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Frequently Asked Questions: the European Small Claims Procedure 2.0

European Commission - MEMO/13/1007   19/11/2013

Other available languages: none

European Commission

MEMO

Brussels, 19 November 2013

Frequently Asked Questions: the European Small Claims Procedure 2.0

What is the European Small Claims Procedure?

Since 2007, the EU has a procedure to resolve small cross-border civil and commercial disputes in a hassle-free way: the European Small Claims Procedure. It is a mechanism which applies to all disputes with a value of up to €2000. 'Cross-border' implies that one of the two parties in the dispute resides in a different EU Member State from that of the court first involved in the case. The mechanism is launched when one of the parties in the dispute submits written information to the court. This information is given to the Court on standardised forms, harmonised by law in all EU languages and available on the eJustice website.

This procedure has greatly simplified the resolution of low-value disputes, by removing the need to be represented by lawyers at hearings, and by allowing courts to use distance means of communication (such as tele- and videoconferencing). On this basis, resulting court decisions can be enforced in every Member State, in much the same way that the decision of a national court can be enforced, and without the need for specific execution orders.

The procedure can be used both for commercial (for example when shopping or for business transactions) and civil cases (such as for example in the case of a construction company renovating a holiday home in another EU Member State but which is not doing its work properly).

Since its introduction, the procedure has reduced the cost of litigating cross-border small claims by up to 40% and the duration of litigation from 2 years and 5 months down to an average duration of 5 months.

Example of a Small Claims Procedure: an Austrian consumer ordered skiing equipment from a German website paid €1,800 in advance via bank transfer. The trader never delivered the equipment and did not reimburse the purchase price. The consumer therefore started a European Small Claims Procedure. The Austrian court in Linz issued a judgment in favour of the consumer, which was enforced by the German authorities in Charlottenburg. The consumer then received a refund of the purchase price. If the value of the order was however more than €2,000, the case would not be eligible for the European Small Claims Procedure as it stands today.

Why is the European Commission proposing changes to the rules?

The system we have in place now has worked well, but it has also shown its limits. There is room for improvement. A Commission report on the European Small Claims Procedure published today notably found that that the upper limit of €2 000 for filing a claim excludes too many low-value disputes, to the detriment of Europe's small and medium enterprises.

Problem 1: As the current threshold for small claims is set at €2,000, low value cross-border disputes above €2,000 are excluded. For these claims, the costs and length of litigation is high and disproportionate to the value of the claim. For example, the average cost of litigating a claim of €10,000 (in Member States without simplified national procedures for small claims) is estimated to be €3,000 or 30% of the value of the claim.

Problem 2: A large number of disputes are excluded by the narrow definition of what a 'cross-border' dispute actually is, meaning that for example, a car accident in a border region of another Member State, a lease contract for a holiday property or a case where a defendant has a bank account in another Member State are not currently covered by the Procedure.

Problem 3: The costs and length of the current procedure remain too high and are not transparent. For example, the fact that oral hearings often require the physical presence of the parties imposes travel costs of between €400 and €800. Unnecessary costs are also incurred where there is no on-line facility for payment of court fees. The lack of transparency on court fees in the Member States also leads to costs and delays for the claimant. In a survey, 45% of companies which experienced a dispute said they did not go to court because the costs for the procedure are disproportionate to the claim.

Problem 4: There is a lack of awareness of the existence and operation of the procedure among interested parties. According to a recent Eurobarometer survey shows that 86% of citizens have never heard of the European Small Claims Procedure.

What is the European Commission proposing?

The European Commission is proposing a range of changes to the European Small Claims Procedure to make it more operational, less cumbersome, and more attractive to consumers and businesses that encounter cross-border problems.

The most significant of these changes will be to raise the threshold for filing an application under the small claims procedure from €2,000 to €10,000, allowing a much wider range of disputes to be covered. This will notably benefit SMEs. Only 20% of all business claims are below €2,000, while claims between €2,000 and €10,000 account for around 30% of all cross-border business claims.

The procedure itself will also be modernised, making more use of easily available technology to limit the hassle of travelling to foreign courts for oral hearings, to submit relevant documents and to even initiate the procedure itself online. It should be made possible to pay court fees online, and these court fees should be capped where they are disproportionate to the value of the claim.

What will be the key changes?

  • Solution to Problem 1: The threshold of cases defined as 'Small Claims' will be raised from €2,000 to €10,000.

  • Solution to Problem 2: A widened definition of 'cross-border cases' to include a greater number of cases with a cross-border dimension, sometimes even if both parties to the dispute are from the same Member State (for example when the court decision is to be applied in a different Member State or where the performance of a contract is in another country).

