The
ADR Directive is now fully operational in the UK. As of 1 October
2015, traders
are required to notify their consumers as to their opportunities to pursue ADR
and whether the trader chooses, or is bound, to adopt an accredited ADR process
when complaints are received. The focus of this blog is on the
early results of the new regulatory arrangement put in place by the Directive,
with a view to raising some likely issues of concern for the future.
Although
the ADR Directive is primarily a consumer law issue, the overlaps in this area with
administrative justice concerns are multiple, especially where ombudsman
schemes are concerned (eg see Walter Merricks). Not only does the work of
several accredited ADR schemes cover services which would once have been
considered as essential public services, but some of the ombudsman schemes affected
by the Directive are subject to judicial review. Moreover, in the medium term, the
Department for Business, Innovation and Skills’ (Bis) approach to encouraging
the sector will likely have an influence on the Government’s parallel efforts to upgrade the role of ADR in
the traditional public sector.
Standards and the
diversity of ADR provision
The
Directive heralds a whole new approach in regulating ADR, which could
potentially offer a model for ADR in the administrative justice sector (much of
which is currently excluded by the Directive, see Article 2(2)). Bis’
implementation of the Directive has led to the formation of eight separate
competent authorities (plus the Secretary of State for Work and Pensions who is
the competent authority for the Pensions Ombudsman) with, in the most part,
existing sector-specific regulators being given the duty to enforce the
standards introduced by the Directive.
A
key duty of competent authorities is to accredit ADR schemes. The accreditation
process should make it easier to garner an understanding of what the ADR sector
looks like. From now on all accredited ADR schemes will be required to report
annually, including the provision of basic data on such issues as complaints
received, compliance rates and time taken to resolve complaints. The collation
of such information should thereafter enable us to analyse what types of ADR
are most prominent in the consumer sector and ask difficult questions about whether the spread of ADR
is appropriate or delivering the benefits claimed of ADR.
Such
full analysis is some way off, but the following table offers a map of the
distribution of the accredited ADR network, based upon the proclaimed dispute
resolution services offered on the websites of the 38 accredited schemes as of
1 October 2015.
Ombuds
|
Industry
Ombuds
|
|||
Financial Ombudsman Service
Pensions Ombudsman Service
Dispute
Resolution Ombudsman
Furniture
Ombudsman
|
Home
Improvement Ombudsman
Office
of the Independent Adjudicator for Higher Education
Ombudsman
Services
|
The
Property Ombudsman
The
Retail Ombudsman
The
Waterways Ombudsman
|
BACTA
ADR service (Trade Association)
Motor
Codes Ltd (Self-Regulatory Body)
|
|
Adjudication
|
Arbitration
|
|||
The
Postal Redress Service
Tattersalls
Committee
Centre
for Effective Dispute Resolution (CEDR)
|
NetNeutrals
EU Ltd
The Independent Parking Committee Ltd (The Independent Appeals
Service)
|
IBAS
Isle
of Man Gambling Supervision Commission
|
ABTA
Centre
for Effective Dispute Resolution (CEDR)
|
The
Independent Panel for Casino and Bingo Arbitration
|
Conciliation
|
Mediation
|
|||
Association
of Chartered Certified Accountants
British
Vehicle Rental and Leasing Association Ltd (Trade Body)
|
Centre
for Effective Dispute Resolution (CEDR)
|
Federation
of Master Builders (Trade Association)
National
Conciliation Service
|
ABTA
ADR
Group
Centre
for Effective Dispute Resolution (CEDR)
eCOGRA
Jennifer Gallagher
|
Pro
Mediate
Renewable
Energy Consumer Code
Small
Claims Mediation
TrustMark
|
The
categorisation offered here is preliminary and open to disagreement, but it
does illustrate the diversity of ADR being offered under the umbrella of the
Directive, commensurate with the purported benefits of the sector. Some of the
schemes offer as an endpoint an adjudicated decision, whereas others focus only
on negotiating a settlement. Some schemes conclude with a solution binding on
both parties, some only binding on the trader, some binding on neither party.
Some schemes operate fully independently of the sector against which complaints
are brought, some operate within trade associations.
This
distribution is to be expected, but does raise difficult and interesting
questions as to what forms of ADR are most appropriate for what forms of dispute,
particularly if a key aspiration remains to promote justice as well as the resolution of
disputes. A concern might arise that the natural response of traders to the
Directive will be to favour those forms of ADR that place them in the strongest
position. Alternatively, schemes
specialising in mediation might be compromised by a consumer pressure towards
free ombudsman services, which despite their title may well operate
predominantly mediation-type services.
