National Automobile Dealer Arbitration Program
NADAP’s purpose is to provide an expeditious, impartial and less expensive means of resolving the disputes that arise from time-to-time between the manufacturers and their most significant business partners – the retail dealers. (French Version)
Since being established in 1997, the program has been reviewed by the manufacturers and dealers and revised in 2002, 2007 and 2012. The program handles roughly ten cases a year, which is a testimony to the constructive and cooperative working relationship that most manufacturers have with their franchised new car dealers.
ADR Chambers, a professional, independent arbitration and mediation firm in Toronto administers the program on behalf of the manufacturers and dealers.
As indicated above, the purpose of NADAP is to settle any of the following disputes between a manufacturer and its dealers involving:
- The interpretation/application of the Dealer Sales and Service Agreement(s) and amendments for that Dealer.
- The termination of the Dealer Agreement based on a Dealer, or Dealer employee conviction, that will hurt the manufacturers’ or Dealer’s reputation or interest.
- The reasonableness of the length of a cure period provided by the Manufacturer in light of the dealer deficiencies to be cured.
- A refusal of the Manufacturer to reasonably provide prior approval to a Dealer’s request to sell or transfer by succession his/her Dealership interest including:
- The reasonableness of the Manufacturer’s conditions and written standards, and any specific requirements set for that new dealer, and if so, does the new dealer meet them;
- Whether the new dealer is unwilling to be bound by the terms of the existing Dealer Agreement;
- Whether the dealer or new dealer fails to cure an existing Dealer default;
- Whether the demographic or economic factors set by the Manufacturer for the continued operation of the dealership by the proposed successor, are reasonable. If so, the dealer can continue to operate the dealership or the Manufacturer can close the dealer-point until economic or demographic factors support its re-opening.
- Failure of the Manufacture to approve the sale or transfer of the Dealer interest where the Dealer can show that the Manufacturer knew for a considerable time that the sale or transfer had occurred.
- The termination of the Dealer Agreement based on the adequacy of the Dealer’s line of credit/working capital.
- Whether a Dealer owes money to a Manufacturer, or vice versa, and the length of time for payment. Where a Dealer’s failure to pay funds is grounds for termination of the Dealer Agreement, the Dealer Agreement can be terminated. If the termination is set aside, and the Arbitrator finds that the Dealer owes funds to the Manufacturer, the Dealer must pay the funds to be reinstated as a dealer.
- The termination of the Dealer Agreement for failure to resume dealership operations within a reasonable time following its closure for more than 7 days where the closure was beyond the Dealer’s control.
- The proposed appointment of a new abutting dealer-point or relocating of an existing dealer.
- The Manufacturer’s termination, refusal to renew or extend, without cause the Dealer Agreement including the awarding of damages by the Arbitrator for such wrongful termination or refusal.
Over 70% of the disputes are resolved by mediation, usually within 30 – 60 days and at minimal cost. This compares quite favourably to the adversarial, costly and time-consuming court alternative.