Arbitrating Collective Consumer Claims in the EU -
Promising Option or Irreconcilable Differences?
Name: Sarah Elisabeth Koller Student Number: 12320145
Word count: 12.988 Submission date: 8 July 2019 Programme: LLM European Private Law
ABSTRACT: In the aftermath of occurrences like “Dieselgate”, the European legislator recognised that infringements of Union law increasingly affect consumers EU-wide and thus require a harmonised collective redress system. One response was the proposal for a directive on representative actions (“Proposal”). It explicitly recognises EU-wide infringements of Union law, but still leaves some related issues which would, however, be essential to its effectiveness, unaddressed (e.g. international jurisdiction). It is thus worthwhile to consider, whether ordinary jurisdiction is the suitable means to handle cross-border collective consumer claims or if alternatives, such as arbitration, can contribute in this regard.
My aim in writing this thesis is twofold: First, I aim to evaluate what arbitration can add to the resolution of collective consumer claims with cross-border implications and second, I aim to assess if and how such a system can be realised in the EU.
The first evaluation is undertaken by using the objectives of the Proposal and their embedment in primary EU law to identify the Proposal’s shortcomings regarding cross-border claims and evaluate, what arbitration can contribute. The second part is approached by first identifying tensions between arbitration and collective consumer disputes, by evaluating the characteristics of arbitration, especially the principle of consent, against principles of collective procedures and consumer protection legislation in the EU. Subsequently, the potential impact of post-dispute arbitration agreements to overcome such tensions will be discussed. This part is rounded off by picking up the approach of the Proposal and examining the possibility and the requirements of representation by a qualified entity in arbitration. Finally, the potential impact of arbitral institutions will be discussed. It can be concluded that arbitration can contribute to the resolution of collective consumer claims in cross-border situations especially insofar, as it would offer a way to centralise the jurisdiction by at the same time providing a neutral forum. This would contribute to the objectives of the Proposal to facilitate access to justice and strengthen a consistent enforcement of Union law. However, it can further be held that there are certain tensions between the resolution of collective consumer claims and arbitration (especially regarding the principle of consent in arbitration), as arbitration agreements with consumers are subject to different restrictions in the MS. Nevertheless, the identified tension can be mitigated by making greater use of ex-post arbitration agreements. Finally, I conclude that to unleash the potential of collective arbitration of consumer claims, the representation by qualified entities and the engagement of arbitral institutions, legislative initiative would be required.
LIST OF ABBREVIATONS
AAA American Arbitration Association
ADR Alternative Dispute Resolution
BGH German Federal Court of Justice
CFR Charter of Fundamental Rights of the European Union CJEU Court of Justice of the European Union
Council The Council of the European Union DIS German Institution of Arbitration
EC European Commission
ECHR European Convention on Human Rights
EP European Parliament
EU European Union
JAMS Judicial Arbitration and Mediation Services
MS Member State(s)
NYC New York Convention
ODR Online Dispute Resolution
PoA Power of Attorney
RQ Research Question
TEU Treaty on European Union
CONTENTS
1. INTRODUCTION ... 5
1.1 Collective Arbitration – An Oxymoron in the EU? 5 1.2 Structure 6 1.3 Methodology 8 2. COLLECTIVE PROCEDURES – DEFINITIONS AND DEVELOPMENT IN THE EU ... 9
2.1 Definition and Benefits of Collective Procedures 9 2.2 Development of Collective Procedures in the EU 9 2.3 Proposal of the EC 2018 11 2.3.1 Objectives of the Proposal ... 11
2.3.2 Content of the Proposal ... 13
2.3.3 Shortcomings of the Proposal regarding cross-border cases ... 15
2.3.4 Conclusion ... 17
3. COLLECTIVE PROCEDURES AND ARBITRATION ... 17
3.1 Main Characteristics of Arbitration 18 3.2 Advantages of Arbitration regarding Collective Cross-Border Disputes 20 3.2.1 Centralisation of the Jurisdiction ... 20
3.2.2 Neutrality ... 22
3.2.3 Finality... 23
3.2.4 Conclusion ... 23
3.3 Tensions between Arbitration and Collective (Consumer) Disputes 24 3.3.1 Principle of Consent – “Opt-out” Systems ... 24
3.3.2 Principle of Consent – Agreement to Arbitrate ... 26
3.3.3 Confidentiality ... 29
3.3.4 Due process concerns ... 30
3.3.5 Challenge and Recognition and Enforcement of an Award ... 30
3.3.6 Conclusion ... 31
3.4 How to overcome the Existing Tensions? 31 3.4.1 Ex-Post Arbitration Agreement ... 31
3.4.2 Excursus: Collective Consumer Arbitration in Spain ... 33
3.4.3 Conclusion ... 33
4. COLLECTIVE ARBITRATION OF CONSUMER CLAIMS WITHIN THE EU FRAMEWORK ON COLLECTIVE PROCEDURES ... 34
4.1 Representation by a Qualified Entity? 34 4.2 Advancement of the Legislative Framework 36 4.3 Involvement of Arbitral Institutions 37 5. CONCLUSIONS ... 38
1. Introduction
1.1 Collective Arbitration – An Oxymoron in the EU?
An effective right requires effective enforcement.1 This is acknowledged by the EU, which focuses in its recent consumer protection legislation on effective enforcement of Union law.2 In this regard, the directive on consumer ADR3, the regulation on consumer ODR4 and the EC’s Recommendation of 20135 (“Recommendation”), as well as the EC’s proposal for a directive on representative actions6 in April 2018 (“Proposal”) have been adopted. The EC stated in its Recommendation that all MS should have collective redress mechanisms at a national level for both injunctive and compensatory relief by July 2015.7 Inter alia due to the limited impact of the Recommendation8, the EC issued the Proposal, which identifies an
increased risk of infringements of Union law affecting consumers in several MS. As some MS still do not provide for collective compensatory redress mechanisms tailored for such mass harm situations, the EC suggests the introduction of representative actions by a qualified entity in every MS.9 The EU thus acknowledges the need for the advancement of collective dispute resolution mechanisms.10 However, regarding infringements of Union law which
affect consumers in more than one MS, which are the focus of this thesis and which will be referred to as “cross-border claims/disputes/situations” etc., the Proposal entails – as will later be discussed – certain shortcomings.
