Is the EU small claims system working?

Is the EU small claims system working?
By Euronews
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Two of the authors of a recent report into the European Small Claims Procedure gave their views to Euronews reporter Seamus Kearney. Italian Federico Vicari and Estonian Kristina Vaksmaa are with the European Consumer Centres Network. Also included here is the response to the report from the European Commission.

What is the procedure?

Adopted in 2009, it aims to simplify cross-border small claims litigation. Claims are only accepted for sums that do not exceed €2,000, excluding interest, expenses and disbursements. The judgement is made in the country of residence of the consumer, or in the country of the defending company should the consumer so choose. The judgement then becomes directly enforceable in the country of the losing party and in any other EU country. Representation by a lawyer is not required, but some fees might be charged and the translation of documents might be required.

Federico Vicari
Director, European Consumer Centre Italy

‘The European Small Claims Procedure is a legal procedure that has a strong impact on consumers. It can provide extremely great support to consumers, helping them to file a lawsuit against a foreign company or business in a relatively short time and with limited costs. For this reason we began this research, to verify whether the procedure is really accessible to consumers.

‘Unfortunately, the outcome of the survey shows a series of problems. The main one was a lack of knowledge about the procedure by competent courts, and thus the impossibility for consumers to easily take advantage of the service. Judges are at the moment still not able to provide information, nor forms, nor the assistance to fill in the forms. This is the first and main problem.

‘Then, even in cases where it is possible to access the procedure, we found logistical problems, operational problems, linguistic difficulties, particularly with the translation of documents. Since we normally speak of long distance procedures, we often face problems related to the expenses of the payment procedure.

‘Even when you get to a final judgement – which, from what we can observe, happens in very few cases – there are still big problems with the execution of the judgement. The European Small Claims Procedure should allow consumers to get an official answer from a judge in a very short time and with limited costs. But when the counterparty does not comply with the final judgement, the only chance consumers have is to launch a new claim in the country where the counterparty resides. In such an event, the advantages linked to speed and cheapness are neutralised.

‘We must remember that every time a new European regulation comes into force, there is always a period of time that organisations need to meet the new rules. Therefore, we had actually foreseen that some time would have been necessary. However, we noticed that since January 2009 (when the small claims procedure was actually initiated), the situation has not improved. This means that we are probably facing a communication gap between European judicial authorities, and perhaps also a scarce perception of the relevance of cross-border disputes.

‘As a matter of fact, the European Commission is calling for the common market to be an environment in which business and purchases can represent good value for consumers. Thus we believe it is extremely important that this new procedure is given adequate relevance, so that it can be easily accessible, and provide consumers with an efficient judicial system, which can also act as a deterrent to businesses trying to operate in the common market without respecting any rules.

‘In consumerism we have a normal general policy, which is to guide consumers involved in a dispute through a series of steps, among which legal action is really the final option. We are set to offer consumers solutions that are as much as possible friendly and non-judicial. Consumer associations, both at national and at European level, act so as to provide consumers with a range of remedies that are non-judicial, and pursue conciliation between the parties. That’s why we tend to send communications to parties that focus on conciliation, in order to reach an agreement with no after-effects.

‘The European Commission particularly promotes Alternative Dispute Resolutions (ADR), which is mediation, conciliation and arbitration. The EC is committed to putting in place, starting from 2014, an on-line platform available to consumers, for the resolution of cross-border disputes. The goal is to create a network of all European organisations that deal with conciliation, which consumers can easily access, and from which they can be redirected to the competent office. So, there is actually a strong effort to promote alternative resolutions of disputes, since they are deemed to be money-saving for consumers. We are speaking of an estimated saving of three billion euros per year, which can be 10 times higher for companies, just for avoiding a legal procedure.

‘Conciliation is definitely the most efficient and effective way to solve cross-border disputes. When conciliation is not possible, then it can be necessary to start a legal procedure. In these cases, it is crucial that the legal procedure works properly, since this can act as a deterrent for companies that tend to avoid conciliation. If the legal procedure is effective in protecting consumers, companies will be encouraged to meet the requirements of consumers in a non-judicial way.

‘The most important thing for consumers who want to live in an environment where rights are respected is to safeguard themselves. Giving up the protection of one’s own rights becomes an encouragement to companies that do not act properly in the market. The main advice we give to consumers is to never give up protecting one’s own rights. So if a consumer comes to us, even if it’s with a small-sized claim, we always recommend to follow all steps to define the dispute, all the more so considering that European institutions offer consumers many instruments to solve these problems, some of which are free of charge. The Network of Consumers Centres is financed by the European Commission and national governments and is free of charge for consumers. We do this as a service to consumers. Thus we always suggest that consumers take all necessary steps in order to define issues. As for legal action, that’s up to the individual’s willingness to front up with the expenses. It’s a judicial process that can involve significant commitment and legal or technical assistance.

‘In the end, the decision to start a legal procedure is really up to each consumer, who has to decide whether he wants to take this road, with the time and costs involved. But for all aspects, before the legal procedure, we definitely want to encourage consumers to do all they can to protect themselves, so as to contribute towards building a system where consumer rights are respected.’

