RESEARCH: Consumers cross-border disputes resolution: European Order of Payment and European Small Claims Procedure

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1 RESEARCH: European Order of Payment and European Small Claims Procedure This publication has been produced with the financial support of the Civil Justice programme of the European Commission. The contents of this publication are the sole responsibility of the Lithuanian consumer institute and can in no way be taken to reflect the views of the European Commission. Lithuanian Consumer Institute Vilnius 2011

2 Contents INTRODUCTION SHORT SURVEY OF CONSUMERS RIGHTS PROTECTION IN EUROPEAN LAW Statistics of European consumers cross-border complaints European instruments of consumers rights protection European Consumer Centres Network (ECC-Net) Alternative Dispute Resolution (ADR) Collective redress Individual judicial redress DETERMINATION OF JURISDICTION IN CROSS-BORDER CONSUMERS DISPUTES EUROPEAN ORDER FOR PAYMENT AS CROSS-BORDER CONSUMERS REDRESS MECHANISM European order for payment: purpose and mission Issuance procedure of European order for payment: advantages and disadvantages Lithuanian approach: legal implementation in national law and practical application Bulgarian approach: legal implementation in national law and practical application EUROPEAN SMALL CLAIMS PROCEDURE AS CROSS-BORDER CONSUMERS REDRESS MECHANISM European small claims procedure: purpose and mission European small claims procedure: advantages and disadvantages Lithuanian approach: legal implementation in national law and practical application Bulgarian approach: legal implementation in national law and practical application HIGHLIGHTS LIST OF USED LITERATURE

3 INTRODUCTION Consumer protection is one of the priority areas of the European Union (EU) policy aimed at the protection of consumer right to health care, safety and economic interests, right to information, fair trade practices, proper functioning of the systems and mechanisms of compensation of the sustained damage. For these purposes, the legislation adopted in the area of EU consumer rights protection guarantees the right to each individual to fair and just treatment in any transaction considered a consumer contract. Irrespective of the EU member state where persons consume (receive or buy services) their principal rights should be the same. The purpose of this research is to make a qualitative study, exploring how European Order for Payment and Small Claims procedures are enforced and implemented in applicant and partner countries in particular in consumer rights protection, as well to conduct in-depth analysis of this topic and investigate good practices in Lithuania and Bulgaria, use the research data in other project materials (presentations during seminars, information brochures, newsletters, etc.). 1. SHORT SURVEY OF CONSUMERS RIGHTS PROTECTION IN EUROPEAN LAW One of the framework EU legal acts defining the policy guidelines for EU institutions in the area of consumer protection is the Charter of Fundamental Rights of the European Union 1 (Charter). Art. 38 of the Charter determines that "Union policies shall ensure a high level of consumer protection." In order to be able to achieve the high level of protection of EU consumer rights referred to in the Charter, the Treaty on the Functioning of the European Union 2 lays down the following lawmaking priorities in the field of consumer protection: Consumer protection requirements shall be taken into account in defining and implementing other Union policies and activities (Art. 12). The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of 1 Charter of Fundamental Rights of The European Union (2000/C 364/01) OJ C Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union OJ C 115,

4 protection, taking account in particular of any new development based on scientific facts. Within their respective powers, the European Parliament and the Council will also seek to achieve this objective. (Art. 114 (3)). In order to promote the interests of consumers and to ensure a high level of consumer protection, the Union shall contribute to protecting the health, safety and economic interests of consumers, as well as to promoting their right to information, education and to organise themselves in order to safeguard their interests. (Art. 169 (1)). Implementing these provisions, the European Parliament and the Council have adopted many legal acts aimed at uniform ensuring of the fundamental rights of consumers in the whole EU. The following legal EU legal acts should be mentioned as principal in the field of consumer protection: Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91. 3 Regulation (EC) No 889/2002 of the European Parliament and of the Council of 13 May 2002 on air carrier liability in the event of accidents (the Montreal Convention). 4 Regulation (EC) No 1371/2007 of the European Parliament and of the Council of 23 October 2007on rail passengers rights and obligations. 5 Directive of the European Parliament and of the Council of 10 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council. 6 Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts. 7 Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising. 8 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 and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of 3 [2004]. OJ, L [2002]. OJ, L [2007]. OJ, L 315/14. 6 Publication of the new Directive in the EU's Official Journal will be approximately by the end of the year [2009]. OJ, L 33/10. 8 [2006]. OJ, L

