Draft Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I beg to move,
That the Committee has considered the draft Alternative Dispute Resolution for Customer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020.
It is an absolute pleasure to serve under your first of many chairmanships, Dr Huq.
The draft regulations were laid before the House on 29 June, and form part of the programme of work to update our legislative framework in readiness for the end of the transition period. We want a relationship with the European Union that is based on friendly co-operation between sovereign equals and centred on free trade. We will have a relationship with our European friends inspired by our shared history and values, and it is important to ensure that retained EU legislation continues to work effectively in the UK immediately after the transition period.
We have a strong framework of consumer rights in this country, which gives most consumers the confidence to settle any disputes directly with businesses—and they do; around six in 10 disputes are resolved directly with the business. However, we know that when resolution is not achievable directly, many consumers would prefer a way other than court action to settle their differences with businesses.
Alternative dispute resolution, known as ADR, helps consumers to resolve complaints with traders by providing a confidential and objective method for tackling disputes without going to court. More than 2.5 million disputes have been resolved through ADR in the past six years. Research by the Department for Business, Energy and Industrial Strategy found that 80% of consumers who used ADR thought that their problem would not have been resolved without it. The draft regulations we are considering today have no impact on the provision or quality of ADR, nor do they alter substantive consumer rights and protections available to UK residents more generally.
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 directive no longer applies to the UK. It amends four pieces of legislation that implement the EU ADR directive. Those four pieces of legislation extend the time limit for bringing court proceedings when a consumer is engaged in non-binding ADR. Those extensions of the time limit allow the ADR procedure to conclude and, if it has not been successful, give the parties an eight-week grace period to commence court proceedings thereafter. That ensures that the parties are not prevented from initiating judicial proceedings where the court time limit expires during or just after the ADR procedure.
The extensions will continue to apply, but, as a result of the draft regulations we are debating today, they will apply only where the consumer is resident in the UK and the ADR provider is approved under the UK’s ADR regulations. Provided those conditions are met, time limits will continue to be extended for consumers resident in the UK whether the trader is based in the UK or the EU, as is the case now.
The changes reflect those that have already been made to section 140AA of the Equality Act 2010, which also implements the ADR directive, via a separate instrument, the Equality (Amendment and Revocation) (EU Exit) Regulations 2019, which has already been approved by this House. The draft regulations before this Committee are 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.
Most disputes involving UK consumers will not be affected by the draft regulations, which do not otherwise affect the ability of any consumer, whether resident in the UK or EU, to apply to the UK courts or to use ADR. Furthermore, the transitional provisions ensure that, where consumers have begun ADR proceedings before these draft regulations come into force, any extensions entailed will be unaffected.
As part of that process, officials from the Department have undertaken the appropriate assessment of the impacts of this instrument. That shows that there is likely to be a negligible impact on business, because the amendments do not bring about a wider policy change or impose any new liabilities or obligations on any relevant businesses, organisations or persons.
In conclusion, this instrument is a sensible and necessary use of the powers of the European Union (Withdrawal) Act 2018, which will ensure that the law in this area continues to function effectively after the transition period. I commend the draft regulations to the Committee.
Paul Scully
I thank the Committee for its consideration of the draft regulations, and I thank the hon. Member for Newcastle upon Tyne Central—I did promise to celebrate Newcastle, in the spirit of collaboration—for her valuable contribution to the debate. To be clear, nothing in the regulations changes which sectors are covered by ADR or the obligations on businesses to engage with consumers. They are limited in their scope to short-term extensions of the time limits for court proceedings where necessary, to give the parties the opportunity to resolve their differences through non-binding ADR.
The hon. Lady asked about the few cases that the regulations affect. That is when cases are getting up to the time limitation—typically six years—so that involves the lengthiest cases, if something has not been resolved by that point. Although it is estimated that 2.5 million cases have been resolved by ADR over the past six years, there are very few at the end period. Most disputes will not be affected by the regulations, and the transitional provisions have ensured that any extensions that have already taken place will also be unaffected by this SI. It avoids inconsistency in the statute books.
Essentially, the hon. Lady asked a few questions about what would happen with EU citizens, UK businesses working abroad and EU companies. UK law still applies to services targeted at UK consumers and UK businesses, so they would have the UK statute book to help protect them within that remit. Without the introduction of the SI, UK legislation would continue to provide EU consumers with flexibility in relation to the extension of court time limits, but it is not clear at this stage whether UK consumers would retain that benefit in member states.
Yes, we want to ensure that we can work through reasonable co-operation with the EU—as sovereign equals, as I said—because we have no intention of lowering standards. The political declaration sets out the parties’ ambitions to work together to safeguard high standards of consumer protection, but our high standards are not dependent on EU membership. The UK has often led or gone beyond the minimum requirements set out by EU consumer law. For example, in 2015, the UK brought digital content within the scope of consumer rights for the first time. We are seeking an agreement with the EU that is like those the EU has struck with other friendly countries, such as Canada. Effective co-operation on consumer protection will be an important part of the UK’s future relationship, and it is in the interests of all parties in that regard. We are examining ways to continue and enhance global co-operation on consumer protection, and the Competition and Markets Authority will continue to take an active role in international forums.
The hon. Lady asked about enforcing consumer rights. I have talked about the fact that UK consumer rights are stronger than those in many other EU countries, and compliance with the law is considered high. Some 84% of consumers think traders respect their rights—the joint-highest rate in the EU—and 79% of traders think their competitors comply with consumer law, which is the highest rate in the EU. We have excellent consumer advice organisations, such as Citizens Advice and Resolver, which can guide consumers in pursuing a complaint and provide data that reveal patterns of behaviour that might require a public enforcement response. That suggests that, for the majority of consumers, the current framework works well most of the time. I must say it is important that we continue to strengthen our consumer rights, and we do not take that lightly at all.
I come back to the fact that current domestic consumer protections relating to ADR will remain the same. The European Union (Withdrawal) Act maintains provisions on ADR that derive from the EU directive. The draft regulations ensure that the consumer rights framework continues to function effectively once the EU ADR directive ceases to apply to the UK. I hope the Committee will approve the SI.
Question put and agreed to.