0344 324 5242 / info@hiesscheme.org.uk

Proposals For Arbitration of Microgeneration Certification Scheme Disputes

We are fundamentally opposed to the proposal to establish a separate MCS arbitration scheme.
We believe that the proposals have not been properly considered, risk undermining existing provision of alternative dispute resolution, will add to consumer confusion and are unlikely (as set out) to be compliant with European Union law.

We have a number of observations on the specific proposals.

In this industry, the consumer is at a very significant disadvantage. These are technically complex transactions that, broadly speaking, consumers do not understand well. This means that, if interested, consumers tend to take the assurance of the company salespeople.

For these reasons, we believe that it is essential for the renewable industry to be successful that the consumer protection flaws of the Renewable Energy Consumer Code (RECC) are addressed. This must include for mandatory requirements that:

  • Installers are fully independently vetted
  • Consumers have access to free, independent advice
  • Deposits are fully protected by insurance
  • Consumers receive a comprehensive insurance backed guarantee with every installation
  • Consumers have access to free independent inspectors, mediators and specialists at technical complaint resolution
  • Consumers have free access to an independent Ombudsman who can resolve disputes
  • The Ombudsman awards should be underwritten by a Compensation Fund

In our view, the above features should be the cornerstone of effective consumer protection in this industry. It is clear that RECC do not provide this level of protection, which we believe is what may lie behind the proposals set out in the consultation paper. However, the paper goes on to propose a solution (being a separate arbitration scheme) without addressing the problem or even acknowledging the problem.

In our view, the lack of comprehensive alternative dispute resolution through RECC ought to be addressed by reforms to RECC and not the provision of an additional scheme.

We note that the perceived need for an additional scheme comes from the fact that RECC refuse to investigate or provide dispute resolution on some key aspects of the consumer experience with installers. These include disputes concerning:

  • Electrical or safety issues
  • Incorrect performance estimates
  • Poor workmanship
  • Repair work
  • System design
  • System faults that arose during the installation process

We also note that RECC refuse to handle complaints against former members even where RECC have taken action to expel the members themselves. This means that when consumers complain to RECC and it is determined to expel the member, the consumer is left to fight their own battle through the courts. That is clearly unacceptable, but providing an alternate arbitration scheme is not the answer.

We can confirm that the HIES scheme will investigate and handle all of these complaints on behalf of consumers of HIES members. In addition, our alternative dispute resolution scheme provides access to quick, effective resolution and is free-of-charge to consumers including mediation, independent inspections and access to the Ombudsman.

Additionally, we confirm that HIES will continue to deal with any outstanding consumer disputes arising about a member even after their membership ceases. The HIES Compensation Fund will also stand behind any Ombudsman decisions where, for whatever reason, the member is unable or unwilling to implement the remedy determined by the Ombudsman.

We find it astonishing that MCS had not considered the provision of alternative dispute resolution by existing providers in the market place before bringing forward these proposals for a new scheme.

We are surprised that the consultation paper makes no reference whatsoever to the arbitration scheme provided by RECC or the Ombudsman Schemes provided by HIES or the Glass and Glazing Federation.

All MCS installations are required to be conducted by a member of a code of practice approved by the Trading Standards Institute (TSI) and yet the consultation paper makes no reference to TSI or their core criteria for approval. In fact, we understand from TSI that they were completely unaware of these proposals, as were Citizens Advice or Ombudsman Services.

The TSI core criteria for approval require:

“That codes shall include the availability of a low cost, speedy, responsive, accessible and user-friendly alternative dispute resolution (ADR) for consumer disputes.

The scheme shall be binding in respect of code members who shall not be able to refuse to allow a complaint to go before the scheme if a customer so chooses and at least 56 calendar days has elapsed since the customer first raised their complaint with the code member.
Any such scheme shall be able to take into account possible breaches of the code where relevant to the complaint.”

TSI go on to provide guidance that the independent redress scheme should be free for the consumer if possible, allow for direct access and must be easily accessible without the assistance of a legal representative.

TSI provide the option of schemes establishing their own ADR schemes or give advance recognition to schemes provided by the Centre for Effective Dispute Resolution (CEDR) or Ombudsman Services Ltd. I can confirm that HIES have elected to appoint Ombudsman Services Ltd to manage and run its ADR scheme from 1st May 2015.

We see no need whatsoever for an alternate approved ADR scheme for the sector when all installations are required to be carried out under a TSI approved code of practice which must itself provide for an ADR scheme.