5 the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council. 9 Directive 98/6/ EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers. 10 Directive 97/7/ EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts. 11 Etc. Most of the above-referred EU legal acts in the area of the protection of consumer rights are directives by their legal form 12. Directives usually lay down only the objectives to be met by each member state (the method of minimum harmonisation). Member states themselves choose the measures to achieve the objectives set in the directives. For the impact of the provisions of the directives to be also felt by EU citizens, the legislators of the member states should approve the instruments to transpose directive provisions into their domestic law and to amend the national law so as to meet the objectives laid down in the directives. As stated in the case-law of the European Court of Justice 13 (ECJ), a legal act, which implements the provisions of a directive, should contain links to the directive implemented. Moreover, the member states should ensure that the measure chosen: 1) will ensure an effective implementation of the directive; 2) will be legally binding; 3) will be clear and precise from the legal perspective. Although directives set out common objectives to be achieved by all member states, the quality and quantity of their implementation solely depends on the implementation measures chosen by the member states. Unfortunately, not all EU directives are transposed and implemented properly in the member states, therefore, legal regulation in the area of consumer protection remains fragmented and inconsistent. In order to improve the protection of consumer rights in the EU, ensure equal rights of consumers and ways their protection in all EU member states, it is sought to use full harmonisation methods in the area of consumer law, although it raises discussions among the member states themselves and not always full harmonisation is achieved implementing one or another EU legal act. 9 [2005]. OJ, L 149/ [1998]. OJ, L 80/ [1997]. OJ, L 144/ That is, the legal acts enacted on the basis of the primary EU law. 13 ECJ Case 207/96, Commission v Italy [1997] ECR I

6 In the context of this study it is also important to note certain differences between EU directives and regulations 14. Two legal consequences are related to the entry into force of a regulation: 1) A regulation becomes directly applicable, i.e. not only it does not need to be transposed into the national law of the member states, but it is also prohibited to do so; 15 2) Regulation becomes directly enforceable, i.e. a person may rely on a specific provision laid down in the regulation when protecting his/her rights, if such provision is clear and unconditional. 16 As a result regulations establish specific provisions for consumer protection: lay down specific compensation amounts, their calculation proportions, care for consumers, assistance of another nature and obligations for traders and/or service providers (e.g., Art. 7, 8 and 9 of Regulation (EC) No 261/2004; Art of Regulation (EC) No 1371/2007). Therefore, if directives and regulations are compared, the latter have an apparent advantage in the area of protection of consumer rights. Nevertheless, irrespective how many and what EU legal acts for consumer protection and harmonisation have been and will be adopted, none of them can guarantee that there will be no disputes between the consumer and the trader (service provider). Unfortunately we have to admit that the performance results of consumer damage compensation mechanisms and of their implementation results are not good yet Statistics of European consumers cross-border complaints As shown by the qualitative study 17 carried out by Eurobarometer in 2008, the circumstances in which consumers are likely to complain about a product or service fall into three broad categories: If a product or service delivery does not meet basic quality standards or a widely accepted industry standard. If a product or service does not meet specific agreed standards. The fraudulent behavior of a supplier or service provider. 14 Regulations are general legal acts, which are designated for all EU subjects and the implementation whereof is obligatory. They all are published in the Official Journal and enter into force on the date specified in the regulation or, if none is specified, on the 20th day after the publication. 15 ECJ Case 34/73, Variola v. Amministrazione delle Finanz [1973] ECR ECJ Case 93/71, Leonesio v Ministry for Agriculture. [1972] ECR Consumer Redress in the EU: Consumer Experiences, Perceptions and Choices, Aggregated report August 2009, Eurobarometer qualitative study, page 6. 6

7 These situations appear to arise across a wide range of product and service categories. On 2011 the European Commission s Directorate-General for Health and Consumers with contributions from the European consumers centres network and relevant Commission services has prepared and published the European consumers centres network 2010 annual report 18. All the statistics in this report was based only on the information collected from the cases handled by the ECC, so it does not reflect the real situation in the internal market, because some of the cases were solved or left unsolved by other consumer rights protection mechanisms. In 2010 almost 33.2% (10 557) of the recorded complaints and disputes were in the area of Transport (57% (6 038) of these concerned air passenger rights), 23.7% of the complaints related to Recreational and cultural services, 11.5% related to Restaurants, hotels and accommodation services, 9,6 % miscellaneous goods and services, 5,8 % furnishing, household equipment and routine household maintenance, 5,4 % communication, 10,8 % others (includes clothing, housing, food and education). As the survey showed, in more than half of the cases, the product or the service was purchased by the consumer on-line. This is not a surprising statistics, knowing that e-commerce rates are still growing rapidly. With this growth disputes are growing parallel. Over 41.6% of the cases handled by ECC have been closed after an amicable settlement was obtained with the trader, in 42.6% of cases no solution were found, while only 15.5% of cases were transferred by the ECC to another organization/agency. Having in mind that ECC can solve 41,6 % of received consumer cases - this could be considered as remarkable input to protection of consumer rights. In the other hand, it shows that in more than 42,6 % of cases no solution were found and this could be recognized as really negative ratings and persuasive argument to look for more effective dispute resolution measurements in EU European instruments of consumers rights protection EU legal acts grant certain rights and guarantees to consumers, however, in order to use them properly and derive some practical benefit, relevant mechanisms must be in place in the whole EU to ensure proper exercise of such rights. For consumers to be able to make use of the common market advantages freely and have confidence while buying goods or services in the EU member states other than their permanent residence, they need guarantees that in case of damages they will be able to seek redress. 18 Luxembourg: Office for Official Publications of the European Union, 2011, ISBN doi: /

