 11, the consumer must be informed of any change in the borrowing rate, on paper or another durable medium, before the change enters into force. The information must state the amount of the payments to be made after the entry into force of the new borrowing rate and information about the change. But it is acceptable that parties may agree in the credit agreement that the information referred to in article 11(1) is to be given to the consumer periodically in cases where the change in the borrowing rate is caused by a change in a reference rate, where the new reference rate is made publicly available by appropriate means and  is also kept available in the premises of the creditor.

RIGHTS IN CONNECTION WITH CREDIT AGREEMENTS IN THE FORM OF AN OVERDRAFT FACILITY: Where a credit agreement provides for an overdraft facility, the consumer shall be kept regularly informed by means of a statement of account, on paper or on another durable medium for specific information such as the precise period to which the statement of account relates, the amounts of drawdowns, the balance from the previous statement, the new balance, the borrowing rate applied etc. Again, in such contracts, the consumer must be be informed on paper or another durable medium of increases in the borrowing rate, or in any charges payable, before the change in question enters into force (article 12).

RIGHTS IN OPEN-ENDED CREDIT AGREEMENTS: Article 13 refers to open-ended credit agreements. In such cases the consumer may effect standard termination of an open-end credit agreement free of charge at any time unless the parties have agreed on a period of notice. Such a period may not exceed one month. The creditor may effect standard termination of an open-end credit agreement by giving the consumer at least two months’ notice drawn up on paper or on another durable medium. If agreed in the credit agreement, the creditor may, for objectively justified reasons, terminate the consumer’s right to draw down on an open-end credit agreement.

RIGHT OF WITHDRAWAL: Article 14 refers to the 14-day right of withdrawal of the consumer from the credit agreement. The period starts from the day of the conclusion of the contract or receipt of the terms of the contract and the information according to article 10.

If the consumer exercises his right of withdrawal, in order to give effect to the withdrawal before the expiry of the deadline, he must notify this to the creditor in line with the information given by the creditor pursuant to Article 10(2)(p) by means which can be proven in accordance with national law. The deadline is deemed to have been met if the notification, is on a paper or on another durable medium that is available and accessible to the creditor, is dispatched before the deadline expires; and pay to the creditor the capital and the interest accrued thereon from the date the credit was drawn down until the date the capital is repaid, without any undue delay and no later than 30 calendar days after the despatch by him to the creditor, of notification of the withdrawal. The interest is calculated on the basis of the agreed borrowing rate. The creditor is not be entitled to any other compensation from the consumer in the event of withdrawal, except compensation for any non-returnable charges paid by the creditor to any public administrative body.

The MSs may set a deadline during which the execution of the contract cannot begin.

Ιt is noted that if an ancillary service relating to the credit agreement is provided by the creditor or by a third party on the basis of an agreement between the third party and the creditor, the consumer is no longer be bound by the ancillary service contract if the consumer exercises his right of withdrawal from the credit agreement in accordance with that Article. The same applies in relation to linked credit agreements – that is, based on Article 15, where the consumer has exercised a right of withdrawal, based on Community law, concerning a contract for the supply of goods or services, he is no longer bound by a linked credit agreement.

CONSUMER RIGHTS IN RELATION TO LINKED CREDIT AGREEMENTS: Based on Article 15(2), where the goods or services covered by a linked credit agreement are not supplied, or are supplied only in part, or are not in conformity with the contract for the supply thereof, the consumer shall have the right to pursue remedies against the creditor if the consumer has pursued his remedies against the supplier but has failed to obtain the satisfaction to which he is entitled according to the law or the contract for the supply of goods or services.

RIGHT OF EARLY REPAYMENT: According to Article 16, the consumer is entitled at any time to discharge fully or partially his obligations under a credit agreement. In such cases, he is entitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract.

In such a case the creditor is entitled to compensation for possible costs directly linked to early repayment of credit provided that the early repayment falls within a period for which the borrowing rate is fixed. Such compensation may not exceed 1% of the amount of credit repaid early, if the period of time between the early repayment and the agreed termination of the credit agreement exceeds one year. If the period does not exceed one year, the compensation may not exceed 0,5% of the amount of credit repaid early. In no case shall the compensation exceed the interest that would be due from early repayment until the due date. In cases where the creditor requests compensation beyond his actual loss, the consumer may request a corresponding reduction.

In the following cases, compensation for early repayment is not allowed:

«a)	if the repayment has been made under an insurance contract intended to provide a credit repayment guarantee;

 

(b)	in the case of overdraft facilities; or

 

(c)	if the repayment falls within a period for which the borrowing rate is not fixed.»

ASSIGNMENT OF RIGHTS:  Based on Article 17, in the event of an assignment to a third party, of the creditor’s rights under a credit agreement or the agreement itself, the consumer shall be entitled to plead against the assignee any defence which was available to him against the original creditor, including set-off where the latter is permitted in the Member State concerned.

Finally, it should be mentioned that based on Article 17(2), the consumer must be informed of the assignment referred to except where the original creditor, by agreement with the assignee, continues to service the credit vis-à-vis the consumer.

OVERRUNNING: In relation to current account opening contracts, if there is a possibility of overruning, the contract must also contain the borrowing rate, the conditions governing the application of that rate and any index or reference rate applied to the original borrowing rate, the charges applicable from the time of the conclusion of the credit agreement and, as the case may be, the conditions under which these charges can be changed. This information is regularly provided in writing or on another durable medium.

In the event of a significant overrunning exceeding a period of one month, the creditor shall inform the consumer without delay, on paper or on another durable medium:

«(a)	of the overrunning;

 

(b)	of the amount involved;

 

(c)	of the borrowing rate;

 

(d)	of any penalties, charges or interest on arrears applicable.»

ANNUAL PERCENTAGE RATE OF CHARGE: Article 19 of the Directive refers to the method of calculating the APR. It is calculated in accordance with the mathematical formula set out in Part I of Annex I. To calculate the APR the following principles are observed:

• The APR is the total cost of the credit for the consumer, expressed as an annual percentage of the total amount of the credit. The total cost of credit for the consumer is the total of charges, including interest, commissions, taxes and any other kind of fees, which the consumer is required to pay for the credit agreement and which the creditor is aware of, except notarial costs. Costs related to additional services related to the credit agreement, in particular insurance premiums, are also included if, in addition, the conclusion of the service agreement is mandatory for the approval of the credit or for its granting under the terms and conditions advertised.
• In the total cost of credit for the consumer (unless the opening of the account is optional and the costs of the account have been clearly and separately shown in the credit agreement or in any other agreement concluded with the consumer) the costs of maintaining an account recording both payment transactions and drawdowns, the costs of using a means of payment for both payment transactions and drawdowns, and other costs relating to payment transactions are included.
• The costs incurred by the consumer due to breach of any of his obligations under the credit agreement are not taken into account.
• The additional costs to the purchase price that the consumer has to pay when buying goods or services, whether he buys on credit or in cash, are not included.
• The calculation of the APR is based on the assumption that the credit agreement is still valid for its entire agreed duration and that the creditor and the consumer fulfill their obligations in accordance with the terms and on the dates specified in the credit agreement. For credit agreements that contain clauses which allow for the variation of the borrowing rate and, where applicable, of the charges included in the APR, but the amount of which cannot be precisely determined at the time of calculation, the APR is calculated according to the presumption that the interest rate and other costs remain fixed at their initial level and apply until the end of the credit agreement.
• Where necessary, the additional assumptions set out in Annex I may be used in calculating the annual percentage rate of charge (for example, in cases where the credit agreement gives the consumer a right of choice regarding withdrawals, the presumption is that a full and immediate withdrawal of the total amount of the credit is made).

