In this post, Richard Kirkham, Senior Lecturer in Public Law at the School of Law, University of Sheffield, explores the problems with regulation of redress in light of the implementation in the UK of the EU ADR Directive. He argues that this is an issue for all branches of justice, including the administrative justice system, because it is part of a number of reforms raising challenges for values of justice and the rule of law.
by Richard Kirkham
The EU 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.
|Financial Ombudsman Service
Pensions Ombudsman Service
Dispute Resolution Ombudsman
|Home Improvement Ombudsman
Office of the Independent Adjudicator for Higher Education
|The Property Ombudsman
The Retail Ombudsman
The Waterways Ombudsman
|BACTA ADR service (Trade Association)
Motor Codes Ltd (Self-Regulatory Body)
|The Postal Redress Service
Centre for Effective Dispute Resolution (CEDR)
|NetNeutrals EU Ltd
The Independent Parking Committee Ltd (The Independent Appeals Service)
Isle of Man Gambling Supervision Commission
Centre for Effective Dispute Resolution (CEDR)
|The Independent Panel for Casino and Bingo Arbitration|
|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
Centre for Effective Dispute Resolution (CEDR)
Renewable Energy Consumer Code
Small Claims Mediation
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.
Thank you Donal. I fully accept both the ‘correctional’ points. I look forward to hearing more about the proposals to upgrade the criteria for membership.
An interesting article, Richard. Very useful to map the landscape. The Ombudsman Association is acutely aware of the importance of maintaining high standards in the ombudsman sector, of the tension between our long held Principles and the Government’s current policy position, and of the need to ensure our membership criteria is both robust and applied consistently. A piece of work is now under way to support that.
As you did highlight the requirements for a business to use the title ‘ombudsman’, its worth noting that the Property Redress Scheme, which appears in your table under the list of ombudsman schemes, is not a member of the Association so does not meet the Companies House criteria. It might also be helpful for me to clarify that although listed separately, the Dispute Resolution Ombudsman, the Furniture Ombudsman and the Home Improvement Ombudsman are in fact one scheme.