8 Most problems encountered by consumers often may be solved through mutual negotiations by contacting the trader or the service provider directly. In this way both parties can save time and money. However, if the initial response of the trader to the consumer's complaint is negative, consumers tend to feel hurt, deceived, feel dissatisfaction and remain offended. During the aforementioned Eurobarometer qualitative study 2009 it was identified that the presence and intensity of such emotions is a decisive factor when the consumer chooses whether to continue seeking compensation for damages or not. Consumers tend to make decisions to act or not based on a trade off between the cost (in terms of time, trouble, stress and effort) of seeking redress and the likely return (in terms of the benefit to them of a successful resolution). 19 Another major problem encountered by consumers seeking redress is the lack of sufficient knowledge necessary to initiate the damage compensation procedure. If the redress procedure is related with a cross-border case the situation is getting even worse. As shown by the above-referred Eurobarometer qualitative study, the majority of the consumers are convinced that the problems they encounter trying to get redress in the state of their residence would increase several times if they have to look for information on redress procedures in cross-border cases. Whenever consumer decides to seek for a justice or redress from a trader/supplier they can choose how to defend their rights in EU. Four big groups of consumer rights protection instruments in EU have to be highlighted: European Consumers Centres Network (ECC-Net). Alternative Dispute Resolution (ADR). Collective redress. Individual judicial redress (Individual court procedure) European Consumer CentresNetwork (ECC-Net) ECC-Net serves EU consumers shopping for goods and services on the European market, providing them with advice on their EU consumer rights and helping them with their disputes with traders in other EU countries. ECC-Net is a Europe-wide network of all the European Consumer Centres 20 (ECC), who co-operate closely to help settle complaints between consumers and traders based in different EU countries. ECC provide free advice on consumer rights and consumer help to EU citizens and consumers living in the EU (as well as Norway and Iceland) who are shopping 19 Consumers redress in the European Union : consumer experiences, perceptions and choices. Aggregated report August 2009, Eurobarometer Qualitative study, page ECC operate in 27 EU member states as well as in Norway and Iceland. 8

9 abroad for goods or services in the European market, as well free expert help in settling consumer complaint against an EU-based foreign trader. 21 ECC are not the bodies hearing disputes of consumers and traders. They provide basic information in order to avoid specific problems in the area of consumer protection (preventive information provision function) and offer assistance providing traders with the standard complaint form 22 approved by the European Commission to help both buyers and sellers resolve disputes between them (mediation function). If the trader does not satisfy the consumer's claims stated in the complaint (does not pay the required compensation/damages, pays compensation/damages not as requested, rejects the complaint as unfounded, etc.), the dispute may be moved to alternative dispute resolution bodies or to the court Alternative Dispute Resolution (ADR) ADR schemes or out-of-court mechanisms as they are also known have been developed across Europe to help citizens who have a consumer dispute but who have been unable to reach an agreement directly with the trader. ADR schemes usually use a third party such as an arbitrator, mediator or an ombudsman to help the consumer and the trader reach a solution 23. An advantage of ADR is that this procedure is more flexible compared to judicial proceedings. ADR procedure is much cheaper, faster, less formal and, therefore, more acceptable to consumers seeking redress. The experience gained by several Member States shows that alternative mechanisms for the out-of-court settlement of consumer disputes provided certain essential principles are respected have had good results, both for consumers and firms, by reducing the cost of settling consumer disputes and the duration of the procedure. 24 For example, Lithuania has its State Consumer Rights Protection Authority which follows the requirements set by the EU, coordinates state institutions' activities on protection of consumers and examines the complaints of costumers. The Authority, while implementing prescribed functions, ensures that every consumer, whether he lives in a city or in countryside, is aware that the State Consumer Rights Protection Authority and state institutions existing under its coordination 21 European Consumer Centres: travel advice and buyers' guide for EU consumers. Interactive [accessed on 15/19/2011] 22 Redress: Asserting Consumer Rights. Consumer Complaint Form. Interactive [visited on 15/09/2011] Helping consumers seek redress: Alternative Dispute Resolution (ADR). Interactive [accessed on 15/09/2011] Health & Consumer Protection Directorate General - Unit B5 "Enforcement and Consumer redress". Commissions Recommendations 98/257/EC and 2001/310/EC on ADR. Interactive [accessed on 10/10/2011] 9

