Government remains concerned over EU Alternative Dispute Resolution

The UK government has published its response to the EU's consultation on Alternative Dispute Resolution (ADR). It questions whether the current proposals will have real business benefits as well as protect consumers adequately.

The European Commission published legislative proposals on ADR on 29 November 2011. The Department for Business, Innovation and Skills launched a Call for Evidence on these proposals.

The Commission argues that all EU consumers should be able to solve their problems without going to court, regardless of the kind of product or service that the contractual dispute is about and regardless of where they bought it in the European Single Market. In addition, for consumers shopping online and from another EU country, the Commission want to create an EU-wide single online platform which will allow contractual disputes to be solved entirely online and within 30 days.

The proposals are likely to impact UK consumers, businesses and organisations that currently provide alternative dispute resolution services.

Key UK findings

  • Cross border shopping is failing. Businesses remain concerned that language barriers, differing technical standards, difficulty of exercising withdrawal rights, lack of brand recognition, payment systems, card costs of currency conversion and delivery costs are all impacting upon economic growth.
  • Non-mandatory requirement to use ADR. It seems unlikely that the Commission's proposals will deliver the benefits suggested. Firstly, although they may establish more ADR capability, there is no guarantee that this would lead to more use of ADR. Secondly, the Commission seems to have significantly over-estimated the potential benefits of greater use of ADR within the EU.
  • Typical loss per consumer. UK Government economists and statisticians believe that the European Commission distorted the real picture when determining the typical loss per consumer complaint. The Commission used the figure of £250 which was determined by using the mean loss per complaint from survey data.
  • Mechanisms to reverse credit/debit card transactions. These are a viable method for consumers to seek redress in certain circumstances but they do not offer the same Government response to call for evidence on EU proposals on Alternative Dispute Resolution level of fairness and transparency as ADR.
  • Concluding ADR proceedings The Government will try to get agreement from other Member States for further flexibility to extend the 90-day deadline for concluding dispute resolution proceedings where this is appropriate and for the legislation to take account of the procedural rules that ADR providers use to ensure their effective operation. The Government shares the view of many stakeholders that it is important for businesses to be given the opportunity to resolve a consumer complaint first, before ADR is undertaken.
  • Single Competent Authority  It would be difficult for the UK to have just one Competent Authority to cover all the ADR providers that exist within the UK and that to do so could lead to duplication and unnecessary costs. they do not need to have regulatory powers. If an ADR provider, which has been recognised under the European legislation, fails to uphold the required standards then the UK Government considers it would be appropriate for them to be removed from the list of recognised ADR providers
  • ODR (Online Dispute Resolution) The UK Government shares the concerns of stakeholders that the ODR platform may deliver only limited benefits and may confuse or even mislead consumers and will continue to press
    the European Commission for further clarifications.
  • Further consultation The Government will publish another consultation to obtain stakeholder views once the proposed European legislation has been adopted. The consultation will look at issues such as a revision of costs and benefits and consider what place mechanisms such as “chargeback” and claims made under Section 75 of the Consumer Credit Act should take in the landscape of consumer redress in the UK.