Your consultation paper mentions the European Union Directive (2013/11/EU) on alternative dispute resolution for consumer disputes. This sets out maximum harmonisation provisions for the establishment and oversight of ADR in the European Union. The approval and notification of such schemes is to be undertaken by competent bodies in each member state and the Directive provides for mutual recognition of such schemes across borders. The proposals as set out in this consultation paper are inconsistent with the requirements of the Directive and would appear to be positioning MCS as a competent body for ADR approval. It is our understanding that the UK government intend to appoint TSI as the general competent body and OFGEM as the sectorial competent body. MCS cannot appoint itself as an alternate approval body for an ADR scheme, when such schemes are required to be approved by the relevant competent authority.

We have some specific observations on the detail of your proposals.

Arbitration we consider it inappropriate to narrow the range of suitable alternative dispute resolution to arbitration under the terms of the Arbitration Act 1996 (line 9). There are other equally effective forms of ADR, not least of which being Ombudsman Services. We have in the past adopted an arbitration based ombudsman scheme, but in light of the ADR Directive, we have elected to switch to an independent ombudsman scheme run for us by Ombudsman Services Ltd. We do not believe that the resolution of consumer disputes under MCS should be limited to arbitration.

Compulsion we consider the requirement that MCS arbitration will be available to all customers holding a contract with an MCS installer (line 19) to be unlawful. This would appear to exclude Ombudsman Services and be contrary to the EU Directive, including provision on mutual recognition of approved ADR providers in other member states. The requirement that MCS installers maintain a separate ADR contract with a provider alternate to HIES, RECC or GGF as potentially TSI approved codes will fundamentally undermine the ADR provisions in those codes.

Fixed Fees we consider that any attempt to fix the fees payable for the provision of ADR services (line 26) is likely to breach competition rules and the EU Directive on ADR provision.
Consumer Contribution – we are opposed to any requirement for the consumer to contribute to the cost of arbitration (line 33).

Separate Arbitration Framework we are opposed to the requirement that Certification Bodies (CBs) operate a separate arbitration framework to the ADR requirements of the Consumer Codes of Practice (line 40). We believe that this will lead to confusion in the industry and consumer confusion.

MCS001 we are opposed to the inclusion of this alternate arbitration provision in MCS001 (line 43). If MCS proceed to include this, we reserve our right to challenge the legality of the provision in mandatory requirements.

Non-Compliance we are opposed to CB’s undertaking a role to police arbitration requirements (line 52). This is properly a role for the consumer codes approved by TSI. In our view, there is already a robust requirement to ensure that ADR is implemented and respected by code sponsors and their members. The disciplinary and sanctions process for failure to comply with the ADR requirements is carefully set out in the scheme rules and the core criteria for approval. TSI regularly audit the code sponsors to ensure that they are meeting these requirements. Providing a role for CB’s to do this would be duplicitous.

12 Weeks (line 65) we note that the industry standard for access to ADR is eight weeks. This applies to the RECC code, HIES code, GGF code and other interested parties such as the Energy Ombudsman and the Financial Services Ombudsman. We consider that eight weeks would be a more appropriate timescale.

1. MCS proposes that, except in exceptional circumstances, customers will not be able to refer a complaint to arbitration until CBs have had 12 weeks to resolve the issue(s) with the parties involved. This is to ensure that every effort has been made to resolve the complaint using the standard complaint handling procedure. Do you think this timescale is reasonable, too short or too long?

No. We think that eight weeks is a reasonable timescale.

2. It is anticipated that most arbitration providers will have their own arbitration application forms and guidance. Do you think it would be helpful for MCS to develop its own standardised forms?

No. We think that the ADR provider should develop information capture forms that are fit for purpose for the ADR provider concerned.

3. Are the proposed fees reasonable? Are the maximum claim values suitable? Are the fees for each party proportionate?

No. Consumers should not face a fee for access to ADR in these circumstances. Our Ombudsman Scheme will consider any claim up to 110% of the contract value or £100,000. We can make arrangements for claims in excess of that amount but different procedures apply.

4. At present MCS does not contain specific requirements for installers to hold minimum levels of professional indemnity or public liability insurance. However, given the cost of potential arbitration awards, do you think MCS should require installers to hold a minimum level of insurance to cover these costs?

This is not correct. All MCS installers are required to hold public liability insurance cover as a condition of membership of a TSI approved code of practice. In the case of HIES members, this must be for a minimum of £10m which ought to be more than enough to cover implementation of remedies.

That concludes our submission. We would be happy to answer any further questions and to participate further in the future development of ADR in this sector.