The settlement of disputes between parties, such as between consumers and traders can be divided into two major groups: settlement of disputes before court or out-of-court. Both methods have their own advantages and disadvantages, too.
The judicial method’s mainstay is its enforceability. The judgment of the court is enforceable, the prevailing party can have resort to the means of coercion ensured by the state, namely he/she can use the means of enforcement. However one of its disadvantages is that because of its strict procedural rules and complexity it may occur that the consumer has to have resort to legal representation, the costs of which may even exceed the measures of the original claim. In addition, further costs of proceedings may appear in point of expenses. Other disadvantage is the process being time-consuming and its possible protraction.
The two major methods in out-of-court settlement of disputes are mediation and alternative dispute resolution (ADR, arbitration).
The principle of mediation is that the parties initiate the involvement of a third party in their dispute who helps them find solution.. The success of this method depends on – in addition to the willingness of the parties for consensus – the expertise, the skills or mostly the reputation of that third party, because he/she tries to bring the parties together to make them come to an agreement. The other important characteristic of this method is that the agreement will be reached by the will of the parties, only the will of the parties stands behind it.
The other form of the alternative forms of settlement of disputes is ADR. The dispute between the two parties is examined by a person or a board and that person or board makes a decision. So the agreement here is not made by the parties, but they entrust a person or board with it. That decision does not possess the same binding force as the judgment of the court. Yet, there is the possibility for the parties to make a statement of submission in which they accept the decision for themselves as a binding one. It is important to note that this binding force is only accepted by the parties and is not the same as the one of the judgment of the court, the means of enforcement are not available here.
Though the alternative forms of dispute settlement have many advantages compared to the court procedures, despite their quick flow, cost-effectiveness and the simplicity compared to the judicial way, their main disadvantage has to be mentioned: such as the lack of the general binding force of their decisions. In case of mediation the agreement is made by the parties and its observation depends on them, while in case of ADR a kind of binding force appears, but that binding force is only present if the parties accept it and it is not the same as in case of the judgments; as regarding the judgments it is always there apart from the will of the parties.
In Hungary, for the out-of-court dispute settlement, the procedure of the arbitration boards and mediation are available for the parties. The rules of the proceedings can be found in Act CLV of 1997 on Consumer Protection, and the rules of mediation can be found in Act LV of 2002 on Mediation Activity.