Because of its consensual nature, its flexibility and the availability of a neutral forum, arbitration is nowadays the main method of resolving international disputes.11 Considering the
1 COM (2018) 184 final 1; Eidenmüller/Fries (2016) 87.
2 ibid; the EU has no autonomous competence to legislate in national civil procedure law. Legislation regarding
enforcement mechanisms is thus usually based on Article 114 and Article 169 TFEU, which means that the legislation aims to contribute to the proper functioning of the internal market through the achievement of a high level of consumer protection (COM (2018) 184 final 6; Hodges (2008) 93; Laurel Harbour, John Evans, Erwan Poisson and Camille Fléchet, “Representative Actions and Proposed Reforms in the European Union” in Karlsgodt (2012) 145). The scope of legislation regarding the implementation of enforcement mechanisms is thus usually not comprehensive, but limited to the enforcement of certain EU legislation, usually listed in an annex to the respective enforcement instrument (Halfmeier/Rott (2018) 243). The term “Union law” relates to legislation of the EU (regulations, directives, etc.). However, it is important to note that most of the EU legislation concerning enforcement mechanisms does not relate to Union law as such but is usually limited to certain sector specific legislation.
3 Directive 2013/11/EU. 4 Regulation (EU) 524/2013. 5 Recommendation 2013/396/EU. 6 COM (2018) 184 final. 7 Recommendation 2013/396/EU. 8 COM (2018) 40 final 19ff. 9 COM (2018) 184 final. 10 Strong (2019) 1. 11 Blackaby/Partasides et al (2015) 1.
increasing occurrences of mass harm situations affecting consumers from different MS, it may be worthwhile considering what arbitration can contribute to resolving such disputes. However, as some of the main characteristics of arbitration, such as party autonomy and confidentiality, must to some extent be foregone in collective procedures,12 and consumer disputes are on tense terms with arbitration, it is debated whether there is a fundamental incompatibility between arbitration and the resolution of collective consumer claims.13 Drawing on these tensions, this thesis aims to answer the following RQ:
How could the resolution of collective consumer claims in cross-border situations benefit from arbitration and (how) can this be realised within the – current and pending – EU legal framework on consumer protection and collective procedures?
Collective arbitration has not gained much attention in Europe so far, although it could – as will later be discussed – be a viable option for the resolution of cross-border collective consumer disputes. The challenges and obstacles arbitration would face in the EU regarding collective consumer disputes as well as solutions to overcome such tensions have been discussed to some extent in the existing literature.
This thesis aims to contribute to this discourse by analysing first, how the resolution of cross-border collective consumer disputes could benefit from arbitration, by especially considering the shortcomings of the Proposal in this regard. Secondly, it will be assessed if and how this could be realised in the EU, by examining the tensions between arbitration and collective consumer disputes and discussing how those tensions could be overcome and how such an approach could fit into the EU framework on collective procedures.
1.2 Structure
To set the stage, I will define collective procedures, discuss their advantages and describe the evolution and the current legal situation regarding collective procedures in the EU. As well as the EU legislation on collective procedures, which focuses on collective actions for consumers14, this thesis only looks at collective procedures in B2C cases and does not relate to other legal relationships where collective claims may arise (e.g. shareholder disputes). Subsequently, I will focus on the Proposal and I will firstly outline the objectives as well as
12 Nater-Bass (2009) 681ff; Neumeier/Georgiev (2018) 53ff.
13 Luca G. Radicati di Brozolo, “Class Arbitration in Europe?” in Nuyts/Hatzimihail (2013) 210. 14 See chapter 2.2 and 2.3.
the key content and secondly discuss the shortcomings regarding cross-border cases (Chapter 2).
The third chapter will focus on the relationship between collective procedures and arbitration. I will first describe the main features of arbitration, by focussing on those, which can be beneficial and/or conflicting with the resolution of collective consumer disputes. Following up, I will examine what kind of advantages arbitration can have for resolving cross-border collective consumer claims. I will especially relate those advantages to the shortcomings of the Proposal, but I will also discuss, how the resolution of cross-border collective consumer disputes could benefit from arbitration in other regards. The foregoing should answer the first part of the RQ, namely how arbitration can contribute to the resolution of collective consumer claims in cross-border situations.
Next, I will focus on the second part of the RQ, if and how arbitration of collective consumer disputes can be realised in the EU. Since the introduction of collective actions at EU level is still in its infancy15 and there is currently no EU involvement regarding collective arbitration,
this question is considerably broad and could be approached in many ways. As a comprehensive analysis of the issues relating to collective arbitration of consumer claims would go beyond the scope of this thesis, some further demarcation is necessary.
Regarding the question whether arbitration of collective consumer claims is realisable, I will discuss certain tensions between arbitration and collective consumer proceedings and examine what challenges and obstacles collective arbitration of consumer claims would face in the EU and how they could be overcome. Within this scope, I will limit myself to tensions between the principle of consent in arbitration and collective consumer proceedings and touch upon briefly on issues regarding the principle of confidentiality and due process. Regarding the question how collective consumer arbitration could be organised in the EU, I will briefly return to the Proposal and its approach to base collective procedures on representative action, to analyse in Chapter 4, if and how a representative action would be feasible in arbitration. In this context, I will assess what legislative changes would be necessary to enable such development, and I will discuss the potential involvement of arbitral institutions. In Chapter 5, I will draw my conclusions.
1.3 Methodology
Defining terms and concepts, describing the evolution of collective procedures in the EU, as well as describing the key content of the Proposal and the main features of arbitration entails a descriptive approach. However, the described content of the Proposal has been chosen because of its further relevance for the scope of the thesis and the characteristics of arbitration, described in Chapter 3, have been chosen inter alia because they are either advantageous for the resolution of cross-border collective consumer disputes, cause tension or both. The objectives of the Proposal are found through a descriptive approach as well, as they are on the one hand outlined in the Proposal. On the other hand, those objectives will be compared to primary EU law and other (legislative) materials with the same or similar objectives and thus set into a broader context. The shortcomings of the Proposal are found through an evaluation of the content of the Proposal against its objectives.
The advantages of collective procedures in general and the benefits arbitration could have for resolving cross-border collective consumer claims will be evaluated against the objectives and shortcomings of the Proposal in its broader context, as outlined in chapter 2.3.1. The tensions between collective consumer proceedings and arbitration are found by evaluating characteristics of arbitration (as outlined in chapter 3.1) against general principles of collective procedures in the EU (as described in Chapter 2) and especially against EU consumer protection legislation and its implementation in three MS16. The suggestion to overcome those tensions will be discussed by evaluating the potential impact of an existing concept in arbitration (post-dispute arbitration agreements) on the identified tensions.
Whether a representative action by a qualified entity in arbitration is possible, or rather, what would be required to make it possible, will be found by examining how a qualified entity is authorised to act in a certain way. Chapter 4 also entails a certain prescriptive and normative approach insofar, as it will be discussed what legislative changes would need to be undertaken to further authorise a qualified entity. The potential involvement of arbitral institutions will be discussed by looking at the development of collective arbitration rules by other arbitral institutions.
16 The Netherlands, Germany and Austria were chosen as examples, because they represent three different approaches
to arbitrating B2C disputes. Besides, the access to sources was facilitated because of previous knowledge, legal background and language.
