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House of Lords Hansard
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Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020
16 September 2020
Volume 805

Considered in Grand Committee

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That the Grand Committee do consider the Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020.

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My Lords, these regulations were laid before the House on 29 June 2020.

We want a relationship with the EU based on friendly co-operation between sovereign equals and centred on a trading relationship based on free trade agreements like those the EU has concluded with a range of other international partners. We will have a relationship with our European friends inspired by our shared history and values. These regulations form part of the important and necessary programme of work being done to ensure that retained EU legislation continues to work effectively and as intended in the UK immediately after the transition period.

Consumers in the UK enjoy a strong framework of statutory rights which enable them to enter into contracts with traders safe in the knowledge that they are protected by the law. These rights help to maintain a fair balance between consumers and business and, in most cases, help consumers to resolve disputes with traders directly. Where resolution cannot be achieved directly with the business, we know that consumers would prefer to have alternative methods of tackling disputes that do not involve the cost or complexities associated with court action.

Alternative dispute resolution, known as ADR, provides a strong alternative to court action by enabling parties to settle a dispute in a favourable manner with the help of an independent third party. ADR is often quicker and cheaper than legal proceedings and, depending on the type used, can produce binding decisions.

I emphasise that these draft regulations have no impact on our access to, or the quality of, ADR in the UK. They also do not alter wider substantive consumer rights and protections available to UK residents, which also remain unchanged.

The regulations are narrow in scope and primarily concerned with the extension of the time limit for bringing court proceedings. They will amend four pieces of legislation which implement EU ADR directives that will no longer apply to the UK following the end of the transition period. The four pieces of legislation currently provide a short extension to the statutory time limit for bringing court proceedings where a consumer is engaged in non-binding ADR with a trader. These extensions allow the ADR procedure to conclude and provide parties with a conditional eight- week grace period to launch legal proceedings if they are not satisfied with the outcome of the ADR procedure. This ensures that parties do not lose their ability to pursue legal action if the time limit for doing so expires during or just after the completion of the ADR procedure.

It is important to highlight that these extensions to the time limit will continue to apply following the transition period but, as a result of this SI, extensions will apply only where the consumer is resident in the UK and the ADR provider is approved under the UK’s ADR regulation. If both conditions are met, the time limits for initiating legal proceedings when engaged in ADR will continue to be extended for UK-resident consumers, irrespective of whether they are interacting with a trader based in the UK or the EU.

The regulations substantively mirror the changes made by the equality exit regulations, which this House has already approved, to Section 140AA of the Equality Act 2010, which provides for extensions of time limits in the case of claims of discrimination relating to consumer disputes. The instrument before the Committee today is designed to ensure that a consistent approach is taken across the statute book to all rules on extensions of time limits deriving from the ADR directive.

These regulations will have no detrimental impact on the majority of disputes involving UK-resident consumers. They also do not otherwise affect the ability of any consumer, whether living in the UK or the EU, to apply to the UK courts or to use ADR as a means of dispute resolution with a trader. Moreover, transitional provisions have been included to ensure that any extensions that have begun before the regulations come into force continue to apply.

My departmental officials have undertaken the appropriate assessment of the regulations’ impact on businesses and relevant bodies. This showed that any impact is likely to be negligible because these amendments do not bring about a wider policy change or impose any new liabilities or obligations on any relevant business, organisations or persons.

In conclusion, the regulations are a necessary and appropriate use of the powers in the withdrawal Act to ensure that this area of law continues to operate as intended after the transition period. I therefore commend them to the Committee.

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My Lords, the regulations are welcome and necessary to enable consumer rights under EEC regulations to be protected before the end of the transition period. It is important to ensure that EU legislation continues to work effectively in the UK after the end of the transition period.

While 60% of consumer rights disputes are settled directly with the business or supplier concerned, where these are unresolved most consumers would still prefer an alternative to formal litigation. The eight-week grace period after a failure to settle a dispute through an alternative dispute procedure and embarking on legal proceedings is welcome. It will help to ensure that the UK and EU consumers can enter into ADR processes in good faith, without fear of strict time limits to bring a case to court.

