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Consumer complaints to leave courts behind

Pilot project taps 'Italian' system to resolve retail disputes

By Victor Velek
Staff Writer, The Prague Post
March 19th, 2008 issue

VLADIMÍR WEISS/THE PRAGUE POST
The Industry and Trade Ministry's Karel Machotka leads the project.
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Avoiding the courthouse



A pilot project, launching next month, will allow consumers to avoid long legal battles in disputes with retailers
The system is aimed at increasing consumer protection by offering low-cost resolutions via arbitration or mediation
Due to its voluntary nature, the government-backed program is unlikely to curb retailers' use of fraudulent practices

Consumers no longer need to rely on the courts to settle their disputes with companies. Thanks to a new dispute settlement scheme set to start next month, consumer complaints will now be able to be resolved cheaply and quickly by mediators and arbitrators.
The system, a two-year pilot project introduced and sponsored by the Industry and Trade Ministry, is aimed at giving consumers more weapons and confidence in protecting their rights.  
“The [system] is based on the voluntary participation of both [the consumer and the trader], who prefer to avoid costly and lengthy court proceedings,” said Karel Machotka, head of the ministry’s corporate environment department, which created the project.
“We expect that out-of-court resolutions of disputes will last no longer than two months, which is far shorter a period than the average court proceeding,” added Industry and Trade Minister Martin Říman.
Consumer disputes largely involve warranty claims on goods of low monetary value. Since the stakes are so low and court proceedings so sluggish and costly, many potential claims are never filed, according to Jana Teplá, lawyer at the Consumers Defense Association (SOS).
The association, together with other consumer organizations and the Economic Chamber, will be one of the primary supports of the system. Their offices will serve as a touch point for consumers and (likely much more rarely) retailers seeking resolution of a particular case. Once filed, the plaintiff can then choose between using mediation or arbitration to resolve the dispute.
The SOS will then deliver the complaint to the other party. If both agree to an out-of-court resolution, mediation or arbitration will follow.
The government has earmarked 10 million Kč ($618,000) for the system during its first year. “Out of this money, the Industry and Trade Ministry will contribute 1,000 Kč to mediation proceedings and 2,000 Kč to cover costs of arbitration judges,” said ministry spokesman Tomáš Bartovský.
Thus, the mediation process will be free of charge, and the plaintiff will pay a subsidized fee of 800 Kč for arbitration, much less than the court and lawyer fees.
Italian reconciliation
Out-of-court resolution of consumer disputes is a common practice in many West European countries, Machotka said. In the European Union, there are two main systems of helping consumers settle their quarrels.
The model prevalent in Scandinavia requires all consumer disputes to be solved by out-of-court means via “consumer complaints agencies” before they are brought to court. However, recommendations issued by these agencies are not binding.
In contrast, in Southern Europe, notably Italy and Spain, resolving a consumer dispute outside the courts is a voluntary choice. But once an arbitration proceeding starts, it is legally binding, according to Machotka.
The government has opted for the South European model. “Consumers should have an opportunity to choose between an alternative dispute resolution and a lawsuit,” Bartovský said.
Moreover, he continued, this option is more expedient as it uses existing legislation and doesn’t require the establishment of a new consumer complaints agency.
There are some 5,000 to 7,000 consumer complaints brought to Czech courts every year, according to Teplá. About half of them could be resolved by mediators and arbitrators after the new system gains momentum, she added.
One major stumbling point for the project could be that, due to its voluntary nature, dishonest retailers will naturally opt out of it. And there are other possible impediments.
“Czechs are not mature enough to accept that a gentlemen’s agreement reached by mediation, even if not legally enforceable, is as valid as a court ruling,” said Běla Hejná of the Czech Association of Mediators (AMČR), the agency in charge of the mediation component of the system.
According to Hejná, only about 30 mediators have been trained to date to help resolve consumer quarrels. Many of them are located in Prague, so that in some regions outside the capital no mediator is available, she said, adding: “I doubt we will be able to cover the whole of the country during the initial phase of the project.”

Victor Velek can be reached at vvelek@praguepost.com


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