Curacao ADR Policy in Need of Significant Reconsideration

Following on from my article yesterday discussing the Curacao Gaming Authority 's Responsible Gambling Policy, I’ve just sat down and reviewed the Player Complaints Policy and their Alternative Dispute Resolution Policy.

I was broadly positive about the proposed Responsible Gambling Policy. Whilst I see a lot of positives with the Player Complaint Policy, sadly the ADR policy has a host of flawed requirements that seem destined to undermine the impartiality and integrity of the Curacao regulatory system.

Firstly I’ll address the complaints policy. Overall, I’d say this is a positive step forward for Curacao. Requiring operators to have a defined internal complaints procedure, setting timeframes for review and response to complaints, and outlining the appropriate next steps. All improvements.

It even prioritise handling responsible gambling related complaints quickly. A sensible requirement.

The only minor comment I would make is that it requires players to submit complaints within 6 months. That’s a short window. I’ve regularly encountered players submitting complaints multiple years after the event. It doesn’t make their complaint any less legitimate. And especially with responsible gambling related claims, there are often other traumas apparent in the player’s life over the period directly after the issue that distract the player from pursuing a claim. I do feel that window could be extended to positive effect.

Moving on to the ADR policies, I have far more to say:

Approval

“Only ADR entities that have a Certification from the CGA (published on the official website) will be permitted to conduct dispute mediation and resolution on behalf of the CGA B2C license holders”

Starting off on a positive note – this is a very good thing. I’m aware of other regulatory systems that don’t require the approval of ADRs, or that simply accept approval from other regulatory authorities. This effectively results in ADRs that answer to no-one about their practices in the jurisdiction. So it’s good to see that approval is going to be required for an ADR to function in Curacao.

Grounds for Refusal

The grounds for refusal in the ADR policy read like they’ve been imported straight from the Directive 2013/11/EU [link in the comments], right down to being in the same order, except they’ve removed two of the grounds upon which an ADR can declined complaints: claims falling under a defined financial threshold, and where the consumer has not submitted the complaint to the ADR within a pre-specified limit, not less than one year.

This creates problems.

Removing the lower financial limit sounds like a sound idea, ensuring that players can seek redress regardless of the value has to be a positive right?

In reality, very low claim values tend to create a disproportionate workload for ADRs and result in little to no benefit for consumers.

Where we see very low claim values submitted, they tend to follow a pattern. It’s not the money that the player is pursuing, it’s the principle of the matter. The player tends to be incensed. This makes them difficult to deal with, and when they calm down there’s a high probability of them coming to view the dispute management process as not worth their time. Most of these cases end up abandoned.

There’s no question that there should be restrictions on how low ADRs can set the financial threshold to decline a complaint – we use €/￡/$10 – but it is valuable to have this limit included as a ground upon which a complaint can be declined to prevent resources being expended on a claim that is almost certain to be abandoned before it is concluded.

The removal of the right to decline a complaint due to it not having been submitted within a pre-specified time limit creates a different sort of issue. Effectively, the ADR has no right to decline any complaint regardless of how long ago the issue occurred.

So whilst operators have the right not to review any complaint where the issue occurred more than 6 months ago, ADRs would still have to take up these claims. The result is that simple issues that should have been managed by the operator get kicked up to ADR and the ADR has to onboard them.

Binding/Non-Binding Nature

The legal enforceability of complaints is dealt with in the following section:

“The outcome of the ADR process is binding on the operator; however it does not supersede a player’s rights to take a dispute to court.”

This is something that can and should worry operators.

Within the comparable European ADR systems, ADRs are intended to serve as an alternative to the small claims courts. Whilst regulators have encouraged ADRs to offer legally binding rulings beyond the thresholds of the small claims courts (€5k EU, ￡10k UK), they have not currently required this.

My personal view on this is that those thresholds should be raised by the regulators. The highly volatile nature of gambling results in lots of claims above these thresholds. For ADR to function as an effective alternative to the courts it needs to be able to take on a significant amount of the case load that the courts would otherwise have to manage.

