European Commission publishes report on use of ADR by businesses

The European Commission has recently published the results of a pan-European consultation canvassing views on ADR usage at the business level. This will inform the European Commission's desire to promote and facilitate ADR between businesses. Much of the European Commission's recent work on ADR has focussed on business to consumer relations (see our post on the proposals on consumer ADR and consumer online dispute resolution (ODR) that were adopted by the European Commission on 25 November 2011 and are currently under negotiation in the European Council and the European Parliament).   The business to business survey results favour ADR and highlight the need for increased awareness and online facilities. So it seems likely that the EU will prioritise the consumer/ODR package and follow-up with a business to business instrument if necessary afterwards.

The consultation

The business to business survey was co-ordinated by the Directorate-General for Communication and conducted in the spring of 2012. The sample was selected from an international business database, with some additional samples from local sources in countries. The survey was designed to explore the experiences of EU companies in business to business dispute resolution, specifically:

• The use of court and ADR schemes by companies, particularly SMEs to resolve business to business disputes/disagreements
• The overall experience of businesses with the court system and with ADR schemes
• How ADR can help SMEs to resolve their disputes with other companies, especially in cross-border situations

The survey included questions about amicable ADR (termed 'mediation' style ADR) and binding ADR (termed 'arbitration' style ADR). 

Key findings

• 28% of companies have used at least one ADR scheme, while 47% have used a court in resolving a dispute with another company.
• Mediation style ADR schemes (23%) have been more widely used than arbitration style schemes (10%).
• Companies are more satisfied with ADR procedures than they are with court procedures, in particular when it comes to the duration (51% vs. 21%), the ease (58% vs. 30%) and the costs (50% vs. 24%) of the procedure.
• The main reason for not using ADR is a lack of awareness: about one fifth of companies do not know about the existence of the procedure, in particular how to initiate it.
• Other reasons for not using a mediation style ADR scheme included the fear that nothing would come of it (19%), that it would be too expensive for the sum involved (18%) and the fear that it would ruin the business relationship.
• 83% of companies that had used a mediation style ADR would do so again, 74% of companies that had used an arbitration style ADR would do so again, while 71% of companies that had used the courts to resolve a dispute in the past said they would consider using them again.

 Speed of resolution and costs

The survey found that it took an average of 17.8 months for courts to resolve a domestic dispute, arbitration style ADR took 10.0 months and mediation ADR took 7.3 months. For cross-border disputes, it took courts 15.2 months to resolve them, arbitration style ADR, 8.0 months and mediation style ADR, 5.8 months. Rather surprisingly, domestic disputes therefore appear to take longer to resolve than international disputes, regardless of the dispute resolution method used.

ADR schemes were found to resolve domestic disputes considerably more cheaply than the courts. For domestic business disputes, businesses spent an average of 11,500 euros when they used a court, 5,500 euros when they used an arbitration style ADR scheme and 2,700 euros when they used a mediation style ADR scheme. For cross border disputes, companies spent an average of 13,000 euros when they used a court, 6,100 euros when they used a mediation style ADR scheme and 21,300 euros when they used an arbitration style ADR scheme. These figures indicate that the pool of respondents were largely SMEs.

Comment

The report contains a wealth of information as well as useful insights on what drives businesses to pursue or settle disputes. The three most important aspects of ADR identified by respondents were predictable: it is quick, cheap, and facilitated by someone with knowledge and experience in dispute resolution.

It is unclear what the next steps will be but it is likely the ADR/ODR legislative package will be approved by the European Parliament in 2013, with a business to business ADR package to follow.