06.07.2017 | KPMG Law Insights

Duty to provide information on readiness for arbitration

Duty to provide information on readiness for arbitration

Since February 1, 2017, §§ 36, 37 of the Act on Alternative Dispute Resolution in Consumer Matters (VSBG) have imposed an information obligation on entrepreneurs regarding their own willingness to arbitrate. This information obligation applies in particular to housing companies, real estate agencies and construction companies.

The Alternative Dispute Resolution Act (VSBG) already came into force on April 1, 2016. However, it is only since February 1, 2017 that Sections 36, 37 VSBG apply, which regulate the information obligations of an entrepreneur regarding his willingness to arbitrate in the event of a dispute.

The VSBG serves to implement Directive 2013/11/EU of the European Parliament and of the Council on the alternative settlement of consumer disputes. While the Directive only refers to sales and service contracts, the CDBG goes beyond this and is not limited to the types of contracts mentioned.

Obligation to indicate readiness for arbitration

The introduction of a duty to provide information is intended to enable any disputes between a trader and a consumer to be settled quickly out of court. However, the duty to inform also applies if the entrepreneur is not willing to participate in dispute resolution. Transparency is to be created as to which entrepreneurs generally refuse to engage in consumer arbitration. In order to avoid damage to their reputation, many companies will certainly opt for the option of out-of-court dispute resolution and publicize this as such. In addition, the aim is to save consumers the effort and expense that could result from unsuccessfully appealing to a conciliation body.

Various information requirements

A distinction must first be made between general information obligations pursuant to Section 36 para. 1 No. 1 VSBG and obligations to provide information after a dispute has arisen pursuant to § 37 VSBG. Both information obligations exist side by side and only apply if an entrepreneur concludes or has concluded a contract with a consumer. Entrepreneurs in the sense of § 14 BGB (German Civil Code) are obliged to provide information.

According to § 36 para. 1 No. 1 VSBG, an entrepreneur who maintains a website or uses general terms and conditions must inform the consumer in an easily accessible, clear and understandable manner whether he is willing or obliged to participate in dispute resolution proceedings. Housing companies in particular will use general terms and conditions vis-à-vis consumers in the form of standardized rental agreements. However, construction companies and brokers who conclude contracts with consumers are also affected by the obligation to provide information that has come into force. However, companies that employed only ten or fewer persons as of December 31 of the respective previous year are not subject to the general duty to provide information under Section 36 VSBG.

According to § 37 VSBG, the entrepreneur must inform the consumer of a consumer arbitration board that is competent for him, stating its address and website, if the dispute concerning a consumer contract could not be settled by the entrepreneur and the consumer. At the same time, the entrepreneur must indicate whether he is willing or obliged to participate in a dispute resolution procedure at this consumer arbitration board. In contrast to the duty to provide information under Section 36 VSBG, this duty applies to all companies that conclude contracts with consumers, even if their number of employees is small.

Form of information

An entrepreneur who is subject to the general duty to provide information pursuant to Section 36 VSBG must inform the consumer in an easily accessible, clear and comprehensible manner about the extent to which he is willing or obliged to participate in a dispute resolution procedure. If the Contractor has declared its willingness to do so or if it is legally obliged to do so, the Contractor shall also refer to the relevant competent body. This information must be provided in accordance with § 36 para. 2 VSBG shall be made available on the website of the entrepreneur, provided that the entrepreneur maintains such a website. If the entrepreneur uses general terms and conditions, the information must be handed over together with the general terms and conditions.

The information according to § 37 VSBG must be provided to the consumer in text form.

Violation of the duty to inform

In the event of a breach by a trader of its duty to provide information, the consumer has the option of asserting claims against the trader for breach of pre-contractual or contractual obligations. In addition, consumer protection associations can enforce compliance with the information requirements via the Injunctions Act (Unterlassungsklagengesetz – UKlaG), which primarily involves costs for the entrepreneur.

Practice Notes

Insofar as an entrepreneur should be subject to general information obligations pursuant to Section 36 VSBG on the basis of the conditions described above, entrepreneurs should indicate in their general terms and conditions, in particular also in residential leases, as well as on their websites whether they are obligated or otherwise willing to settle disputes before a consumer arbitration board. If any of the above conditions are met, the website and address of the competent body must also be provided. These additions should be addressed in the near term if not already done. So far, many clauses and websites do not yet take the new legal situation into account.

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