This is a sensible approach and a good beginning to protecting consumer rights before the end of the transition period, but there is a long way to go in meeting the challenges of wider consumer protection, covering nearly 100 directives on consumer rights. This will not be helped by the recent souring of relations between us and Europe. The EU consumer protection laws, which we helped to frame over 40 years, enable us to purchase goods and services with confidence and enhance our trade with the EU. We still have a long way to go in our increasingly fraught negotiations with Europe to preserve those rights. There is also a need for more resources to ensure compliance with our new independent standards.

I close with the words of the Chartered Trading Standards Institute:

“Much has been made of maintaining the UK’s post-Brexit standards of regulation, but rules without resources for application, advice and enforcement are rendered ineffective and detrimental to the UK economy.”

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My Lords, over the last 20 years I have represented many thousands of people in what would accurately be described as alternative dispute resolutions, in a range of different ways. I see nothing amiss with this very sensible proposal. However, I want to press the Minister on the current situation and some of the likely ongoing disputes, in view of experiences I have had in recent times.

One problem I have encountered is the return of goods. Some suppliers have been remarkably reticent in acknowledging electronic communication, and consumers visiting their premises to return goods find that those premises are closed—a new scenario that potentially weakens the consumer’s position. I wanted to ensure that there is no hidden detriment in any way to those disputes where the goods supplier makes themselves unavailable. This is obviously severely compounded by their ability to do so at the current time.

The second is much more common, and concerns services—for example, airline services—and cancellations of airline and other transport services and comparable bookings due to the current crisis and for no other reason. Again, some airlines and third-party travel agencies have been highly responsive. Others have been highly unresponsive, with huge delays even in acknowledging requests for refunds. It appears that there is a danger in some cases of this potentially going on for many months and becoming protracted. An example would be if one were to cancel a Christmas booking now. There are all sorts of issues regarding what the rules for Christmas will be, whereas the rules for airlines seem much more precise.

As regards the Government’s thinking on this, does this legislation have any impact other than pro consumer, with the additional time allowance built in, or would it be accurate to entirely phrase this legislation as an additional time opportunity for consumers seeking redress through alternative dispute resolution without the need to go to court in these difficult times?

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My Lords, alternative dispute resolution regulations are being made because of the UK exiting from the EU. This statutory instrument will ensure that ADR continues to work as intended after the end of the transition period in a context in which the EU’s ADR can longer apply to the UK. The regulation will give extra time to allow the ADR procedures to conclude, and if it has not been successful, will give the parties an eight-week grace period to commence court proceedings thereafter. This protects the parties, who are not prevented from initiating additional proceedings where the court limit expires during or just after the ADR procedures. The effect of the regulations will protect both UK and EU-based consumers buying goods and services in the EU. It will ultimately mean that UK consumers are protected by the time limit extensions only when working through ADR organisations.

Everything I have said today shows the huge number of consumers and organisations that will be affected by our withdrawal from the EU. The EU is our biggest market, and the withdrawal from the EU is, in many people’s minds, the biggest error and self-harm that the Government have imposed on the country. History will record how the politics of our EU exit has harmed the richness of our country. Unemployment and closures of our industries will remain scars for a very long period.

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My Lords, I declare my position as a practising lawyer, and I am pleased to contribute to this scrutiny process today. As a former member of the House of Commons Secondary Legislation Scrutiny Committee, I have always been clear that the use of SIs by government is to be carefully and thoroughly monitored, and the effects of Brexit have resulted in large numbers of instruments coming before us, many of which will be rightly deemed subject to affirmative resolution and worthy of further debate or inquiry. With nearly 300 more instruments on their way, this will place an enormous burden on Parliament, but we must not allow the pressure of numbers to lessen our duties of proper scrutiny. I appreciate that the process does not permit us to reject an instrument, so it is all the more important that any concerns and inquiries about the operation of provisions are raised with our Ministers using the opportunity that occasions such as this afford us.