2. Collective Procedures – Definitions and Development in the EU
2.1 Definition and Benefits of Collective Procedures
Collective procedures enable a representative claimant or a representative entity, to bring a claim on behalf of a group of individuals who share the same interest.17 It is a procedural mechanism that permits several similar claims to be bundled into one court action, aimed at obtaining a decision for all parties involved.18
From the perspective of “access to justice”, as discussed in chapter 2.3 as one of the main objectives of the Proposal, there are several benefits of collective actions: It increases procedural economy and efficiency and reduces costs, since it avoids that every claim, which is based on the same facts, is litigated individually.19 It also provides access to justice in cases
where one claimant alone would not file a claim because the individual damage is not worth the effort.20 Collective action thus strengthens the negotiating power of the claimants and
facilitates a more consistent jurisdiction, legal certainty and equal treatment of all affected claimants, by avoiding conflicting decisions on the same cause of action.21
2.2 Development of Collective Procedures in the EU
Furthering the enforcement of Union law and strengthening consumer’s access to justice has been on the agenda of the EU for some time. Since 1998, the Injunctions Directive22 enables qualified entities to bring representative actions for the protection of the collective interests of consumers with the aim of stopping infringements of EU consumer law. In its Consumer Policy Strategy 2007-2013, the EC highlighted the significance of collective redress mechanisms and stated that it would consider action in this regard.23 The evaluation of the EC24 as well as the later briefing paper by the EP25 found that a certain number of MS has implemented collective redress mechanisms, which are however considerably different. Every national system is unique, which leads to disparities regarding the accessibility and consumers
17 Nater-Bass (n12) 672; van Zelst (2018) 206. 18 COM (2013) 401 final 4.
19 Hodges (n2) 117. 20 van Zelst (n17).
21 COM (2013) 401 final 4; Nater-Bass (n12); Lukasz Gorywoda, “The Emerging EU Legal Regime for Collective
Redress: Institutional Dimension and Its Main Features” in Nuyts/Hatzimihail (2013) 185; van Zelst (n17).
22 Directive 2009/22/EC. 23 COM (2007) 99 final 11. 24 EC Evaluation (2008) 4.
are confronted with a variety of systems within the EU.26 The Green Paper on Consumer Collective Redress of 200827 also held that the current consumer redress situation is
unsatisfactory, and that effective redress is prevented by high costs, complexity and risk of litigation. The EP held in its Report “Towards a Coherent European Approach to Collective Redress” that there is a need for a European approach to collective redress.28
In the Recommendation, the EC stated that all MS should have collective redress mechanisms at the national level for both injunctive and compensatory relief by 26 July 2015. The Recommendation laid down a set of common principles29 and emphasised that ADR should always be available alongside, or as a voluntary element of, judicial collective redress.30 The Collective Redress Report of the EC31found that the Recommendation has made a valuable contribution but – especially regarding the transition into national legislation – the impact of the Recommendation has been somewhat limited. There were still nine MS which did not provide for any means to collectively claim compensation and in some MS, which formally provide a mechanism, the procedural framework needs improvement.32
Regarding the Injunctions Directive, the EC’s Fitness Check 201733concluded that it had significant shortcomings, which relate to its limited scope and the limited effects of injunction decisions on redress for harmed consumers.34Besides, in its 2017 Recommendation to the Council and the EC, the Parliament asked the EC to propose legislation on a harmonised system of collective redress for EU consumers.35
It can be observed that the EU acknowledges a need for a harmonised collective redress system. However, as to date, the situation in the MS varies considerably as some MS do not provide collective redress mechanisms at all and the mechanisms which are in place in the MS are based on different approaches.
26 ibid.
27 COM (2008) 794 final. 28 EP Report 2011/2089(INI). 29 COM (2018) 184 final 4.
30 Recital (16) Recommendation 2013/396/EU. 31 COM (2018) 40 final 19.
32 ibid.
33 SWD (2017) 208 final/SWD (2017) 209 final, see bibliography regarding information on scope of Fitness Check. 34 SWD (2017) 209 final 101.
2.3 Proposal of the EC 201836
In April 2018, the EC thus issued the Proposal, which aims to modernise and replace the Injunctions Directive and provide a framework for an efficient and effective enforcement system. The Proposal identifies an increased risk of infringements of Union law affecting different consumers in several MS and recognises that some MS still do not provide for collective compensatory redress mechanisms tailored for such mass harm situations.37
The status of the Proposal at the time of writing is that after the EP adopted its position at First Reading in March 201938, the Council’s position is currently awaited. In the following, I will discuss the objectives and key features of the Proposal, focussing especially on those rules that are relevant in collective procedures with a cross-border aspect. Reference will be made to the Proposal as well as to the amendments of the EP. Subsequently, I will discuss the shortcomings of the Proposal compared to its objectives.
2.3.1 Objectives of the Proposal
The overall objective of the proposed directive is to establish a representative action mechanism for the protection of the collective interests of consumers to ensure a high level of consumer protection across the EU and the proper functioning of the internal market.39 The directive aims to further access to justice by overcoming obstacles faced by consumers within individual actions, strengthen the enforcement of consumer law and improve the deterrence of unlawful practises.40 The EP emphasises a strong need for Union intervention to ensure both access to justice and sound administration of justice as it will reduce the costs and burden entailed by individual actions.41 The Proposal further recognises that infringements of Union Law often have cross-border implications and that the directive should also aim to cover situations when consumers concerned live in MS other than the MS where the infringing trader is established.42
In the context of the effect of final decisions issued by a court of a MS, the Proposal notices the need to enhance legal certainty and avoid inconsistencies in the application of Union
36 Unless indicated otherwise in this thesis, “Article” refers to Articles of the Proposal. 37 COM (2018) 184 final 1.
38 Position EP on Proposal.
39 Recital (44) COM (2018) 184 final. 40 ibid Recital (2) and (3).
41 Position EP on Proposal, Amendment 2. 42 Recital (5) and (8) COM (2018) 184 final.
law.43 The need to avoid inconsistencies in the application of Union law was also recognised by the EC’s Fitness Check44, where it was held that widespread infringements of Union law are often treated in parallel proceedings and thus in an uncoordinated manner, which creates an unnecessary duplication of enforcement efforts and inconsistencies in how Union law is applied.
