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Following is the speech by the Secretary for Justice, Ms Elsie Leung at the Conference on Consumer Redress Mechanisms organised by the Consumer Council today (April 26):

General

Ladies and Gentlemen, Professor Chan, it gives me great pleasure to be invited to speak at this Conference on Consumer Redress Mechanisms. This is a good opportunity to review our efforts made in consumer protection, and to reflect on the future as Hong Kong, like the rest of the world, is facing the challenges brought about by technological changes.

Speaking as Chairman of the Law Reform Commission of Hong Kong, which incidentally has just celebrated its 20th anniversary, I am pleased that the Commission has made substantial contribution in bringing about the enactment of several major pieces of consumer protection legislation. Based on the recommendations in the Commission's Report on 'Sale of Goods and Supply of Services' issued in 1990, three ordinances, namely, the Sale of Goods (Amendment) Ordinance, the Supply of Services (Implied Terms) Ordinance, and the Unconscionable Contracts Ordinance were enacted in 1994.

In 1998, thanks to Ms. Audrey Eu, Senior Counsel who chaired the Sub-committee and also to the valuable input from the Consumer Council and other organisations, the Commission issued another important report on consumer protection - Report on Civil Liability for Unsafe Products which recommended the creation of a new basis of liability to supplement the traditional laws of contract and negligence.

Currently, the Commission has two consumer protection projects in hand. First, a sub-committee of the Commission is reviewing the law governing contracts for the supply of goods, as opposed to the sale of goods. Second, another sub-committee is looking at the description of residential properties for sale. I am hopeful that the two sub-committees will be able to issue consultation papers later on this year.

All this represents significant efforts and achievement to ensure that Hong Kong has the appropriate rules and laws in place to provide the mechanism for consumer redress. It is, however, equally important to ensure that these laws remain enforceable in the face of a changing society.

E-commerce

Nowhere is this more true than in relation to electronic commerce. Electronic commerce is changing the way consumers are relating to businesses. Consumers are now provided with more opportunities to access a greater variety of goods and services at competitive prices in a borderless virtual marketplace. The reality of open networks and the prospect of widespread electronic commerce as a medium of choice for the consumer begs the question of whether current legislation and practices are adequate to meet the needs of the online consumer.

The use of electronic commerce may lead to various problems. Consumers often have to bear all the transaction risk because payment is usually made by means of credit card before receipt of goods. They may have doubts as to whether the vendor will perform the contract. They take the security risks inherent in transmitting financial and personal details on the Internet. When something has in fact gone wrong, there is no clear means to seek redress.

Consumer Redress Mechanisms / Access to Justice

Providing consumers with a system of access to justice is not enough in itself. This system must also be suited to the needs and particular features of consumer disputes. Most consumer disputes are characterised by the disparity between the low economic value of the claim and the substantial cost and duration of its eventual settlement. Quite apart from the cost of litigation and time delays, the psychological pressure stemming from the formal nature of court proceedings are obstacles which a consumer has to face.

To remedy the specific problems of consumer disputes arising from e-commerce, organisations in other jurisdictions have looked at various measures. Some have opted to strengthen out-of-court mechanisms or Alternative Dispute Resolution ("ADR") whose flexibility may be more attuned to the needs of both consumers and vendors.

For quite some time now, the European Commission has been supporting various projects aimed at developing an informal system of resolving consumer disputes. It has recently launched two extra-judicial initiatives designed to improve the existing situation regarding consumers' access to justice; one is the European Consumer Complaint Form and the other is the European Extra-judicial Network.

The European Consumer Complaint Form

Drawn up by the European Commission in the eleven official languages of the European Union, the European Consumer Complaint Form is aimed to guide and orient consumers in formulating their claims. It contains multiple-choice lists of responses so that consumers can conveniently set out their problems and their claims. Additional space is available if consumers have further details to provide. The Form can be used for disputes within the jurisdiction. However, it will be most useful for cross-border disputes within the European Union because the multiple-choice design, and the fact that the Form is available in 11 languages, should facilitate the problem of translation in cases where the parties speak different languages. The Form is written in simple language used as far as possible. But as the use of legal terminology is unavoidable in certain places, the European Commission has also prepared a Guide explaining how the various sections should be completed.

