Alternative Dispute Resolution Q&A
On 9 July 2015, the EU Alternative Dispute Resolution (ADR) Directive came into force in the UK. This will bring all ADR services across the European Union in line with each other, offering the same levels of service and easy accessibility for consumers and traders.
So what does this mean for you as a business? The IGA has put together a Question and Answer sheet to help.
Q. What is ADR?
ADR is a means of settling disputes without using the court system. It therefore involves lower costs, making dispute resolution more accessible. It often involves an independent, neutral third party.
Q. Why has the EU changed ADR?
The aim of the legislation is to make sure that no matter what country in the EU you are in or have purchased goods or services from, you will have easy access to ADR.
ADR services across the member states will also have to meet a specific standard, which helps to ensure that the level of ADR available is consistent.
‘The ADR Directive will ensure that consumers can turn to quality alternative dispute resolution entities for all kinds of contractual disputes that they have with traders; no matter what they have purchased (excluding disputes regarding health and higher education) and whether they purchased it online or offline, domestically or across borders’.
As more and more people buy services and goods online, the Directive has also established an Online Dispute Resolution service which provides an ‘EU-wide online platform for disputes that arise from online transactions’ (January 2016).
Q. When do the changes come into practice?
The UK Government has introduced the Alternative Dispute Resolution Regulation.
The EU ADR Directive commenced on 9 July 2015. This means that the UK’s Alternative Dispute Resolution Regulation, which implements the requirements of the EU ADR Directive came into force on the same date.
However, for businesses, the business information obligation will come into force on 1 October 2015. This means that by 1 October, businesses that cannot resolve consumer disputes internally will have to give consumers the details of a certified ADR provider. This is irrespective of whether the business is planning to use the ADR service or not.
Q. Why is the EU pushing ADR?
The aim of the legislation is to make ADR the standard way to resolve disputes between consumers and traders.
ADR is a cheaper alternative to the court system and this is a key reason for the ADR push; lower costs means more accessibility for consumers and traders.
Q. Do I have to offer ADR as a trader as a legal obligation?
Businesses are under absolutely no legal requirement to offer ADR to their customers. What you are obliged to do is inform customers that these ADR services exist, and whether or not you are planning to make use of them.
Q. Do I have to use a specific ADR provider?
There are a number of different ADR providers and you are not obligated to use any particular one.
However as an IGA member you are automatically entitled to use the National Conciliation Service, which is included in your membership fee.
What is worth noting is that it may be preferable to use an ADR provider that specialises in your specific industry. Whilst the level of ADR service across industries will meet a minimum standard, it is always helpful when looking at cases if a case handler has a history of working within that industry and/or specialist knowledge and understanding of it.
Q. As ADR is not a legal obligation, shall I ignore it?
The lack of legal requirement does not necessarily mean you and your business should ignore ADR.
Consumers may be suspicious of a business that does not offer such a service as the government pushes for ADR, rather than the courts, to become the main method of dispute resolution. It is therefore arguably in a business’ interest to find an ADR provider that meets their needs. As a member of a trade body, it will also be expected, but not required, that you will offer ADR. If the government achieves its aims, ADR will become standard practice in the UK and it is highly likely consumers will expect this service.
Q. What is the ‘business information obligation’?
The business information obligation is the requirement for businesses to inform consumers of an ADR service.
The UK’s regulations do not impose any requirement on businesses to use ADR. However, all businesses, irrespective of whether or not they intend to use ADR as a means to resolve disputes, must advise consumers, in writing, of the contact details of the relevant ADR provider in their sector and whether or not the trader intends to use it.
Informing the consumer of the details of an ADR service and the company’s intentions is the ‘business information obligation’.
The commencement date for the business information obligation is 1 October 2015.
Businesses that are legally obliged to use ADR or have voluntarily committed to use ADR, must also provide information about their provider on their website and, if applicable, within their contractual terms and conditions.
Finally, any business that sells goods or services online, must provide a link to the ADR platform and information about the platform.
Q. Where can I find a certified ADR provider?
Details of certified ADR providers are available at www.tradingstandards.uk/ADRbodies
Q. Are all ADR providers certified?
In short, an ADR service is not automatically certified because it is in operation. To be a certified ADR service, an ADR provider must apply to the Trading Standard Institute (TSI) If it meets the necessary criteria laid out by the EU Directive, the provider can be certified.
TSI have the authority to certify ADR providers operating in non-regulated sectors because they have been appointed by BIS to be the UK’s principal competent authority.
For those sectors that are regulated, the competent authorities already established and operating in those sectors will also regulate their ADR schemes (for example, the Financial Conduct Authority for the financial services sector, including the Financial Ombudsman Service).
Q. Is the NCS a certified ADR provider?
The NCS received its certification on 11 June 2015 and was the first automotive industry provider to do so.
The NCS covers the widest range of automotive dispute of any ADR service currently open to car dealers, these include consumer and trader disputes:
- regarding sale and service contracts of vehicles
- over new cars
- over used cars
For more information on ADR or the National Conciliation Service, please call our member helpline on 0845 305 4230.