November 4, 2015

New Alternative Dispute Resolution (ADR) Regulations may require changes to your Terms & Conditions

The new Alternative Dispute Resolution (ADR) regulations have been implemented as a result of a directive (order) from the European Union. All member states must comply. Directive (2013/11/EU) addresses ADR in consumer disputes, it’s aim being to increase and improve the use of out-of-court schemes in the EU by providing consumers with a faster, cheaper and more informal way of settling disputes with traders.

The Regulations (1) place an information requirement on businesses; (2) establish competent authorities to certify ADR schemes; and (3) set the standards that ADR scheme applicants must meet in order to achieve certification.

For reference, the full name of the Regulations is – The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (‘the Regulations’).

Who do the Regulations affect?

They affect ALL businesses selling goods and/or services to consumers.

Part 4 (of the Regulations) provides that where a trader is obliged by law or their trade association rules to use ADR services provided by an ADR entity, the trader MUST provide the name and website address of the ADR entity in its general terms and conditions of trading with consumers and on its website (if it has one).

The Regulations do not make participation in ADR schemes mandatory for traders, however they do require businesses selling directly to consumers, to point the consumer to a certified ADR scheme (where they cannot resolve a dispute in-house), and declare whether or not they intend to use that scheme (although if you are required by your regulatory regime or trade association to use ADR, then you must agree to use ADR).

According to the BIS Guidance (referred to below), details of certified ADR providers can be obtained from your trade association, and from the Chartered Trading Standards Institute website (https://www.tradingstandards.uk/advice/ADRApprovedBodies.cfm).

When

The New Regulations came into force on 1st October 2015.

Why

The EU recognised that consumers sometimes encountered problems in getting redress for unsatisfactory goods or services, and that these problems may be more difficult for consumers to solve when they buy something online or in another EU country.

Disputes of this kind can be settled quickly, effectively, and cheaply through ADR entities, however not all EU countries have ADR entities to cover all kinds of consumer disputes, and where they do they may not meet minimum quality standards. As a result, consumers are not always able to resolve their disputes and may lose money unjustly.

ADR covers any process that enables disputes to be settled outside of the court system. There are different types of ADR, however ADR providers typically provide mediation, arbitration or adjudication services. A mediator should use his or her skill and expertise to mediate a case and facilitate an agreement, encouraging the parties involved to come to a mutually acceptable compromise. If both parties agree to observe the outcome, their signature to the agreement makes it legally binding and can be enforced in court. Whereas an arbitrator/adjudicator acts like a judge, assesses the evidence and judges each case on its merits reaching a firm decision. The parties will normally agree in advance as to whether the decision will become legally binding.

The Regulations do not cover:

  • Disputes unrelated to terms in a contract, such as complaints relating to the conduct of a business or discrimination;
  • Business to business contracts;
  • Consumer to consumer transactions;
  • Public sector service providers (unless the consumer is paying the public sector directly for those services); or
  • Contracts for the sale of property or tenancy agreements.
  •  

Failure to comply

It is mandatory for businesses to comply with the Regulations. According to the Department for Business, Innovation and Skills’ Guidance for Business (BIS Guidance) failure to comply could result in civil enforcement action by Trading Standards. This could result in a Court order, ordering a business to comply with the Regulations. Subsequent failure to comply with the Court order could result in an unlimited fine or up to two years in prison.

The more detailed BIS Guidance is available here – guidance to business, (PDF, 192 KB).
 

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