 

2.4.   EXAMINATION BY THE COURT ON ITS OWN MOTION

According to case C-377/14, a national court has an obligation, in the event that a dispute arises before it, relates to claims arising from a credit agreement within the meaning of the Directive, to examine in its own motion the issue of whether the obligation to provide information provided by this provision, and to give way to all the consequences brought about by the violation of such provision, according to national law, provided that such consequences meet the conditions of article 23 (for sanctions – see section 3.4. below) of the Directive. [15]

3. OBLIGATIONS/CHOICES OF MEMBER STATES

3.1.   PRE-CONTRACTUAL INFORMATION

PRE- CONTRACTUAL INFORMATION: Based on Article 5(6) Member States ensure that creditors and, where applicable, credit intermediaries provide adequate explanations to the consumer, in order to place the consumer in a position enabling him to assess whether the proposed credit agreement is adapted to his needs and to his financial situation, where appropriate by explaining the pre-contractual information to be provided in accordance with paragraph 1, the essential characteristics of the products proposed and the specific effects they may have on the consumer, including the consequences of default in payment by the consumer. Member States may adapt the manner by which and the extent to which such assistance is given, as well as by whom it is given, to the particular circumstances of the situation in which the credit agreement is offered, the person to whom it is offered and the type of credit offered.

According to case C-449/13 although the creditor may provide the consumer with sufficient information, it is possible that based on the assessment of the creditworthiness of the consumer, the specific information needs to be adapted and communicated to the consumer in due time, before signing the credit agreement, without however requiring the drawing up of a specific document. [16]

OBLIGATION TO ASSESS THE CREDIT WORTHINESS OF THE CONSUMER: This is referred to in article 8 and it has been analysed above. However, it should be noted that based on Article 9, each Member State shall, in the case of cross-border credit ensure access for creditors from other Member States to databases used in that Member State for assessing the creditworthiness of consumers. If the credit application is rejected on the basis of consultation of a database, the creditor shall inform the consumer immediately and without charge of the result of such consultation and of the particulars of the database consulted.

3.2.   IN RELATION TO MATTERS RELATING TO THE CREDIT AGREEMENT

RIGHT OF WITHDRAWAL: By virtue of Article 14(7) the Article in question (which deals with withdrawal) applies without prejudice to any rule of national law establishing a period of time during which the performance of the contract may not begin.

EARLY REPAYMENT: In relation to early repayment, Article 16(4) states that Member States have the right to determine that such compensation may be claimed by the creditor only on condition that the amount of the early repayment exceeds the threshold defined by national law but in no case can it be more than €10,000 within a 12-month period.

Also, the Member States can allow a creditor to demand higher compensation where he can prove a loss that exceeds the rates of 0.5% and 1% mentioned in Section 2.3. above.

 

3.3.   IN RELATION TO CREDITORS AND CREDIT INTERMEDIARIES

REGULATION OF CREDITORS: According to Article 20, Member States must ensure that creditors are supervised by a body or authority independent from financial institutions, or regulated.

OBLIGATIONS OF CREDIT INTERMEDIARIES: Article 21 states that Member States shall ensure the following in relation to credit intermediaries:

«a)	a credit intermediary indicates in advertising and documentation intended for consumers the extent of his powers, in particular whether he works exclusively with one or more creditors or as an independent broker;

 

(b)	the fee, if any, payable by the consumer to the credit intermediary for his services is disclosed to the consumer, and agreed between the consumer and the credit intermediary on paper or another durable medium before the conclusion of the credit agreement;

 

(c)	the fee, if any, payable by the consumer to the credit intermediary for his services is communicated to the creditor by the credit intermediary, for the purpose of calculation of the annual percentage rate of charge.»

3.4.   PENALTIES

Based on Article 23, Member States must lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive.

Based on case C-42/15 in the event that national legislation makes the contract interest-free and without costs in case of non-compliance with the information duties of Article 10(2), the legislation in question is valid as non-inclusion of the elements of Article 10(2) may call into question the consumer’s ability to assess the content of his commitment.

The deterrent nature of the sanctions was examined in case C-565/12. In that case it was held that the national system of sanctions under which, in case of breach by the creditor of its obligation to assess, before concluding the loan agreement, the creditworthiness of the borrower by carrying out a search in the relevant database, was incompatible with the Directive. The reason was because the sanctions prevented the creditor from collecting contractual interest but allowed him to claim statutory interest from the date of the judgment, which statutory interest was increased by 5% at the expiry of the 2 month period from the judgment if the borrower did not fully repay his debt, with the result that the creditor may, even after the application of the sanction, be in a substantially similar position if he collected the contractual interest.[17]

OUT-OF-COURT DISPUTE RESOLUTION: Member States ensure that adequate and effective out-of-court dispute resolution procedures are in place.

 

4. OTHER RELEVANT PROVISIONS

Directive 87/102/EEC was repealed with effect from 12 May 2010.

 

[1] C-602/10, SC Volksbank România SA v. Autoritatea Naţională pentru Protecţia Consumatorilor — Comisariatul Judeţean pentru Protecţia Consumatorilor Călăraşi (CJPC)

[2] C‑127/15, Verein für Konsumenteninformation v. INKO, Inkasso GmbH, para. 39, 41

[3] In such cases, only articles 1-3, 4(1), 4(2)(a)-(c), 4(4), 6-9, 10(1), 10(4), 10(5) apply ), 12,15,17 and 19-32.

[4] In such cases, only articles 1-3, 18, 20, 22 -32 apply.

[5] C-377/14 Ernst Georg Radlinger, Helena Radlingerová ν. FINWAY a.s., παρά 86, 87 και 91

[6] C – 127/15 Verein für Konsumenteninformation v. INKO, Inkasso GmbH, para 43, 44, 46-48, 53

[7] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Savary Charline Bonato,

[8] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Charline Bonato, Savary, Florian Bonato

[9] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[10] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 42

[11] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 43

[12] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 44

[13][13] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[14] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[15] C-377/14 Ernst Georg Radlinger, Helena Radlingerová ν. FINWAY a.s.

[16] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Charline Bonato, Savary, Florian Bonato

[17] C-565/12LCL Le Crédit Lyonnais, SA ν. Fesih Kalhan

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Regulation 524/2013 on online dispute resolution for consumer disputes and amending 

By Evripides Hadjinestoros

1. INTRODUCTION

Regulation 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC («Regulation») aims to promote Online dispute resolution («ODR») through the creation of a European Online Dispute Resolution platform («ODR platform»). This Regulation entered into force on the 9^th of January 2016.

The said platform, which the Regulation creates, aims to facilitate the independent, impartial, transparent, effective, fast and low-cost out-of-court solution and fair out-of-court resolution of disputes between consumers and traders online., particularly with regard to cross-border markets.  The platform launched on February 16.

WHAT IS ONLINE DISPUTE RESOLUTION? Generally, Online Dispute Resolution («ODR»), is the resolution of disputes using technology. The use of ODR, results from the rapid development of both technology and Alternative Dispute Resolution («ADR»). In fact, it has been said that ODR is the future of dispute resolution.

