From January 1 2009 a new, simplified procedure for small claims will come into effect in the European Union. However, most companies are likely to be caught unprepared by an increase in litigation generated by the new regulation.
This article describes the new procedure, reviews its scope and offers advice on how to deal with its impact.
On July 11 2007 the European Parliament and the Council of the European Union adopted Regulation 861/2007, which establishes an EU procedure for small claims.
The aim of the regulation is to facilitate access to justice in cross-border cases, making it quicker and less expensive to obtain judgments and providing equal treatment for creditors and debtors in different member states. The European Union has set itself the objective of adopting measures to encourage judicial cooperation in civil matters with cross-border implications. Among other measures, Article 65(c) of the EC Treaty requires European bodies to eliminate obstacles to civil proceedings and thus promote the compatibility of civil procedure rules in the member states.
The new procedure is intended to simplify and expedite small claims litigation by introducing rules that make the cost and complexity of a civil proceeding proportionate to the value of the claim.
Principles and Content
The procedure is based on the principles of simplicity, proportionality and speed. It is intended as an alternative to the procedures which already exist in the member states' legal systems.
Article 2 of the regulation states that the EU procedure will apply to civil and commercial matters in cross-border cases where at least one of the parties is domiciled or habitually resident in a member state other than the member state of the court to which the claim is submitted. The value of a claim may not exceed €2,000 and all interest, expenses and disbursements are disregarded in order to facilitate calculation of the value of the claim.
However, the simplified procedure will not apply to certain claims, including those relating to:
- tax, customs or administrative matters;
- employment law;
- violation of privacy; or
- family law.
One of the key elements of the regulation is the provision of a written procedure based on the use of standard forms.
A proceeding begins when the claimant presents the competent court with a claim form (accompanied by any relevant documents), at which point the court may dismiss the claim as clearly unfounded or inadmissible. If it does not do so, a system of claim forms and standard response forms, which the claimant and the defendant submit to the court, and the short time limits set out in the regulation will ensure that cases are resolved within a few months.
An oral hearing, which can cause considerable delay, will be held only if the court considers it strictly necessary for the fair consideration of the claim. Furthermore, in order to avoid unnecessary delays, the court will take evidence in what it considers the fastest and simplest way. This will determine not only the way in which evidence is taken, but also the range and amount of evidence presented. Individual member states must announce the means of communication (potentially including electronic correspondence or teleconferences) that may be used in relation to this procedure, thereby facilitating the submission of forms and evidence to the competent court.
Parties are not required to have professional legal representation. This provision is intended to prevent parties from incurring costs which are disproportionate to the size of the claims at issue.
Judgments issued under this procedure must be recognized and enforced in other member states without the need for a declaration of enforceability; moreover, actions may not be brought to contest their recognition. Thus, intermediate proceedings are not required to validate or give effect to such judgments.
Information Required from Member States
Member states must provide the European Commission with all relevant information relating to jurisdiction, means of communication and appeals, including details of:
- the courts which have jurisdiction to hear claims under
- the means of communication accepted by and available to
such courts for the purposes of the procedure;
- whether the member state's procedural law allows
for a decision under the procedure to be appealed and, if so,
the court or tribunal before which such an appeal may be
- the language(s) in which a claim may be submitted;
- the authorities with competence to enforce a judgment or
rule on a stay or limitation of a judgment further to a
challenge by one of the parties.
Leaving aside the mandatory terms regulating the member states' obligation to supply such information, the regulation will apply from January 1 2009.
The EU small claims procedure represents a significant step forward for consumer and commercial claims, establishing common procedural rules applicable in all member states.
The procedure should provide faster and more affordable access to justice in cross-border litigation, making it a more realistic option for many claimants, especially customers seeking an efficient means of protecting their infringed rights, as the legal systems in some member states might otherwise deter such claimants from commencing proceedings for small claims on the grounds of time and cost efficiency.
However, the procedure could lead to a vast increase in the number of legal proceedings, particularly as consumers will be able to claim compensation by submitting a standard form without the aid of a lawyer. This potentially poses a serious threat to companies, which will have to be prepared to face more litigation. Companies, especially those which already deal with a significant number of consumer claims, will need to establish an efficient procedure for negotiating out-of-court settlements. The common practice of undervaluing a consumer claim, however well founded it may be, is based on the assumption that customers will be reluctant to engage in legal proceedings – from January 1 2009 companies will make this assumption at their peril.
In addition to devising standard procedures for reaching an out-of-court settlement, companies will need to acquire a working knowledge of the new small claims procedure, as in many cases it will be much less expensive for their legal departments to deal with such claims directly without using external lawyers. Companies should ensure that their in-house teams are trained appropriately.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.