Oireachtas Joint and Select Committees
Wednesday, 5 February 2014
Joint Oireachtas Committee on Justice, Defence and Equality
Small Claims and Payment Procedures: Motion
No apologies have been received except Deputy Farrell said that he might be late arriving.
The purpose of the meeting is to consider a proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No. 861/2007 of the European Parliament and the Council, of 11 July 2007, establishing a European Small Claims Procedure and Regulation (EC) No. 1896/2006 of the European Parliament and of the Council, of 12 December 2006, creating a European order for payment procedure. A briefing note has been circulated to members.
I welcome the Minister for Justice and Equality, Deputy Alan Shatter, and his officials to the meeting who will assist the committee in its consideration of the matter. I ask everybody to please turn off all mobile phones. I ask for them to be switched completely off as it is unsatisfactory to have them on silent mode.
I invite the Minister to brief the committee on the motion and it will be followed by a question and answer session.
I thank the Chairman. At the outset I thank the committee members for their willingness to deal with this matter today, at short notice. It is important that Ireland is seen to be in a position to play a full part in the negotiations which have begun in regard to this instrument, and a positive response to the motion which has been tabled will facilitate our achieving that objective.
The proposal for a new Regulation amending Regulation (EC) No. 861/2007 of the European Parliament and the Council of 11 July 2007 establishing a European Small Claims Procedure and Regulation (EC) No. 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure was presented by the Commission at the end of November. It effectively amends two proposals into which we have already opted. The amending proposal’s legal basis is to be found in Title V of Part Three of the Treaty on the Functioning of the European Union. As a result, the protocol which we share with the United Kingdom, whereby we have three months to exercise our option to take part in the adoption and application of relevant measures, applies. The exercise of that option is, of course, subject to the prior approval of both Houses of the Oireachtas. We have been informed that the three month period in respect of the proposal will expire on 25 February next.
The proposal which is being examined today is the most recent in a long line of proposals to which the protocol applies and which have come before the Houses of the Oireachtas in recent years. It is not especially controversial and I hope that the committee will give it its support.
The proposal under discussion should be seen against the background of the development at EU level of measures geared towards the enhancement of judicial co-operation in civil matters. The overriding aim of this development is that of making access to justice easier for the individual litigant. It is predicated on the fact that in a genuine European area of justice, individuals or businesses should not be prevented or discouraged from exercising their rights by the incompatibility or complexity of legal and administrative systems in member states. The regulation establishing a European small claims procedure was adopted in 2007 in order to enhance access to justice by simplifying and speeding up cross-border litigation concerning small claims, and also reducing the costs of such litigation.
Article 28 of the 2007 regulation requires the Commission to present a report by 1 January 2014 reviewing its operation. The proposal now before the committee follows on from that review. It is also noteworthy that, in the 2013 EU Citizenship Report, the Commission identified the revision of the 2007 regulation as an action necessary to strengthen the rights of European citizens and the initiative is also included in the European Consumer Agenda as a means of improving enforcement of consumer rights. Moreover, the revision of the regulation supports the EU's current political priority of promoting economic recovery and sustainable growth by creating more efficient, simplified court procedures and by making them more accessible to SMEs.
Committee members will be aware of the small claims procedure which has been operating in the District Court since 1997. That procedure is an alternative method of commencing and dealing with a civil proceeding in respect of a small claim. The procedure originally applied only to consumer claims but, since January 2010, it has also covered a limited range of business to business claims. It is designed to handle claims speedily, inexpensively and informally without involving a solicitor. It is administered by a small claims registrar, an official of the court whose function it is to process the claim and, if possible, reach a satisfactory settlement without the need for a court hearing. Should this prove unsuccessful, the claim will then go before a District Court judge.
Use of this procedure as a means of settling low-value consumer and business claims not exceeding €2,000 is consistently high. In 2012, the last year for which statistics are available, over 3,000 applications were lodged. Most of those claims concerned household and electrical goods, with others relating to building services, motor vehicles and holidays.
Regrettably, the success of our domestic procedure is not matched by an equal success in regard to the EU procedure and use of the EU Small Claims Regulation has been low in Ireland. I have been advised by the Courts Service that 44 such cases came before the Dublin District Court last year, and that a small number of additional cases were taken in other areas. Unfortunately, the Courts Service does not compile its statistics in such a way as to extract a breakdown of the type of cases taken under the EU procedure. This low level of usage accords with the Commission contention that the procedure is still little known and remains under-used several years after the entry into application of the regulation. The low usage of the regulation was a major factor in the determination of the amendments which the Commission has proposed should be made to the regulation.