The objective and notion of “access to justice” cannot only be found in the Proposal but has – through the CFR45 and the enactment of the Lisbon Treaty46 – also found its way into primary EU law.47 Article 67 (4) TFEU stipulates that the Union shall facilitate access to justice, in particular through the principle of mutual recognition of decisions in civil matters, and Article 81 (2) (e) TFEU notices the requirement of approximation measures in the area of judicial cooperation in civil matters with the aim of furthering effective access to justice.48 The access to justice requirement is repeated in many legislative documents regarding collective procedures49 and can further be found in Brussels-I50, where it is stipulated that the mutual
recognition of judgements and the rules governing jurisdiction should enhance access to justice in the EU and provide legal certainty.51
Besides, the right of access to justice has been codified in Article 47 CFR52. It provides the right to an effective remedy and a fair trial and is thus inspired by Article 6 and 13 of the ECHR. The right of every individual to have an effective remedy before a court and the right to a fair trial means that everyone should be guaranteed judicial protection in case of an infringement of the law53, should have the right to a fair and public hearing and to have one’s case decided within a reasonable time by an independent and impartial tribunal.54 Furthermore, access to justice should not be impeded by a lack of financial resources.55 Access to justice, therefore, relates to the issue of time as well as costs, including practical
43 ibid Recital (33).
44 SWD (2017) 209 final 30.
45 which has the status of primary EU law (Article 6 TEU).
46 which amended inter alia the Maastricht Treaty (now TEU) and the Treaty of Rome (now TFEU). 47 Vernadaki (2013) 32.
48 ibid 34.
49 e.g. Recital (1), (4) and (10) Recommendation 2013/396/EU; COM (2018) 40 final 20; COM (2018) 184 final 4. 50 Regulation (EU) 1215/2012, hereinafter “Brussels-I”.
51 e.g. recitals (1), (3), (4) and (15) Brussels-I; Lukasz Gorywoda, Nikitas Hatzimihail and Arnaud Nuyts,
“Introduction: Market Regulation, Judicial Cooperation and Collective Redress” in Nuyts/Hatzimihail (2013) 29.
52 Vernadaki (2013) 35.
53 EC – 2017 report CFR 137; Dinah Shelton in Peers/Hervey/Kenner/Ward (2014) Art 47, 47.10. 54 Vernadaki (2013) 35.
accessibility to the remedy56 and thus aims to ensure that no one is prevented from addressing a court for the mentioned reasons.
2.3.2 Content of the Proposal
The Proposal regulates key aspects, which must be complemented by specific procedural rules on the national level.57 In a nutshell, the EC suggests that qualified entities should be entitled to bring representative actions seeking a redress order which obligates the trader58 to provide e.g. for compensation, repair or replacement.59 Besides, the Proposal contains several rules aiming to prevent abusive litigation60 and thus strikes a balance between facilitating access to justice and preventing abusive litigation.61
Compared to the Injunctions Directive, the scope of the Proposal is considerably broader and includes in an annexe a list of EU-legislation, which is relevant for the protection of collective interests of consumers (e.g. legislation on insurance law, capital markets law).62 Whereas the
Proposal defines the “collective interest” of consumers as the interest of “a number of consumers”,63 the EP suggests in its amendments to apply the directive to infringements with
a “broad consumer impact” which should start when two consumers are affected.64
Regarding the right to initiate proceedings, the Proposal follows the approach of the Injunctions Directive which enables qualified entities designated by the MS to bring representative actions.65 The affected consumers themselves should not be able to bring a representative action.66 Article 4 stipulates the criteria that qualified entities must fulfil to be entitled to bring representative actions. They must be (i) properly constituted according to the law of a MS, (ii) have a legitimate interest in ensuring that provisions of Union law covered by the Proposal are complied with and (iii) have a non-profit making character. In particular, consumer organisations and independent public bodies will be eligible for the status of a
56 COM (2013) 401 final 7. 57 COM (2018) 184 final 4.
58 Article 3 (3) defines „trader” as any natural or legal person, irrespective of whether privately or publicly owned,
who is acting, including through any other person acting in their name or on their behalf, for purposes relating to their trade, business, craft or profession.
59 COM (2018) 184 final 3.
60 e.g. rules regarding criteria, which a qualified entity must fulfil or regarding funding of qualified entities and of
specific actions.
61 COM (2018) 184 final 2. 62 Halfmeier/Rott (2018) 243.
63 Article 2 (1) in conjunction with Article 3 (3); Lühmann (2019) 570. 64 Position EP on Proposal, Amendment 6.
65 COM (2018) 184 final 3.
qualified entity.67 The Proposal also contains rules regarding their funding.68 The EP further emphasises the requirement of independence by adding in its amendments69 that a qualified entity has to be independent of other entities who might have an economic interest in the outcome of the dispute and must not have financial agreements with plaintiff law firms that go beyond a standard service contract.
As opposed to the Injunctions Directive, which only provided for claims to stop or prohibit an infringement of the law70, the Proposal also provides for the possibility to seek measures eliminating the continuing effects of an infringement, such as redress orders (e.g. compensation, repair, replacement) and declaratory decisions establishing the trader’s liability.71 Regarding the question whether the qualified entity is required to have the mandate
of the individual consumer before initiating a proceeding, reference can be made to chapter 3.3.1, where the difference between opt-in and opt-out procedures and the approach of the Proposal will be discussed.
Regarding the effects of final decisions, the Proposal and the EP suggest different rules. Concerning e.g. decisions of another MS, the Proposal stipulates that they should be considered as a “rebuttable presumption”72 whereas the EP suggests that they should “at least be considered as evidence”73.
Concerning cross-border representative actions, the Proposal stipulates that MS shall ensure that qualified entities designated in one MS may apply to courts of another MS.74 Besides, MS shall ensure that where the infringement affects consumers from different MS, the representative action may be brought to the competent court of a MS by several qualified entities from different MS, acting jointly or represented by a single qualified entity, for the protection of the collective interest of consumers from different MS.75
67 COM (2018) 184 final 14. 68 Article 7.
69 Position EP on Proposal, Amendments 44 and 45. 70 Halfmeier/Rott (2018) 245.
71 Article 5 and 6; Halfmeier/Rott (2018) 245; Lühmann (2019) 571. 72 Article 10 (2).
73 Position EP on Proposal, Amendment 84. 74 Article 16 (1).
2.3.3 Shortcomings of the Proposal regarding cross-border cases
The Proposal does not contain a rule regarding the relationship between parallel representative actions by different representative entities against the same defendant and based on the same set of facts, which has been criticised, as the absence of rules on this issue carries the risk of inconsistent jurisdiction.76 In this context, the EP suggests in its amendments that MS shall ensure that no other ongoing action has been brought before a court of the same MS regarding the same practise, the same trader and the same consumers.77 However, this rule only relates to ongoing actions in the same MS. It is argued that also at EU level, it must be ensured that the same practice of the same trader can only be the subject of a uniform procedure based on collective action, to avoid diverging decisions and legal uncertainty. This would require further provisions on the concentration of jurisdiction and/or the combination of parallel collective actions.78
However, the Proposal does not address issues of international jurisdiction. To the contrary, Article 2 (3) stipulates that the proposed directive shall be without prejudice to the rules on private international law.79 As specific rules on jurisdiction in collective cross-border proceedings are lacking80, the general jurisdictional rules of Brussels-I would apply to such cases. Brussels-I is mainly designed for litigation among individual parties and does not sufficiently address the need of collective procedures.81 Its provisions could point to (i) the court of the MS where (i) the defendant is domiciled (Article 4 Brussels-I), (ii) the consumer is domiciled (Article 18 Brussels-I), (iii) the obligation was to be performed (Article 7 (1) Brussels-I) or (iv) the harmful event occurred, in matters relating to tort (Article 7 (2) Brussels-I). According to the jurisprudence of the CJEU82, qualified entities, such as consumer organisations, can also bring a claim at the courts of the state where the interests of the consumer were violated. Besides the jurisdiction of the courts of the MS where the defendant is domiciled, jurisdiction would thus also be given at every place where the interests of a consumer were violated.83 If the claim affects consumers from more than one
