The following debate tackles the issue of consumer disputes and whether arbitration is suitable for their resolution. As the consumer is known to be the weaker party in such situations, the debate revolves around the question if arbitration, in today’s forms, can be used as an effective approach for such dispute resolutions, or should these disputes be exclusively submitted to state courts.

Our guest writers from this issue manage to bring strong arguments in favour of both positions, so keep reading to find out more.  

Marko Mećar

Marko had graduated from the University of Zagreb, Faculty of Law. He is working as an attorney at law in Zagreb, Croatia. In his practice he provided legal advice and prepared documents including contracts regarding various legal issues in fields such as such as international and domestic commercial law, real estate acquisition, construction, litigation, arbitration law, intellectual property law. Currently, he is taking the LLM in International Business Law at the Central European University in Budapest, Hungary.

Michael Imran Kanu

Michael is a LLM Candidate for the Central European University's International Business Law program, currently living in Budapest. He is a barrister and solicitor of the High Court of Sierra Leone. He is also a Prosecutor at the autonomous State Anti-Corruption Commission in Sierra Leone.


Opening Statement - Marko

When choosing the appropriate mechanism of dispute resolution, one should bear in mind that there is no universal mechanism which is always appropriate for resolving certain type of dispute. This is because sometimes particular circumstances of a case may require specific mechanism to be applied for resolving the said dispute. Therefore, requiring the parties in a consumer dispute to go exclusively to the state courts even in cases when arbitration would be more appropriate means of resolving that dispute would defeat the same purpose we are trying to achieve – to provide high-quality mechanisms most appropriate for resolving consumer disputes. 

Argument that the parties should be able to arbitrate their dispute if they want, would come short to the whole truth if one would not analyze objective advantages which arbitration has in comparison to court proceedings. Comparative advantages of arbitration lead to conclusion that arbitration will be in some cases more appropriate for resolution of consumer disputes than court proceedings. Possibly the biggest comparative advantage of arbitration is flexibility and cost-effectiveness without sacrificing the quality of the procedure itself. For example, real life shows us that consumers will often have a certain claim towards a merchant (for instance to cure defective goods) but will not pursue their rights because that would mean going to state court, engaging in a time-consuming court procedure, hiring attorneys, paying high court and attorney fees, etc. So, even though consumer has a well-founded claim against a merchant, consumer does nothing to enforce his rights in court. This problem is even more present today when e-commerce has spread around the globe and often consumer and merchant are not from the same country. In such situations consumers are discouraged even more to seek protection of their rights because of language barriers and unfamiliar foreign procedural rules.

Arbitration resolves all of these issues. 

Firstly, in arbitration the parties may agree on a procedure which is tailor-made for that specific case. For instance, it is an ongoing trend which produces efficient results that arbitration proceedings may be wholly conducted and resolved via Internet, which makes the whole procedure quick and cost-efficient. This practice has become more and more dominant in certain types of consumer disputes. In arbitration parties may use e-communication and do not have to travel lengthy distances to go to court proceedings; parties may agree on procedural rules and thereby avoid complex jurisdiction issues; language barriers are also easily dealt with because parties may agree on use of common language and on the arbitrator who is versatile in the same language, or if they wish they may use translation services. Obviously, the procedure before state courts cannot provide such flexibility.

Secondly, in arbitration parties are free to choose the arbitrator who will decide their dispute, so they may choose a person specialised in consumer disputes and who will maneuver efficiently through the procedure. By doing that the parties will ensure that the arbitration will be more expedient than proceedings before state court which are not specialised for consumer disputes. Also, the result of the arbitration procedure will be a high-quality award. The overall final result will be achieving more consumer protection by high-quality awards adopted in more expedient arbitration procedure, as opposed to procedure before state courts.

The above points only scratch the surface of the argument that arbitration is in some cases better solution than court proceedings. Obviously, in such cases it would be wrong to exclude the possibility for the parties to go to arbitration if they choose so. Therefore, I strongly believe that state courts should not have exclusive competence to resolve consumer disputes.