The Form can be used whatever the sum of money involved and for whatever the type of consumer dispute. Its use is not mandatory as the parties can choose to use conventional redress methods or any other voluntary means. The Form is intended as an easy, inexpensive means of resolving disputes which should be useful not only to consumers, but also to vendors who wish to avoid legal fees and the publicity associated with legal suits.

To allow a dialogue between consumers and vendors, the Consumer Complaint Form is designed with an attached reply coupon, so that even if the dialogue does not result in an amicable settlement, the Form can help to speed up the dispute resolution procedures.

If the Form has been filled in properly by the parties, it should contain full details of the names and addresses of the parties, the problems encountered by the consumer, the request of the consumer, and the vendor's response to the request. Therefore, on the lodgement of the Form, the relevant dispute resolution body should have sufficient information to decide how to proceed with the matter.

The European Consumer Complaint Form will be kept under review to assess its effectiveness, and changes may be made depending on the results. The European Commission will also consider the need to create other more specific forms for particular economic sectors will also be considered.

Creation of European Extra-judicial Network (EEJ-NET)

The second extra-judicial initiative to improve consumers' access to justice is the setting up of the European Extra-judicial Network. This project is formulated with the specific aim to target cross-border consumer disputes which is increasing in number due to both increase in consumer travel and the growing popularity of e-commerce. The gist of the project is to identify suitable bodies responsible for the out-of-court settlement of consumer disputes in each member state, and then facilitate the networking of these bodies so as to promote their active collaboration in resolving consumer disputes. The aim is that, ultimately, a consumer should be able to refer cross border disputes to the relevant extra-judicial body in his own country, which will then liaise directly with the corresponding extra-judicial body in the foreign country.

In order to qualify as an extra-judicial consumer dispute resolution body recognised by the scheme, the dispute resolution bodies are required to have procedures that "lead to the settling of a dispute through the active intervention of a third party, who proposes or imposes a solution"(1). Therefore, conciliation bodies are excluded from the scheme. The dispute resolution bodies have to satisfy also seven requirements regarding independence, transparency, respect of the adversarial principle, effectiveness, legality, liberty and representation. This is to ensure that cases handled by the scheme will be treated with rigour and fairness, with the advantage of a simpler and quicker settlement.

In addition to creating a network or link between existing dispute resolution bodies in different countries, it is envisaged that central contact points will have to be created in each member state. These central contact points will carry out a number of functions, including: to gather and up-date information about extra-judicial dispute resolution bodies within the jurisdiction; to liaise with the central contact points in other member states and obtain information about extra-judicial dispute resolution bodies in the other jurisdiction; to assist consumers in the preparation of their complaint and to provide translation assistance in cases of cross-border claims; to receive complaints from other member states and to direct the complaints to the appropriate body. Also, as a single contact point in each member state, the central contact point has a strategic role in monitoring and storing information on the level and nature of complaints. Such information would be useful in the development of policy in consumer redress mechanisms.

Although the European Extra-judicial Network scheme is not yet in operation, considerable progress has been made in the preparation work. All member states have identified suitable dispute resolution bodies within their own state and have notified the European Commission of the same. The United Kingdom, for example, has supplied extensive information on its various dispute resolution bodies, including the structure of each of these bodies, its powers, procedures, cost, the nature of its decisions and the mode of enforcement available.

For mail order disputes, for example, complaints can be sent to the Mail Order Traders' Association ('MOTA') which will refer the matter to its member company. If the complaint is not resolved satisfactorily, it may be referred for conciliation to the Secretary of the MOTA. If conciliation fails, the customer may make use of the special low cost arbitration arrangements administered by the Institute of Arbitrators. Arbitrations will normally be on the basis of documents only. Decisions by the arbitrator are legally binding and are enforceable through the courts as a binding contract. The contact address, email address, phone and fax numbers of the MOTA are also supplied.

There are specialised bodies dealing with different types of consumer complaints. For example, there is the Ombudsman for Corporate Estate Agents, the Arbitration Scheme for the Association of British Travel Agents, the National Consumer Credit Federation, and the Scottish Motor Trade Association. There is even the Funerals Ombudsman to ensure that consumers can rest in peace.