76 Halfmeier/Rott (2018) 248.
77 Position EP on Proposal, Amendment 53; Lühmann (2019) 573. 78 Position Paper DAV 5.
79 BEUC-X-2018-094–23/10/2018, 10. 80 Gorywoda/Hatzimihail/Nuyts (n51) 45.
81 Burkhard Hess, “Collective Redress and the Jurisdictional Model of the Brussels I Regulation” in
Nuyts/Hatzimihail (2013) 67; Strong (2013) 288.
82 C-167/00 para 37; C-191/15 para 38. 83 Position Paper DAV 29.
MS, different courts could be seized in different MS.84 This situation, therefore, involves the risk of forum shopping and inconsistent adjudication.85 It is thus, for example, suggested that collective actions regarding consumer from different MS should only be possible at the courts of the domicile of the defendant.86
Besides, it is unclear how the (cross-border) effects of a final decision will be regulated. Regardless of how this issue will be solved, it remains open what part/content of a decision should be considered as a “rebuttable presumption” or as “evidence”. The rule probably does not regard the mere recognition of the foreign decision, as there are more specific rules on this issue, namely Brussels-I. If the purpose of the provision is however to achieve a binding effect beyond the mere recognition of decisions, this fails to recognise that foreign decisions may be based on different rules of material and procedural law, the latter not being harmonised at all.87 As long as the material and procedural law of the MS differs, it might
thus be difficult to achieve a binding effect of a foreign decision which goes beyond the mere recognition. For this reason, rules on the concentration of jurisdiction and/or the combination of parallel proceedings would be desirable.
Article 16 deals with cross-border representative actions and provides for a claim by several qualified entities at the court of one MS, acting jointly or represented by a single qualified entity, for the protection of the collective interest of consumers from different MS (para (2)). It does, however, not exclude parallel collective proceedings in different jurisdictions. Regarding the provision of Article 16 (1), which stipulates that qualified entities designated in advance in one MS shall be able to apply to courts of another MS, it is criticised that the issue that a qualified entity might be reluctant to sue at a court of another MS is not addressed.88 Besides, it is criticised that the Proposal generally leaves too much leeway to the MS in the implementation of the proposed directive, which does not further the development of an equivalent EU-wide enforcement mechanism.89
84 Hess (n82) 61ff; Elie Kleiman, “The Future of Class, Collective and Mass Arbitrations in Europe: A European
Approach to Collective Redress” in Hanotiau/Schwartz (2016) 188; Halfmeier/Rott (2018) 250.
85 EP (n25) 42; Kleiman (n85) 188. 86 Position Paper DAV 30.
87 ibid 25.
88 BEUC-X-2018-094–23/10/2018, 10. 89 Halfmeier/Rott (2018) 251.
2.3.4 Conclusion
Although the Proposal is welcomed and its objectives to strengthen the enforcement of consumer rights, further access to justice for consumers and ensure a consistent application of Union law are applauded, shortcomings, especially regarding cases with cross-border implications, can be identified.90
The Proposal does not sufficiently provide for the resolution of disputes regarding infringements of Union law that affect consumers in several MS. It stipulates that qualified entities should be entitled to address courts in all MS and should be able to act jointly. However, as specific rules regarding jurisdiction are lacking, several courts would be competent to decide about such claims. Since rules concerning the relationship between parallel proceedings in different MS are missing and the effect of resulting decisions on proceedings in other MS is unclear, an evident conflict with the objective of furthering access to justice and a consistent application of Union law can be observed.
Parallel proceedings in several MS on the same cause of actions can lead to inconsistent findings and legal uncertainty regarding their effect. The adjudication of claims based on the same set of facts in different courts with discrepancies in their procedural rules is not exactly in line with the objective of effective and efficient rights enforcement. The discretion left to the MS in implementing the proposed directive does not encourage the mitigation of procedural differences and does therefore not further the development of an equivalent EU-wide enforcement mechanism. Besides, the absence of rules regarding the concentration of jurisdiction also relates to the issue of costs, especially from the perspective of the defendant, who must deal with several claims in different MS.
3. Collective Procedures and Arbitration
Arbitration is the principal method of resolving international commercial disputes, which is among other things owed to its consensual nature, its flexibility and the fact that it provides a neutral forum91. Considering the increased number of mass harm situations affecting consumers from different MS, it may be worthwhile considering what arbitration can add in
90 BEUC-X-2018-094–23/10/2018, 1; Position Paper DAV 5; Halfmeier/Rott (2018) 251; Lühmann (2019) 570. 91 Blackaby/Partasides (n11) 1.
this regard.92 To discuss the potential contribution of arbitration, I will first describe its main characteristics. Subsequently, I will discuss the benefits, arbitration could have for resolving collective cross-border disputes, by especially focussing on the shortcomings of the Proposal that exist in this regard. Subsequently, I will assess the nevertheless existing tensions between arbitration and collective consumer proceedings and examine, if and how those obstacles can be overcome.
3.1 Main Characteristics of Arbitration
Arbitration is a private dispute resolution mechanism, agreed to by contract, for obtaining a final and binding resolution of disputes.93 The key elements of arbitration, which will be relevant for discussing the advantages and tensions of arbitration relating to collective consumer proceedings, are the following:
(i) Consent
Consent, i.e. the agreement to arbitrate, is the foundation stone of arbitration. It is particularly important, as it documents the parties’ consent to submit their (potential) dispute to arbitration and thus “opt out” of the otherwise applicable national court system.94 The agreement to
arbitrate can be either part of a contract between the parties and therefore refer to future disputes, or it can have the form of a submission agreement, which is concluded after the dispute between the parties has arisen.95
(ii) Party Autonomy
Party autonomy is – together with the principle of consent, which can be seen as an expression of party autonomy – the guiding principle of arbitration.96 The parties are – within certain limits – the “masters of their procedure”. They can e.g. decide upon the seat of arbitration, which is usually a “neutral” place97 and – within certain limits – about the
procedure to be followed.98 The arbitral proceeding can, therefore, be tailored to meet the
92 Nater-Bass (n12) 671, who argues that it could only be a matter of time, before first class action arbitrations are also
initiated in Europe or Strong (n10) 28, who expects further developments in collective arbitration in Europe in the coming months and years.
