The Association of Accounting Technicians (AAT): Further Comment on the BIS
Consultation: Call for Evidence: EU proposals on Alternative Dispute Resolution.
This further submission in relation to the Consultation is in response to an email from Rose
Leigh (CCP) dated 13 February 2012 entitled ‘EU negotiations on Alternative Dispute
Resolution – update’, wherein we were asked to comment on the issues referred to below that have been raised in discussions between Member States.
Our views are as follows:
Issue 1
To limit the scope of the legislation to disputes initiated by consumers, i.e. to exclude disputes initiated by businesses against consumers.
The legislation should not be limited to disputes initiated by consumers but should include disputed initiated by businesses. This will be as much to the advantage of consumers as to businesses. Our reasons for this view are twofold, namely:
(a) Generally, we believe that consumers will be more: i. intimidated by court proceedings than by ADR; ii. likely to bury their heads in the sand or pay-up in the face of Court proceedings, despite having a valid counter position in the dispute; iii. likely to incur substantially greater costs when they lose in court than in ADR.
(b) Many businesses are small and lack the resources to pursue a dispute through the courts, particularly a cross-border dispute. Also, (a) (iii) applies to businesses, which raises the threshold at which pursuing a dispute would be worthwhile and leads to more funds being written-off rather than initiate a dispute. It is equally important to the economy that businesses are able to thrive as well as consumers. This is 2 sides of the same coin. It is to be hoped that inclusion of disputes initiated by businesses will also save pressure on the courts system and, therefore, the public purse.
Issue 2
The addition of a new recital that will state that the “consumer should be encouraged to seek an amicable solution of the dispute directly with the trader before they submit disputes to an ADR entity.”
The inclusion of such a new recital would be beneficial. Before implementing court summons, claimants are required to comply with pre-action protocols, which are designed to ensure that the parties are fully aware of the issues between them, providing the opportunity for them to engage in settlement negotiations and avoiding the necessity of litigation.
Providing evidence of a reasonable attempt to settle a dispute would be consistent with such
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an approach and could be the entry requirement to the envisaged ADR. Such requirement could be set out in legislation and thereby implied into consumer contracts. On a practical note, to avoid disputes being artificially drawn out, strict time limits would have to be set out for the submission of and response to initial contacts between consumer and business.
Issue 3
To limit the scope of the legislation to disputes about on-line cross-border transactions but for such disputes to make participation in ADR a requirement and outcomes of ADR binding.
The proposed ADR scheme is more important to consumer confidence in on-line crossborder trading than for other modes of trading, due to the immediacy of on-line trading and the tendency of on-line consumers to ignore terms and conditions of sale. Confining the legislation to on-line cross-border disputes would also allow the scheme to be monitored and assessed with a view to introducing it to all cross-border consumer trade. However, the legislation should be applied to all cross-border trade, at least eventually, as the prospect of proceeding against a foreign party would act as an extra barrier to those mentioned in our response, above, to Issue 1.
In any event, ADR should be a requirement and outcomes binding. At least in relation to certain financial limits of dispute, parties would benefit from (a) the cheaper mode of dispute resolution (this benefit would be mutual, preventing one party from brow-beating the other by actual or threatened court action) and (b) finality.
Finality is a very important principle if the parties are to put the dispute behind them and to limit costs. Both of these aims would be frustrated if ADR was a mere prelude to litigation.
Appeal to the court is possible pursuant to the Arbitration Act 1996 but is on a point of law or where there is an irregularity in the arbitration procedure.
Issue 4
To allow Member States the discretion to set lower and upper level thresholds on the value of disputes that fall within scope.
The adoption of lower and upper level thresholds would be a sensible. However, they should be consistent across the EU.
A de minimus would be consistent with the principle of proportionality. It would also ease the burden upon (a) the public purse (we have previously expressed the view that the scheme would not be self-financing) and (b) the parties, as it could be uneconomic to defend financial claims of low value, even in non-deserving cases.
As stated previously, an upper limit may be determinative of the mode of ADR, for example, mediation for higher values and arbitration for lower values. Also, the higher the dispute value, the more appropriate court proceedings would be by reference to the principle of proportionality and rigour of scrutiny.
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Issue 5
To remove the requirement for details of ADR bodies to be provided by businesses on invoices and receipts. But businesses would still need to provide information of an
ADR body that covers their transactions and then to state whether they commit to use
ADR.