ADVANTAGES: The advantages of Online Dispute Resolution are many. Among these are its low cost, its accessibility and its effectiveness, compared to face-to-face ADR.  Since consumers who use Online Dispute Resolution, do business online, this prompts traders to settle their disputes with them – as this avoids bad online reviews. Because consumers are making more and more purchases online, while at the same time more and more traders are selling their products online, the use of ODR enhances consumer confidence in online transactions. Confidence in ODR is also achieved by easy and low-cost access to dispute resolution systems. As reported by Donnelly and White:

“The simple provision of an algorithmically derived standard complaint format can facilitate the negotiation process by removing unnecessary and inflammatory information, thus allowing for more focused engagement”

2. SCOPE

Based on article 2, the Regulation applies to the out-of-court resolution of disputes arising from disputes related to online sales contracts or service contracts  between a consumer residing in the EU and a trader established in the EU where the dispute is handled by an ADR Entity. The Regulation applies to domestic online transactions as well as cross-border transactions, as this ensures equality in the conditions of competition in online commerce in the single market.

The Regulation and Directive 2013/11/EU should be read together since the Regulation complements the Directive to the extent that differences arise from online contracts. However, it does not exclude the use of the ODR platform in complaints which come from a trader against a consumer to the extent that the legislation of a Member State (“MS”) allows this. In such a case, the MSs inform the Commission about the ADR Entities that deal with trader against consumer disputes. Although this provision is of limited use, situations in which a trader may have a claim against a consumer include claims for payment of a price due for products the latter purchased or even cases involving defamation for a false negative consumer review against a trader.

WHAT IS AN ONLINE SALES CONTRACT: According to the Regulation, an online sales contract is a contract for the sale of goods or the provision of services in which the trader or intermediary offers goods or services through a website or other online means and the consumer orders those goods or services through that website or other online means. For example, contracts entered into via an electronic device (e.g. mobile phone) are considered online sales contracts.

As with Directive 2013/11/EU, the Regulation does not affect the application of Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain matters of mediation in civil and commercial matters.

Nor is the Regulation preventing the operation of existing ADR Entities within the Union or their ability to deal with online disputes that have been submitted directly to them.

3. ADR Platform

The use of the words ODR platform is somewhat misleading since the platform is essentially a case management tool rather than a comprehensive dispute resolution process. The process is left to the ADR Entities who willingly use the platform in accordance with their existing procedural regulations. Precisely because of the operation of the platform as a case management tool, as well as the freedom of choice of the use of the platform by the ADR Entities, the latter can use the platform to manage all their cases – whether they concern online purchases or not.

CREATION OF THE ODR PLATFORM: Article 5 of the Regulation provides for the creation and development of the ODR platform at EU level in which consumers resolve disputes with traders through an ADR Entity, and in which information is provided about ADR Entities.

This platform is provided through the “Your Europe” portal and has already been developed by the Commission which is responsible for its operation, maintenance and funding, as well as for the security of the data resulting from it. According to the Regulation, the platform must be easy to use, accessible and useful for everyone, including vulnerable users. It also ensures respect for privacy.

WHAT IS THE ODR PLATFORM? The platform is an interactive website listing ADR Entities and offering free access to consumers and traders to resolve their disputes by providing the following features:

a)	It provides an electronic complaint form which can be filled in by the complainant party in accordance with Article 8;

 

b)	it informs the respondent party about the complaint;

 

c)	it identifies the competent ADR entity or entities and transmit the complaint to the ADR entity, which the parties have agreed to use, in accordance with Article 9;

 

d)	It offers an electronic case management tool free of charge, which enables the parties and the ADR entity to conduct the dispute resolution procedure online through the ODR platform;

 

e)	It provides the parties and ADR entity with the translation of information which is necessary for the resolution of the dispute and which is exchanged through the ODR platform;

 

f)	it provides an electronic form by means of which ADR entities shall transmit the information referred to in point (c) of Article 10;

 

g)	it provides a feedback system which allows the parties to express their views on the functioning of the ODR platform and on the ADR entity which has handled their dispute;

 

h)

it makes publicly available the following: i) general information on ADR as a means of out-of-court dispute resolution;   ii) information on ADR entities listed in accordance with Article 20(2) of Directive 2013/11/EU which are competent to deal with disputes covered by this Regulation;   iii) an online guide about how to submit complaints through the ODR platform;   iv) information, including contact details, on ODR contact points designated by the Member States in accordance with Article 7(1) of this Regulation;   v) statistical data on the outcome of the disputes which were transmitted to ADR entities through the ODR platform.

 

CONTACT POINTS FOR ODR: Each MS designates an ODR contact point which can be the European Consumer Center of the MS or another consumer association or other entity. The contact points host two ODR consultants.

These contact points are entrusted with various tasks which consist of facilitating communication between the parties and the ADR Entity as well as submitting to the Commission an activity report every two years. It is noted that the said duties do not need to be performed when the parties have their habitual residence in the same MS unless the MSs decides otherwise. Contact points work together to carry out their tasks through a network of ADR contact points established by the Commission.

3.1.              Complaint

The submission of a complaint is governed by article 8 of the Regulation, while the processing and transmission of the complaint is governed by article 9.

Article 8 states that, in order to submit a complaint to the ODR platform, the complainant (i.e. either the consumer, or – in case the MS chooses  – the trader) completes the online complaint form which contains information to identify the competent ADR Entity. The information is contained in the Annex to the Regulation and includes the name and address of the consumer and the trader, the language, the price of the products purchased, the type and description of the order and some other information. The complaint may also contain supporting documents  such as invoices, receipts, photos, etc.

By completing the complaint form, the consumer has the possibility to negotiate directly with the trader before being informed of the complaint before the complaint is made known to the ADR Entity.

INFORMATION COMMUNICATED TO THE TRADER: Where the above selection is not made, as soon as the completed complaint form is received, the ODR platform forwards the complaint to the complainant in an online form along with specific information regarding the right to choose/use an ADR Entity, the ADR Entities that may handle the dispute, inviting the trader to state within 10 days whether he is committed or required to use a specific ADR Entity for resolving disputes with consumers or, where he is not committed, whether he is willing to use such an entity. The information also includes the contact points of the MS.

INFORMATION COMMUNICATED TO THE CONSUMER: Upon receipt of the above information and the trader’s response, the ODR platform communicates to the complainant information regarding the right to choose/use an ADR Entity as well as the entities indicated by the trader that he is willing to use (if the complainant is a consumer) and it invites him/her to agree on a specific ADR Entity within 10 calendar days. The information also includes the contact points of the MS.

All notifications contain the following information regarding the characteristics of the ADR Entity:

a)	the name, contact details and website address of the ADR entity;

 

b)	the fees for the ADR procedure, if applicable;

 

c)	the language or languages in which the ADR procedure can be conducted;

 

d)	the average length of the ADR procedure;

 

e)	the binding or non-binding nature of the outcome of the ADR procedure;

 

f)	the grounds on which the ADR entity may refuse to deal with a given dispute in accordance with Article 5(4) of Directive 2013/11/EU.

 

INFORMATION COMMUNICATED TO THE ADR ENTITY: The ODR platform automatically forwards the complaint to the ADR Entity that the parties have agreed to use according to the above procedure.

 

3.2.              Dispute Resolution

FAILURE TO START THE PROCESS: If the parties are unable to agree within 30 calendar days of the submission of the complaint form regarding the ADR Entity of their choice, then the complaint is not processed further, and the complainant is informed of the opportunity to contact an ODR Adviser. The same happens if the ADR Entity refuses to deal with the dispute. As we shall see below, in the year 2020, 89% of the cases referred, the trader did not respond within the 30-calendar day period, while in 6% of the cases, it refused to participate within the above time frame.

COMMENCEMENT OF THE PROCEDURE: Once the ADR Entity receives the complaint, it informs the parties whether it agrees or refuses to deal with the particular dispute (always in accordance with Directive 2013/11/EU) and informs the parties of its procedural regulations and the costs of the chosen dispute resolution process.