Although numerous obstacles have yet to be overcome before the European Extra-Judicial Network can be formally launched, there are high hopes that the scheme will be an important milestone in improving consumers' access to justice.

Other Measures by the European Commission

In its Consumer Policy Action Plan for 1999 to 2001, the European Commission announced that it will monitor the effectiveness of the consumer complaints form, and will also utilise the information obtained from the various dispute resolution bodies to assess whether further action is required to facilitate access to justice for individual consumers. The Policy Action Plan also mentioned that the European Commission will take steps to improve the functioning of small claims procedures in trans-national disputes, and will consider the case for a European Consumer Ombudsman with competence for cross-border complaints.

Other International Efforts

Apart from the European Commission, other international efforts have been made to address the problems of consumers' access to justice. One of them is the proposed Hague Convention on Jurisdiction and Foreign Judgment in Civil and Commercial Matters. Formal discussions on the provisions started in 1996 and negotiations are scheduled to be completed in Year 2000. However, controversy over business to consumer transactions including e-commerce transactions now make it unlikely that the proposed Hague Convention can be finalised as scheduled.

The controversy concerns jurisdictional issue in business to consumer transactions. In Article 7 of the October 1999 draft of the Convention, considerable protection is afforded to consumers on the issue of jurisdiction. Article 7 stipulates that consumers cannot, at the time of the transaction, alienate their right to sue in the courts in their home country; instead, consumers could be asked to make a choice of jurisdiction only after a dispute has arisen. This will afford consumers a genuine choice of jurisdiction whereupon they can decide which jurisdiction is most advantageous to them given the nature of their claim.

Presently, consumers of various giant software companies do not have any choice of jurisdiction. For example, a Canadian software company requires consumers to "agree to irrevocably submit to the jurisdiction of the Courts of the Province of Ontario"(2). Also, a US software company routinely stipulates that consumers must submit to "King County, Washington" as the venue of jurisdiction (3). If Article 7 of the draft Convention is enacted, these contract provisions will be invalid in international business to consumer transactions.

Whilst Article 7 is still under consideration, the Deputy Secretary General of the Hague Conference on Private International Law, Professor Catherine Kessedjian, proposed a modified form of protection to consumers by the setting up of a certification system (4). If vendors provides a certain level of protection to consumers "including warranties, and a fair and easy dispute resolution mechanism which could possibly be free of charge to the consumer"(5), then the vendor will be awarded a certification label. A certified vendor could then include a stipulation in its contract that cases which cannot be resolved by the dispute resolution mechanism under the certification system, will be governed by the law of the country of the vendor's choice.

There is, at present, still a lot of controversy concerning Article 7 and the counter-proposals, and it is uncertain what form the final version of the Convention will take. There is also the suggestion that model contracts and international common standards should be developed which will render the conflict rules less important (6). It is only certain that global jurisdictional issues in cyberspace is a complicated and novel issue, and, in the words of the Organisation for Economic Co-operation and Development (7), "businesses, consumer representatives and governments should work together to continue to use and develop fair, effective and transparent self-regulatory and other policies and procedures, including alternative dispute resolution mechanisms, to address consumer complaints and to resolve consumer disputes arising from business to consumer electronic commerce."

Conclusion

As I have mentioned earlier, significant efforts have been made in Hong Kong to strengthen the protection of consumers. We need to build on these efforts and continue to look for ways to improve our mechanism for redress. It is clear that consumers need not only substantive rights, but also mechanisms for redress that are simple, inexpensive and effective. Some of the mechanisms I have discussed today are worthy of serious consideration. I have no doubt that delegates to this conference will have other stimulating ideas. Today's conference will therefore provide a useful forum for the exchange of ideas on this subject and I wish you all a most rewarding conference.

Thank you.

Footnote:

1 European Commission Working Document on the creation of a European Extra-Judicial Network.

2 According to Consumer Project on Technology, a non-profit organisation in the United States.

3 As above.

4 Press release from September 1999 Geneva Roundtable on electronic commerce and private international law.

5 As above.

6 Proposed by Trans Atlantic Consumer Dialogue.

7 Recommendation of the OECD Council concerning Guidelines for Consumer Protection in the context of Electronic Commerce.

End/Wednesday, April 26, 2000

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