On the matter before us, most disputes involving consumers and businesses are, thankfully, settled amicably, but there has always been a need to try to find a middle course before resorting to court action, which is inevitably complicated, expensive and necessarily delays the outcome. That is where alternative dispute resolution has been so useful. I am pleased to hear that we are not planning to change the basics of the system through this instrument, although extensions to time limits for bringing court proceedings with eight weeks’ grace is of significance. Of course, the basis of ADR comes, as do so many other civil law initiatives, from European Commission directives, to which the UK contributed in a leading way. As a result, in the case of ADR, we have built up a positive cross-border engagement covering consumer rights in a very international environment. This covers the protection of consumer rights everywhere and anywhere in the EU.

There is a complex and interwoven system in the single market, supported by nearly 90 EU directives, which has been greatly to the benefit of consumers here and across the European Union. My first question to my noble friend is therefore: the Government state that this SI changes nothing regarding the protection of UK consumers, but how will we be able to guarantee the protection of consumers’ rights when they visit the EU 27 after January next year? Secondly, how will UK consumers avail themselves of the services of agencies and the infrastructure in place across Europe, which is currently their right? Thirdly, we currently enjoy full reciprocal rights with our European neighbours, which includes investigation of breaches of consumer law. How will UK consumers obtain redress from these businesses and traders based in the EU through our UK courts, to which they will have to apply solely in future?

Cross-border ADR will presumably be lost to UK consumers. I have to say to my noble friend that in this field, a statutory instrument such as this is only one half of the post-Brexit story. To ensure ongoing consumer protection, we surely need at least mutual recognition rules within the EU 27. Without that, our UK consumers, whatever the Government may say, will be greatly disadvantaged in the future. Finally, in the time-limited extension provisions in this SI, two important groups appear to be excluded: EU-based consumers transacting business or obtaining goods and services in the UK, and UK-based consumers transacting business or obtaining goods and services in the EU. Can my noble friend offer us all the reassurances that we would like to have on these apparent omissions?

I realise that our opportunity to debate this SI is not based on the matters I have concentrated on, being of major concern to the European SI Committee, which was concerned then about the diminution of rights relating to the time limits before court proceedings and the linked legislation being primary in nature. However, I am nevertheless grateful for this opportunity, and I hope that it will be extended to many more items of secondary legislation from the very long list.

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My Lords, the UK had a tradition of alternative dispute resolution before the EU ADR directive. As has been indicated by the noble Lord, Lord Kirkhope, UK MEPs played a significant part in achieving the passage of the EU legislation. It was not just an extension of the applicable territory that the UK gained through the directive. As I understood it, there was an extension of timing possibilities for factions so that, if ADR was unsuccessful, the matter could still be taken to the courts. That was a useful addition to the law and I am glad that it is being kept, although it appears it is now being reduced, so that it is applicable to UK residents only, as a consequence of Brexit.

UK-based ADR organisations will also no longer be required to act in cross-border disputes, and the UK competent authorities that approve ADR providers will no longer be required to report to the European Commission on the state of ADR activity. I note that result with sadness, for both UK consumers who will—as indicated by the noble Lord, Lord Kirkhope—lose some access, and ADR organisations, which would appear to be losing work. The reciprocal effect will happen, so EU residents will no longer be able to exercise cross-border ADR rights in the UK. I wonder whether this will promote a change in online trading patterns and possibly the reintroduction of liable inter- mediaries and higher costs, or influence trade to go elsewhere, with less cross-border trade.

Given that statistics have been collected in the past, it would be interesting to know how many ADR claims UK residents have made relating to the remaining EU member states and, conversely, what volume of ADR cases EU residents have pursued in the UK.

Online dispute resolution is also being lost and is not really covered by this instrument. That platform is run by the Commission and I understand that, at the end of the implementation period, access to it will be lost. It is disappointing that there appears to be no UK substitute. I have read that the dispute resolution provisions tend not to have been as widely displayed as they should in the UK, but that is not really an excuse to abandon them, never to be returned. Therefore, can the Minister say whether this is a long-term abandonment or if there are plans for replacement?

Coronavirus has increased the amount of online trading and much of that trend is likely to be permanent, being just an acceleration of a trend that was already under way. It makes sense, in a modern digital world, to have a modern digital way for consumer redress mechanisms. Similarly, as I asked before about statistics, does the Minister have any numbers for the volume of online disputes relating to UK consumers?