DISPUTE RESOLUTION: According to article 10 of the Regulation, the ADR Entity that agreed to handle the dispute should:

a)	conclude the ADR procedure within the deadline referred to in point (e) of Article 8 of Directive 2013/11/EU;

 

b)	not require the physical presence of the parties or their representatives, unless its procedural rules provide for that possibility and the parties agree;

 

c)	without delay transmit the following information to the ODR platform: i) the date of receipt of the complaint file;   ii) the subject-matter of the dispute;   iii) the date of conclusion of the ADR procedure;   iv) the result of the ADR procedure;

 

d)	not be required to conduct the ADR procedure through the ODR platform

 

PRESENCE OF THE PARTIES: As mentioned in the above article, the process takes place online through the platform and the procedural rules for resolving the dispute of the selected ADR Entity are followed. The only case in which the procedure may take place in the physical presence of the parties is (a) if the procedural rules of the ADR Entity allow it and (b) the parties agree to it.

3.3.              Personal Data

The Regulation places particular emphasis on the protection of personal data. First of all, it should be noted that, in relation to the electronic complaint form, only information that is accurate, relevant, and not excessive in relation to the purposes for which it is collected is processed. A complaint that is not fully completed will not be processed, and in such case the complainant is informed that his complaint cannot be further processed, unless the missing information is provided.

According to article 11 of the Regulation, the Commission takes the necessary measures to create and maintain an electronic database in which it stores the information processed.

Access to the necessary information constituting the dispute is limited to the ADR Entity and – to the extent necessary for the fulfillment of their duties as well as for platform maintenance purposes – the ODR contact points and the Commission.

The data retention period in the ODR platform is 6 months from the date of completion of the dispute investigation process.

RESPONSIBLE FOR PROCESSING: ODR consultants and ADR Entities are considered data controllers for their own activities.

DATA SECURITY: ODR contact points are subject to the rules of professional secrecy or other equivalent confidentiality obligations set out in the legislation of the relevant MS. The Commission, for its part, must take appropriate technical and organizational security measures.

3.4.              Statistical Data

According to the Commission’s report regarding the operation of the ODR platform in the year 2020, it is important to mention the following in relation to the use of the ODR platform:

• A total of 17,641 fully completed complaints were registered.
• 50% of complaints registered are cross-border.
• In 95% of complaints, the trader ignored the complaint or refused to resolve it (89% of complaints were ignored) while 4% of complaints were withdrawn by consumers.
• In fact, 1% of complaints ended up with an ADR Entity.
• Most complaints concerned airlines – most likely due to the impact of Covid-19 on flight schedules (about a quarter of the total number of complaints) while the second largest area of ​​complaints concerned motor vehicle spare parts (6.38% of complaints).

Although over time there is an increase in complaints that are filed and resolved on the ODR platform, from the above data it appears that Alternative Dispute Resolution does not end up with the ADR Entities. This is not necessarily negative, given that complaints are resolved before reaching the ADR Entities. Unfortunately, the above report does not include cases where the trader and the consumer have reached a compromise, e.g. outside the ADR platform.

Given the voluntary use of the ODR platform by traders as well as consumers, it seems that the information obligation provided by the Regulation (but also by Directive 2013/11/EU) act as push mechanisms for traders (directly through informing them and indirectly through the information consumers receive) to use ODR.

4. Trader’s Obligations

Article 14 provides for the obligation of traders who are established in the EU and conclude contracts for online sales or services as well as in online markets established in the union, to provide on their websites the link to the ODR platform as well as their email. The purpose of this provision is to make the ODR platform widely known to consumers.

“Online marketplace” is defined as a service provider providing information society services that enables traders to make their products and services available to consumers  and therefore to electronically enter into sales and service contracts with each other through the online market website.

CASES WHERE TRADERS ARE REQUIRED TO USE ADR ENTITIES: In case traders are bound or obliged to use ADR Entities, this information also includes the possibility of using the ODR platform. Where prior to the purchase there was an offer from the trader via e-mail, all such information should be included in the e-mail. They should also be included in the general terms and conditions applicable to the contract of online sales or services.

The information on the basis of article 14 of the Regulation, is without prejudice to the duties of information of the Trader to inform about the ADR Entities covered by Directive 2013/11/EU, and is also without prejudice to the duties of information regarding the possibility of recourse by a consumer in an out-of-court complaint mechanism to which the trader is subject, and for the relevant methods of access to those referred to in Directive 2011/83/EU.

5. Role of Member States

According to the Regulation, the MSs ensure that the ADR Entities, the Network of European Consumer Centers as well as the competent authorities, provide a link to the ODR platform. Also, the MSs encourage consumer associations and business associations to provide a link to the ODR platform.

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ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Alternative dispute resolution for consumer disputes (Directive 2013/11/EU)

by Evripides Hadjinestoros

1. INTRODUCTION

Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) («Directive») is the natural evolution of 98/257/EC Commission Recommendation of 30 March 1998 on the principles applicable to the bodies responsible for out-of-court settlement of consumer disputes (Text of EEA relevance) and 2001/310/EC Commission Recommendation of 4 April 2001 on the principles for out-of-court bodies for the consensual resolution of consumer disputes (Text with EEA relevance). It is the first legislation at European Union (“EU“) level to establish a common legal framework for the alternative resolution of consumer disputes.

The Directive aims to contribute to the achievement of a high level of consumer protection and the proper functioning of the internal market by ensuring that Consumers can voluntarily submit complaints against traders to ADR entities that provide independent, impartial, transparent, efficient, speedy, and fair alternative dispute resolution procedures. The concept of “voluntary” complaint was considered in the case Rampanelly by the Court of Justice of the European Union (“CJEU“). The “voluntary” nature of a dispute resolution system does not consist in the freedom of the parties to resort to the ADR process but in the fact that «the parties are in charge of the process and can organize it as they wish and complete it at any time». On this basis, it is permissible for a MS to create a system of mandatory submission of a complaint by a Consumer to an Alternative Dispute Resolution Entity (“ADR Entity“) as it does not prevent the parties from exercising their right to go to the Court.

However, it is noted that, although the MS have the freedom to do so, they are not obligated to force either Consumers or Traders to use ADR. The Directive however, obliges MSs to provide Consumers with the right to access ADR.

The importance and advantages of Alternative Dispute Resolution have been thoroughly discussed in the literature. In short, ADR offers speed, low cost, an opportunity for the parties to resolve their disputes away from outdated regulations and procedures, preserves the confidentiality of the information exchanged and does not torpedo the relationship between the parties to the extent that it would in a court procedure – which has been characterized by authors as primitive.

OPERATION OF ADR ENTITIES: The Directive’s scope is limited to some general rules for the operation of ADR Entities but it leaves the procedure used by them a matter for each ADR Entity.

There are four actors governing the operation of the Directive:

• The Consumers
• The Traders,
• The ADR Entity,
• The Competent Authority of the MS in which the ADR Entity is established. The competent authority assumes an assistive and regulatory

A complaint originates from a Consumer against a Trader. The Consumer first contacts the ADR Entity informing the ADR Entity that the complaint cannot be resolved with the Trader. The ADR Entity contacts the Trader asking them to attend (either online or in person) an Alternative Dispute Resolution process with the Consumer to resolve the dispute according to the method used by the ADR Entity in question. The ADR Entity may charge the Consumer for the management of the complaint and if the Trader agrees to approach the ADR Entity to resolve the dispute then a relevant charge is imposed on the Trader.