93 Drahozal/Friel (2002) 357; Born (2014) 247. 94 Blackaby/Partasides (n11) 71. 95 ibid. 96 ibid 13; Born (n93) 266. 97 Blackaby/Partasides (n11) 166. 98 ibid 355.
requirements of the respective dispute, which makes it a very flexible form of dispute resolution.99
(iii) Enforcement
Both the arbitration agreement as well as the arbitral award can be enforced according to the NYC, which contains a strong pro-enforcement policy and is one of the most important pillars in international commercial arbitration as it facilitates enforcement in any of its more than 140 signatory states.100 However, within the EU, recognition and enforcement of decisions of a court of a MS is facilitated by Brussels-I and can only be refused under exceptional circumstances.101 Within the EU, enforcement is thus no reason to choose arbitration over court litigation, as Brussels-I facilitates easy enforcement of court decisions as well.102
(iv) Finality
An arbitral award is usually final and binding and cannot be appealed. By opting for arbitration, the parties pick a system, which provides them with a final and binding decision, contrary to court litigation, where the first decision is often only the start of a lengthy procedure of appeals through different instances.103
(v) Neutrality
If a dispute between parties of different nationalities is litigated in a court of the state where one of the parties is domiciled, the court and the related procedure will naturally be foreign to the other party.104 One party thus always has a certain “home advantage”. By submitting the dispute to arbitration, the proceeding takes place in a neutral setting and is decided by a tribunal which is chosen by the parties.105
99 ibid 30. 100 ibid 616. 101 Gorywoda/Hatzimihail/Nuyts (n51) 29; Bogdan (2016) 71. 102 Strong (n10) 16. 103 Blackaby/Partasides (n11) 569ff; Born (n93) 253. 104 Blackaby/Partasides (n11) 28. 105 ibid.
(vi) Confidentiality
Arbitral proceedings are generally private and confidential, contrary to court proceedings, which are usually public. This feature can be especially appealing for parties who do not want details of the proceeding to be made public.106
3.2 Advantages of Arbitration regarding Collective Cross-Border Disputes
Although the EC recognises an increased risk of EU-wide infringements of Union law107, the Proposal – as discussed in chapter 2.3.3 – does not address all issues relating to the resolution of collective cross-border disputes sufficiently. In the following, I will thus discuss, what the specific characteristics of arbitration can contribute to the resolution of collective cross-border claims, inter alia in the light of the shortcomings of the Proposal.
3.2.1 Centralisation of the Jurisdiction
A crucial issue in every case with a cross-border element is the determination of the competent court. As discussed in chapter 2.3.3, the Proposal does not tackle this issue, but refers to the existing rules on jurisdiction, which leads to the unsatisfactory situation that in case of an infringement affecting claimants all over the EU, several courts in different MS would be competent to adjudicate claims based on the same cause of action.
The EC held in its Green Paper on consumer collective redress that an element which contributes to the effectiveness and efficiency of a collective redress mechanism is the bypassing of the formalities of normal civil procedures.108 On the other hand, an element which hinders such effectiveness and efficiency is the use of one collective redress mechanism for all claims, without tailoring it to the specificities of each particular claim.109 The consensual nature of arbitration could thus be useful in dealing with collective cross-border cases, as the jurisdiction could be consensually centralised before one arbitral tribunal, and the parties could determine the applicable arbitral rules to be followed – subject to mandatory provisions of the applicable lex arbitri – which cannot be excluded. Uncertainties regarding the competent court and the effects of decisions from courts of one MS on
106 ibid 30.
107 COM (2018) 184 final 1. 108 COM (2008) 794 final 5. 109 ibid.
proceedings in another MS would thus be avoided, and the entire dispute could be resolved in one forum rather than in several countries.110
In view of the objectives of the Proposal, the advantages of resolving cross-border disputes in one (arbitral) forum would be manifold. On the one hand, piecemeal litigation in several MS would be avoided or at least reduced, which would avoid procedural discrepancies in the resolution of claims based on the same cause of actions, due to differences in national procedural law.111 Mitigating uncertainties regarding jurisdiction would also be in line with the understanding of access to justice in Brussels-I.112 On the other hand, bundling identical claims in one forum would mitigate inconsistent findings and reduce procedural costs.113 The issue of cost efficiency is especially relevant for the defendant, who is otherwise faced with considerable legal consultancy and procedural costs if mass disputes are litigated in several countries. Resolving a collective consumer claim before an arbitral tribunal would thus serve the objectives of the Proposal insofar as it would facilitate an equivalent and thus fair treatment of all consumers concerned and it would impact cost aspects and reduce the issue of inconsistency.
How well these advantages could be unleashed depends on how such a system would be organised. As will be discussed in chapter 3.3.1, the previous approach of the EU, as well as the approach of the Proposal, is not favouring full opt-out systems, meaning that every claimant who is affected by certain conduct is automatically affected by a decision on that conduct.114 The Proposal does not exclude individual claims by consumers115, which means that the Proposal would not prevent differing decisions in different countries because of individual actions of consumers. Recourse to arbitration would not overcome this issue, as it would in the EU – as will be discussed in chapter 3.3.1 – likely have to be organised as an opt-in system. However, it is still an alternative worth considering, as jurisdictional rules on collective cross-border procedures are currently lacking.116
Arbitration offers a way to centralise jurisdiction and thus overcome a currently existing, substantial shortcoming of the Proposal, with the additional advantage that it would not – 110 Kleiman (n85) 189; Strong (n10) 16. 111 Strong (n10) 17. 112 see n51. 113 Neumeier (2018) 147; Strong (n10) 16. 114 See chapter 3.3.1.
115 Position Paper DAV 10; Halfmeier/Rott (2018) 249. 116 See chapter 2.3.3.
contrary to every other jurisdictional rule – refer to the courts of a MS. As mentioned above, one suggestion is that collective actions regarding consumer from different MS should only be possible at the courts of the domicile of the defendant.117 Such a rule, like every other jurisdictional rule that refers to the courts of a MS, can, however, entail disadvantages for those consumers who are not domiciled in the MS where the dispute is litigated. Consumers from different MS might thus be reluctant to join a collective claim which is adjudicated in another country than the one where they are domiciled. In this respect, arbitration could serve as an alternative, as it would provide equal conditions for all claimants.
Although arbitration – as every collective proceeding that is organised through an opt-in system – would not prevent additional individual actions, it could serve as a viable alternative to centralise jurisdiction and – if it proves to be successful – reduce the amount of additional individual actions.
