From 1 October 2015, almost all UK businesses selling goods, services or digital content to consumers in the EU (excluding health professionals) must comply with new Alternative Dispute Resolution (“ADR”) signposting obligations in their dealings with consumers.
Such obligations are imposed by The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015, as amended. “Consumer” in this context means an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession. The Regulations do not apply to business to business, or consumer to consumer transactions.
The Regulations implement the ADR/ODR Directive 2013/11/EU on Alternative Dispute Resolution for consumer disputes, which is intended to ensure that all consumers in the EU have access to an ADR scheme to seek redress for problems with goods and services, set common standards for ADR providers, and reduce consumer confusion. ADR is the use of methods such as mediation or arbitration to resolve a dispute without resort to litigating in the courts.
Under the new Regulations, if a business is unable to resolve a consumer complaint about a sale or service contract, it must inform the consumer on a durable medium i.e. letter or email:
- that it cannot settle the complaint;
- of the name and website address of an ADR entity which would be competent to deal with the complaint; and
- whether the business is obliged, or prepared, to submit to an ADR procedure operated by that ADR entity.
Additionally, if a business is obliged to use ADR services provided by an ADR entity under statute, the rules of a trade association or term of a contract, it must provide the name and website of the ADR entity on it’s website (if it has one) and include it in any contractual terms with consumers.
Businesses are not obliged to submit to the ADR procedure - they are obliged only to provide the information set out above. The requirements apply in addition to any information requirements imposed on a business by a regulator or trade association. The Chartered Trading Standards Institute (“CTSI”) has approved a number of ADR bodies and provides a list on its website, available here.
The sanction for failing to comply with the new Regulations is potentially an unlimited fine and imprisonment for up to two years.
Online Dispute Resolution
In addition to the above, from 9 January 2016, all businesses that sell goods or services online (including online marketplace websites) must provide on their website a link to the EU Commission’s Online Dispute Resolution (“ODR”) Platform. The ODR is aimed at providing an online platform to signpost consumers to the correct ADR body, and to facilitate cross-border disputes. In addition, online traders who are obliged to use ADR must provide information about the ODR Platform in any contractual terms with consumers.
Solicitor Consumer Disputes
In the legal sector, solicitors should be aware that the Legal Ombudsman recently withdrew its application to be certified as an ADR approved body pending a full consultation. The Legal Ombudsman’s Board is expected to announce its plans in December 2015 and ultimately re-submit its application.
Until then, if solicitors are unable to resolve a consumer complaint internally, they must provide the consumer with both information on the Legal Ombudsman (as the statutory complaints scheme for solicitors) and information required by the new Regulations, including the name and address of an appropriate certified ADR provider.
The Law Society has provided suggested text to be included in letters at the end of first-tier complaints, from 1 October 2015, available here.
Click here to view the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015.
Click here to view the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015.
Click here to view the ADR/ODR Directive 2013/11/EU on Alternative Dispute Resolution for consumer disputes.