    Solutions to Problem 3:

  • Greater use of technology, including: email and other electronic means for communication, (e.g. for the submission of legal documents); teleconferencing or videoconferencing technologies for oral hearings; and possibility to launch the procedure on-line.

  • Oral hearings, entailing travelling to the court abroad, will take place only when the court cannot decide on the basis or written evidence.

  • Parties' procedural safeguards are strengthened by the new rules: even if hearings are held by teleconference, people will have a right to participate in person, and conditions for reviewing court decisions will be clarified.

  • Capping of court fees to reduce disproportionate costs: court fees cannot exceed 10% of the value of the claim; if a minimum fee is charged by a Member State, it should not be higher than €35; payment of the fees by bank transfer and credit card will be made available.

  • Solution to Problem 4:Better information to consumers and businesses on court fees, on where to obtain assistance in filling in the application, and on how to apply for a review of the judgement in special circumstances.

Are stakeholders generally in favour of the proposed solutions?

The results of a public consultation show that 66% of respondents support an extension of the threshold up to €10,000, 63% are in favour of using electronic means in the course of the procedure and 71% support the idea of courts being equipped with videoconferencing or other electronic communication equipment.

Organisations representing EU consumers and EU businesses including SMEs expressed support for raising the threshold and bringing procedural improvements leading to greater cost savings and reduced length of proceedings. In the Eurobarometer survey, 45% of companies said they did not go to court because the costs for the procedure are disproportionate to the claim

The improved European small claims procedure answers citizens' real concerns: in a recent Eurobarometer survey, one third of the respondents said that they would be more inclined to file a claim if the procedures could be carried out only in writing, without need to physically go to court.

Source: Flash Eurobarometer Survey 365, page 55

Who will benefit from the changes?

Consumer and business, particularly SMEs, both stand to benefit from this procedure.

The main objectives of this initiative are to provide better access to justice for a wider range of cross-border small value claims and reduce the current economic detriment to SMEs and consumers resulting from expensive litigation. More specifically, the initiative aims at reducing costs and length of litigating small claims disputes, extending the procedure to claims of a small value of SMEs and to all situations having a cross-border element including those which involve parties resident in third countries, simplifying the procedure itself and improving legal certainty and information for consumers and businesses on the procedure.

For consumers, the European Commission proposal will:

  1. Make the procedure better, faster and cheaper than before due to the limitations placed on and disincentives to litigate and other procedural improvements

  2. Result in more information and better assistance throughout the procedure.

For businesses the European Commission proposal will:

  1. bring the same advantages as for consumers in terms of simplification, speed, and lower costs of justice

  2. lead to significant benefits through the higher threshold of €10,000, which will open the procedure to approximately 50% of SMEs cross-border claims.

What are the expected economic benefits of this proposal?

The combined time and cost savings of the individual elements of the preferred option account for a potential reduction of costs for the parties of about €325 to €418 million.

The reduction in costs related to raising the threshold from the current €2,000 to €10,000 alone is estimated to amount to approximately €233 million based on the assumption that 50% of eligible court cases concerning claims between €2,000 and €10,000 in Member States where there is a simplified procedure would be filed under the European Small Claims Procedure.

By reducing the disproportionate costs and time of litigation concerning small claims in cases with a cross-border element, the proposed changes would improve access to justice for consumers and businesses.

The proposal will have a positive impact with regard to the procedural improvements especially for economically disadvantaged persons, since the existence of disproportionate costs particularly affects this social group: their claims are likely to be small, and the fear of incurring disproportionate costs will prevent them more than anyone else from lodging a claim.

The justice systems will also benefit from the simpler and more efficient procedure.

ANNEX 1: Small Claims Guide for Practitioners

ANNEX 2: Small Claims Guide for Citizens

For more information

See IP/13/1095

Press pack

http://ec.europa.eu/justice/newsroom/civil/news/131119_en.htm

European Commission – Small Claims Procedure
http://ec.europa.eu/justice/civil/commercial/eu-procedures/small_claims

e-Justice portal – Small claims forms
https://e-justice.europa.eu/content_small_claims_forms-177-en.do

Citizen Factsheet

http://ec.europa.eu/justice/civil/document/2013_small_claims_factsheet

Report of the European Consumer Centre
http://ec.europa.eu/consumers/ecc/consumer_reports_en.htm

Eurobarometer Survey on the Small Claims Procedure:

http://ec.europa.eu/public_opinion/archives/ebs/ebs_395_sum_en.pdf

Homepage of Vice-President Viviane Reding, EU Justice Commissioner:

http://ec.europa.eu/reding

Follow the Vice-President on Twitter: @VivianeRedingEU


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