Is ADR compulsory?
There is no general rule in law that says that ADR must be used to resolve a dispute. However, in some sectors ADR is compulsory. For example, most financial services consumers can insist that their complaint be dealt with by the Financial Ombudsman Service. Also, estate agents and telecommunications businesses traders must belong to an ADR scheme, although they have a degree of choice about which one.
In sectors where ADR is not compulsory by law, traders may nevertheless be members of a trade association or a "trusted trader" scheme that requires its members to use ADR. Such schemes often provide or arrange the ADR scheme for their members.
A trader can also use their own contract terms to require themselves to use ADR, although they cannot insist that a consumer does so.
Even where there is no obligation requiring the use of ADR, the Civil Procedure Rules (CPR) require parties to any dispute to consider whether ADR is appropriate both before civil proceedings are commenced, and throughout the life of the case. Again, the CPR does not make ADR compulsory, but if a party chooses not to participate without good reason, then it may suffer adverse costs consequences. That said, most consumer claims are brought under the small claims track where adverse costs orders are less likely to be an issue.
The Impact of the Consumer ADR Regulations
The Consumer ADR Regulations provide for the designation of competent authorities to vet and approve those who apply to become an ADR provider, together with the standards that a certified ADR entity must meet. For those in the retail sector, the Chartered Trading Standards Institute (the "CTSI") is the competent authority. ADR providers which have already been approved by the CTSI are listed on its website. The ADR mechanism which these providers will offer under the Regulations is designed to be quick (generally concluded within 90 days of receiving the complete complaint file) and free of charge to consumers, or available at a nominal fee.
The Consumer ADR Regulations apply to all business in the UK that sell goods, services or digital content to consumers (with some limited exceptions), and impose certain obligations on traders to provide information to consumers about ADR entities. For example, a trader who is obliged by law, or its trade association rules, or the terms of a contract to use ADR services, must make the name and website address of the relevant ADR entity available on its website and in its general terms and conditions.
In addition, any trader, including those who are not obliged to use ADR services, who receives a complaint from a consumer about a contract, and is unable to resolve the complaint with them using its own internal complaints procedure, must inform the consumer in writing:
- that it cannot settle the complaint;
- the name and website address of an ADR provider that would deal with the complaint, if the consumer wishes to use ADR; and
- whether the trader is obliged or prepared to make use of the ADR provider.
In other words, the trader has to give a consumer details of an ADR provider but does not have to agree to use ADR. The information should be given in durable form, such as an email or a letter – most likely, the final deadlock letter in response to a consumer complaint.