Either
way, the concern is whether the framework provided by the Directive provides a
sufficient basis within which to capture this diversity of activity in terms of
standard setting. In other words, what might be considered good practice for a
mediator, might vary considerably from what is appropriate practice for an
adjudication scheme. But the Directive
adopts a uniform approach to all forms of ADR. Hence the likelihood is that the
specialist interests of different forms of ADR will not be high on the list of
concerns for competent authorities and that instead, provided that the minimum
criteria of the Directive are met, the market-place will dictate the quality of
ADR provision. But given the heightened profile that ADR can be expected to
attain in the delivery of civil justice, there is a risk that this regulatory
arrangement will not be sufficient to satisfy consumers of the veracity of
standards in the sector.
Regulation and the
ombudsman
An
acute example of the regulatory challenges that the Directive creates is
already evident in the ombudsman branch of the sector.
Separately
to the Directive, the combined impact of the Companies Act 2006, section 56,
the Company, Limited Liability
Partnership and Business Names (Sensitive Words and Expressions) Regulations
2014 (Schedule
1, Part 1) and Companies House guidance means that, as from 7 April 2015,
for an organisation ‘to register a company name or to obtain approval to use a
business name’, amongst other things, it must ‘be a member of the Ombudsman Association at ombudsman level membership’ (see Annex A, p.51-2). Thus all the accredited ADR schemes carrying the
title ombudsman now carry the stamp of approval of both a competent authority
and the Ombudsman Association (OA) (see table below). This in turn though raises the awkward possibility of
conflict between the two layers of de facto regulation, particularly because at
present the Government favours competition in ADR provision whereas the OA has
historically supported single sector ombudsman schemes.
This
enhanced regulatory regime also throws
the spotlight more brightly on the standards applied by the competent authorities
and the OA with
respect to such issues as, for instance, independence (see Peter Causton, at Practical Law). Given the commercial advantage
in being branded an ombudsman, the potential for legal action challenges being
brought against either a competent authority or the OA for the rejection or
removal of accredited/membership status is strong. In view of this pressure,
will either system be strong enough to push for higher standards?
Teething problems
and the unregulated ADR sector
A
further immediate observation that can be made of the impact of the Directive
is that a sizeable unregulated ADR sector looks likely to continue to operate.
The Directive does not require ADR providers to be accredited, which is
fortunate in the short-term for two leading ADR schemes, the Legal Ombudsman (Leo) and the Scottish Legal
Complaints Commission (SLCC), neither of which had been accredited by the
cut-off date. The SLCC appear to have made a deliberate decision not to apply
for accreditation, whereas Leo failed to consult in time on required changes to its
scheme. During the interim period that Leo remains unaccredited, this has led
some to predict mass confusion as legal providers will be
required to inform consumers about two separate ADR routes (the Legal Ombudsman
and the existence of an accredited ADR scheme). The situation may be even worse
if legal providers try to bypass the Legal Ombudsman altogether by signing up
to other accredited residuary ADR providers, as allowed for under the
Directive.
The
eminence and statutory backing for the two ombudsman schemes for the legal
professions makes it unlikely that their authority will be undermined in the
long run, but elsewhere traders will be able to access ADR schemes which do not
necessarily meet the standards required by the Directive. As of 1 October 2015,
38 ADR providers[i]
had gained accreditation, which compares with 70 schemes identified in the
consultation process of the Department for Business, Innovation and Skills prior to the UK’s implementation
of the Directive (Bis 2014, p.14). It is unlikely that
these other ADR schemes have folded, instead an already complex branch of the
civil justice system has just got more complicated.
Justice and the
rule of law
Other
debates on the ADR Directive arise because of the Government’s faith in a
competition model of ADR provision and its decision to distribute the competent
authority role around so many different bodies. These debates I aim to tackle
in a further blog and paper. But above all, the ADR Directive matters to all
branches of the UK’s system of justice, including the administrative justice
system, because its implementation overlaps with a number of ongoing
initiatives and proposals to enhance access to justice (eg online courts, the introduction of registrars, revisions to the Pre-Action
Protocol).
Collectively these reforms are forcing us to reconsider the extent to, and
manner in which, long-held values of justice and the rule of law can and should be protected in
the new and evolving civil justice system. The Directive is a welcome step in
terms of enhancing the potential for consumers to access justice and offers a
model for regulation of the sector, but it is as yet unclear whether the
competent authorities are sufficiently well-equipped to provide the consumer
with the confidence that the integrity of the sector is robust enough to secure
an equality of arms in the resolution of disputes.
[i] Arriving at this figure is not
straightforward (for the list used here, see the table above), as some
providers provide more than one ADR scheme. Ombudsman Services, for instance,
is accredited in six separate sectors but clearly brands itself as Ombudsman
Services. Other providers appear to provide more than one scheme within the
same organisation eg the Dispute Resolution Ombudsman, the Furniture Ombudsman and the Home Improvement Ombudsman all operate as one scheme..
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