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My Lords, I thank the Minister for his clear introduction of the SI. All noble Lords have taken his point that the intention is not to change the existing arrangements as they affect UK residents in relation to ADR, but to provide an additional safeguard for the extension of time because of the transition period. However, I am no different from the other speakers in that it raises a wider question about how ADR is conceived and operates in the UK, and what the future might bring.

My first point is directly related to that, because the Minister made a strong plea for ADR as a strong alternative to court proceedings and, therefore, a valuable asset for consumers and consumer rights. That depends on whether the ADR systems in place are active, efficient and serve customers well. Noble Lords will recall that, when the original directive was going through, this side of the House spent a considerable amount of time and effort trying to persuade the Government—unsuccessfully, in the end—that, when the directive is transposed, we ought to take a hard line against industries that are either slow to take up an ADR system or produce one with weak and ineffective operations. It may be wrong to require ombudsman services to be set up, but they seem to be a gold standard in many areas. Where they work well—financial services is a good example—they provide a mechanism that has the confidence of consumers and is effective in getting results for them, so they do not have to go into the aggressive atmosphere of courts.

When he responds, could the Minister give us a tour d’horizon of consumer areas, at the moment? The noble Lord, Lord Mann, mentioned some topical areas where he felt there were some doubts, and many noble Lords will be aware of the situation affecting the vouchers that have been offered by airlines and other transport operators when tickets have been cancelled. My personal experience is that this is patchy at best: some are very good and able to respond within a few days; some have been a nightmare. I am still not certain whether I have a voucher waiting to be delivered to me, even though the company—I shall not name it—keeps putting on its website that significant progress has been made in getting through the backlog and that it is all going well. It is funny that no voucher ever seems to arrive.

My second point is a narrow one about what is happening with legislation. As I understand it, this SI amends primary as well as secondary legislation, in pursuit of what is a not objectionable objective. I noticed, in the instance I was pursuing, two primary legislative issues—one in Scotland and another in Northern Ireland. However, when I looked at the consultation process, I could not see anything reflective of the sort of discussion and debate that one might have expected from legislation that affects devolved Administrations, in particular Scotland and Northern Ireland. The reference in paragraph 10 of the Explanatory Memorandum simply says that the department wrote to the Department for the Economy in Northern Ireland to seek agreement with the Northern Ireland Executive to make the instrument, and the department confirmed its agreement on 10 February.

Why is nothing mentioned about Section 14 of the Prescription and Limitation (Scotland) Act 1973, or am I missing something? There would have been a case for the Minister to be in correspondence with his counterparts in Scotland on this issue, even if it was only a courtesy. Presumably it is legislation that took place before devolution, but I think it is important to keep the niceties going on these issues.

My third point picks up that made by the noble Lord, Lord Singh, about how this works in practice. Consumers are relying on ADR but, in many cases, can do this only if the issue at hand has been subject to work, particularly by trading standards. We all know trading standards is under considerable pressure and has had additional responsibilities placed on it recently, but little additional resources flow its way. Could the Minister reassure us that trading standards is resourced effectively to do this work and will be able to pick up any additional work that results from this directive? I suspect that it will not be significant.

The point of the noble Lord, Lord Kirkhope, about consumers’ ability to get redress in the EU is important. I appreciate it is not relevant to the strict wording of this SI, but it will be an issue that people pick up. I cannot be the only person who gets nervous—this point was also made by the noble Baroness, Lady Bowles —when I buy something from a well-known deliverer of books, the name of which starts with “A”. I often find that the purchase I have made for my Kindle is delivered from Luxembourg.

I had not thought about the connection but the noble Lord, Lord Kirkhope, and the noble Baroness, Lady Bowles, made it very clear that that will be a problem if I want to exercise my rights in future about anything that might go wrong. Fortuitously, as far as I am aware, nothing has gone wrong so far, but in an imperfect world we cannot always be certain that that will be the case. Could the Minister give us some words about how he thinks this will develop? Clearly, if the noble Lord, Lord Kirkhope, is right, we are seeing a considerable diminution in the ability of UK consumers to exercise their rights when they choose to buy from our closest trading partner—the EU. Is that where this is going? Is there anything the Minister can say that would help us?