Opening Statement - Michael

Presently, there is a resonance of pro-arbitration policy in the leading legal jurisdictions across the world, following the weakening of the initial mistrust, which then manifested in the reluctance by courts to enforce arbitration awards. Amidst this air of pro-arbitration stance, a key issue remains unresolved, and continues to be a subject of academic and practical debate; and that is the scope of arbitration, usually referred to as the concept of arbitrability. 

Though there is no statutory definition of arbitrability per se, most statutes have narrowed its meaning to the ‘inability to arbitrate rights that cannot be freely disposed of’ (Varady et all, 2009). It is important to note that the law in Switzerland provides that ‘any dispute involving an economic interest may be subject matter of arbitration’. Judicial bodies including national and supranational courts have given consideration to what are those rights that cannot be freely disposed, especially with economic interest.

Fundamentally, there is inequality of bargaining power between consumers and businesses, and there is a general public interest to protect the consumer from the ramifications of such bargaining imbalance, especially in social market economies as in the European Union. In United States of America, the doctrine of unconscionability is often invoked to invalidate arbitration clauses in consumer contracts. The interests of consumers have to be taken collectively and not as an individualised right which could be freely bargained on a case by case basis; hence a class right. This proposition forms the thrust of the argument of non-arbitrability of consumer disputes. The public interest in preserving the protection of consumers from unfair and bad faith transactions overrides arbitration.

In the European Union, the Directive on Unfair Terms in Consumer Contracts includes as ‘unfair’ a contract term that has the 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.’ As implemented in the United Kingdom, many (if not most) pre-dispute agreements for binding consumer arbitration are unlawful. 

Further arbitration is an inadequate forum for consumer disputes, because the costs involved in arbitration, as opposed to low cost access to courts, make the forum inaccessible to the consumer. Under most arbitration rules, the parties split the cost of the arbitration. The administrative fee is usually calculated based on the quantum of the claim. Since these fees and costs can be substantial, engaging in such endeavour will be costly for the consumer, thereby inhibiting consumers’ exercise of fundamental right to access justice (Barron, 2001).

Also, the issue of ‘inherent conflict’ between arbitration and the public policy goals of court actions in consumer disputes is crucial to provide effective deterrence. Court’s decisions are traditionally necessary for the full implementation of the deterrence posture in preserving consumers’ interest. 

Arbitration has become a useful mechanism to resolve commercial disputes; however, jurists are generally of the view that not all disputes are arbitrable, and consumer law ought to be outside the purview of arbitration in my considered opinion. Consumer protection represents a key component of public policy consideration which would render any arbitral award prone to being unenforceable. It is arguable to suggest that arbitrability must not be equated to enforcement of an award; however, the essence of arbitration is to secure an enforceable award, hence any action that fails to achieve this purpose would be an exercise in futility. 

For these reasons cited above I submit that consumer disputes must be non-arbitrable and that such disputes should be submitted exclusively to courts.


By now we have learned from our debate that the problem of consumer disputes is highly controversial and, as Michael says, ‘continues to be a subject of academic and practical debate’. In the Opening remarks Marko argues that state courts should not have exclusive competence to resolve consumer disputes, underlining the main advantages of arbitration such as flexibility and cost-effectiveness. On the other hand, Michael underlines the disadvantages, such as higher costs and lack of enforceability, submitting that consumer disputes must be non-arbitrable and that such disputes should be submitted exclusively to state courts.

Rebuttal - Marko

My opponent argues that consumer disputes should be non-arbitrable and should be exclusively submitted to courts for several reasons, which I rebut hereunder.