First among those is a proposal to increase the monetary scope of the regulation from claims not exceeding €2,000 to claims not exceeding €10,000. This proposed increase is represented as being of particular assistance to SMEs, as raising the current threshold will allow parties to litigate a substantially bigger number of cases on the basis of the simplified European procedure, thereby benefitting from reduced costs and shorter length of proceedings. It is envisaged that consumers will also benefit from the proposed increase in the financial scope.
The European Commission estimates that the reduction in costs related to raising the threshold from the current €2,000 to €10,000 amounts to approximately €233 million across the EU. This estimate is based on the assumption that 50% of 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.
My Department has undertaken a process of consultation in respect of the proposal, which is now in its final stages. In the broadest of terms, the outcome of that process to date indicates that there is support from bodies representing businesses for an increase in the threshold to €10,000. However, concern has been expressed by the Courts Service and legal professionals about the desirability of an increase to such a level.The reasons behind this concern include the appropriateness of dealing with legally and factually complex claims at the higher end of the scale in a simplified procedure.
I am inclined to the view that an increase in the threshold is both desirable and necessary. However, the negotiation process has only just begun - in fact, the first meeting of the relevant working group took place yesterday. In its deliberations that group will attempt to reach a view as to the level of threshold which is both appropriate and likely to be acceptable to the majority of member states. Early indications are that a number of member states seem to be of the view that the proposed increase is pitched at too high a level and does not have regard to what is considered to be a small claim in those member states in the context of their social and economic circumstances. On the other hand, some member states are very positively disposed to the proposed threshold, which is actually lower than the value of a small claim under their national systems. The question of the threshold was discussed at the recent Justice and Home Affairs informal meeting and the views expressed on that occasion were in accordance with those which I have just outlined.
The 2007 small claims regulation applies only to disputes where at least one of the parties is domiciled or habitually resident in a member state other than the member state of the court or tribunal which is seized with the case. It is now proposed to enlarge the scope of the regulation to cover cases which have an important cross-border element, notwithstanding the fact that both parties to the case are domiciled in the same member state. For instance, the case of parties who are domiciled in the same member state, but who are involved in a car accident in another member state, would be comprehended by the new regulation – the cross-border element being the place where the harmful event occurred.
Another element of this proposal concerns the use of electronic communication, including the service of certain documents by electronic means. The 2007 regulation prescribes postal service with acknowledgement of receipt as the primary method of service. It is now proposed to put postal service and electronic service on the same footing in member states which desire to do so, and where a party has expressly indicated in advance that documents may be served electronically. This safeguard is appropriate because there will always be a minority of cases where people do not have access to means of electronic communication or do not use such means frequently. Furthermore, it has been suggested that many types of communications between the parties and the courts could, in principle, be carried out by electronic means, which would save time and reduce costs in cross-border scenarios and that electronic communication would be the norm where communications of a routine nature are concerned.
The committee may be interested to note that the Courts Service has recently completed the development of a new online small claims system. Should the proposal for electronic filing of EU small claims be agreed, the Courts Service has indicated that it is likely that the domestic system could be adapted to accommodate an extended European small claims procedure.
Also included is a proposal concerning the use of video-conferencing, tele-conferencing and other means of distance communication for the conduct of oral hearings and the taking of evidence. A very good case can be made for the use of those means of communication in the European justice sphere and I support their use in this context.
However, it is important that participation in the electronic elements of the proposal is voluntary and has regard to the relative technological advancement of each member state. Indeed, voluntary action is one of the key principles of the Strategy on European e-Justice 2014-2018, which was adopted at the December 2013 Justice and Home Affairs Council.
The proposal also envisages that a limitation would be placed on court fees charged for the procedure to ensure that they are proportionate to the value of the claim and that member states should facilitate electronic means of payment of such fees. Furthermore, member states will be obliged to inform the Commission of the court fees concerned and of the means of payment which are accepted. These are significant elements of the procedure which facilitate transparency and access to justice. Indeed, enabling the creditor to make an informed decision as to whether the cost of taking the claim is proportionate to the value of that claim was an issue of major concern to Ireland during the negotiations of the 2007 regulation and our concern is reflected in the preamble to that regulation.
The Commission has drawn attention to the high charges levied in some member states in respect of a European small claim. For instance, in one member state, the court fee for litigating a claim of €500 is €115 while in another member state a fee of €180 applies to a claim worth €1,000. I can tell the committee that the fee payable in Ireland in respect of a European small claim is €25, the same fee as is payable for a claim taken under the domestic small claims procedure. This amount is well within the parameters considered desirable by the Commission, which are either a maximum set fee of €35, or a fee of not more than 10% of the value of the claim.
