ADR stands for Alternative Dispute Resolution and refers to the procedures used to resolve disputes between parties over contracts for the sale of goods and services.
ADRs have their historical origin in US practice, with subsequent introduction in Europe with an EU specific legislation.
The parties have the opportunity to resolve national or cross-border disputes concerning sales or service contracts by filing a complaint (an ADR procedure) with an ADR body supervised by a competent authority.
One of the disputing parties asks the neutral third party to intervene and act as an intermediary. The body may suggest a solution, impose a solution on both parties or simply bring the parties together to find a solution.
The disputing parties can be 2 businesses in a business to business transaction, or a business and a consumer.
Among the various types of ADR, the following stand out for their prevalence: mediation, conciliation, arbitration.
Mediation is an informal alternative to litigation. Mediators are individuals trained in negotiations, who bring opposing parties together and attempt to work out a settlement or agreement that both parties accept or reject. Mediation is not binding.
Like mediation, conciliation is a voluntary, flexible, confidential, and interest-based process.
Like in mediation proceedings, the ultimate decision to agree on the settlement remains with the parties. The main difference between conciliation and mediation proceedings is that, at some point during the conciliation, the conciliator will be asked by the parties to provide them with a non-binding settlement proposal.
Arbitration is more formal than mediation and conciliation and has a lot of similarities with traditional court proceedings. Unlike mediation or conciliation, an arbitration is binding on the parties. The arbitrator’s ruling resolves the dispute, even if one or both parties do not agree with it.
What is an ADR body?
It is a public or private body set up on a permanent basis which offers the resolution of a dispute through an ADR procedure. It is registered on a special list kept by the competent authority. ADR bodies thus constitute the central point of the proper functioning of the instrument.
EU legislation requires that dispute resolution bodies are assessed by Member States and must meet a number of quality requirements to ensure that they operate effectively, fairly, impartially, independently and transparently.
Advantages of ADR
The advantages of ADR are that it provides a quick and effective solution to disputes and reduces the judicial burden by taking ‘alternative’ action without going to court. It also avoids that consumers or small companies, discouraged by the cost and duration of court proceedings, give up protecting their rights.
Alternative dispute resolution can also help the sale of goods and services at national level or abroad, online or offline. It can also help maintain a company’s reputation and good customer relations.
How it works
The parties involved in the dispute must agree on the alternative dispute resolution body that will deal with the case. Each dispute resolution body has its own rules and procedures and charges different fees.
While the dispute is being dealt with, the dispute resolution body may contact the party concerned to ask for more information or documents or invite him to a meeting.
It is possible to appoint a representative for assistance. In other words, a business or a customer can ask someone else to present the complaint or follow the case on his behalf.
A solution can usually be reached within 90 days.
EU Online Dispute Resolution platform
EU makes available an Online Dispute Resolution (ODR) platform.
In case of a dispute with a consumer about an online purchase, the ODR platform could be the right tool to find a quick and cheap solution and avoid going to court. The trader can use the platform to file a complaint against a customer (e.g. in case of non-payment) or the consumer can use it to file a complaint against a trader.
The ODR platform is available in all EU languages and is free of charge. One of the competent dispute resolution bodies registered on the platform will receive and deal with the dispute. All procedures take place online.
The goal of ADR is to provide a forum for the parties to work toward a voluntary, consensual agreement, as opposed to having a judge or other authority decide the case.This way of dealing with disputes is beneficial both for the involved parties and for reducing court congestion and to prevent unnecessary costs and delays. For these reasons the ADR instrument is of growing importance and interest in the business and consumer community.
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