He claims that high costs of arbitration may defer the consumer from submitting the dispute to arbitration and thereby diminish the consumer’s right of access to justice. He claims that, because of this risk, arbitration should be prohibited in consumer disputes. However, one must bear in mind that today consumers have a wide range of specialised arbitration proceedings at their disposal, some of which are increasingly being used in consumer disputes precisely because they do not involve high expenses. It suffices to say that EU established a specialised body to carry out resolutions of consumer disputes within EU territory through online dispute resolution (‘ODR’) e.g. arbitration. Most of the beneficial aspects of online arbitration I have already pointed out in my opening statement. I would just like to add that EU Commission has ordered studies which estimate around €20 billion of potential savings for EU consumers if consumers can refer their dispute to ODR schemes. Therefore, arbitration, if rightly employed, may actually save money to consumers and lead to better results than state litigation. Therefore, the argument that recourse to arbitration in consumer disputes should be banned because of high costs simply does not stand. 

My opponent claims that arbitration agreements might in certain circumstances represent unlawful agreements leading to unlawful results. He claims that according to EU Directive on Unfair Terms in Consumer Contracts an arbitration clause always represents unfair contract term since it hinders the consumer’s right to take legal action by requiring the consumer to take disputes exclusively to arbitration. I would first like to point out that the mentioned EU Directive provides no such thing. The mentioned EU Directive stipulates in Article 3 that any contractual term will be unfair in certain exceptional situations – when it has not been individually negotiated with the consumer and, contrary to good faith, it significantly detriments consumer’s rights. For example, this may be the situation when the merchant misuses consumer’s trust and, without any negotiations taking place, includes an arbitration clause in the contract, whereby the consumer was not even aware of the existence of such clause. In other situations, e.g. when the consumer has individually negotiated with the merchant on the arbitration clause, the arbitration clause shall not represent an unfair contract term and will be perfectly legal. Therefore, the EU Directive cited by my opponent actually proves the contrary to his arguments – it shows a pro-arbitration attitude in EU since arbitration is generally allowed in consumer disputes when the merchant does not misuse consumer’s trust.  

With regard to the last argument of my opponent, that there is an ‘inherent conflict’ between arbitration and the public policy goals in consumer disputes, I would like to point out that there is no such inherent conflict. The best proof for this is that in most of countries today, when the arbitration clause is in accordance with good faith properly negotiated between merchant and consumer, arbitration is possible and actually used in consumer disputes. The reason for this is that the states have recognised all the benefits arbitration may bring to consumers. Therefore, obviously arbitration in consumer disputes is not conflicting with public policy goals.

In conclusion, most legislations today allow arbitration in consumer disputes. When properly negotiated between the parties, arbitration leads to better protection of consumers’ interests and consequently, it is in consumers’ interests to allow arbitration in consumer disputes. Therefore, contrary to my opponent’s arguments, it is obvious that arbitration should be allowed in consumer disputes.


Rebuttal - Michael

As expected any argument in support of arbitrability of consumer disputes would be hinged on the universal advantages of arbitration, and my opponent canvassed his arguments essentially on the advantages thereby concluding that arbitration is also suitable to settle consumer disputes with high public interest. My opponent referenced the flexibility, cost-effectiveness, and party autonomy covering choice of procedural rules, language and specialisation of arbitrators as being the comparative advantages of arbitration. 

It is widely agreed in academic circles that the advantages highlighted by my opponent have lost their currency as arbitration has become for example, prohibitorily costly; in that the cost for the arbitrators, counsel, administration, and often the institutions are borne by the parties. There are further web of complexities in arbitral procedures, and serious uncertainty in the area of multiple parties’ claims. While party autonomy may be arbitration’s biggest advantage, this could hardly prove to be relevant in consumer disputes. In the context of consumer law, there can hardly be any true meeting of the minds, owing to the bargaining imbalance. 

A case that brings out the deficiencies of arbitration vis-à-vis litigation is the American Almond Products Co. vs. Consolidated Pecan Sales Co. Inc. where Learned Hand, Circuit Judge opined that: ‘Arbitration may or may not be a desirable substitute for trials in courts; as to that the parties must decide in each instance. But when they have adopted it, they must be content with its informalities; they may not hedge it about with those procedural limitations which it is precisely its purpose to avoid. They must content themselves with looser approximations to the enforcement of their rights than those that the law accords them, when they resort to its machinery.’

