The ADR Regulations: What do you need to tell consumers?

Written on 20 Jul 2015

In recent months, the Government has passed two sets of
regulations, implementing the European Directive on alternative dispute resolution
(ADR Directive), which will affect all businesses that sell to consumers:

  • The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations (SI 2015/452) (ADR Regulations), published in March; and 
  • The Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015 (SI 2015/1392) (the Supplementary Regulations), published in June. 

The Supplementary Regulations push back the date of the information requirement on businesses from 9 July 2015 to 1 October 2015. The Supplementary Regulations also implement provisions on online dispute resolution for consumer disputes (ODR Regulation). The Department for Business, Innovation & Skills (BIS) has published guidance for business on the ADR Regulations (see here). 

What is ADR? 

The term Alternative Dispute Resolution (ADR) encompasses a wide range of out-of-court procedures aimed at settling disputes more quickly and simply, and at lower cost than formal litigation. 

Some forms of ADR, such as adjudication or early neutral evaluation, involve a third party making an independent and impartial decision in a dispute outside of the court process. Depending on the form of ADR selected, such a decision may be binding, or might be intended simply to assist the party’s in reaching an agreement. Other forms of ADR, such as mediation, are essentially facilitated methods of negotiation.

What are the benefits of using ADR?

There are a number of benefits of using ADR, either instead of or in parallel with formal litigation (for example, after the parties have exchanged statements of case or before a trial commences):

  • Invariably, ADR is less expensive and time consuming than court action.
  • ADR can help parties to resolve their dispute in a way that preserves their commercial relationship and maintains good customer relations. It is far more difficult to preserve this relationship through the rigours of litigation. 
  • More generally, a policy of using ADR demonstrates a commitment by the business to customer service. 

Background to ADR Regulations

The aim of the ADR Directive is to encourage access to ADR to resolve contractual disputes regarding the sale of goods or provisions of services to consumers. The Directive requires businesses to notify consumers of the options for ADR that are available if they are unable to resolve a dispute. As a by-product, it is hoped that this will increase awareness and uptake of ADR among businesses, as an alternative to going to court.

The Directive requires that Member States implement its provisions by 9 July 2015. Parliament reacted to this by publishing the ADR Regulations which implemented the majority of the provisions in the Directive. Part of the ADR Regulations came into force on 7 April 2015. The rest of the ADR Regulations will come into force on 1 October 2015 and 9 January 2016 in relation to the ODR Regulations.

Identifying a certified ADR provider 

The Supplementary Regulations amend the original entry into force date for provisions contained in Parts 4 and 5 of the ADR Regulations to 1 October 2015. From 1 October 2015, businesses that sell goods, services or digital content to consumers must provide consumers with details of the certified ADR provider in their sector if they cannot resolve a dispute directly with the consumer. Businesses will also have to inform the consumer whether they intend to use ADR.

These requirements apply irrespective of whether or not the business intends to use ADR.
Those in the regulated sector where ADR is mandatory or those committed to ADR due to the terms of their trade association or professional membership, need to be aware of an additional requirement. Details of the certified ADR provider will need to be provided on the businesses website and in terms and conditions.

ODR Platform available from 6 January 2016 

The Regulations also implement the ODR Regulation which will come into force on 6 January 2016. Consumers who have a complaint regarding a product or service which is bought online will be able to submit a complaint to a business based in another European country via the ODR platform.

From 6 January 2016 all online businesses are required to include a link on their website to the ODR platform.

More details on how the ODR platform will operate will be available nearer the time with BIS updating their guidance to reflect this.

What are the consequences of failing to comply with the information requirements?

Failure to comply with these requirements could result in any of the following sanctions:

  • Liability to Trading Standards civil enforcement action. 
  • Court order to comply with the requirements of the Regulations. 
  • an unlimited fine, or up to a maximum of 2 years imprisonment for failure to comply with a court order.