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I thank all noble Lords for their valuable contributions to this brief debate.

I reiterate that these regulations are extremely limited in their scope, to only the short-term extensions of the time limit for court proceedings for consumer disputes. They do not remove the ability for any consumer, whether resident in the UK or the EU, to use ADR in the UK or to access our courts. Disputes involving consumers resident in the UK should not be affected, and the transitional provisions avoid disruption in any case where consumers have commenced ADR proceedings before the draft regulations came into force.

These amendments are necessary as a result of the ADR directive ceasing to apply in the UK when we leave the EU and to prevent inconsistency in the statute book given the changes already made by the equality exit regulations. If these amendments are not made, EU consumers may continue to benefit from the possibility of an extension which might not be available to UK consumers within the arrangements in place in remaining member states.

The Government remain firmly committed to maintaining the high standards from which UK consumers have benefited for many years, and these regulations do not hinder these in the slightest. I reassure the noble Lord, Lord Kirkhope, that our high standards are not and never have been dependent on EU membership. The UK has often led and in most cases goes well beyond the minimum requirements set out by EU consumer law. We also have many excellent consumer advice organisations that guide consumers in pursuing complaints against traders. All of this suggests that for the majority of consumers the current framework works well.

I can also reassure the noble Lords, Lord Mann and Lord Stevenson, that nothing in these regulations has any effect on existing consumer rights, whether the return of faulty goods or refunds for travel or airline tickets. They are all dealt with under separate legislation. It remains the case that many suppliers have offered vouchers for holidays, flights, et cetera, but it is entirely up to consumers whether they choose to accept them. There are separate regulatory and statutory frameworks governing those rights. I reiterate that none of that is affected by this SI.

This legislation is limited purely to the additional time for consumers seeking redress. It allows for short-term extensions to the time limits for court proceedings where that is necessary to give the parties the opportunity to resolve their differences through non-binding ADR. It enables the existing rights to an extension to work effectively after the end of the transition period. We are proud that Britain’s consumer protection regime is among the most robust in the world; the UK has a strong history of protecting consumers in its own right. UK consumers will of course continue to enjoy excellent rights after transition.

The noble Lord, Lord Kirkhope, raised the important question of how the Government will guarantee that consumers will be protected when buying from EU-based traders post implementation period. This point was also made by the noble Lord, Lord Stevenson, with his reference to “the big A”. The noble Lord raised the important point of how consumers will obtain redress in the UK courts from traders based in the EU following the transition period.

Consumers resident in the EU will continue to be able to resolve disputes with UK businesses directly, will be able to use ADR as long as the ADR provider is available to them, and will retain access to the UK courts. EU-based companies selling their products or services in UK-regulated markets must comply with all UK regulatory requirements. In the regulated sectors, this would include compliance with sectoral rules and requirements around the offer of ADR or other forms of redress to their customers. In future we want a relationship with the EU based on friendly co-operation between sovereign equals, centred on a trading relationship based on free trade agreements like those the EU has concluded with a range of other international partners.

The noble Lord, Lord Stevenson, asked about the scope of ADR. My department has announced its intention to review various areas of the consumer enforcement landscape. We intend to bring forward a package of reform to make it easier and quicker for consumers to use ADR services. On his question about engagement with the devolved bodies, this is a consumer protection measure and is reserved, except for Northern Ireland. That has driven the focus of our engagement. As I said, we want a relationship with the EU based on friendly co-operation.

The noble Baroness, Lady Bowles, asked about statistics. Over 2.5 million disputes have been resolved through ADR in the past six years. BEIS research found that 80% of consumers who used ADR procedures thought their problem would not have been resolved without it. We consider that a success story. We will always closely examine areas of the dispute resolution landscape which are not working for consumers and lay out our proposals for reform.

The draft regulations we are considering today do not dilute consumer rights and protections by any means, and merely form part of a programme of legislation required to ensure that retained EU law is workable and free of deficiencies after the end of the transition period. With that, I commend these draft regulations to the Committee.

Motion agreed.

Sitting suspended.