Alternative dispute resolution - change afoot

Alternative dispute resolution - change afoot

Published:

Author: Heather Smith

Applies to: UK wide

The obligations imposed by new ADR Regulations will come into force on 1 October 2015, followed by the Online Dispute Resolution ('ODR') on 9 January 2016.

There are now a range of options for resolving a dispute between a consumer and a trader. Although taking legal action is possible, it may be quicker and cheaper for a consumer to look at alternative options.

High levels of consumer confidence encourage consumers to support new businesses and creates growth which is fundamental to building a stronger economy. Good service and reputation is vital to help a business flourish, although misunderstandings do happen. It is therefore important to ensure disputes are dealt with fairly, within a reasonable timeframe and in the most cost efficient manner.

The recent publication of 'The Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015', which amends the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (collectively the 'ADR Regulations'), seeks to implement the majority of Directive 2013/11/EU on alternative dispute resolution for consumer disputes (the 'ADR Directive').

Purpose of the ADR Regulations

Prior to the ADR Directive, if a consumer was to make a purchase from a trader and the goods or services were deemed unsatisfactory, the most effective option available to the consumer was to seek redress through the courts. This was often unappealing due to the cost and time involved in litigation and may have deterred some consumers.

The ADR Regulations are intended to give consumers confidence to carry out transactions in the knowledge that there is an alternative way of resolving the issue.

Changes

To provide the consumer with more confidence, the ADR Directive requires the UK to warrant that alternative dispute resolution ('ADR') is available for any dispute between a consumer and a business by providing a certified ADR entity. In addition, the ADR Directive ensures that the UK will designate competent authorities to maintain and regulate a list of ADR providers.

From 9 July 2015 all traders selling to consumers have access to a certified provider of ADR services in their sector in accordance with the ADR Regulations. Quality and consistency of the ADR entity are ensured by strict certification procedures.

ADR is not mandatory for all sectors, however, from 1 October 2015, all traders selling to consumers must give the consumer the details of a certified ADR provider and inform the consumer of whether or not they intend to use that provider, even if they do not intend to use ADR.

Online Dispute Resolution from January 2016

For online sales and service contracts, the EU is setting up an ODR platform (the 'Platform'), allowing consumers to submit a complaint online regarding an online sale or service contract from January 2016. The Platform will enable the communication between the trader and the consumer and the online ADR provider.

It is anticipated that the Platform will often be useful in dealing with cross-border disputes, which are more commonly dealt with online, as it offers a translation function.

Under the Regulations, an online trader must provide a link to the Platform on its website; and state the online trader's e-mail address.

Practical implications

Already required to use ADR?

Companies who are already required to use ADR as a condition of law or trade regulation must state the name and address of the ADR entity on the trader's website and include these details in the trader's general terms and conditions.

Complaint about unsatisfactory goods or services?

For all other traders, the ADR Regulations specify that, where a consumer has exhausted an internal complaints procedure in relation to a dispute regarding unsatisfactory goods or services, the trader must:

  • inform the consumer that the trader cannot settle the dispute;
  • provide the consumer with the name and address of a certified ADR entity; and
  • tell the consumer whether the trader is obliged, or prepared, to submit to an ADR process with that entity.

There is no obligation to submit to the ADR process but the consumer must still be notified of the situation if the dispute cannot be dealt with internally.

Fees payable?

ADR can be cheaper and quicker than going to court. Whether or not traders are required to pay a fee will depend on the scheme. If a fee is payable it might be on a case-by-case basis or through annual membership. In most cases ADR will be free to the consumer although ADR providers are permitted to charge the consumer a nominal fee.

Binding decision?

Whether or not an outcome is binding will depend on the scheme offered by the ADR provider; it should be made clear to both the trader and the consumer before the process is commenced. Most schemes bind traders but not consumers, unless they agree to it at the start of the process.

Timescales?

All complaints should be dealt with within 90 days of the ADR provider receiving the information relating to the dispute, although more complex disputes may take longer.

Consumers are also given a choice of whether they wish their complaint to be dealt with online.

Confidentiality?

ADR providers are required to share information about trends in complaints and their outcomes but the details regarding the business and specific cases will be kept confidential.

Next steps for businesses

The Regulations apply to all business, no matter what size, and cover disputes in relation to terms in contract for goods and services bought by consumers from traders throughout the whole of the UK.

Mandatory requirements

It is mandatory for all traders who sell goods, services and digital content to consumers to comply with the ADR Regulations by informing consumers of the name and contact details of a certified ADR provider and set out whether or not it intends to use ADR. This must be done by 1 October 2015.

Any companies trading online must also provide a link to the Platform on its website from January 2016.

It is only those traders that are required by their regulatory regime that must use ADR to resolve a dispute though.

Liability for traders

If a trader ignores the requirements it could be liable to the Trading Standards civil enforcement action which could result in an order from the court compelling compliance. In the event of a failure to comply with the court order, an unlimited fine or up to two years imprisonment could be imposed.

It is worth noting that the information requirements apply to sales contracted before 1 October 2015 if notification is given to the consumer after 1 October 2015 explaining that the trader is unable to resolve the dispute internally.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

About the Author

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Heather Smith

Solicitor

03700 86 6767

Heather is a commercial litigation lawyer specialising in providing clients with advice on a wide range of contractual disputes, breach of warranty claims and post-employment restrictive covenants. In addition to acting for clients in High Court and County Court litigation, Heather has had success working with clients to reach a settlement of matters outside the court process using ADR. Heather advises in-house legal counsel and directors of businesses on the challenges they face whether looking to enforce their legal rights or protect their position. Heather finds practical solutions that meet each business's individual needs, and clients find her attentive and approachable.

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