Practical Law

All eyes are currently on the EU referendum, but few people have thought about the consequences of a Brexit on ADR. A vote to leave the EU would also be a vote against the steps taken to increase the use of ADR. In short, leaving the EU would be an unmitigated disaster for ADR in the UK, as the recent ADR Directive has been bringing about a change of culture in the UK.

That said, the ADR directive has not been as effective as it could be, owing to the way in which the UK government implemented it, and we are still in the early stages of its implementation. So, where do we currently stand?

ADR information requirements

We are now certified to deal with complaints by consumers against businesses through the EU ODR platform and the ADR Directive. Following implementation of the ADR Directive, UK businesses are required to signpost to a certified ADR provider and have a link to the ODR platform on their websites, even if they don’t want to use ADR. However, this leads to confusion for consumers. Sadly, that does not seem likely to change in the near future and businesses are missing out on the chance to save costs by mediating. Moreover, some big name retailers are failing to put the link in an easily accessible part of their websites and are not sold on the whole process.

Despite the penalties for failing to comply with these information requirements, many traders do not know about them and Trading Standards are adopting a light touch approach to enforcement. No doubt the impending referendum is at the back of BIS’ mind, as businesses who do not understand the benefits of ADR would consider this to be additional red tape, rather than best practice for complaints handling and customer service.

Competent authorities

The multiplicity of competent authorities in the UK does not help the fledgling ADR market either, with some requiring payment of over £18,000 for the privilege of dealing with complaints for the first year, such as the Civil Aviation Authority. This charge has led to the market leader, the Ombudsman Service, withdrawing from the aviation complaint marketplace altogether.

Use of the ODR platform so far

We are informed that over 5,000 complaints have been submitted to the platform since 15 February. As far as the UK is concerned, around 1,300 complaints have been submitted by UK consumers against EU traders (among which, close to 90% are against UK traders). In total, just over 1,400 complaints have been submitted by EU consumers (including UK consumers) against UK traders. What is unclear is how many traders have agreed to follow the procedure or resolved their complaints through the platform.

When looking at these figures, however, one has to take account of the fact that we are still at an early stage and that not all member states have notified ADR entities for all sectors. The EU Commission is closely working with them to reach a full coverage as soon as possible.

Implementation in the rest of the EU

In an answer to Parliamentary questions, the Commission recently confirmed that all member states have set up an ODR contact point, save for France, Luxembourg, Poland and Romania, and that it has been working closely with member states to ensure timely implementation of the ADR Directive and notification of the national ADR entities to be registered on the ODR platform.

It is clear from this that some countries are lagging behind others in the EU in implementing the ADR Directive.

Raising awareness

A further element to bear in mind is that the platform still needs to be better known by consumers and traders in the EU. The Commission therefore plans to launch some communication activities starting this summer, when it is expecting the platform’s coverage in terms of sectors to be more complete. These communication activities will focus on social and online media and complement efforts undertaken by national authorities. They will target both consumers and traders. Online traders will, in particular, be reminded of their obligation to provide a link to the platform and receive information on the benefits that can be gained from engaging in ADR to resolve contractual disputes.

In relation to promoting the scheme within the UK, the national competent authorities do not seem to be doing very much to publicise the system, owing to budgetary constraints. BIS has admitted that it needs to do more to publicise the new law and is considering how best to do this.

Enforcement

It is fair to say that publicity has been woeful. Moreover, a light touch approach to enforcement has been adopted. Although businesses can be fined, and even imprisonment is an option, a decision has been taken to educate businesses about the system rather than punishing them. The Citizens Advice helpline collates data on compliance with the ADR regulations. Should it become apparent that there are problems in a particular sector, this could be reported to the National Trading Standards Board, which will take a decision on whether further action is necessary. However, the competent authorities, including the Chartered Trading Standards Institute (CTSI), are not responsible for enforcement in respect of traders. That role rests with Local Authority Trading Standards Services, which could apply for a court order requiring compliance if it was considered appropriate, but the primary course of action would be to work with the trader towards compliance.

The ADR Directive does not prescribe the nature of the ADR procedures to be implemented in member states, and notably whether the trader participation in the ADR procedure should be mandatory or not. This is a decision to be taken by each member state. The UK decided not to make it mandatory. Judging by the meeting of the All Parliamentary Party Group of MPs on ADR, which I attended, there are other priorities (not least the EU referendum) taking precedence and there is no prospect of the UK amending the regulations.

The future role of mediation

I would urge consumers to write to their MPs or complain to BIS if they are unable to use ADR because of a traders’ refusal to engage. One reason behind their refusal may be that traders are aware that the small claims mediation service is free to defendants in the County Court, even if it is not always possible to get a telephone appointment with one of the 16 court mediators.

I have it on good authority that Briggs LJ is looking quite closely at the role of the Small Claims Mediation Service and whether it should continue to be free, given the adverse effect it is having on pre-issue mediation, such as that provided under the ADR Directive. He is likely to recommend that the online court website will encourage use of pre-issue mediation, explain what it is, and provide links to where it can be found.

Secondly, Briggs LJ has expressed an interest in judicial ENE type conciliation which is being used in some County Court centres. This system involves a short preliminary hearing for 15 minutes to explore the issues and encourage the parties to settle, which is similar to a Mediation Information Meeting.

Briggs LJ may well look at re-opening County Court after-hours local mediation schemes, of the type that were closed down to make way for the short-lived National Mediation Helpline. Maybe the National Mediation helpline might be resuscitated?

When the Helpline was closed in 2012, Jonathan Djanogly MP told the CMC conference of his plans to “move mediation centre stage within our civil justice system” as part of its planned legal aid and civil justice reforms: “For the first time, mediation would become part of the court process”. Sadly, that did not happen, but Briggs LJ now has an opportunity to try again.

Possible amendments to the ADR Directive

On the possible future amendment of the ADR Directive, the EU considers that it is important to have enough hindsight on its implementation before drawing any conclusions. The Commission is, however, closely monitoring the implementation of the ADR Directive in all member states and it will regularly report (in 2019 for the first time) on its application. The report will build on national reports on the development and functioning of ADR entities in member states that national authorities must provide every four years. The Commission may consider the advisability of proposing an amendment to the ADR Directive in the framework of this regular review exercise.

I understand that CTSI is responsible for collating information on the functioning of the ADR market in the UK, which it will report to the Commission on or before 9 July 2018. I F International, instructed by BIS, has been carrying out a study on the consumer landscape, which should be completed by the end of September. I F International is likely to publish its report shortly afterwards.

In short, this means no change until 2019 at the earliest, unless the EU makes further recommendations regarding the Mediation Directive, which is being reviewed following a consultation and is expected to be reported on shortly. I await further statistics with interest, as in my experience traders remain to be convinced about the merits of ADR, although there are several who retain our services to deal with disputes by way of voluntary mediation, as opposed to ombudsmen, and recognise the cost benefits.

Of course, if the outcome of the Referendum is that we are to leave the EU, then it is possible that all the steps to encourage ADR use in member states may mean nothing and the ADR industry will be left in limbo and reliant upon internal proposals to develop ADR in the UK. Given that mediation saves UK businesses £2.8bn per annum (according to CEDR) that would be a disaster for UK plc. However, there is no plan B available and the courts would be likely to continue to increase reliance on ADR in order to save cost. The online court, coupled with court closures, is here to stay because there is no budget for each claim and complaint to go to a full hearing.