While I share the Commission's concerns about high fees being charged in respect of low value claims, I have some doubts about the appropriateness of EU intervention in this area as there is an argument to be made that the settling of court fees falls squarely within the autonomy of member states and should not be interfered with. Having said that, this State has an interest in ensuring fees are kept at a reasonable level or, at a minimum, they are proportionate to the claim being made. It is to the benefit of our citizens and residents in this State should they need to access this new proposed small claims procedure, or even the existing one, that fees are not excessive and do not act as a barrier to using the small claims apparatus. The recently developed online small claims system to which I referred earlier includes a facility for the payment online of fees associated with domestic small claims. Again, this facility could also be used in respect of the European small claims procedure.
I now turn to the proposed amendment of Regulation (EC) No 1896/2006 creating a European order for payment procedure. By way of background, the European Order for Payment Regulation establishes a European-wide procedure for getting a court decision in respect of an uncontested claim. Its key features are that an order is obtained in the first instance without the debtor taking part in the action. It is then served on the debtor who has the option of abiding by it or contesting it within a short period of time. Failure to act leads to the order acquiring the status of enforceability. Article 17 of the regulation provides that where the defendant opposes the claim, the proceedings are automatically continued in accordance with ordinary civil procedures, which do not include the European small claims procedure. It is now proposed that in those circumstances, it should also be possible to continue an appropriate claim under the European small claims regulation. I support this extension of the choices available, which is to the benefit of the ordinary litigant and again will keep costs down.
In both the European and domestic sphere, I am of the view that it is crucial that parties involved in legal conflict do not incur more legal costs than are necessary in circumstances in which they have to resort to litigation. On the domestic front, members will be aware that I have increased the monetary jurisdiction of both the Circuit and the District Courts with effect from Monday of this week. Those changes should be of benefit to litigants in bringing about reduced legal costs for individuals and companies involved in litigation and have particular significance for litigants of low value claims which do not come within the scope of either the domestic or EU small claims procedures.
I have said in the past to this committee in regard to other proposals, and I emphasise it again today, that opting into the proposal at this time does not mean that we necessarily agree with every aspect of it. The opt-in process merely ensures that we can be active participants in the negotiation process and this carries with it the undisputed right to make proposals to alter the text should that seem desirable and to participate in any votes that may arise at working group and other levels.
Ireland has in the past taken a very positive approach to participation in the various civil law instruments which have been presented and our approach on this occasion is very much in keeping with past practice. It is important that we honour the commitment given in the context of successive treaties that we will take part in relevant measures in the justice area to the maximum extent possible. Also, given that we have no fundamental difficulties with the proposal, we do not want to create a perception that such difficulties do in fact exist in so far as Ireland is concerned.
From previous consideration of these issues, the committee will be aware that it is the case that, under the protocol, we may accept a proposal any time after it has been adopted. However, it has always been our considered view that in the absence of any significant policy issues, early opt-in to the discussions on particular proposals will maximise our ability to influence the shape of the final outcome.
I thank the committee for making the time available to deal with these matters.
These two instruments are of particular importance and relevance to individuals across the country, particularly in the context of the extent to which those resident in the State and citizens engage in commercial transactions on a cross-border basis and the manner in which the Internet works and the capacity to purchase goods in Ireland that may be on sale in other parts of the EU through website offers. It is particularly important that there is ready access to the Small Claims Court should difficulties arise regarding the commercial transaction or the contract. One may not realise there is a contract but one participates in a contract to acquire goods or services.
I welcome this initiative by the Commission. It is in our interest as a State to fully participate in the discussions that are taking place. I look forward to the comments of committee members and I am happy to respond to questions.
As a Deputy representing a Border constituency, I am well aware from my conversations with business people of their concerns about pursuing cases across the Border. With regard to building an all-Ireland economy that is fair and provides people with appropriate recourse, I have no difficulty with the regulation and with supporting the Government's proposal to opt in and engage in negotiations. It is in everyone's best interest across the EU.
I thank the Minister for setting this out clearly. All of us recognise the desirability of the changes. Like many of us, I am concerned about the small number who have taken up the EU small claims procedure in Ireland. Only 44 such cases came before Dublin District Court last year and we do not know what types of cases are involved. Presumably, the low usage of the regulation is not unique to Ireland. The Commission has proposed these amendments to make it more broadly used across member states. I welcome most of the changes, particularly the change to cover cases where both parties are domiciled in the same member state but there is a cross-border element. One can imagine that, for example, in the context of holidays, which are the focus of many domestic small claims disputes, where two Irish people go on holiday in another member state and an issue arises with the provider of accommodation or services there, that this would be an attractive route for them to pursue a claim. Is there low usage of the regulation generally in the EU or is that unique to Ireland?