In practical terms however, this is somewhat a moot point. With thousands of complaints managed as an ADR, our compliance rates have been very close to 100%, regardless of complaint value.

But let’s consider the other end of the spectrum. As an operator, would you really be happy with ADRs issuing legally binding rulings on claims in the hundreds of thousands, or millions? They happen.

It would seem sensible for the system to establish thresholds where and ADRs ruling is not legally binding, or where the complaint should be escalated to the regulator/courts.

On the other side of this dynamic, this requirement seems to mean that the rulings are never legally binding on the player. Again looking to the comparable European systems, where a settlement is reached between the parties to resolve the issue, the player has to be informed in advance of accepting the settlement that the settlement will be legally binding, but the ruling would be legally binding in these situations.

Without this requirement, what happens is that the player accepts the settlement then contests the issue in the courts anyway. Perhaps even using the settlement money to fund their appeal. It undermines any incentive for the operator to agree to any mediated settlement, as the settlement may not conclude the matter. Mediation then becomes a non-viable approach to ADR, despite the regulations encouraging this as an option.

Financial Thresholds

“Provision of Information

The ADR provider must have a standalone website (or portion therein) dedicated to its service provisions under the LOK.

Information to be displayed includes, at a minimum:

- The types of disputes the ADR provider can handle, including any financial thresholds that apply.”

I’ve already discussed the low end threshold above, and highlighted that financial thresholds are not provided as a grounds to decline a complaint. This inclusion seems to suggest otherwise.

More worryingly though is the lack of any other conversation throughout the policy on upper limit thresholds. If the ADR is simply allowed to set choose their own upper limit threshold, it’s conceivable that the ADR sets a threshold of €1k (or other similarly low figure) and rejects any claim above this amount. This would make the ADR very popular with licensees, who could rest assured that the majority of claims would never qualify for ADR review.

Non-Participation of Operators

“In the case of non-cooperation of the operator, the ADR provider must report this to the CGA within one week of the resolution deadline as it puts the operator in direct breach of its licensing obligations”.

The above standard goes beyond similar ADR systems. Neither the MGA nor UKGC considers failure to comply with an appointed ADR’s rulings a breach of license. I think this is a big positive, so I’m drawing attention to it. If the ADR system is to be viewed as credible, and have teeth, the regulator needs to back their ADRs up. Licensees failing to comply and the regulator taking no action fundamentally undermines the credibility of the entire system.

Reporting

“…the ADR provider is required to submit quarterly reports to the CGA which includes the following information:

- The number and types of disputes handled, including a breakdown per complaint as follows:

-????????? Brief description of the complaint.

-????????? Operator involved.

-????????? Date of filing and final handling of the complaint.

-????????? Brief description of the final decision and the reasoning underlying the decision.

-????????? Whether the player has accepted the outcome of the dispute.”

To start off with, this reporting requirement is four times as often as the UKGC requires, and twice as often as required by the MCCAA in Malta.

More than that however, this requires a report for each individual complaint.

I’ll be clear about my position on this – I’m firmly in favour of published complaint reports for each and every complaint managed. I think this significantly improves transparency in the system and helps foster consumer trust. However, CasinoReviews.com is the ONLY ADR I am aware of that publishes complaint reports. For every other ADR, this reporting requirement is likely to represent a substantial additional reporting burden.

And let’s consider that additional reporting burden. One of the leading ADR providers in the sector, IBAS - Independent Betting Adjudication Service , recently published a report for their activity report for January.

368 disputes received in January alone. By one ADR. And IBAS are only functioning in the UK.

So when we consider that Curacao is a far broader licensing system, covering hundreds of countries, and factor in multiple ADRs, just how many reports are going to end up getting filed each quarter? Does the GCB actually have the manpower to review all of these complaint reports? Or are they simply going to be filed as a tick box exercise and never looked at? If so, it’s hard to see the value in this requirement.

Legal Expertise

“- At least one key person in the ADR provider must be a practicing barrister or lawyer.”

