Documents considered by the Committee on 29 January 2014 - European Scrutiny Committee Contents


11 European Small Claims Procedure

(35576)

16749/13

+ ADDs 1-2

COM(13) 794

Draft Regulation amending Regulation (EC) No. 861/2007 of 11 July 2007 establishing a European Small Claims Procedure and Regulation (EC) No. 1896/2006 of 12 December 2006 creating a European Order for Payment Procedure
Legal base Article 81 TFEU; QMV; co-decision
Document originated 19 November 2013
Deposited in Parliament 27 November 2013
Department Ministry of Justice
Basis of consideration EM of 4 December 2013
Previous Committee Report None
Discussion in Council No date set
Committee's assessment Legally important
Committee's decision Not cleared; further information requested

The document

11.1 This is a proposal to revise the European Small Claims Regulation.

11.2 In evaluating the working of the current Regulation the Commission says that the procedure has reduced the costs of litigating cross-border small claims by up to 40% and reduced from two years and five months to five months the average duration of litigation. Two-thirds of those that had used the procedure were satisfied with it. However use of the procedure is quite limited. The reasons given for that include the low ceiling of €2,000 which is said to limit the availability for SMEs in particular; the inability of parties to be able to choose the jurisdiction of their common domicile under the Brussels I Regulation[47] to determine their dispute; disproportionate court fees in relation to the value of the claim or high costs if parties are expected to attend a court hearing in another Member State; obstacles in the method of paying court fees; difficulties in completing the standard forms or the costs incurred in having unnecessary parts translated; barriers to the use of electronic or online procedures; and uncertainty about the way a judgment can be reviewed. The Commission has also suggested that improvements could be made to the way the Regulation is implemented and publicised.

11.3 Addressing these issues the Commission has proposed the following changes to the Regulation. First an increase in the threshold from €2,000 (approximately £1,670) to €10,000 (approximately £8,300). It believes this will be of particular benefit to SMEs. The Commission says that while 71% of consumer claims are within the current threshold, for SMEs only 20% of their claims are below €2,000. It is also stated that approximately 30% of all cross-border business claims are between €2,000 and €10,000. Where the value of the claim exceeds €2,000 the Commission has suggested that an oral hearing should be held if requested by one of the parties.

11.4 Many changes are aimed at reducing the costs and burdens on parties wishing to use the procedure. These include allowing for the use of electronic service of documents where this is available in Member States; making electronic communication between the parties and courts the rule for documents not subject to formal service where the parties agree and where such methods are allowed under national law; obliging courts to use videoconferencing, teleconferencing and other means of distance communication for the conduct of oral hearings and taking of evidence unless a party expressly requests to be present in court; limiting court fees to 10% of the value of the claim; obliging Member States to allow distance payment of court fees; and obliging Member States to make available information on the amount of the fees and payment methods available. There is a suggestion that the translation requirements in standard form D, the certificate of enforcement, should be limited to the substance of the judgment to avoid unnecessary costs.

11.5 The Commission has also suggested amending the cross-border restriction in scope to include situations where the parties and the court are in the same Member State but the place of performance of the contract, the place where the facts on which the claim was based or the enforcement of the judgment are in a different Member State.

11.6 Other amendments include increasing the level of assistance that parties can receive from courts; making clearer the procedure allowing a defendant to apply for a review of the judgment in Article 18 by aligning it with a similar provision in the Maintenance Regulation.[48] In addition Articles 26 and 27 have been amended to take into account the post-Lisbon Treaty comitology requirements. The proposal is to amend the Annexes by using the delegated acts procedure.

11.7 There is also a proposed change that will affect the European Order for Payment Regulation.[49] Currently if a defendant lodges a statement of opposition in response to a European Order for Payment the claim is transferred to the ordinary civil procedure of the Member State concerned unless the claimant has requested that the proceedings be terminated in that event. The Commission proposes that where a statement of opposition has been lodged in such a case and the claim falls within the scope of a simplified procedure, including the Small Claims Regulation, it should be possible to transfer the claim to that procedure.

The Government's view

11.8 In his Explanatory Memorandum of 4 December 2013, the Secretary of State for Justice (Chris Grayling) says that the Government acknowledges the value of an effective cross-border small claims procedure and welcomes the opportunity this revision of the Regulation brings to improve it. It recognises that an increase in the threshold is likely to be of benefit to potential users of the procedure and could allow more businesses to use it. Given that the threshold for the domestic small claims procedure in England and Wales was raised for most cases to £10,000 in April 2013 the Government can support the Commission's suggested threshold of €10,000.