I refer to the increase in the threshold for a claim to €10,000. I agree with the Minister that this is desirable and necessary, given the low take-up and given the cost, for example, of holidays. A threshold of €2,000 is low. If we support the proposal, does that mean we support the threshold of €10,000 or are we supporting the negotiations to increase it and it may not ultimately be as much as €10,000 because of differing views among member states? It could, for example, be €5,000 or €6,000. The Minister also said the Courts Service has expressed concern about the desirability of an increase. Has the service sufficient capacity to deal with these claims? According to the briefing from the Library and Research Service, the impact of the moratorium and difficulties with staffing may impact on capacity but that should not be a factor if we believe it is desirable to increase the threshold. Can we be sure the service will cope with the volume of claims if the number increases because of the change to the threshold?
The Commission's estimate of the reduction in costs is based on an assumption that 50% of court cases would be filed under the European small claims procedure. On what basis is it making that assessment? Is that based on the take-up of the procedure to date using the lower threshold or has a more scientific method been used? It would be wonderful if that cost saving could be made and it would be welcomed by both small businesses and consumers. If the threshold was reduced from €10,000, there would be presumably be fewer claims and a lower saving.
The low take-up across the EU is principally because the availability of this facility is not known in many member states. There is also an issue where oral hearings are required. Individuals may not want to travel and incur the expense of such hearings for small claims. The cost of travel and accommodation may offset any benefit to be accrued by engaging in this procedure, which is why the use of electronic means in the context of videoconferencing and so on will increase usage. The translation cost of documentation required to make a claim in another member state is also an issue that arises and I have referenced the variance in fees in member states.
With regard to where the Commission gets its projections from, it has made an impact assessment based on certain assumptions, including that fees will not pose a barrier to bringing applications and there will be greater knowledge of the availability of this service among individuals who get caught up in minor legal conflicts in a financial sense, which are important to them.
I have an open mind on the €10,000 threshold but it is unlikely it will settle at that figure because it is high. The recent changes effected to our District Courts increased their jurisdiction from IR£5,000 or €6,350 to €15,000. A threshold of €10,000 is on the high side but I have an open mind on where it should settle and I am open to being persuaded. It should be not less than €5,000 but this will be discussed by the working groups and an accommodation will be reached. I will not be upset if is €6,000 and it would be workable at €5,000 but it is inevitable it will be lower than €10,000.
With regard to numbers, resources and capacity, the reality is the Courts Service, like all other parts of the justice family, has had to reorganise and use its resources with greater efficiency and ensure it effects financial savings. The service has not been entirely immune to budgetary reductions, though it has been substantially protected from them. The decrease in funding to the service compared to other sections within the justice family has been small. Even without this measure, I am currently considering an increase in our Small Claims Court jurisdictional level. It has been €2,000 for some years. It was at that level when the District Court was at the level I mentioned earlier and now that has been increased to €15,000. However, I do not want to create confusion by amending our jurisdiction and then discovering in nine months that I have to change it again because of the outcome of discussions at European level. We are examining that. If the discussion on this instrument was not taking place, I would be tempted in the next few weeks to increase the Small Claims Courts jurisdiction to between €3,000 and €5,000 because the cost of goods and services is increasing. Where one might have spent €1,500 or €1,800 on something six or seven years ago, today one might spend €2,200 or €2,300. Our small claims jurisdiction is too low but it would create terrible confusion if I increased it now only to find I had to do so again in a year.
I am very conscious, however, that it takes considerable time for even the most worthy European instruments to be processed to a conclusion. The likelihood of this being completed, between the engagement of the European Parliament, the working group and the Ministers, before the elections to the European Parliament is limited. There must be some uncertainty as to whether it will conclude before there is a new Commission. I want to discuss this with my officials. If there is no possibility that this could become operational for 18 months to two years, there is a benefit in our increasing the jurisdiction, at least to a modest extent, of our Small Claims Court. I expect the Courts Service will make appropriate adjustments to accommodate that, for the blindingly obvious reason that if the matter is not dealt with in the Small Claims Court, it will go to the District Court proper and the service will have to accommodate it.
This is an attempt to make justice more accessible to, and less expensive for, citizens and residents in this country and for business. The Small Claims Court has been a very useful location in which to deal with issues in a more efficient and less expensive way.
I welcomed the establishment of the Small Claims Court some years ago as a step in the right direction for the consumer. I now welcome its extension to the EU. The fee payable in Ireland is €25. If the value of cases increases to €10,000, there will presumably be extra work involved. Will the costs rise?