10 will help to solve the problems arisen for consumer. 25 The Communications Regulatory Authority of the Republic of Lithuania and Insurance Supervisory Commission of the Republic of Lithuania work as ADR mechanisms in specific service sectors. Bulgaria has established nine conciliation commissions which operate under authority of the Commission for the Consumer Conciliation Committee. These out-of-court mechanisms, however, were developed differently throughout the entire EU and, therefore, the power of the decisions they take varies to a great extent. Some decisions are guidance documents, some are binding only to one party to the dispute (professionals), and some are binding to both parties. The most frequently expressed consumers concern is that using such a mechanism might be insufficiently binding on the supplier or result in a compromise, something consumers tended to find unattractive; they want full compensation 26. For this reason consumers might choose to go directly to the court Collective redress Two types of collective redress can be specified: Collective ADR and Collective Court Action. A possibility of sharing litigation costs, responsibility and effort grants some advantage to this mechanism, but its functioning also raises many questions. One of the most frequent questions is how to find the necessary number of co-claimants in order to have the complaint/claim recognised as collective. Talking about collective claims, it is a broad concept, meaning a mechanism whereby it is sought to terminate an unlawful business practice from which multiple claimants have suffered or to prevent such practice or get compensation for the damages caused by such practice. 27 The institute of a group claim is provided for in Article 49(5) of the Lithuanian Code of Civil Procedure 28, however, due to an overly laconic regulation, this provision has not established itself in practise and in the best case the institute of procedural complicity is used. 25 General information about Lithuania s State Consumer Rights Protection Authority. Interactive [accessed on 28/09/2011] 26 Consumers redress in the European Union: consumer experiences, perceptions and choices, Aggregated report august 2009, Eurobarometer Qualitative study, page Commission Staff Working Document, Public Consultation. Towards a Coherent European Approach to Collective Redress. Interactive [accessed on 10/10/2011] 28 Civil Code of the Republic of Lithuania. Official Gazette Valstybės žinios No

11 Meanwhile in Bulgaria the collective redress mechanism was introduced by the Law on Consumer Protection in year A collective action for damages suffered by consumers can be filed provided that the following prerequisites are met: 29 Consumers who suffered damage are identified and are in number at least two or more. Individual damage, suffered by consumers, has to have been caused by the same producer, importer, businessperson or retailer, as well as has to have derived from the same infringement. A consumer association has to have been explicitly granted by consumers with a power-ofattorney for bringing a claim for damages and for litigation representation. The designation of this collective redress mechanism is collection of damages to individual interests of at least two identified consumers, represented in the litigation by a consumer association. Although only a small amount of collective actions have been filed so far in Bulgaria courts Individual judicial redress Individual judicial proceedings are most easy for consumers to recognise and understand as a mechanism of redress. Consumers identify the binding character of a court decision as the main advantage of this mechanism. On the other hand, many consumers also associate this mechanism with high costs in terms of time and expenses. Moreover, if the trader is based in a country other than the consumer s home country, the consumer may well not know who and how to approach to make a complaint, settle the dispute. Therefore, the issue of protection of consumer rights all over the EU is becoming more and more relevant. Some Member States have special procedures to deal with small claims, available for both domestic and international disputes. But in this case a claimant consumer may face with additional procedures if the judgment has to be enforced in another Member State. 30 As mentioned before, if redress is concerning the cross-border litigation the situation gets even more complicated. As a result consumers would not envisage employing it in any but the most serious cases. In order to get the full benefit from individual court proceedings in cross-border cases users have to change their attitude to this process and be aware of simplified judicial redress procedures such as European Order for Payment procedure and European Small Claims procedure. 29 Evaluation of the effectiveness and efficiency of collective redress mechanisms in the European Union, page 17. Interactive [accessed on 14/10/2011] 30 House of Lords. European Small Claims Procedure. 23 rd Report of Session London. p. 7 11

12 2. DETERMINATION OF JURISDICTION IN CROSS-BORDER CONSUMERS DISPUTES European Order for Payment procedure (EOPP) and European Small Claims procedure (ESCP) are relatively recent. Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure 31 is applicable to full extent in all Member States except Denmark since 12 December 2008 and Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure 32 only since 1 January 2009 (in all Member States as well, except Denmark). The time since the Regulations are in operation is rather short for consumers to realise the advantages and benefit of the European simplified and accelerated procedure in crossborder cases. Consumers are still very slow in the protection of their rights using the instruments offered in the EU. Whenever consumer considers using the EOPP or the ESCP for gaining a redress in a crossborder case, first of all, answers to two questions are necessary: 1) is the dispute a cross-border case, i.e. is it possible in general to use such European procedures, because both EOPP and ESCP may be used only for cross-border disputes; 2) proper determination of the jurisdiction. Both regulations define that a cross-border case is one in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court or tribunal seised. Domicile shall be determined in accordance with Articles 59 and 60 of Regulation (EC) No 44/2001 ( Brussels I ) 33. Neither Regulation creating EOPP nor Regulation creating ESCP (nor Brussels I Regulation) define the concept of habitual place of residence. It is interesting to see whether national law has a part to play in defining this concept, especially considering that Art. 26 of the Regulation creating EOPP and Art. 19 of the Regulation creating ESCP both provide that subject to the provisions of Regulation, proceedings shall be governed by the procedural law of the Member State in which the procedure is conducted. If we consider that these rules must be applied in a uniform way, it could be argued that there is no role for national law in defining this meaning, because the use of lex fori challenges this uniformity [2006]. OJ, L [2007]. OJ, L Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. [2001]. OJ, L Choosing among the three Regulations Creating a European Enforcement Order (EEO Regulation, EOP Regulation, ESCP Regulation): Practical Guidelines by Elena D' Alessandro. Interactive [accessed on 15/10/2011] a_european_enforcement_order_eeo_regulation_eop_regulation_escp_regulation_practical_guidelines. 12