11.9 Although the domestic small claims threshold for personal injury and housing disrepair cases remains £1,000, the Government does not see this as a reason to oppose the increase for cases within the remit of the European procedure. Domestically the vast majority of personal injury cases arise out of road traffic accidents or employers' or public liability claims where there is a fixed costs out of court scheme for liability-admitted claims of up to £25,000. There is also a fixed costs regime for use where cases exit the out of court scheme, including where liability is not admitted and the case proceeds to court. Therefore the Government can see merit in the higher limit for the relatively few personal injury cases which might arise under the Regulation.

11.10 In Scotland the current limit for a small claim is £3,000 and for summary cause (another simplified procedure designed to allow litigants to bring a claim without the need for a lawyer) is £5,000. There is a proposal to combine both into a new "simple procedure" which will have a limit of £5,000, to be kept under review. In Northern Ireland the current small claims threshold is £3,000. The devolved administrations are considering the implications of the Commission's suggestion.

11.11 While the Government agrees that the level of court fees should not be a disincentive to potential users of the procedure it believes that such matters are better left to Member States to decide in a way which best meets the needs of their legal systems. If the cap as suggested by the Commission is agreed, currently in England and Wales the court application fees for all claims except for those below £700 are well within the proposed 10%.

11.12 Of the other suggested changes, the Government can support use of more methods of electronic communication where they are available and appreciates the advantages of using videoconferencing or teleconferencing where hearings are thought necessary. While not all courts have videoconferencing facilities all can undertake telephone hearings. It can also support the use of distance payment of court fees and improved provision of information on the level of fees and the payment methods. While there is no online system currently available in our courts to accept fee payment, credit card payments can be accepted over the telephone.

11.13 The Government will want to ensure that any improvement in the assistance that courts can offer parties does not stray into the area of legal advice. It can support the mainly technical changes to the provision allowing a defendant a right to review of the judgment. The suggestion that it is only necessary to require the translation of the substance of the judgment in form D is sensible given that the form itself is standard in all official EU languages and that is the only section where free text is necessary.

11.14 The Government notes that the Commission proposes the delegated acts procedure for amending the standard forms. During the negotiations the Government will call for the implementing acts procedure to be used instead as it believes this will provide more oversight by Member States. The Government believes that the proposed changes to the European Order for Payment Regulation to allow a transfer of proceedings to the European Small Claims Procedure in appropriate cases are sensible and will benefit creditors.

LEGAL BASE AND OPT-IN

11.15 Article 81(1) TFEU requires that measures adopted under that provision must have cross-border implications. The Government believes that this restriction must be reflected properly in this proposed Regulation. While it will give further consideration to the Commission's changes to Article 2, it currently remains concerned that those changes will not properly respect the Treaty's cross-border restriction and would unduly extend the instrument's scope of application to cover cases which should remain subject to national law only.

11.16 As this proposal has been brought under Article 81 TFEU the UK's Title V opt in applies. The text was presented to the Council in English on 25 November. Therefore the eight week period before which the Government will not make a decision on the opt in expires on 20 January. When deciding whether to opt in, the Government will consider the effect on UK citizens and businesses if the UK no longer participates in the Regulation; how effective the Commission's suggested changes will be in improving the quality and use of the procedure; and the negotiability of resisting the proposed changes to the cross-border restriction.

REGULATORY IMPACT ASSESSMENT

11.17 The Government's initial assessment is that the changes to this Regulation are unlikely to give rise to any significant regulatory impact. Parties with claims that fall within the Regulation's scope will be able to choose whether to use the procedure. The purpose of the majority of amendments proposed seek to reduce the costs and burdens on parties who wish to use it. An EU checklist assessment is being prepared.

FINANCIAL IMPLICATIONS

11.18 The Government does not at this stage expect the adoption of this proposal will have any significant financial implications for the United Kingdom.

CONSULTATION

11.19 The Government will consult interested parties such as consumer organisations, the legal profession and the judiciary about this proposal to amend the Regulation.

Conclusion

11.20 We thank the Minister for his Explanatory Memorandum.

11.21 We take note of the Government's concerns about the revised scope of the draft Regulation in Article 2, and ask the Minister to keep us informed of how negotiations on this Article in particular develop.

11.22 The Government acknowledges the value of an effective cross-border small claims procedure and welcomes the opportunity this revision of the Regulation brings to improve it. It recognises that an increase in the threshold is likely to be of benefit to potential users of the procedure and could allow more businesses to use it. Given that the threshold for the domestic small claims procedure in England and Wales was raised for most cases to £10,000 in April 2013 the Minister supports the Commission's suggested threshold of €10,000. We do not have reason to disagree with the Government's assessment; accordingly, we do not recommend that the opt-in decision on this amending Regulation be debated. We ask the Government to inform us of its decision in due course.

11.23 In the meantime the proposal remains under scrutiny.


47   44/2001. Back

48   4/2009. Back

49   1896/2006. Back


 
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