Let’s contrast this with the comparable European ADR systems:

"(36) It is essential for the success of ADR, in particular in order to ensure the necessary trust in ADR procedures, that the natural persons in charge of ADR possess the necessary expertise, including a general understanding of law. In particular, those persons should have sufficient general knowledge of legal matters in order to understand the legal implications of the dispute, without being obliged to be a qualified legal professional.”

I have personally managed close to 9k claims over the last 13 years, accounting for well over $8 million returned to consumers. I likely have more knowledge and direct experience of dispute management in the gambling sector than all but a handful of people. The blunt reality is that the vast majority of disputes in the gambling sector do not require a legal qualification to manage. They are easily managed with appropriate knowledge of the relevant gambling regulations, consumer laws, the contractual terms of the agreement, and a personality that is inclined to a strong sense of social justice.

Where a case requires a barrister or lawyer to manage, then it should unquestionably should be rejected by the ADR as (quoting one of the given grounds for rejection) “The issue involves complex legal matters better suited for court resolution.”

Contextual experience is, in my opinion, potentially worth more than legal qualifications. Requiring that ADRs include a practicing barrister or lawyer, drives the cost of providing this service up significantly, and creates other questionable dynamics that I’ll discuss in the next section.

“- The ADR team must consist of 3 or more people.”

Again contrasting with the European equivalents:

“2.???Member States shall ensure that ADR entities have in place procedures to ensure that in the case of circumstances referred to in point (e) of paragraph 1:

(a) the natural person concerned is replaced by another natural person that shall be entrusted with conducting the ADR procedure; or failing that

(b) the natural person concerned refrains from conducting the ADR procedure and, where possible, the ADR entity proposes to the parties to submit the dispute to another ADR entity which is competent to deal with the dispute; or failing that

(c) the circumstances are disclosed to the parties and the natural person concerned is allowed to continue to conduct the ADR procedure only if the parties have not objected after they have been informed of the circumstances and their right to object.

This paragraph shall be without prejudice to point (a) of Article 9(2).

Where the ADR entity comprises only one natural person, only points (b) and (c) of the first subparagraph of this paragraph shall apply.”

Whilst I won’t contest the benefits of having more than one ADR Official, comparable systems have actively accounted for ADRs with a single official. Forcing multiple ADR Officials again drives up the cost of the service, for little gain. As the European rules evidence, it’s a simple thing to legislate for potential conflicts of interest to allow an individual ADR Official to operate effectively.

“- The combination of the ADR provider team must have [SIC] least three years or relevant professional experience in the gambling industry.”

I find the above a highly concerning inclusion. Why? Surely experience in the gambling sector is a positive? I would not argue that point. However, when this is combined with the requirement for the ADR to be established in Curacao, and the requirement for at least one member of the team to be a qualified lawyer or barrister, this policy effectively guarantees that all of the approved ADRs are going to be lawyers with a background working within the Curacao iGaming ecosystem. These are people who are indoctrinated with an industry friendly perspective on the interpretation of the regulations. These are people whose network and friends are made up of Compliance/Legal officials in Curacao gambling operators. These standards, far from ensuring excellence, run a significant risk of fundamentally undermining the fairness of the Curacao ADR system by prohibiting any diversity in viewpoint, and locking in an industry friendly approach that will ensure players cannot receive a fair hearing via ADR.

Independence

“- The ADR or its connected companies must not engage in affiliate business or marketing activities for gambling operators.

- ADR providers must not advertise for any operator”

I made it to this part of the document before I started to wonder whether these policies had been crafted explicitly to exclude CasinoReviews.com as an ADR.

As the only ADR approved in any of the regulatory jurisdictions to engage an affiliate marketing based funding model, it’s a little tough not to view the above restrictions as targeted straight at us.

So let’s strip the independence conversation back to its core and publicly address any concerns that the regulator has about our funding model detrimentally impacting our independence.

Every ADR service has to be funded somehow. Other ADR services charge a fee directly to operators, either per complaint, or in batches.