13 Furthermore, the difference between two of the discussed procedures (EOPP and ESCP) emerges on the questions regarding the determination of jurisdiction. Art. 6 of the Regulation creating EOPP states: 1. For the purposes of applying this Regulation, jurisdiction shall be determined in accordance with the relevant rules of Community law, in particular Regulation (EC) No 44/2001 (Brussels I). 2. However, if the claim relates to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, and if the defendant is the consumer, only the courts in the Member State in which the defendant is domiciled, within the meaning of Article 59 of Regulation (EC) No 44/2001, shall have jurisdiction. Although Regulation establishing ESCP does not expressly provide that jurisdiction must be based on Brussels I Regulation, a need of this prerequisite shall be deducted by the literal interpretation of the text by Annex I, Section I, paragraph 4 of this Regulation. Brussels I Regulation has a separate section (Section 4 of Chapter II, Art ) for determining the jurisdiction over consumer contracts. In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section, without prejudice to Article 4 and point 5 of Art. 5 of Brussels I Regulation, if (Art. 15(1)): a) it is a contract for the sale of goods on instalment credit terms; or b) it is a contract for a loan repayable by instalments, or for any other form of credit, made to finance the sale of goods; or c) in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer's domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities. If the first two paragraphs are quite clear to understand and apply, the third paragraph seems to be more complicated. On 7 December 2010 Grand Chamber of ECJ had a reference for a preliminary ruling of interpretation of Article 15(1)(c) and (3) of Brussels I Regulation. 35 Court had to answer what are the minimum characteristics required of an internet site in order for the activities advertised on that site to be capable of being regarded as activities "directed" to the Member State of the consumer s domicile. In this case ECJ held that in order to determine whether a trader whose activity is presented on its website or on that of an intermediary can be considered to be "directing" its activity to the Member State of the consumer s domicile, within the meaning of Article 15(1)(c) of 35 ECJ joined cases 585/08 Peter Pammer v Reederei Karl Schlüter GmbH & Co KG and 144/09 Hotel Alpenhof GesmbH v Oliver Heller, [2010]. 13

14 Regulation No 44/2001, it should be ascertained whether, before the conclusion of any contract with the consumer, it is apparent from those websites and the trader s overall activity that the trader was envisaging doing business with consumers domiciled in one or more Member States, including the Member State of that consumer s domicile, in the sense that it was minded to conclude a contract with them. [...] It is for the national courts to ascertain whether such evidence exists. On the other hand, the mere accessibility of the trader s or the intermediary s website in the Member State in which the consumer is domiciled is insufficient. The same is true of mention of an address and of other contact details, or of use of a language or a currency which are the language and/or currency generally used in the Member State in which the trader is established. Art. 15(2) of Brussels I Regulation protects the consumers rights in such way that it indirectly broadens the jurisdictional territory of EU courts while application of Art. 15(3) of Brussels I Regulation has also been discussed in jurisprudence of ECJ. In the same joined cases 585/08 and 144/09 (mentioned above) the ECJ was given the following questions for preliminary ruling: Does a voyage by freighter constitute package travel for the purposes of Art. 15(3) of [Regulation No 44/2001]? [ ] Regarding Art. 15(3) of Brussels I Regulation the ECJ has stated that "it is therefore appropriate to interpret Article 15(3) of Regulation No 44/2001 in the light of the corresponding provision in Regulation No 593/ and to refer to the concept of package travel to which the latter regulation makes reference.[...] It must therefore be determined whether a voyage by freighter such as that at issue in the main proceedings corresponds to the concept of package as defined in Directive 90/ When it is finally determined that a contract is concluded by a consumer and this case is recognised as a cross-border case, then jurisdiction shall be determined further by Art. 16 of the Brussels I Regulation. Compared with the general principle of jurisdiction established in Brussels I Regulation that persons domiciled in a Member State shall be sued in the courts of that Member State (Art. 2(1)), alternative jurisdiction is applied in consumer disputes, i.e. the consumer is granted the right to choose (Art. 16(1)): bring proceedings against the other party to a contract either in the courts of the Member State in which that party is domiciled or in the courts for the place where the consumer is domiciled. 36 Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). [2008]. OJ, L 177/6. 37 Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours. [1990]. OJ, L