Kristina Vaksmaa
Director, European Consumer Centre of Estonia

‘If we take a look at crossborder customer complaints, or the way they are being solved, then we understand that there is a big need for this kind of solution. While in the legal area of the EU the small claims procedure plays a very big role, unfortunately, at the moment, this procedure doesn’t work the way it should in Estonia. It is still not so accessible and affordable for ordinary citizens. They do not really informed about it. But in my opinion it is a very necessary tool for solving crossborder customer complaints, because day after day we meet sellers who do not cooperate, and the only way for solving the problem is going to court.

‘Really this report proved that the small claims procedure doesn’t work the way it should. There are quite few reasons. Firstly, the report showed that people are not that well informed. And the strangest fact is that not only are ordinary customers not informed about it, but even courts and judges all over Europe don’t have enough information. This is the first thing to improve: to raise the level of awareness.

‘Another problem is the language issue. Most people can’t really write applications in a foreign language and they don’t know in what language they should do that. However, what should be considered is a coming together to simplify the use of a legal language, for example to use some international language to submit those complaints.

‘The report also showed that the forms used for the submission of complaints are not accessible in every EU country, and even court officials don’t know where can they get them. There are no such forms in some courts, so people don’t know what to do. And it is also important that the procedure should be affordable/cheap for the customer, cheaper than common legal action. But the report says it is not cheap at all. It is not so affordable because of state legal taxes, and in some cases the customer’s needs for special expertise at court. Even a small claim procedure can be very expensive for the customer.

‘The main problem to be solved is the level of awareness. I think some training for court officials, judges and even customer support office workers should be considered, because they are the first ones who deal with these kinds of problems.’

The European Commission responded to the publication of the report by the European Consumer Centres Network with the following statement:

Hunting for cross-border bargains is a way for consumers to get the ‘best deal’ across the EU’s internal market. Shopping online makes these bargains ever more accessible. But sometimes things can go wrong: there might be a problem with the goods or with delivery. To avoid difficult, costly and time-consuming legal procedures, the European Union is facilitating access to justice for consumers in Europe, so that they can effectively enforce their rights. The European Small Claims Procedure is one of the solutions available to resolve cross-border disputes in cases involving €2,000 or less. However, a new report from the European Consumer Centres Network (ECC-Net), released today, shows that this user-friendly procedure, available since 1 January 2009, is often under used. This is mainly because judges are not aware of the procedure – something the Commission intends to tackle vigorously.

Vice-President Viviane Reding, the EU’s Justice Commissioner said: “European consumers should feel secure when buying goods and services in the single market without facing additional risks. In case of problems, they should be able to pursue their claims in the European Union’s courts quickly and easily. The European Small Claims Procedure helps consumers to get their money back from abroad. But there is still work to be done to make the procedure work for consumers. Member States should make sure their judiciary knows about the European Small Claims Procedure so it can help people to successfully assert their claims.”

Health and Consumer Commissioner John Dalli (who is no longer in the post) said: “Consumers who want to take advantage of the opportunities offered by the Single Market need to be able to rely on a variety of effective and efficient means of redress. I am disappointed to see such a low level of assistance to consumers who have tried to use the European Small Claims Procedure. Today, any small amount counts and not getting proper compensation for consumers affects pockets, hurts confidence and slows down European growth.”

Main findings:
Lack of awareness and enforcement of judgments are still key problems

In 2010, in a project led by ECC Italy, European Consumer Centres (ECCs) in the 27 EU Member States investigated how the European Small Claims Procedure worked in practice. They found that the procedure is relatively unknown – not only among consumers but among judges as well. Although the European Small Claims Procedure itself is in principle straightforward and free of charge, the enforcement of the judgment resulting from this procedure is often protracted by the losing party. As a consequence, only a minority of the positive rulings made by the courts in consumers’ home countries, are actually enforced across borders. When action is necessary to get a decision enforced in the country of the trader and in accordance with the laws of this country, consumers often abandon the procedure because the process for national enforcement is complex and can be expensive.

But the need for an effective small claims procedure remains clear

In domestic markets, around 20% of European consumers report having encountered a problem in the past 12 months with a good, service, retailer or provider. The average estimated value of losses is €375 per case. 60% of consumers surveyed found a satisfactory solution directly with the trader but the remaining 40% obtained no remedy, of which 25% did not even try to complain. The number of consumers taking businesses to court when they have a problem is very low (2% of those who experienced a problem in the past 12 months). Many said they did not complain because the sums involved were too small (26%), they thought the procedure would be too expensive compared to the sum involved (13%) or that it would take too long (12%).

Next steps

The European Commission will work with Member States to ensure enforcement of the European Small Claims Procedure and develop awareness of it. More consumers should know about the procedure and use it. In particular, the Commission will:

- work with court authorities to promote awareness of the procedure;
- issue a guide providing practical advice to consumers and legal practitioners in 2012;
- raise awareness of the existing standard forms and make information available online in 22 official EU languages, through the European e-Justice Portal, to make it easier to register a claim and see how the procedure works;
- work with ECCs to actively promote the procedure among consumers and judges;
- encourage the ECCs to give concrete assistance to consumers to use the European Small Claims Procedure in individual cases;
- present an evaluation report on the operation of the procedure (including court fees, the speed and the ease of use of the procedure) and if necessary revise the European Small Claims Procedure to make it work more effectively for consumers by, for example, increasing the threshold of €2,000 to cover bigger claims or further simplifying the standard forms used to make a claim.

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