3.2.2 Neutrality
As already briefly touched upon in the previous section, even if there would be a provision that would centralise jurisdiction, it would necessarily entail a choice for the courts of one MS. Every claimant or the defendant who is not domiciled in that MS would thus face certain disadvantages. Regardless where the proceeding would take place, someone would face the burden of e.g. additional consultancy costs, as there might be the need to familiarise oneself with the specific procedural circumstances of the respective country.
The fact that in arbitration, the dispute would be decided by a tribunal chosen by the parties and being independent of their domicile and nationality can thus serve as an advantage for everyone involved, as it sets a level playing field.118 It would also mitigate the issue that a qualified entity might be reluctant to sue at a court of another MS. Besides, a neutral tribunal in the sense that it is independent of the nationality of the parties can contribute to the trust and acceptance of the parties in the decision. Avoiding a decision by one party’s “home jurisdiction” would be advantageous insofar as especially mass disputes are often highly politicised.119
117 Position Paper DAV 30. 118 Strong (n10) 16. 119 Neumeier (n113).
A neutral tribunal could thus contribute to the objectives of the Proposal insofar, as it would further the right to be heard by an independent and impartial tribunal as one of the core requirements of access to justice.
3.2.3 Finality
Finality, meaning the fact that an arbitral award can usually not be appealed, can be conceived as an advantage120 as well as a disadvantage, usually depending on the perspective of the parties after the outcome of the dispute. An advantage, from the perspective of both parties is the aspect of time and costs. An arbitral proceeding can be a way to obtain redress in a relatively short timeframe, compared to court litigation, where usually several instances are involved. Even in case of a negative outcome, it can be advantageous for a defendant to have a quick resolution of a dispute than go through years of litigation which can be costly and may also cause reputational harm. However, especially from the perspective of the losing party, finality can also be conceived as a disadvantage, as the decision can usually not be appealed and can only be challenged under exceptional circumstances.121 Nevertheless,
obtaining a quick resolution of a dispute can serve the time and costs aspects of effective access to justice122 and thus the objectives of the Proposal.
3.2.4 Conclusion
Arbitration can contribute to the resolution of collective consumer claims with cross-border implications and would serve the objectives of the Proposal, especially regarding its shortcomings.
The centralisation of the jurisdiction before the arbitral tribunal would facilitate an equivalent and thus fair treatment of all consumers concerned, impact cost aspects, reduce the issue of inconsistency123 and avoid uncertainties regarding the competent court.124 Moreover, the neutrality of the tribunal would contribute to the right to be heard by an independent and impartial tribunal, and the finality of the arbitral award as well as the fact that many claims
120 Strong (n10) 16.
121 Regarding the challenge of an award see chapter 3.3.5. 122 COM (2008) 794 final 5.
123 Kleiman (n85) 189; Strong (n10) 17. 124 ibid.
are bundled before one tribunal would positively impact time and cost aspects for all parties involved.125
3.3 Tensions between Arbitration and Collective (Consumer) Disputes
Arbitration is a unique dispute resolution system based on consent, whose procedure is characterised inter alia by party autonomy and confidentiality.126 Collective procedures, however, need to sacrifice such principles to some degree to achieve their purpose of effectively handling a multitude of claims. Besides, the development of a collective redress regime in the EU is also shaped by public policy considerations. Facilitating access to justice is a major concern of the EU, as an effective judicial system is considered to strengthen the individual citizens’ trust and thus further the development of the internal market.127 Besides,
the development of collective procedures in the EU is mainly discussed in the context of consumer disputes, the latter being on tense terms with arbitration. It is thus not surprising that there are tensions between arbitration and the collective resolution of consumer disputes in the EU. In this subsection, I will examine which characteristics of arbitration are especially considered to be obstacles regarding the collective resolution of consumer claims, and I will discuss the underlying reasons.
3.3.1 Principle of Consent – “Opt-out” Systems
In an opt-out system, every person affected by a defendant’s conduct is automatically included in litigation over that conduct unless they take steps to exclude themselves and thus opt-out of the procedure. Every affected individual is bound by the judgment, except for those who expressly opted out128 (e.g. the US class action model129). In an opt-in system, affected individuals must take the initiative to be a member of the claimant group, meaning that a later judgment binds only those who expressly opt in. This model is most common in European jurisdictions and is used by most MS that provide collective procedures.130 The distinction between opt-in and opt-out systems basically boils down to the question towards whom a decision of a collective procedure has res iudicata effect. Only towards those, who expressly
125 Kleiman (n85) 194.
126 Neumeier/Georgiev (n12) 53.
127 Recital (3) Directive 2013/11/EU; Recital (5) COM (2018) 184 final; Gorywoda (n21) 173; Kleiman (n85) 191. 128 COM (2013) 401 final 11; Michael D. Hausfeld and Brian A. Ratner, “Prosecuting Class Actions and Group
Litigation” in Karlsgodt (2012) 546; José-Miguel Júdice, “Collective Arbitration in Europe: The European Way Might Be the Best Way” in Hanotiau/Schwartz (2016) 48.
129 Júdice (n128); van Zelst (n17).
opted into the proceeding or towards everyone who was affected by the relevant conduct and did not opt out?
Some claim that opt-out systems are conflicting with the consensual nature of arbitration, as they treat everyone who did not opt out as a party, regardless of whether this person consented to the respective proceeding or not.131 Although opt-out systems are not inevitably in conflict with the core of the principle of consent, as the parties still had to conclude an arbitration agreement at some point in time132 and thus consent to arbitration as such, the consent of a party to arbitrate can better be established in an opt-in system. Extending the effect of an award only to parties who expressly agreed to be part of the proceeding (i.e. opted-in) and not to everyone affected by a certain conduct (i.e. everyone who did not opt-out) ensures that those bound by an award certainly agreed to resolve the dispute in arbitration and do not have any objections regarding a previous arbitration clause.133 It is thus argued that an opt-in
system is more in line with the consensual nature of arbitration.134
Opt-in systems are also the preferred approach of most European jurisdictions and are favoured by the EC in its Recommendation135 and its related Communication.136 It emphasises the importance of a clear definition of the claimant group, to ensure that the proceeding is conducted in a manner compatible with the rights of all parties. Moreover, it argues that an opt-in system facilitates a correct determination of the amount in dispute, which consists of the sum of the individual claims. In an opt-out system, the compensation might not be distributed to all affected persons, as they might not be identifiable, which is hard to reconcile with the aim of collective redress, to obtain compensation for those who suffered harm.137 It is further argued that one of the benefits of an opt-out system, namely to accumulate a higher number of claimants, is becoming less important, as, due to the availability of various information channels, it is becoming easier to collect potential claims.138 Besides, an opt-in system is more compatible with the legal traditions of the MS, as regards party autonomy, the voluntary character of ADR and individual control over
131 Troum (2013) 437; Júdice (n128) 48; Neumeier/Georgiev (n12) 54.
132 see e.g. rule 4 (a) (6) AAA Supplementary Rules, which follow an opt-out system (see Rule 6 (b) (5) AAA
Supplementary Rules); Strong (2008) 8.