The requirement for details of ADR bodies to be provided by businesses on invoices and receipts should be removed. This requirement is excessive and gives undue prominence to
ADR information over other statutorily required information. Businesses could provide the necessary information in their terms and conditions of sale and on their websites. As consumers become more aware of the Scheme, they would look for such information. Also, as suggested previously, a dedicated logo could be a useful indicator of commitment to the scheme.
Issue 6
ADR bodies would no longer be required to publish details of the source of their finance.
In the interests of transparency and the avoidance of conflict of interest, ADR bodies should either be required to publish information about the sources of their funding or be prohibited from dealing with disputes involving products or services of any donor of funds or products and services of a donor’s competitor.
Issue 7
ADR bodies would only have to report to Competent Authorities every 2 years not every year.
Depending upon the amount of detail required, annual reporting can be extremely onerous, expensive and detract from core functions and efficiency. Although more frequent reporting might be necessary for a body that is required to show improvement, it is unlikely that biannual reporting would detrimental to quality of ADR bodies. We would support the easing of the administrative burden that bi-annual reporting would bring.
Issue 8
A requirement that, in the case of cross-border disputes, any ADR outcome should not result in the consumer being deprived of the protection afforded by any mandatory provisions that apply in their Member State.
Consumers are likely to have a good idea of their consumer rights within their home Member
State. Where they are uncertain, they may consult organisations, such as the Citizens
Advice Bureau. In short, consumers’ expectations are informed by the domestic legislation.
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Meeting consumer expectation is essential in encouraging consumer confidence and crossborder trade. Domestic consumer rights must, therefore, be maintained.
From a business point of view, it is reasonable to assume that any business intent upon supplying goods or services in a foreign jurisdiction would research the target market and the laws governing it and adapt its businesses accordingly. It, at least has the opportunity to do so.
The maintenance of consumer protection in the Member State in which the consumer resides would, therefore, meet the expectation of the consumer and business, alike.
Issue 9
To require the Commission to set out guidelines for the implementation of the ADR
Directive and, in particular, with respect to the quality principles for ADR bodies.
The Directive is expressed in terms of principles but is vague on practical detail, especially in respect of implementation and how to achieve the required quality of ADR bodies. Such vagueness provides wide scope for interpretation, potentially leading to huge differences in approach and quality of ADR bodies across Members States. This would undermine the utility of the scheme and defeat its purpose – to build consumer confidence and increase cross-border trade.
The Directive is so vague on implementation of the Directive and the quality of ADR bodies that we had assumed that the suggested guidance would be forthcoming. It is difficult to see how the scheme would work without it. Such will be essential if consistency across member
States is to by achieved, and, therefore, for the scheme to work.
Issue 10
To allow Member States to have more than one Competent Authority with a lead, coordinating authority.
The ADR scheme will cover all cross-border consumer goods and services. This is a very wide spectrum of categories of goods and specialities. The suggestion may allow Member
States the flexibility to provide for different existing authorities to absorb the role of
Competent Authority over their particular sector into their existing functions and/or applying their specialist expertise to the best advantage of the scheme.
Whether there is a need for a co-ordinating authority remains to be seen. A forum of competent authorities of equal status might serve better, allowing each competent authority to apply its expertise to best advantage, allowing for a margin of appreciation within the different sectors, while promoting consistency. If a co-ordinating authority is necessary, it should be an existing authority with lengthy experience of regulation, if the scheme is to succeed in the short term, rather than a newly established (‘naïve’) entity.
Conclusion
The further issues raised have identified various lacuna within the Directive, which it is essential to address if the scheme is to achieve its goals of improving consumer confidence and increasing cross-border trade.
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We agree with the thrust of all of the issues as expressed, except Issues 1 and 6. In relation to Issue 1, we believe that it is illogical and to the disadvantage of consumers to omit businesses from the scope of the legislation; in relation to Issue 6, we believe that information about funding of ADR bodies is important for the sake of transparency and to openly avoid the suspicion of conflicts of interests.
David Simpson
Barrister
20 February 2012
If you require further input from the AAT, please contact:
Aleem Islan
Technical Manager
Tel: 020 7397 3088
Email: aleem.islan@aat.org.uk
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