When a licensee is dissatisfied with one of these ADRs and decides to switch to another ADR provider, the ADR loses 100% of any future revenue that they would have generated from managing complaints against that licensee.

Under the affiliate marketing ADR model, where we do not charge a direct fee to licensees for managing complaints and instead derive revenue from marketing, when a licensee decides to switch away from our service, we can simply switch the adverts we have out for an alternative advertising partner. This may not result in us retaining 100% of the revenue we would have made, but it substantially offsets the losses and reduce the financial leverage that licensees can potentially exert over ADRs.

So the Curacao Gaming Authority has opted to explicitly prohibit the funding model that by structure offers the highest level of independence!

This isn’t my first rodeo. And it’s not the first time I’ve seen this sort of mindset in a market establishing a new ADR system. In my experience, these views tend to come off the back of lobbying by interested legal firms who feel that an ADR that can offer services free to licensees critically undermines their financial model. Why would licensees pay for their service when we’ll provide the same service free of charge?

Between the explicit prohibition of the affiliate market model, the legal qualification requirements, and the industry experience requirements, it seems very likely that some self-interested parties have given the GCB less than impartial advice on this front.

“There must be no conflict of interest between the ADR and either party to the dispute.”

And here we get to the actual independence rules, rather than those simply designed to prohibit certain funding models.

In an ideal world, the above is less a regulatory standard than it should be a statement of fact. In the real world however, simply stating that there “must be no conflict of interests” doesn’t mean that no conflict of interests will occur.

We cannot predict the future or every eventually. It’s not enough to assert that no conflict of interests should occur. What are the rules surrounding the management of conflicts of interest that do occur? Having policies doesn’t mean that we’re planning for conflicts of interest. It simply means that we’re acknowledging the unpredictability of life.

For example, how do we manage a situation where the ADR Official has a pre-existing personal relationship with a complainant? Or what happens if the complainant is a previous employee who has worked with the team and all the ADR Officials know them? Impartiality and independence don’t simply require a statement that the ADR must be independent. They require robust policies to help manage situations where independence is impacted by unexpected circumstances.

Choice of ADR

Something that has not been covered at all in the published ADR policy is providing PLAYERS a choice of ADR. In fairness, none of the current ADR systems address this matter properly.

In the currently suggests Curacao ADR system, mirroring both the UKGC and MGA systems, the licensee is allowed to select the ADR that will be used. This fundamentally undermines the impartiality and credibility of the ADR system.

How? When the operator is allowed to dictate the dispute mediator that is used, it’s to be expected that the player is going to question the impartiality of the ADR. This immediately undermines public confidence in the system.

And it should. Having watched this play out in other markets, what happens is that certain ADR entities take a soft touch approach to their client, failing to appropriately mitigate the natural disadvantage that the consumer is subject to, or taking an business friendly interpretation of the regulatory and legal standards.

The industry recognises this and a significant number of licensees will gravitate towards ADRs that they feel are more likely to provide them with favourable rulings. This is a win/win for the ADR and the operator. The ADR processes more claims and earns more fees. The operator loses less claims, has to pay fewer players, and as such saves money.

Allowing the operator to choose a single ADR creates a ‘race to the bottom’ type system, incentivising ADRs to engage a less than robust process.

All ADR systems would benefit from requiring licensees to offer a selection of ADR providers from which the player can choose one. Either all approved ADR providers, or requiring the licensee to list a pre-defined number.

This would do far more to build consumer confidence and ensure independence than prohibiting the affiliate marketing model.

When Does the System Start?

And here’s a big question – we know when licensees will likely have to ensure compliance with the ADR requirements, but what’s the historic impact of the implementation of ADRs? Should ADRs only accept disputes that occur from the date of the implementation of the ADR requirements? Or should we accept complaints up to 6 months before this point as is required by the Complaints Policy? Or should we accept any complaint from any time period as there’s no grounds built into the ADR Policy to allow ADRs to reject complaints based on age?

A clear statement regarding when an ADR’s authority should kick in would prevent significant problems later.