133 Nater-Bass (n12) 681.
134 Lea Haber Kuck and Gregory A. Litt, “International Class Arbitration” in Karlsgodt (2012) 730. 135 Recommendation 2013/396/EU para 21-24.
136 COM (2013) 401 final. 137 ibid 11.
substantive rights and procedure.139 Interestingly, in the Proposal, the EC seems to leave more discretion to the MS, regarding the implementation of an opt-in or an opt-out system. Article 6 (1) stipulates that a MS „may require” the mandate of the individual consumer concerned before a declaratory decision is made or a redress order is issued.140 The EP added in this regard that a MS may “or may not” require the mandate of the individual consumer.141 This approach is criticised as it is argued that qualified entities should not be enabled to claim redress measures without the individual mandate of the consumer since the latter should be able to decide by themselves if and what redress measure they want to obtain.142
Collective procedures, organised as opt-out systems, can cause certain tensions regarding the principle of consent in arbitration. However, opt-in systems are the preferred approach of most MS which provide for collective redress regimes and have been – at least until the controversial approach in the Proposal – favoured by the EU. The fact that collective procedures can be organised as opt-out system does therefore not cause an insurmountable obstacle to the development of collective arbitration in the EU, where opt-in systems are the favoured approach. In the following, I will thus focus on collective procedures, organised as opt-in systems, and leave aside further issues that may arise in opt-out systems.
3.3.2 Principle of Consent – Agreement to Arbitrate
The focus of this paper is collective consumer claims. As such claims often emerge out of mass, standardized contracts, another issue regarding the principle of consent is, if and how a valid arbitration agreement can be concluded with consumers in general and particularly in such contracts.143 The tension thus lies in the relationship between arbitration and consumer disputes rather than arbitration and collective disputes. Since the focus of this work are, however, collective consumer disputes, the issue will be dealt with in this context.
(i) Conclusion of an Arbitration Agreement with a Consumer in Standardised Contracts?
The Unfair Terms Directive (“UTD”)144 stipulates in Article 3 that a term, which has not been individually negotiated shall be regarded as unfair if, contrary to good faith, it causes a
139 COM (2013) 401 final 11; Philippe Billiet, “Collective Redress and Class Arbitration in the EU” in
Hanotiau/Schwartz (2016) 60.
140 Article 6 (1) COM (2018) 184 final. 141 Position EP on Proposal, Amendment 60. 142 Position Paper DAV 20.
143 Nater-Bass (n12) 681. 144 Directive 93/13/EEC.
significant imbalance in the parties’ rights and obligations to the detriment of the consumer. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract. The annex to the UTD, which contains and indicative and non-exhaustive list of terms which may be regarded as unfair, stipulates inter alia that “terms which have the object or effect of excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions” may be regarded as unfair.145
According to the CJEU, the UTD is not limited to establishing the legal value of arbitration agreements with consumers146, but also lays down obligations for the courts of the MS.147 In C-168/05, the CJEU held that the UTD must be interpreted as meaning that a national court deciding on an action to set aside an arbitral award must determine whether the arbitration agreement was unfair and thus void. In C-40/08, the CJEU confirmed the obligation of a national court to assess on its own motion whether an arbitration agreement is unfair.148 This
jurisdiction is in line with previous jurisdiction of the CJEU regarding ex-officio control of contract terms by courts (e.g. Océano,149 which concerned a jurisdiction clause).
MS can to a certain extent decide whether and under which conditions arbitration agreements with consumers should be allowed.150 In this regard, different approaches can be observed. In the Netherlands, arbitration agreements in standard terms and conditions are deemed to be unreasonably burdensome, unless consumers are given a period of one month from the moment an arbitration clause is invoked against them to decide whether they prefer to go to court instead.151 The ratio behind this provision is to ensure that consumers are not deprived of the protection of the courts against their will or without being aware of it.152 In Germany, arbitration agreements with a consumer must be contained in a document signed by the parties personally, which may not contain agreements other than the arbitration agreement. This does not apply, if the agreement is recorded by a notary.153 The provision entails a warning
145 Article 3 (3) in conjunction with Annex 1 (q) UTD. 146 Piers (2011) 216.
147 C-168/05; C-40/08.
148 C-168/05; C-40/08; Drahozal/Friel (n93) 363; Piers (n146) 216. 149 C-240/98-C-244/98.
150 van Duin (2018) 6.
151 Article 6:236n BW; van Duin (n150) 9. 152 van Duin (n150) 10.
function and protects the consumer from unintentionally submitting to arbitration by signing extensive standard form contracts.154 However, the provision does not generally prohibit arbitration agreements in standard terms, as long as the arbitration clause is signed separately from the other provisions.155 Contrary to the Dutch provision, which contains an “escape” period for the consumer, the German provision requires certain formalities, for an arbitration agreement with a consumer in standard terms to be valid.
In Austria, a trader and a consumer can conclude an arbitration agreement only for already existing and not for future disputes.156 Additionally, certain formal requirements such as a personal signature and a separate document for the arbitration agreement must be fulfilled.157 Contrary to the Dutch and German system, pre-dispute arbitration agreements with consumers are therefore not valid at all under the Austrian regime.
The approach of those three legal systems concerning the availability of pre-dispute arbitration agreements with consumers in general and their specific (formal) requirements thus differs considerably. Besides that, it is argued that even if the formal validity requirements of an arbitration agreement are fulfilled, it could still be questioned – from the perspective of the principle of consent – if an arbitration agreement contained in standard terms was validly concluded, meaning if the consumer really consented to arbitration.158 Moreover, regarding collective arbitration, it can be doubtful if a simple arbitration agreement – even if it would as such be valid – can be interpreted as also including the consent to collective arbitration.159
(ii) Excursus: Development in the US
In the US, collective arbitration – which is much more advanced than in Europe – developed through the interpretation of arbitration clauses in consumer contracts. In the landmark decision Green Tree v Bazzle,160 the US Supreme Court held that an arbitrator must determine whether an arbitration clause allows for class arbitration. In that case, several standard form consumer contracts contained an arbitration clause, which did, however, not refer to collective arbitration. The arbitrator administered the cases as class-wide arbitrations and issued class 154 Saenger (2019) § 1031 Rn 9. 155 ibid Rn 13. 156 Section 617 (1) öZPO. 157 Section 617 (2) öZPO. 158 Nater-Bass (n12) 682. 159 Nater-Bass (n12) 683; Neumeier/Georgiev (n12) 55. 160 539 US 444 (2003).
