The UK government has now published the principal legislation that will implement the European ADR Directive and the European Online Dispute Resolution (ODR) Regulation, both of which seek to encourage the use of alternative dispute resolution schemes to resolve consumer disputes across the EU.

While the new legislative package does not impose any form of mandatory ADR, it does extend the obligations on businesses to provide consumers with information about ADR options.

Almost all UK businesses selling goods, services or digital content to consumers in the EU will need to ensure that they comply with the new requirements, which may involve reviewing websites, contractual terms and complaints handling procedures before the first operative date, 1 October 2015.

KEY POINTS

Nothing in the new legislation makes ADR mandatory for any consumer or trader. However:

From 1 October 2015:

  • All businesses that are legally obliged (or have committed) to use a certified ADR entity must provide information about that entity on their website and in any contractual terms with consumers; and
  • All businesses (regardless of whether they are committed to using ADR or intend to use it) must, in the event of an unresolved consumer complaint, signpost the consumer to an appropriate certified ADR provider and advise whether or not the business agrees (or is obliged) to use ADR in the dispute.

From 9 January 2016:

  • All businesses that sell goods or services online must provide on their website a link to the EU Commission's ODR Platform (as must all online marketplace websites). Online traders who are committed to using ADR must also provide information about the ODR Platform in their contractual terms.

These requirements (expanded upon in section 3 below) are in addition to any existing sector-specific obligations on traders to use ADR or to provide consumers with information about it.

To be informed when we report on further developments (particularly when more details of the proposed EU ODR Platform are published), you can click on the following link to subscribe to our blog 'ADR Notes' : www.hsfnotes.com/adr.

1. BACKGROUND: THE EU LEGISLATION

Both the ADR Directive (2013/11/EU) and the ODR Regulation (524/2013) entered into force on 8 July 2013. Member States are required to transpose the Directive into national law by 9 July 2015 (although, as noted below, the UK's transposition will be 3 months late in relation to some provisions). The ODR Regulation will be directly applicable in Member States from 9 January 2016 in respect of the bulk of its provisions.

The key features of the ADR Directive are summarised in our earlier reports on our blog 'ADR Notes'. Essentially, the Directive requires national governments to ensure that ADR provided by a certified body meeting minimum quality standards is available (if both parties wish to use it) for all domestic and cross-border contractual disputes involving complaints by EU consumers against EU traders. (Importantly, the Directive does not apply to businessagainst-business complaints or to trader-against-consumer claims, such as debt recovery actions).

National governments must also require businesses to provide consumers with certain information about such ADR bodies.

The complementary ODR Regulation provides for the EU Commission to establish by 9 January 2016 a free, interactive, multi-language website through which parties throughout the EU can initiate ADR in relation to consumer complaints concerning online transactions (offline transactions are excluded).

2. THE UK IMPLEMENTING REGULATIONS

The measures to be taken by the UK to implement the European legislation are detailed in our earlier blog post here. The key measures include:

  • the creation of a new ‘residual’ ADR scheme for consumer disputes, to fill the current gaps in the existing ADR landscape;
  • the appointment of the Trading Standards Institute (TSI) as the principal competent authority to certify and monitor relevant ADR providers. In regulated sectors, existing regulators such as the Financial Conduct Authority and Ofgem will act as the competent authorities for consumer ADR schemes in their sectors; and
  • new statutory obligations on businesses to provide information to consumers regarding the availability of such certified ADR entities.

Nothing in the legislative package imposes any form of mandatory ADR on any party. The use of an ADR entity will require the agreement of both the consumer and the trader (although where sector specific requirements already exist for traders to use ADR, such as referrals to the Financial Ombudsman Service for financial services complaints, these requirements will remain).

The legislation implementing the measures is primarily contained in:

as subsequently supplemented and amended by

The majority of the provisions in the regulations come into force on 9 July 2015, apart from those imposing the consumer information requirements, which will now take effect on 1 October 2015.

The government has also published detailed Guidance for Business on the new rules.

Who do the UK regulations apply to?

The regulations apply to all businesses in the UK selling goods, services or digital content to consumers, with the exception of health professionals. They do not apply to business to business nor to consumer to consumer transactions. For the purposes of the regulations, "consumer” means "an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession".

Public sector providers of services are outside the scope of the regulations unless the consumer is paying the public sector provider directly for those services.

Contracts for the sale of property and tenancy agreements are also outside the scope of the regulations, as property is not legally viewed as being a good or a service.

3. THE CONSUMER INFORMATION REQUIREMENTS

Under the UK legislation The consumer information requirements in the new UK legislation are set out in Part 4 of the ADR (C&I) Regulations. The obligations are twofold:

1. Where a trader is obliged (either by law or by virtue of its membership of a trade association) to use ADR provided by a particular ADR entity, the trader must provide the name and website address of that ADR entity

  1. on the trader’s website, if it has one; and
  2. in the general terms and conditions of sales or service contracts between the trader and a consumer.

2. Where a trader has exhausted its internal complaint handling procedure in respect of a consumer complaint, the trader must inform the consumer, on a durable medium (which can include email):

  1. that the trader cannot settle the complaint with the consumer;
  2. of the name and website address of an ADR entity that would be competent to deal with the complaint, should the consumer wish to use ADR; and
  3. whether the trader agrees to submit to an ADR procedure operated by that ADR entity. (Traders obliged or committed to using the ADR entity will of course have to agree).

This requirement will apply to all disputes that are unresolved after 1 October 2015, even if the contract was entered into, or the complaint first arose, before that date.

A list of certified ADR providers (which will be updated as further entities are certified) can be found on the Trading Standards Institute website at: http://www.tradingstandards.uk/ADRbodies

Under the EU ODR Regulation

In addition, the ODR Regulation (Article 14) directly imposes an obligation on all business selling goods or services online to provide on their website a link to the EU Commission's new ODR Platform. All websites that provide a platform for such transactions (ie. online marketplaces) must similarly contain such a link.

All businesses in the EU trading online therefore need to ensure before 9 January 2016 that their websites contain such a link, even if they do not currently trade with consumers in other Member States.

Further, in the case of such online traders who are obliged or committed to using an ADR entity, Article 14 requires that they provide information about the existence of the ODR Platform in their general terms and conditions applicable to their online sales and service contracts.

We expect more detail about the ODR Platform (including the website link) to be provided on the EU Commission's webpage (here) in the coming months, to enable businesses to comply with the information obligations by the start date of 9 January 2016. We will report on developments in this regard on our 'ADR Notes' blog (www.hsfnotes.com/adr) – you can click on this link to subscribe to the blog and receive email alerts when new items are posted.

4. THE STEPS THAT TRADERS NEED TO TAKE

Traders that are already obliged or committed to use ADR for consumer disputes may already be complying with the above requirements under the new UK regulations. However, it will be important for them to:

  1. verify that they do so before 1 October 2015 (including checking that any relevant ADR entity has been certified under the regulations); and
  2. if they sell goods or services online to consumers, take steps to comply with the new requirement to link to the EU ODR Platform on their website and include reference to it in their terms and conditions from 9 January 2016.

Traders not already committed to using ADR for consumer disputes will need to:

  1. identify one or more certified ADR providers appropriate to deal with consumer complaints in their sector and ensure that their complaints handling process is updated by 1 October to include a reference to such a provider where a dispute cannot be resolved after that date; and
  2. if they sell goods or services online to consumers, take steps to comply with the new requirement to link to the EU ODR Platform on their website from 9 January 2016.