The process is voluntary for the Consumer in the sense explained above. If the dispute is resolved, then the parties may enter into a binding agreement. The role played by the ADR Entity depends on the process used. In general, the ADR Entity controls the process and that the person appointed to resolve the dispute proceeds independently, impartially, and expeditiously in resolving the dispute. These criteria are controlled by the fourth actor – the competent authority.

The European Union’s aim is to encourage Traders to use ADR – but not to force them to do so. This is left to the MS to decide.

LEVEL OF HARMONIZATION:  The above Directive is of minimal Harmonization since it does not affect the national legislation that makes it mandatory to participate in relevant alternative dispute resolution procedures.

 

2. SCOPE OF APPLICATION

2.1.             Where does the Directive apply?

In accordance with article 2, the Directive applies to procedures for the out-of-court resolution of domestic and cross-border disputes concerning contractual obligations stemming from sales contracts or service contracts between a trader established in the Union and a Consumer resident in the Union through the intervention of an ADR entity (“ADR Entity”) which proposes or imposes a solution or brings the parties together with the aim of facilitating an amicable solution. All disputes arising from any contracts are covered by the Directive with the exception of health services as well as secondary education services from public providers.

The Directive also sets requirements for someone to be recognized as an ADR Entity as well as requirements for recognition of ADR procedures, leaving however the MSs to establish rules that provide for a higher level of consumer protection.

CONDITIONS OF APPLICATION: In case C-75/16 it was stated that in order for the Directive to be implemented the following conditions must be met cumulatively:

«… firstly the procedure must have been initiated by a consumer against a trader concerning contractual obligations arising from sales or service contracts, secondly the procedure must comply with the requirements laid down in that directive and, in particular, in that respect, be independent, impartial, transparent, effective, fast and fair, thirdly that procedure must be entrusted to an ADR entity, that is to say, in accordance with Article 4(1)(h) of that directive, an entity, however named or referred to, which is established on a durable basis and offers the resolution of a dispute through an ADR procedure and which is entered on the list drawn up in accordance with Article 20(2) of Directive 2013/11, a list which is notified to the European Commission.»

CONSUMER AND TRADER: According to the Directive, the “Consumer” is any natural person who acts for purposes that do not fall within his commercial, business, craft or professional activity and the “Trader” is any natural or legal person, private or public, who acts , possibly through another person acting in his name or on his behalf, for purposes falling within the scope of his commerce, business, craft, or professional activity.

DOMESTIC AND CROSS-BORDER DISPUTES: The Directive covers domestic as well as cross-border disputes. “Domestic” are contractual disputes resulting from a sale or service contract if, at the time the goods or services are ordered by the Consumer, the Consumer resides in the Member State of establishment of the Trader.

The Directive applies only where the dispute arises from a contract between a Consumer and a Trader. With this in mind, the Member State or the Governmental Agencies or semi-Governmental Organisations can be considered Traders. This is also clarified by article 4(1)(b) of the Directive which states that “the Trader is any natural person, or any legal person irrespective of whether it is privately or publicly owned…».

Where there is no contract, there can be no resolution of the dispute on the basis of the provisions of the Directive – i.e. the dispute can be resolved by an ADR Entity which is not licensed under the provisions of the Member State implementing the Directive. For example, a civil dispute based on an accident does not fall within the provisions of the Directive. As a general rule, where the provision of services is “non-financial”, there is no financial consideration (i.e. it is provided without remuneration) with the result that as a rule no contract is implied and therefore, such arrangements are also not covered by the Directive.

A dispute arising from a contract can also be an attempt to renegotiate an existing contract, such as an attempt to restructure a credit facility. Whenever there is a dispute or impossibility of fulfilling a contractual obligation, it must be considered that it falls within the scope of the Directive – thus, an attempt to renegotiate the contract due to a failure to perform contractual obligations, arises from a contract.

WHERE THE TRADER IS ESTABLISHED: The Trader is established in the place of carrying out its business activity if it is a natural person or, in case it is a legal person, in the place of its registered office, its central administration or where it exercises its business activity as well as branches, agencies or other establishments.

WHERE IS THE ADR ENTITY ESTABLISHED: The ADR Entity is established if it is managed by a natural person, in the place where that person carries out its ADR activities. If the ADR Entity is a legal person or association of natural or legal persons, at the place where said legal person or association of natural or legal persons carries out their ADR activities or at the place of their registered office. If it is managed by an authority or other public entity, at the place of the registered office of that authority.

IMPORTANCE OF PLACE OF ESTABLISHMENT: The importance of the place of establishment of the Trader and the ADR Entity is that the procedure for resolution of the dispute initiated by the Consumer must begin (1) in the place where the Trader is established and (2) before an ADR Entity which is established in the place where the Trader is established.

That is, the place of establishment of the ADR Entity should be identical to the place of establishment of the Trader. Therefore, in contrast to Regulation 1215/2012 where the Consumer can file a lawsuit at the place where the Consumer is located, in relation to out-of-court dispute resolution cases, the Consumer can appeal to the ADR Entity where the Trader is established.

RELATION TO OTHER DIRECTIVES: Based on article 3, where there is a conflict, the Directive prevails over the provisions of other Directives which concern out-of-court resolution procedures initiated by a Consumer against a Trader.  However, for there to be a conflict, the provision of the directive being compared should provide less protection to the Consumer than that provided for by Directive 2013/11/EU. Where the directive being compared provides greater protection to the Consumer, it is not considered to be in conflict and the directive being compared prevails. The reason is that Directive 2013/11/EU is of minimum harmonisation, with the result that it is possible for a MS to provide more protection (even if this protection is derived from another EU Directive) rather than less.

Directive 2013/11/EU, however, does not prevail over Directive 2008/52/EC of the European Parliament and of the Council, of May 21, 2008, on certain matters of mediation in civil and commercial matters. The relationship between the two Directives was examined in the case Rampanelly. In this case, the CJEU decided that Directive 2008/52/EC prevails over Directive 2013/11/EU to the extent that the conflict between the two concerns cross-border issues. The reason is that Directive 2008/52/EC is limited to them – regardless of whether it enables MS to apply the Directive to internal mediation systems.

 

2.2.             Where does the Directive not apply?

The Directive does not apply to the following cases listed in article 2(2) of the Directive. These are the following:

• procedures before dispute resolution entities where the natural persons in charge of dispute resolution are employed or remunerated exclusively by the individual trader, unless Member States decide to allow such procedures as ADR procedures under this Directive and the requirements set out in Chapter II, including the specific requirements of independence and transparency set out in Article 6(3), are met.
• procedures before consumer complaint-handling systems operated by the trader.
• non-economic services of general interest.
• disputes between traders.
• direct negotiation between the consumer and the trader.
• attempts made by a judge to settle a dispute in the course of a judicial proceeding concerning that dispute.
• procedures initiated by a trader against a consumer.
• health services provided by health professionals to patients to assess, maintain or restore their state of health, including the prescription, dispensation and provision of medicinal products and medical devices.
• public providers of further or higher education.

Regarding the above exceptions, it is important to note the following:

Firstly, the provisions of the Directive concern the obligations of traders vis-à-vis consumers and therefore, do not apply to proceedings initiated by traders against traders, traders against consumers or by consumers against consumers. The Directive, of course, does not prevent MSs from creating Bodies which deal with complaints from traders against consumers.

