::this post ID is 11258::::in categories of ..Legal Corner..::

Q&A With Frank Zaid: Automotive franchises and NADAP

crop1By Frank Zaid

Q: Are there special procedures that automotive dealers, which are considered franchisees under provincial franchise legislation in Canada, and the manufacturers they represent can follow for resolving their dispute—whether involving rights, obligations or contractual matters—outside the usual court process?

A: Yes. Automotive manufacturers and dealers established the National Automobile Dealer Arbitration Program (NADAP) in 1997 to provide an expeditious, impartial and less expensive means for resolving the disputes that arise from time to time between them. The program outlines specific rules and procedures for such disputes to be submitted to private arbitration.

NADAP has been reviewed by both manufacturers and dealers and revised every five years (i.e. in 2002, 2007 and 2012). The program handles roughly 10 cases a year, which is a testament to the constructive and co-operative working relationship between most manufacturers and their franchised dealerships.

The evolution of NADAP
When NADAP was launched in 1997, it was an immediate success, as 95 per cent of Canadian dealers signed implementation agreements with their manufacturers that committed them to the program for an initial five-year term, during which neither the dealer nor the manufacturer could terminate its application.

As mentioned, the parties agreed to review the program every five years to ensure it functioned as it was intended to. The parties in NADAP are the Canadian Automotive Dealers’ Association (CADA) and original equipment manufacturers (OEMs) represented by the Canadian Vehicle Manufacturers’ Association (CVMA) and the Association of International Automobile Manufacturers of Canada (AIAMC).

The first and seconds reviews in 2002 and 2007 resulted in some minor enhancements to the program. For the third review in 2012, CADA organized a committee comprising dealers, CADA provincial association representatives and CADA staff, who met regularly to determine whether or not the program continued to meet dealers’ needs. Other dealers were also surveyed for their input and the committee studied the results of disputes that had gone to mediation and arbitration.

After reviewing the program and other, comparable provincial and, in the U.S., state franchise laws, the committee recommended a renewal of NADAP, but again suggested enhancements. These included the following:

  • Ensuring NADAP is offered to all dealers by getting a letter from the manufacturer associations committing to this goal in principle and altering language in NADAP to enshrine it.
  • Ensuring CADA gets an updated list of all dealers signed onto NADAP, as the lack of one had caused uncertainty among dealers, particularly when they were contemplating using the program.
  • Extending the notice period each party must provide to the other that a NADAP decision will be made public, from 48 hours to five days.
  • Resolving language ambiguity regarding cost awards.
  • Reviewing the arbitration appeal process to ensure it is still appropriate for the program.
  • Ensuring the French translation of the rules better reflects the English text.
  • Ensuring any settlement agreement entered by the parties does not truncate one party’s right to use NADAP, by discussing the insertion of clarification language in the NADAP principles.
  • Reviewing the timeline for bringing a complaint and then initiating arbitration.
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