Many people do not know about their right to access the Small Claims Court. Is there a role for the National Consumer Agency to run a public awareness campaign?
I will take the last question first. Yes, once these facilities are available to help people resolve small claims disputes, it is important to have the maximum public knowledge of them. Some of the consumer bodies publicise this from time to time. It is not an issue that generates major media excitement. The problem in publicising anything nowadays is that unless something arises that becomes a media focus, be it in print media, television or radio, people tend not to know about it. Unless people look for the website they will not find the information. I am happy to encourage any of the agencies that seek to assist consumers to publicise the availability of this matter. It is on the court’s website, and in the EU practitioner's guide, and it will be in the EU user’s guide, which will be available shortly, all online. The problem is if I have paid for a holiday that does not work out, I would not necessarily search for these sites.
I mentioned that the European Commission envisaged a fee of something like €35. There are technical legal reasons it may be outside the Commission’s competence to specify the fee. It is important for consumers and business that the fees are not set at an unnecessary level. I am also conscious that in our present circumstances, the funding available to me for court services is not likely to increase any time soon beyond the additional funding we will have for the establishment of the Court of Appeal. It will be important to bring in revenue to try to make some of the services more self-financing than they are. I would not see major changes in our fee levels, but if we increase them to between €3,000 and €5,000, I would be very tempted and do not think it would create any great barrier or be unreasonable to increase our fee from €25 to €35.
When agreement is reached at EU level, there may be a case to be made that we should fix a fee that is proportionate to the claim made, provided it is a modest fee. For example, if someone made a claim of €6,000, I would not see it as a major barrier if the fee were 10% or some proportion of it. That would not be unreasonable. We need to think about this and ensure we do not create barriers. I am probably getting my percentages wrong because for a claim of €6,000, I would envisage a fee of €60 rather than €600. There is a reasonable case if we increase our jurisdiction to increase our fees modestly and reconsider that later, on the assumption that the EU does not ultimately agree a global fee across member states, although it may be outside the competence for that to be fixed.
We all have an interest in the fees not being unduly high in some member states. Even if it cannot be dealt with by way of a legal instrument, it would be in the interests of businesses and consumers across the Union if there was informal agreement between member states that they would fix their fees but not beyond a certain amount. I would not be unhappy if it was discovered that although there may be technical issues, they do not prevent some sort of arrangements being agreed that ensure fees do not become excessive.
I thank the Minister. It is a pity the Courts Service cannot compile the statistics to give us a breakdown of the type of cases taken. It would be very useful if there was some way to arrange that. I know it produces a report on the Small Claims Court but the European one would be interesting, especially if, as we hope, there is an increase in its use. That it is little known raises the concern about the need to publicise it.
The Minister said the legal professions have concerns about the desirability of increasing the level to €10,000. Does he want to expand on who they are and what their concerns are? The use of electronic communication, which cuts down on paperwork and cost, is welcome.
In respect of the legal profession, the design of the Small Claims Court is such that people are not represented. There is an informal procedure to facilitate a resolution or adjudication on matters. One argument is that if one is dealing with claims at that level, to protect people’s rights they should have legal representation, or the facility for that, but the moment legal representation comes into a Small Claims Court, the costs for everyone involved increase substantially. There is a balance to be achieved. I understand those concerns, particularly if issues of great legal complexity arise. There could be a mechanism whereby were that to happen the case could transfer from the Small Claims Court to the District Court where it would be dealt with as an ordinary District Court case. We cannot, however, provide a European prescription designed solely to meet our court structure.
It would be helpful if the courts maintained statistics on the different types of disputes on which they adjudicate. I will write to the Courts Service suggesting that would be of help. It would also help because annual publication of that information would give the public some insight into the nature of the cases, if it was reported.
I have some statistics for the Small Claims Court. I do not have the 2013 figures but in 2012 it received 3,067 applications in this State. That was fewer, for reasons I am not aware of, than in 2011, when it received 3,836. In 2012, the court adjudicated on 345 cases, and in 2011, on 286. The cases adjudicated on in a year were not necessarily initiated in that year.
Some cases initiated in 2011 would have been determined in 2012 and so on. There were 73 cases dismissed in 2012 and 86 in 2011. In 2012, 304 cases were either struck out or withdrawn, and it was 310 cases in 2011. In instances where cases are withdrawn or struck out, it may be as a consequence of the individuals who made the claim deciding not to pursue it or that the claim is resolved and settled and the issues in dispute have been dealt with. These are some of the statistics from the extracts of the 2012 Courts Service annual report.