Secondly, a key pillar of the Directive is the independence of the Alternative Dispute Resolution Entities as well as the requirement of a lack of any form of conflict of interest of the persons responsible for resolving disputes. For this reason, procedures where the Consumer tries to resolve his dispute directly with the Trader, or complaint systems operated by the Trader, are excluded from the scope of the Directive, but also in cases where the persons responsible for resolving disputes are paid by the Trader. In relation to the latter case, MSs may permit such a procedure to fall within the scope of the Directive, given that the following cumulative requirements are met:

(a), the natural persons in charge of dispute resolution are nominated by, or form part of, a collegial body composed of an equal number of representatives of consumer organisations and of representatives of the trader and are appointed as result of a transparent procedure; (b), the natural persons in charge of dispute resolution are granted a period of office of a minimum of three years to ensure the independence of their actions; (c), the natural persons in charge of dispute resolution commit not to work for the trader or a professional organisation or business association of which the trader is a member for a period of three years after their position in the dispute resolution entity has ended; (d), the dispute resolution entity does not have any hierarchical or functional link with the trader and is clearly separated from the trader’s operational entities and has a sufficient budget at its disposal, which is separate from the trader’s general budget, to fulfil its tasks.

 

When natural persons are paid exclusively by a professional organization or business association of which the Trader is a member, the MSs must ensure that a special budget is allocated which sufficient for the fulfillment of their duties – but this does not apply where there is an equal representation of representatives of the interests of the collegial body consumers and traders. In addition, where an ADR Entity consists of natural persons who participate in a collegial body, MS should ensure that the specific body (not the ADR Entity), perhaps includes a number of representatives of consumer and trader interests.

Thirdly, the Directive explicitly sets the role of the Court as separate from Alternative Dispute Resolution procedures. Therefore, the procedure before a Court cannot under any circumstances be considered as a procedure that falls within the scope of the Directive  – regardless of whether, for example, the judge tries to help the parties resolve their dispute by agreement.

 

 

 

 

 

3.             COMPETENCE OF ADR ENTITIES

ADR Entities must meet specific qualitative criteria provided for in the Directive and the Competent Authorities must ensure that these rules are met.

The Directive, although it states that it applies to institutional procedures – not ad-hoc, it does not mention the consequences where a Consumer and a business resolve disputes through an institution offering ADR services when that Center does not meet the requirements of the Directive.

It appears that such procedures do not lead to invalidity, but rather such Centers will not have a competitive advantage over others which are approved. For example, businesses will be referred by competent authorities to approved Centers (rather than non-approved) and will not be included in the EU Online ADR platform. Also, since they will not meet the quality requirements, this will act as a disincentive for a business and also for a Consumer to use the services of an ADR Entity especially if one takes into account that a procedure initiated through a licensed ADR Entity affects the statute of limitations.

 

3.1.              Basic Quality Requirements to be Fulfilled by an ADR Entity

Article 5 refers to the obligation of MSs to facilitate access by consumers to ADR procedures and that they should ensure that disputes covered by this Directive and which involve a trader established on their respective territories can be submitted to an ADR entity which complies with the requirements set out in this Directive. Member States shall ensure that ADR entities:

(a), maintain an up-to-date website which provides the parties with easy access to information concerning the ADR procedure, and which enables consumers to submit a complaint and the requisite supporting documents online; (b), provide the parties, at their request, with the information referred to in point (a) on a durable medium; (c), where applicable, enable the consumer to submit a complaint offline; (d), enable the exchange of information between the parties via electronic means or, if applicable, by post; (e), accept both domestic and cross-border disputes, including disputes covered by Regulation (EU) No 524/2013; and (f), when dealing with disputes covered by this Directive, take the necessary measures to ensure that the processing of personal data complies with the rules on the protection of personal data laid down in the national legislation implementing Directive 95/46/EC in the Member State in which the ADR entity is established.

 

The above information is an important tool in the hands of the Consumer to be able to make a decision – e.g. to which ADR Entity to resolve its dispute or which Traders accept alternative dispute resolution. It is also important to mention the fact that the above information may be used as an advertisement for the Trader – e.g. to advertise that it deals with its customer complaints or that there are no complaints against it or, for example, that it resolves a high percentage of complaints.

MSs have the right to create additional ADR Entities that cover specific disputes for which there is no competent ADR Entity. An example of such Entities Financial ADR Entities that exist in each MS.

Also, MSs may allow ADR Entities to maintain or establish procedural rules which enable them to refuse to accept a particular dispute on specific grounds. These are the following:

(a), the consumer did not attempt to contact the trader concerned in order to discuss his complaint and seek, as a first step, to resolve the matter directly with the trader; (b), the dispute is frivolous or vexatious; (c), the dispute is being or has previously been considered by another ADR entity or by a court; (d), the value of the claim falls below or above a pre-specified monetary threshold; (e), the consumer has not submitted the complaint to the ADR entity within a pre-specified time limit, which shall not be set at less than one year from the date upon which the consumer submitted the complaint to the trader; (f), dealing with such a type of dispute would otherwise seriously impair the effective operation of the ADR entity.

 

Where an ADR Entity is unable to accept a dispute, it shall notify both parties of the reasons for its decision not to accept it within three weeks of receipt of the complaint file.

 

3.2.              Natural Persons Responsible for the Resolution of Disputes

Based on Article 6, the MS must ensure the expertise, independence and impartiality of the natural persons responsible for ADR. They also ensure that ADR Entities have procedures in place that ensure that, in the event that there are circumstances which may affect the independence and impartiality of natural persons, then the said natural person is replaced by another, or the said natural person is removed from of the ADR process or the circumstances are disclosed to the parties and that natural person is permitted to continue the ADR process only if the parties have not objected, after being informed of the situation and of their right to object.

It is noted that where an ADR Entity is staffed by government employees, it is generally considered to be independent and impartial since as a general rule, government employees are considered independent since they are «representatives of both consumers’ and traders’ interests .

TRAINING OF NATURAL PERSONS: According to article 6(6) of the Directive, the ADR Entities must provide training to the natural persons who are responsible for ADR. The MSs, which designate the competent authorities, follow the training programs established by the ADR Entities. The above article is inextricably linked to article 6(1)(a) which provides that persons resolving disputes possess the necessary knowledge and skills in the field of ADR or judicial resolution of consumer disputes as well as basic knowledge of the law. It is important to note that natural persons do not need to be legal professionals – however, it is important that they have acquired knowledge in at least some areas of consumer law as well as ADR.

3.3.              Transparency

Each ADR Entity must publish on its websites upon request, on a fixed medium and by any other appropriate means, clear and easily understandable information on the following:

(a), their contact details, including postal address and e-mail address; (b), the fact that ADR entities are listed in accordance with Article 20(2); (c), the natural persons in charge of ADR, the method of their appointment and the length of their mandate; (d), the expertise, impartiality and independence of the natural persons in charge of ADR, if they are employed or remunerated exclusively by the trader; (e), their membership in networks of ADR entities facilitating cross-border dispute resolution, if applicable; (f), the types of disputes they are competent to deal with, including any threshold if applicable; (g), the procedural rules governing the resolution of a dispute and the grounds on which the ADR entity may refuse to deal with a given dispute in accordance with Article 5(4); (h), the languages in which complaints can be submitted to the ADR entity and in which the ADR procedure is conducted; (i), the types of rules the ADR entity may use as a basis for the dispute resolution (for example legal provisions, considerations of equity, codes of conduct); (j), any preliminary requirements the parties may have to meet before an ADR procedure can be instituted, including the requirement that an attempt be made by the consumer to resolve the matter directly with the trader; (k), whether or not the parties can withdraw from the procedure; (l), the costs, if any, to be borne by the parties, including any rules on awarding costs at the end of the procedure; (m), the average length of the ADR procedure; (n), the legal effect of the outcome of the ADR procedure, including the penalties for non-compliance in the case of a decision having binding effect on the parties, if applicable; (o), the enforceability of the ADR decision, if relevant.