15 Whereas consumer can be sued by the other party to the contract only in the courts of the Member State in which the consumer is domiciled (Art. 16(2)). All the provisions of the Brussels I Regulation determining the jurisdiction may be departed from only by an agreement. However, Art. 17 of Brussels I Regulation should be interpreted and understood in the way that parties can not make an agreement which would limit the rights of consumer, embedded in the Section 4 of the Regulation Brussels I. In the other words, parties can make only prorogation agreement for determining competent court jurisdiction including other courts from non Member States. 3. EUROPEAN ORDER FOR PAYMENT AS CROSS-BORDER CONSUMERS REDRESS MECHANISM Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure has undoubtedly introduced certain changes on the EU level not only solving the issues of satisfying uncontested claims but also forming international methods of consumer dispute settlement. It is a measure enabling a fast, effective and economic recovery of debts that are not disputed at court. Regulation (EC) No 1896/2006 came into force on 31 December 2006 and is in its full extent applicable in all Member States, except Denmark, since 12 December The application of this European instrument is not restricted by any amount of money, i.e. it may be applied for regarding any amounts claimed. The purpose of this section of the study is to analyse the impact of EOPP on the consumer rights protection policy in Lithuania and Bulgaria, with a special focus on the objective and purpose of EOPP, its advantages and disadvantages European order for payment: purpose and mission Mechanisms for consumer protection enforcement authorities to obtain or facilitate redress on behalf of consumers include, but are not limited to, the ability to seek a court order for redress in civil proceedings 38. The Green Paper of 20 December 2002 on a EOPP and on measures to simplify and speed up small claims litigation noted that "it is an established fact of life that the main purpose of a substantial percentage of court proceedings in the Member States is not to obtain an authoritative impartial decision on contentious questions of fact or law. Rather, it is increasingly not 38 OECD (Consumer Policy). Recommendation on Consumer Dispute Resolution and Redress. Paris: Head of Publications Service, 2006, p

16 the exception but the rule that in the verifiable absence of any dispute the creditor has to turn to the judiciary to attain an enforceable title allowing him to collect a claim by means of forced execution that the debtor is simply unwilling or unable to honour 39. EOPP, allowing creditors to obtain enforcement orders rapidly as long as the debtor remains inactive and does not contest the claim, are a common feature in every Member State 40. Chapter XXIII of the Code of Civil Procedure of the Republic of Lithuania, for example, deals with the specifics of proceedings for the issuance of orders for payment. This amendment, which encompassed the institute of an enforcement order that is known and successfully applied in many European states, came into force on 1 January 1999 already. 41 Meanwhile in Bulgaria this institute is rather recent "the adoption of the latest Bulgarian Civil Procedure Code (BCPC) 42 and the novel order-for-payment procedure presented thereby could be acknowledged as one of the most important events affecting the entire area of dispute resolution in Bulgaria 43. Since the procedure simplifies, speeds up and reduces the costs of litigation significantly, there is an increasing number of persons who have recourse thereto. Moreover, the procedure applies to both civil and commercial claims, thus providing a considerable option for both domestic and foreign persons to claim their rights 44. The option is further substantiated by the procedure for EOPP, provided for by Regulation creating a European order for payment. The main purpose of the Regulation on a European order for payment is "to simplify, speed up and reduce the costs of litigation in cross-border cases concerning pecuniary claims; to permit the free circulation of European orders for payment throughout the Member States which renders unnecessary any intermediate proceedings" 45. This procedure enables the collection of pecuniary claims for a specific amount that have fallen due at the time when the application for a European order for payment is submitted 46. Since 12 December 2008 when EOPP became operating, in one year it surpassed in popularity the European Enforcement Order procedure (EEO) provided for in Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement 39 Green Paper on a European Order for Payment procedure and on measures to simplify and speed up small claims litigation. 2002, COM (2002) 746 final, p Gomez Amigo, L. The European Order for Payment Procedure: An Example of Harmonization of the Civil Procedure in Europe. International Association of Procedural Law, 2009 Toronto Conference, p Laužikas, E., Mikelėnas V., Nekrošius V. Civilinio proceso teisė, II tomas. Vilnius: Justitia, 2005, p Promulgated, State Gazette No. 59/ , effective as of 01/03/2008, last amended, State Gazette No. 100/ Ganev, A.; Simeonov, S. Bulgaria. In The International Comparative Legal Guide to: Litigation & Dispute Resolution Global Legal Group in association with CDR, p Ganev, A.; Simeonov, S. Bulgaria. In The International Comparative Legal Guide to: Litigation & Dispute Resolution Global Legal Group in Association with CDR, p Gumuliauskienė, L. Užsienio teismų sprendimų pripažinimas ir vykdymas civiliniame procese (eng. Recognition and Enforcement of Foreign Judgments in Civil Proceedings). Doctoral Dissertation. Social Sciences, Law (01 S), p Regulation (EC) No. 1896/2006 creating a European order for payment procedure, Article 4. [2006]. OJ, L 399/1. 16

