Draft Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc.) (EU Exit) Regulations 2020

Chi Onwurah Excerpts

Monday 20th July 2020 General Committees

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I start by offering my unequivocal support to the Minister in welcoming the opportunity to serve under your chairship, Dr Huq; it is a real pleasure. [Hon. Members: “Hear, hear.”] I hope the debate will be conducted with the same level of mutual support, although I am not sure about that.

Over 40 years of membership of the European Union, the UK has shared responsibility to protect the UK’s consumer rights with EU member states. An extensive body of law has grown up, with more than 90 European directives applying across the single market. The reciprocal rights enshrined in those directives enable UK consumers to seek redress for any poor service they receive anywhere in the EU. Indeed, the UK played a central role in negotiating many of those directives alongside the European Commission, including the alternative dispute resolution directive to which today’s regulations refer.

The ADR directive has made a valuable contribution to consumer confidence across the EU single market by reducing impediments to, and improving cross- border engagement with ADR organisations. The directive has helped UK consumers to avoid some of the more challenging issues about jurisdiction and applicable laws related to ADR that often arose before the directive came into play. That has saved UK citizens and businesses many hours of complex and costly court proceedings. In particular, the time extension provisions—the subject of today’s statutory instrument—have ensured that UK and EU consumers can enter into ADR processes in good faith, without fear of strict time limits to bring a case to court elapsing in the meantime.

We can therefore see that much of the EU’s consumer protection laws and UK national laws are interwoven in a complex and interconnected way. That harmonisation between our domestic and European law has provided us with the comprehensive protection UK consumers need to purchase goods and services with confidence, which has in turn bolstered trade across the single market, including here in the UK. While the Government’s withdrawal Act attempts to mirror in UK law the individual consumer rights that operate within the EU, it cannot guarantee the protection of UK consumers’ rights when they visit the EU27 after the transition period, nor can the UK Government assure UK consumers of continued access to the shared network of agencies, mechanisms and infrastructure that polices, secures, develops and underpins consumer confidence across the EU single market.

In short, the harmonised reciprocity of consumer protections we have enjoyed as members of the EU will come to an abrupt end once we leave the transition period, yet the Government are not clear about what comes next. We know that talks with the EU have been stalling, and as we move closer to the end of the transition period, it looks increasingly unlikely that the Government will be able to negotiate a post-Brexit relationship that continues to protect consumers’ rights for UK residents in the same way. That added uncertainty comes on top of the business interruption and drop in consumer confidence that we have seen as a result of covid-19.

Labour is concerned that without reciprocal obligations to investigate breaches of consumer law and progress with necessary enforcement actions between the UK and the EU, the Government will leave UK consumers unable to seek redress from EU-based traders in UK courts when things go wrong. There is every chance that divergence between UK and EU consumer law will become even more pronounced over time without proper oversight from the Government, which would have a significant impact on consumers and businesses and burden cross-border transactions and recourse processes with unnecessary red tape.

With the possibility of a no-deal Brexit and an economy hit by covid-19, Labour calls on the Government to take a more proactive approach to protecting UK consumers by agreeing mutual recognition rules, underpinned by a standard equivalence principle, as a matter of urgency. The Government may say that they want high regulatory standards and robust domestic market surveillance after the transition period, but they have slashed funding to frontline trading standards services by more than 50% in just over seven years. That has led to potentially dangerous counterfeit cigarettes and unsafe toys and electrical products entering our homes. The UK’s largest market surveillance authority and regulatory service, the Chartered Trading Standards Institute, recently said:

“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.”

The regulations remove all reference to the ADR directive from four pieces of EU-derived legislation. Of course, Labour accepts that it is a broadly technical instrument designed to ensure that EU law does not apply after the transition period has come to an end, but it excludes two key groups of people from the ADR-related time-limited extension: first, EU-based consumers buying goods and services in the UK and, secondly, UK-based consumers buying goods and services in the EU. It will ultimately mean that UK consumers are protected by the time-limited extensions only when working through ADR organisations. Will the Government seek to address that and ensure that all consumers are protected in the UK?

The Government estimate that the changes will affect about 131 ADR cases per year that are five years old or older, but it is not clear how those figures have been arrived at or what the total value of those cases might be. Can the Minister take this opportunity to show how the figures have been calculated? Can he outline clearly the Government’s plans to protect UK consumers when making purchases of goods and services in the EU, and vice versa, if the statutory instrument comes into force?

Labour has noted, and is grateful for, the European Statutory Instruments Committee’s intervention on the grounds that the diminution of rights to the time limit that the Government are proposing is significant, alongside the fact that the legislation being amended is mostly primary legislation. That Committee deemed it appropriate to upgrade the instrument to an affirmative resolution, and a debate will take place in Parliament after the recess.

Labour has always strongly supported giving consumers and businesses every opportunity they need to reach mutually beneficial dispute settlements. Mediation and conciliatory processes supported by third-party ADR organisations are informal, flexible, low-cost and user-friendly compared with court proceedings. The Government must make sure that UK consumers and businesses have an equally straightforward route to ADR and that any such access comes with similar provisions to ensure that parties are not caught out by time limits when entering into them in good faith.