Ongoing development of consumer protection legislation throughout Europe, stimulated by the increasing efforts of the European Union aimed at achieving a higher level of consumer protection, have also influenced the introduction of significant legislative developments in Croatia. 

The Croatian Parliament recently enacted the Act on Alternative Consumer Dispute Resolution ("Act"), implementing the relevant EU legislation and introducing alternative methods of out-of-court resolution of contractual disputes between consumers and traders.  

The Act contemplates a simplified, faster and less expensive method of resolving disputes stemming from sales or service contracts, putting the existing Court of Honor at the Croatian Chamber of Commerce center stage. 

The Court of Honor is an honorary court that was established in 1989. It has been resolving non-monetary disputes of unfair business practices between members of the Croatian Chamber of Commerce, by which it was authorized to issue public warnings. Under the new Act, consumers can initiate proceedings before the Court against all traders having their seat in Croatia for violation of public morals and good business practices, even if such disputes contain cross-border elements.  

Although the sanctions which may be imposed by the Court of Honor are limited to public warnings, the importance of these proceedings for the development of consumer protection arises out of the fact that any settlements reached between consumers and traders in disputes held before the Court of Honor represent directly enforceable deeds under Croatian law.  

The Act also stipulates that traders need to amend the mandatory consumer rights notifications in order to inform consumers accordingly that they are entitled to initiate such out-of-court proceedings before the Court of Honor.

The initial reaction of traders shows a general aversion towards this alternative dispute resolution platform. Considering the fact that the Court of Honor is entitled to render a decision even in cases of nonparticipation of traders, traders will most certainly be forced to participate in these proceedings, which are expected to increase the number of settlements reached. 

However, several major traders in Croatia have expressed an opinion that they are not legally obliged to participate in these proceedings before the Court of Honor; under the reasoning that the applicable regulations apparently do not explicitly stipulate their mandatory participation. Some traders have even gone further, by publishing official notices to consumers that they do not recognize the proceedings before the Court of Honor as legally binding. 

It remains to be seen how these legal developments will affect contractual disputes between consumers and traders, since there are several ambiguities related to the practical application of the Act. In this respect, further developments are expected shortly, since authorities have already announced that the audits of traders’ compliance with the Act will commence soon.