How a no-deal Brexit may affect UK consumer rights
5th November 2018
On 12 October 2018 the UK Government published a number of technical papers regarding the effect of a no-deal Brexit. These included a paper on consumer rights if, by 29 March 2019, the UK fails to conclude a withdrawal agreement and the UK leaves the EU with no transition period.
Whilst UK consumer rights are generally expected to remain the same as that of the EU on ‘exit day’ (the EU (Withdrawal) Act 2018 will ensure consumers do not lose out on any current protections they currently enjoy), there are a number of specific implications of a no-deal Brexit to consumers, including the ability for UK consumers to bring a claim against a member state in the UK, the ability to enforce a decision a UK court decision in the retailer’s member state and UK consumers would no longer have access to the EU Commission’s online dispute resolution (“ODR”) platform.
See the UK’s Government’s full technical note here: Consumer rights if there’s no brexit deal
We consider below the impact of a no-deal Brexit on consumer rights and what this means in practice for retailers.
Consumer rights in the UK
- consumer protection and cross border enforcement – there is currently cooperation between the UK’s Competition and Markets Authority (“CMA”), the UK courts and their counterparts in EU member states to ensure reciprocal enforcement of consumer law across the EU. If a UK consumer purchases goods or services from another member state and has a problem, the UK consumer can use UK law and the UK courts to seek redress and a UK court decision would be recognised by the member state in question. However, if the UK leaves the EU without a deal, UK consumers would not be able to use UK courts to take action against EU-based retailers and if a UK court did make a decision, that decision may not be enforceable in the relevant member state. Further, there will no longer be reciprocal obligations on the UK and EU member states to investigate cross-border complaints and take action.
- alternative dispute resolution and ODR – the ability for EU consumers to use ODR (which is run by the European Commission for member states) is currently mandatory for all cross-border sales made online within the EU. On exiting the EU, the UK will cease to be a member state so it would no longer have access to the ODR. UK consumers and businesses would still be able to obtain redress through other ADR forums in the UK, but these would not be suitable to resolve cross-border disputes.
There are other sector-specific implications of a no-deal Brexit which include:
- package travel – customers purchasing package holidays from EU-based companies may not be protected should the trader become insolvent because mutual recognition of insolvency protection between member states will cease. Consumers would need to assess the protection under the laws of the relevant member state.
- timeshares – timeshares in EU member states will be subject to the laws of that member state and UK consumers will not be able to require an English version of their contract.
Whilst there will not be immediate changes to consumer rights, it will be paramount to monitor any divergence of UK law with EU consumer law over time
What this means for retailers
The UK Government’s technical note on consumer rights if there’s no Brexit deal suggests that risk will lie with UK consumers who will need to complete further due diligence before they order goods or services from other members state, to ascertain how that member state’s laws differ from the UK’s. However, retailers will also need to consider the laws of the relevant member state they are selling into. It may be necessary to carry out a risk analysis of a no-deal Brexit and update terms and conditions.
For UK and EU businesses, cross-border enforcement issues may be of benefit as it means customers purchasing goods or services from outside the UK will need to bring a claim in the UK (where there is more certainty for the UK retailer). Further, retailers in other members states selling into the UK may similarly be assured by UK consumers having to bring a claim in the retailer’s member state.
In a no-deal scenario traders would still need to refer consumers to mandatory ADR forums (including sector specific ADR), but retailers would no longer need to refer to the ODR. Websites and terms and conditions of sale would need to be updated to ensure that customers are not misled as to where they can bring a claim or initiate ADR.
The likelihood of a no-deal Brexit is uncertain and the UK Government’s technical papers will assists businesses with risk analysis and contingency planning. Whilst there will not be immediate changes to consumer rights, it will be paramount to monitor any divergence of UK law with EU consumer law over time, regardless of the Brexit deal reached, if any.
Other implications to be aware of
- geo-blocking – the UK Government has published a separate technical note regarding geo-blocking of online content if there is no Brexit deal: Geo-blocking of online content if there's no brexit deal
- the UK Government intend to publish an explanatory memorandum this autumn which will provide further information on the status of ADR and the ODR.
For more information please contact Matthew Gough.