17 Order for uncontested claims 47. Individual courts of the EU Member States in 2009 have issued 4-5 more of EOP certificates compared to EEO certificates 48. According to unofficial data, Lithuania issued approximately 20 EOP in EOPP means special procedures provided by the regular courts, which may only be used for a particular type of claim. These procedures are not usually tailored towards consumer disputes 50. For example, Article 6.363(4) of the Civil Code of the Republic of Lithuania 51, which regulates the specifics of purchase and sale contracts, specifies that the buyer who has been sold things of improper quality shall be entitled, at his own choice: (1) to have the thing of improper quality replaced with a thing of satisfactory quality, (2) to the price of the goods reduced accordingly, (3) to have the defects eliminated without any payment within a reasonable time, (4) to have the buyer s expenses for the elimination of defects reimbursed if the buyer has not eliminated the defects on his own or with the help of third persons. Paragraph 8 of that same article prescribes that instead of putting forward the above-mentioned claims, the buyer may unilaterally terminate the contract and demand reimbursement of the price paid. In this case the buyer must, upon the seller s request, return the thing of improper quality, at the expense of the seller. Refunding to the buyer the money paid, the seller has no right to deduct the amount whereby the value of the thing has been reduced due to its use or loss of appearance or due to other circumstances It follows from the specifics of the above-mentioned consumer purchase and sale contracts and the criteria defined in the Regulation on EOP that the consumer, who buys improper quality goods and has a clearly defined range of safeguards for his infringed right, will be able to use EOPP in respect of the protection of only one of them, i.e. terminate the contract unilaterally and claim reimbursement of the price paid. Let us imagine a hypothetical situation: the consumer habitually resident in Lithuania buys a camera during holidays in Germany. Only upon return to Lithuania he notices that the product is with defects and of improper quality. The consumer returns the poor quality camera to the seller and demands to repay the price paid. The seller, however, does not satisfy this claim. Since the consumer's pecuniary claim is specifically defined, uncontested and its payment term has expired, 47 [2004]. OJ, L Association Lithuanian Chamber of Bailiffs. Europos mokėjimo įsakymas sėkmingai taikomas atgaunant skolas [interactive]. Vilnius, 2009 [accessed on 27/09/2011]. < articleid/1217>. 49 Vėbraitė, V. Europos Parlamento ir Tarybos reglamento (EB) Nr. 1896/2006, nustatančio Europos mokėjimo įsakymo procedūrą, taikymo ypatumai (eng. Specifics of the Application of Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure). Teisė. 2010, 77: 50-61, p OECD (Consumer Policy). Consumer Dispute Resolution and Redress in the Marketplace. Paris: Head of Publications Service, 2006, p Official Gazette Valstybės žinios No

18 he has the right to have recourse to EOPP and in this way recover the price paid for the product in a simplified judicial procedure. The consumer would also be able to use EOPP in case he has bought a product by means of e- commerce from another member state, but the seller has failed to deliver the product. In this case, through EOPP, the consumer would be entitled to claim the award of the price paid for the goods and other expenses from the seller. Nevertheless, EOPP does not ensure the enforcement of other consumer rights, for example, to demand to replace the goods of improper quality with good quality goods, reduce the price of the goods accordingly or eliminate the defects within a reasonable period of time, although in some cases, in particular, when the product defects cannot be easily seen, they would be more acceptable to the consumers than unilateral termination of the contract Issuance procedure of European order for payment: advantages and disadvantages In order to provide an extensive analysis of one of the potential methods of international settlement of consumer disputes EOPP, we will briefly discuss its procedure and practical application specifics. Recalling the above-referred hypothetical example, it should be stressed that this procedure is optional and it depends only on the claimant how he is going to defend his legitimate interests 52. In case the consumer decides to recover the price paid for the goods using EOPP specifically, the first step is to submit an application to issue an EOP. As it has been already mentioned, following Article 16 of the Brussels I Regulation, consumers may initiate action against the other party to the contract in courts of the member state of habitual residence of that party to the contract or in courts of the consumer's habitual place of residence. Such situation is especially favourable to the consumer, because, for example, in the above-mentioned hypothetical scenario, the consumer habitually resident in Lithuania, will be able to institute proceedings against the unfair seller in a competent court of Lithuania following the rules of jurisdiction laid down in the Code of Civil Procedure of the Republic of Lithuania and in accordance with Article 20 of the Law Implementing EU and International Legal Acts Regulating Civil Procedure of the Republic of Lithuania of 13 November Vėbraitė, V. Europos Parlamento ir Tarybos reglamento (EB) Nr. 1896/2006, nustatančio Europos mokėjimo įsakymo procedūrą, taikymo ypatumai (eng. Specifics of the Application of Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure). Teisė. 2010, 77: 50-61, p Official Gazette Valstybės žinios No

