Alternative Dispute Resolution, also referred to as ADR, is another way of resolving disputes between parties without having to go through the Court process. In the UK, there are several different ADR schemes available in regulated sectors including but not limited to: financial services, energy, and telecoms.

The development of ADR is now encouraged by the government because it is cost-effective and provides an easy access to solving disagreements quickly. The ADR process is also confidential, more flexible, less stressful, and users may receive compensation as a result of this procedure. 

Alternative Dispute Resolution for Consumers

In March and June 2015, two sets of regulations were put into place in the Parliament to implement the European Directive. These regulations, which came into force on 9 July 2015, are:

The Alternative Dispute Resolution (ADR) for Consumer Disputes (Competent Authorities and Information) Regulations 2015

The Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015.

The guidelines place an information requirement on businesses selling to consumers, establish competent authorities to certify ADR schemes, and set the standards that ADR scheme applications must meet in order to attain certification.

If a consumer has a dispute, they should expect the trader to provide a name and website address of an approved ADR body in their business sector, and advice if they are able to engage in the ADR process. If the trader’s internal complaint-handling procedure cannot settle the dispute, the trader must also provide a statement to prove this or be prepared to submit to an ADR procedure.

Although traders do not have to agree to use ADR for consumer disputes, they are required to offer information about ADR.

For instance, a simpler form of ADR is direct negotiation which often leads to a solution. Where it doesn’t resolve the dispute amicably, a range of options are available.  

Forms of ADR

The most common forms of ADR are mediation and arbitration. With mediation, an independent third party usually helps the two disputing parties focus on the issue and consider the best way of solving it. The mediator considers the needs of both sides before coming to a mutually acceptable outcome.

Arbitration involves an independent third party, typically from the Chartered Institute of Arbitrators, who takes into account the paper evidence from both sides before coming to a decision. This judgement is legally binding, and the dispute cannot be later resolved at Court if you don’t agree with the outcome.

Other forms of ADR include conciliation and ombudsman services. Conciliation is often free to use and is normally the first offer of resolution. It involves a conciliator who aims to reach an agreed solution for both parties on either side.

In consumer cases, the contract you have with a trader generally asks you to use their own conciliation service before using an independent arbitration. Local trading standards officers may also offer a conciliation service and are mostly able to refer you for help.

Sometimes, conciliators and mediators can be employed by the organisation the consumer is complaining about, but they are trained to be impartial and assist both sides to reach a fair agreement.

Ombudsmen are free for consumers to use, but traders must pay. This type of ADR can cover many different types of companies, including financial services, such as the following: banks and building societies, insurance companies, and energy and telephone companies. Financial service consumers can insist that their complaint be decided by the Financial Ombudsman Service.

Consumers can only use an ombudsman if they’ve first used the organisation’s internal consumer complaints service. If you’ve waited longer than 8 weeks since you’ve made a complaint, then it should be taken to an ombudsman with paper evidence, so that they can make a ruling.

A financial ombudsman can order a company to do something due to holding greater legal powers. Whereas an ombudsman who deals with energy, communications and property complaints can only make a recommendation to traders.

Why use Alternative Dispute Resolution?

There are many advantages to using ADR without having to resort to legal actions. Some of the main reasons parties resort to using ADR is because it is cheaper than going through the Court process and disputes are often handled more efficiently. Moreover, the Court may not look fondly upon parties who refuse to engage in alternative dispute resolution if it could have been seen as a way to resolve their dispute. In these cases, legal costs sanctions may apply.

Since British consumers are rapidly active online, including across national borders, the European Regulation on Online Dispute Resolution is also available.

This regulation, which came into law in early January 2016, helps UK consumers and consumer services receive greater access to redress, if anything goes wrong with purchased goods or services.