 

MSs have the obligation to ensure that the ADR Entities publish on their websites (or upon request, on a fixed medium or in any other way they deem appropriate) enough of the above information for the purpose of informing the public.

PROBLEM OF OVERLAPING OF DIFFERENT ADR ENTITIES COVERING WITH THE SAME SECTORS OF THE ECONOMY: One of the main problems created by the enactment of the Directive is the fact that there are several ADR Entities that cover the same sectors of the economy. To illustrate this point, it is important to consider the meaning of the acronym “ADR”. ADR means, “Alternative Dispute Resolution”, or otherwise “Adequate Dispute Resolution”. The word “adequate” is used to indicate the ability of the parties to make a sufficiently informed decision about the process to use so that the solution they find is mutually acceptable and beneficial. Although the Directive tries to set common rules for the operation of the ADR systems in the MSs, it does not try to reduce the confusion that may exist in the resolution of disputes where different Entities may be competent to deal with the same complaint. The result is an information overload and ultimately confusion for the Consumer as to which ADR Entity to use. Therefore, the dissemination of the above information, and in particular the relevant information regarding the types of disputes that ADR Entities are competent to consider, is important to avoid confusion to Consumers as to disputes being resolved by an ADR Entity and not by another.

 

3.4.              Efficiency and Fair Treatment

Article 8 of the Directive refers to the effectiveness of ADR Entities. According to this article, ADR Entities must meet the following requirements:

(a), the ADR procedure is available and easily accessible online and offline to both parties irrespective of where they are; (b), the parties have access to the procedure without being obliged to retain a lawyer or a legal advisor, but the procedure shall not deprive the parties of their right to independent advice or to be represented or assisted by a third party at any stage of the procedure; (c), the ADR procedure is free of charge or available at a nominal fee for consumers; (d), the ADR entity which has received a complaint notifies the parties to the dispute as soon as it has received all the documents containing the relevant information relating to the complaint; (e), the outcome of the ADR procedure is made available within a period of 90 calendar days from the date on which the ADR entity has received the complete complaint file. In the case of highly complex disputes, the ADR entity in charge may, at its own discretion, extend the 90 calendar days’ time period. The parties shall be informed of any extension of that period and of the expected length of time that will be needed for the conclusion of the dispute.

 

USE OF A LAWYER: Article 9 refers to the obligation of MSs to ensure that in ADR procedures there is fair treatment of the parties to the procedure. That is, that the parties have the possibility to express their views, that it is not necessary to use a lawyer or a legal advisor. The parties may also be represented by a third party at each stage of the proceedings or receive advice from an independent person – without the latter being a lawyer. In fact, it has been decided by the Court of Justice of the European Union that national rules cannot stipulate that the Consumer must be represented by a lawyer in an ADR procedure.

COMPLETION OF THE PROCEDURE: At the end of the procedure, the ADR Entity must notify the parties, in writing or on a fixed medium, of the outcome of the ADR procedure as well as its reasoning. The process is completed within 90 days. Whilst the 90 days, seem like a generous timeframe in sales of goods cases – especially in low-cost disputes, is likely to be considered short when compared to service contracts.

3.5.              Freedom to Commit to a Decision

SUGGESTED SOLUTION: Under the Directive, where a solution to the process is proposed (such as in a conciliation process) some peculiar rules apply. These are the following:

Firstly, the parties may withdraw from the procedure at any stage if they are not satisfied with the whole conduct of the procedure; they are informed of their right to withdraw before the procedure begins. In order to understand the above rule (which only applies if the procedure does not result in binding decisions), it is important to distinguish two cases:

The first is the case of starting a process and the second is the case of continuing it. It is permissible for a Consumer to initiate an ADR procedure when this is provided for by law. In fact, the MSs can impose sanctions (either directly or indirectly) on the Consumer in the event that he refuses to initiate such a procedure given that the following conditions are met: The process (1) is not binding on the parties, (2) does not materially delay the exercise of a remedy, (3) suspends the limitation period (4) causes no or minimal cost to interested parties (5) is not provided only electronically (6) provisional measures may be taken in exceptional cases where the urgency of the situation so requires (7) any sanctions provided for if the procedure is not used should not be excessive and burdensome.

Things differ where, in the event that the Consumer, while starting the process, wishes not to continue it. The second case is an inalienable right of the Consumer and he is not allowed to be adversely affected in case he makes such a decision. Case C-75/16 is illustrative of this. In that case the national legislation allowed the withdrawal from mediation only if the Consumer demonstrated reasonable grounds for his decision. It was ruled by the CJEU that the legislation was not compatible with the Directive.

 

As mentioned above, if national legislation required the Consumer to participate in mediation but gave him the right to terminate the process after the first meeting with the mediator, this would be permissible given that the aforementioned conditions are met.

Secondly, and related to the above, before the parties agree to a proposed solution, they are informed that:

(i), they have the choice as to whether or not to agree to or follow the proposed solution; (ii), participation in the procedure does not preclude the possibility of seeking redress through court proceedings; (iii), the proposed solution may be different from an outcome determined by a court applying legal rules.

 

Thirdly, the parties, before agreeing to or following a proposed solution, are informed of the legal effect of agreeing to or following such a proposed solution.

Fourthly, the parties, before expressing their consent to a proposed solution or amicable agreement, are allowed a reasonable period of time to reflect.

The above should be read with the caveat that it is permissible for a MS to decide that a Trader is required to take part in an ADR process and that a Trader is bound by the proposed solution. The same cannot apply to the Consumer.

BINDING DECISION: Based on Article 10, the MSs ensure that the agreement of a Consumer and a Trader to submit a complaint to an ADR Entity is not binding on the Consumer if it was concluded before the dispute arose and if it entails a deprivation of the Consumer’s right to appeal to the competent courts for the settlement of the dispute. Such is the case of a clause which refers to institutional arbitration (ie an ADR Entity). Where such a clause exists, the Consumer is not bound unless it agrees to arbitration after the dispute has arisen. Where an arbitration clause refers to ad hoc arbitration, it is subject to an unfairness review under the provisions of Council Directive 93/13/EEC of 5 April 1993 on unfair clauses in contracts concluded with Consumers.

As far as the Trader is concerned, if the national law provides that the solutions are binding on him, no specific acceptance is required – i.e. the only one who has the right to choose whether to take part in the process in which the solution is binding is the Consumer. It is noted that this does not negate the non-mandatory nature of the ADR.

Based on article 11, the MSs ensure that in ADR procedures where the solution is imposed on the Consumer, then the imposition of a solution is allowed only where the following conditions are met:

(a), in a situation where there is no conflict of laws, the solution imposed shall not result in the consumer being deprived of the protection afforded to him by the provisions that cannot be derogated from by agreement by virtue of the law of the Member State where the consumer and the trader are habitually resident; (b), in a situation involving a conflict of laws, where the law applicable to the sales or service contract is determined in accordance with Article 6(1) and (2) of Regulation (EC) No 593/2008, the solution imposed by the ADR entity shall not result in the consumer being deprived of the protection afforded to him by the provisions that cannot be derogated from by agreement by virtue of the law of the Member State in which he is habitually resident; (c), in a situation involving a conflict of laws, where the law applicable to the sales or service contract is determined in accordance with Article 5(1) to (3) of the Rome Convention of 19 June 1980 on the law applicable to contractual obligations, the solution imposed by the ADR entity shall not result in the consumer being deprived of the protection afforded to him by the mandatory rules of the law of the Member State in which he is habitually resident.