19 In Lithuania, applications to issue an EOP are usually submitted to the relevant local court (Code of Civil Procedure of the Republic of Lithuania, Article 26(1)). Meanwhile in Bulgaria, an application for issuing of an EOP shall be submitted to the district court (BCPC, Article 625(1)). After jurisdiction is determined, an application to issue an EOP should be submitted filling out a standard form, which should state: the parties, the amount claimed, the basis of the claim and the description of evidence supporting the claim. It means that EOPP is based on the use of standard forms for correspondence of the courts and the parties in order to facilitate its implementation and create pre-conditions for automatic data processing. The standard form of the application should be completed in one of the working languages of the court where the application is submitted. In accordance with the provisions of Article 113(3) of the Code of Civil Procedure of the Republic of Lithuania, however, a translation of all submitted documents (in this case, application to issue an EOP) into the relevant foreign language should be also enclosed, because the EOP issued by the court and the applicant's application to issue the EOP has to be sent to the defendant located in another EU member state. In this situation, it is very helpful both to consumers and other parties to the proceedings that all document forms specified in the Regulation have been translated into all official languages of the EU member states and are available on the European Judicial ATLAS in Civil Matters. 54 The EOP issuance procedure is rather simple and does not require any special legal knowledge to pursue any relevant judicial procedure. As it is in fact the same in all EU member states, in many cases the consumer does not have to hire any foreign lawyers 55 and expenses for translation are saved. Besides, there is a provision in the Regulation (EC) No. 1896/2006 (Article 24) that it is not compulsory for an advocate or any other lawyer to represent the applicant, i.e., consumer in this case, regarding his application to issue an EOP. After the submission of an application to issue an EOP, the court where such application has been submitted verifies as soon as possible if the set requirements have been satisfied and if the application appears reasoned. If the requirements have been satisfied, the court issues the EOP using the standard form (Article 12 of the Regulation) as soon as possible (normally within 30 days as of the day of submission of the application). Another step is to serve the issued EOP to the defendant. The EOP informs the defendant that he/she may either pay the amount claimed or object to the EOP, by submitting an objection to the court within 30 days as of the day of its service. It is sufficient to state that he/she objects to the claim without specifying any reasons to this effect (Article 16 of the Regulation). 54 European Judicial ATLAS in Civil Matters/ Tamošiūnas, M. Europos mokėjimo įsakymo procedūra efektyvi skolų išieškojimo priemonė (eng. European Order for Payment An Effective Instrument of Debt Recovery) [interactive]. Vilnius, 2010 [accessed on 27/09/2011]. < 19

20 EOPP, as an international method to settle consumer disputes, encounters several problems in this stage. Firstly, it is the cases when the EOP cannot be served to the defendant. It should be noted that the EOP Regulation does not provide for any special procedure for service of documents to the defendant it is done following national legal acts in the way compliant with the requirements specified in Articles 13, 14 and 15 of the Regulation. Thus, service may be effected by a courier, a bailiff or it can be done by registered mail; it is not yet possible in Lithuania to effect the service by leaving the documents in the post box, post office with the relevant notification or by electronic means confirming the dispatch automatically, therefore, such methods cannot be used when it is sough to serve an EOP 56. Thus, consumers, defending their violated rights in Lithuanian courts, find it more difficult to serve EOPs to defendants and the likelihood to have it revoked increases accordingly. Another issue of the aforementioned phase is submission of objections by the defendant. If a statement of opposition is entered within a specified time limit, the proceedings continue before the competent courts of the Member State of origin in accordance with the rules of ordinary civil procedure (Article 17 of the Regulation). A shift to the ordinary civil procedure is regulated by legal acts of the member state of origin. It means that in case the defendant files a statement of opposition (which may be fully groundless), the EOP does not become enforceable and the consumer, who sought in this way to recover the product price paid, will have to apply to court within the prescribed time in accordance with the rules of the ordinary civil procedure. This, in principle, almost always means much higher litigation costs, longer proceedings and a more complicated enforcement of court decisions. If no statement of opposition is lodged within the time limit specified, the court of origin without delay declares the EOP enforceable using the standard form (Article 18 of the Regulation). Although there is no direct reference made to res judicata power of EOP, it should be carried by this document 57. It is also very important that EOP abolishes exequatur an EOP which has become enforceable in the Member State of origin shall be recognised and enforced in the other Member States without the need for a declaration of enforceability and without any possibility of opposing its recognition (Article 19 of the Regulation). 56 Vėbraitė, V. Europos Parlamento ir Tarybos reglamento (EB) Nr. 1896/2006, nustatančio Europos mokėjimo įsakymo procedūrą, taikymo ypatumai (eng. Specifics of the Application of Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure). Teisė. 2010, 77: 50-61, p Vėbraitė, V. Europos Parlamento ir Tarybos reglamento (EB) Nr. 1896/2006, nustatančio Europos mokėjimo įsakymo procedūrą, taikymo ypatumai (eng. Specifics of the Application of Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure). Teisė. 2010, 77: 50-61, p