It is important to note that in relation to what is stated in article 11(1) is that reference is made to the laws of habitual residence of the Consumer and the Trader – to the extent that there are provisions that protect the Consumer. Based on the above provisions, the law of the MS which is applicable is that where the Consumer has his usual residence. As mentioned above, ADR procedures are filed in the MS where the Trader is located, in an ADR Entity in the Trader’s MS. The result is that, while ADR procedures aim to resolve a dispute between a Consumer and a Trader at a low cost, matters become more complex when provisions of the Consumer’s MS have to be applied. This is because the Consumer may have to present evidence from the MS in which he resides through an expert, etc.

PRESCRIPTION: According to article 12 of the Directive, MSs ensure that in proceedings the outcome of which is not binding, the limitation period is suspended. This means that at the time of commencement of the ADR procedure, the limitation period is suspended and continues to run at the end of the procedure. It is submitted that the time of commencement of ADR is a matter of the rules of procedure of the respective ADR Entity or based on the law of the MS concerning a particular procedure – for example mediation.

The Directive does not state what applies regarding the limitation period in cases where the outcome of the procedure is binding. In such a case, it seems that the matter rests with each MS. For example, where the procedure chosen is arbitration, one should refer to the Arbitration Laws or local Statutes of Limitation.

 

4.             INFORMATION SHARING AND COOPERATION

OBLIGATIONS OF TRADERS: Chapter III refers to the information and cooperation that the MSs must ensure between Traders and Consumers.

Specifically, Article 13(1) states that, MSs shall ensure that where Traders undertake or are required to use ADR Entities, they should inform Consumers of the ADR Entity or ADR Entities covered by those Traders.

This information includes the address of the website of the competent ADR Entity or ADR Entities and must be displayed in a clear, legible and easily accessible manner on the Trader’s website and, as referred to in Article 13(2), “if applicable“, in the general terms and conditions of the sales or service contracts between the Trader and the Consumer. It is important to say that this information cannot be given at the point of conclusion of the contract (e.g. with the general terms and conditions document). It is necessary to give them in advance.

MEANING OF “IF APPLICABLE“: What the Directive means by the words “if applicable” was examined in CJEU decision C-380/19 where a Trader who did not enter into contracts through its website nevertheless listed the general terms and conditions of a potential contract on its website. The question that arose was whether it had to include in these terms the details of the ADR Entity to which it belonged. The answer given by the CJEU was affirmative. That is, a Trader who is required to use ADR Entities, regardless if transacting through their website or not, if it decides to list its general terms and conditions on its website, then it must inform the Consumer about the ADR Entity to which it belongs through the general terms of the contract and not simply mention the details of the ADR Entity to which it belongs elsewhere of its website or in another document (e.g. an invoice). It is understood that this obligation also applies where the Trader enters into contracts through its website.

With reference to the above, the following conclusions can be drawn. First, a Trader who decides not to commit to using an ADR Entity does not have to inform Consumers about the ADR Entity that the Consumer must use. This may also act as a disincentive for a company to commit to the use of an ADR Entity, since additional obligations are born for the business, which should make sure that it informs the Consumers about the ADR Entity it is committed to using. The problem is magnified when one considers that a business may choose to work with an ADR Entity for some disputes but not for others – eg. which Consumers does it inform and which does it not? This also creates additional confusion for Consumers regarding the complaint process and how they will raise it. Finally, there is ambiguity as to exactly how the “commitment” for a Trader to use an ADR Entity is interpreted. Is an agreement between an ADR Entity and a Trader required, or is a declaration by a Trader that it will use an ADR Entity sufficient? Ultimately, all of these problems work against the ease of use that should characterize ADR.

Secondly, based on the above provision, regardless of whether the Trader decides to commit to using an ADR Entity or not, there are cases where either the use or the information requirements are mandatory (see for example Directive (EU) 2015/2302 article 7 (2)(g)71 and Regulation (EU) No. 524/2013, Article 14(1)). In such cases there is no choice for the Trader – it must inform the Consumer.

DIRECT SUBMISSION OF A COMPLAINT: An important provision is Article 13(3) which states that:

«Member States shall ensure that, in cases where a dispute between a consumer and a trader established in their territory could not be settled further to a complaint submitted directly by the consumer to the trader, the trader provides the consumer with the information referred to in paragraph 1, specifying whether he will make use of the relevant ADR entities to settle the dispute. That information shall be provided on paper or on another durable medium. »

This means that, in accordance with article 13(3), where the Trader cannot resolve a Consumer complaint through the Trader’s internal complaints procedure, there is an obligation under article 13(3) to inform the Consumer of the ADR Entity or ADR Entities covered, their address as well as their website on in paper form or other durable medium. For this provision, it has been said that a Consumer will be more receptive to receiving this information than at the initial stage of the contract. This is because the information provided under article 13(3) follows the dispute with the Trader – resulting in the Consumer being focused on how to resolve their dispute – which is why this provision has attracted significant criticism from businesses.

With that said, our opinion is that this provision poses a particular difficulty in complying by Traders but also in a way is gift without effect to the Consumer. This is because the Trader should, in the event that he has not committed to an ADR Entity, seek to find all the Entities to which it belongs, to write down their details and inform the Consumer, in all probability telling the Consumer at the end that “I do not wish to use any ADR Entity”. If one considers the inconvenience that a Consumer will undergo before an investigation or complaint against the Trader for violation of this provision arises, it is not difficult to conclude that this provision is problematic. In particular, a Consumer will first refer to the Traders to resolve his dispute. If the Trader does not respond, then the Consumer should contact the Trader a second time asking him to inform him about the ADR Entites to which the Trader belongs. If the Trader does not respond, the Consumer should approach the competent authority in the country of residence of the Trader to report the Trader for failing to inform the Consumer in accordance with Article 13(3) – and this, without considering the Consumer’s original contractual dispute.

OBLIGATIONS OF MEMBER STATES: Article 14 refers to the obligation of MSs to ensure that in cross-border contracts Consumers can obtain assistance in accessing the ADR Entity operating in the other MSs. This responsibility is assigned to their centers included in the Network of European Consumer Centers, consumer organizations or any other ADR Entity.

Based on article 15, the MSs have various obligations regarding the publication of various general information (such as the names of the ADR Entities and their websites, etc.). They must also ensure appropriate dissemination of information on how Consumers can have recourse to ADR procedures and encourage consumer organizations and professional bodies, both at Union and national level, to promote ADR Entities and their procedures and promote the use of ADR by professionals and Consumers.

According to article 16, MSs ensure that ADR Entities cooperate in the resolution of cross-border disputes and that they carry out regular exchanges of good practices, regarding the resolution of both cross-border and domestic disputes.

Article 18 states that each MS designates a competent authority which does the following:

• It undertakes to collect various data from the ADR Entities (such as their name, their procedural rules, the fees imposed, the average length of the dispute resolution procedures, etc.).
• It undertakes to evaluate whether an Entity can be considered an ADR Entity that falls within the scope of the Directive and whether it meets the specific requirements of the Directive. Then, based on its assessment, it compiles a list of all ADR Entities which includes information such as (contact details, fees they charge, language, types of disputes, etc.). Each competent authority shall publish on its website the consolidated list of ADR Entities referred to in article 20(4) providing a link to the relevant website of the Commission.

SANCTIONS: Based on article 21 of the Directive, the Member States must establish rules regarding the sanctions applied to the violations of the national provisions. Special mention is made in relation to article 13 of the Directive, which includes the obligation of Traders to inform Consumers about the ADR Entity or Entities they are covered by. Sanctions should be effective, proportionate and dissuasive.

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