Consumer protection, although given to each person, transcends their individual capabilities to alter or amend such protection. Hence the protection provided by law is not that of the consumer to hedge, as inherent in every consumer right is considerable public interest. Arbitral procedural limitations for example could prevent consumers from relying on rules pertaining to discovery, preliminary relief, speedy remedies like injunctions etc. This would seriously hamper the deterrence effect of consumer protection law; therefore the law must not allow the wholesome disposal of the protection by contractual proceedings.

A case for shared jurisdiction was made for arbitration and litigation to coexist as disputes resolution mechanisms for consumer disputes. In support of the exclusivity of the jurisdiction of courts, I am of the reasoned view that there would be disparities in procedure, costs and outcomes, if jurisdiction is shared. Arbitration has limited procedure scope and reliefs, and predominantly no appellate opportunity. This may lead to varying decisions between the two processes which will bring much uncertainty in consumer protection jurisprudence.

My opponent stressed in his argument against non-exclusivity of courts on perceived advantages of choice of arbitrator (specialisation), language and innovation with respect to e-commerce.  Again, the cited benefits of party autonomy are not relevant to consumer law, as it is mainly territorial. Further, courts are also becoming very specialised and more adept to deal with consumer dispute, and in the European Union the use of preliminary rulings by the European Court of Justice has been quite useful in pronouncing reasoned interpretations.

Finally on e-commerce and consumer, apart from the internal market dynamics of the European Union, consumer laws across international borders differ and hence dispute mechanisms are fraught with challenges whether through courts or international arbitration. Arbitration does not resolve those issues, but rather exacerbates them by endangering the enforcement of an arbitration award.


We have now seen how the two guest debaters tried to disqualify each other’s arguments. While Marko argued that in reality the consumer has access to different arbitral proceedings that are not that costly and that there is no inherent conflict between arbitration and the public policy goals in consumer disputes, Michael argued that the advantages highlighted by his opponent have lost their currency. We shall now proceed to the last part, the conclusions, where each of them will try to underline the strengths in their cases while pointing out the opponent’s weaknesses. 

Conclusions - Marko

The reasons which my opponent introduced seem to raise a question over use of arbitration in consumer disputes. However, the practice and everyday business give us precise answers to this question. Arbitration is getting more and more used in consumer disputes. 

Arbitration has many features which are not attributable to the procedure before state courts, including: quick and flexible procedure, neutral arbitrators with high professional experience and, what most consumers will hold as one of the most relevant factors, the possibility of cheap arbitration via ODR procedure. 

Admittedly, there are some extreme situations in which arbitration may be misused by merchants. However, today’s legal systems have remedies for these situations which protect the consumer’s interests and the consumer may either renegotiate a new arbitration clause which he deems favourable or even seek recourse to courts.

All the advantages which arbitration can offer to consumers should not be overcome by possible risks which may be involved in some consumer disputes, especially because these risks may be satisfactorily resolved by appropriate legal mechanisms. Forbidding the use of arbitration in consumer disputes altogether, even when it is in consumer’s interest and the consumer wants to arbitrate, would be simply going to unwanted extreme.  

Conclusions - Michael

Without restating the arguments in my opening, and the counter premised on the obvious advantages of arbitration, it is clear that the suitable of arbitration for public interest consumer disputes is hinged on the condition of compliance to the good faith and bargaining imbalance in the Unfair Trade Terms Directive. Courts must exclusively resolve such important public interest issues.  

The point on ODR is well taken, but ODR has its limitation as to quantum, which is very insignificant to warrant greater public interest. The procedure is not applicable to offline sales. Comparatively, the European Small Claims Procedure, a judicial mechanism, improves access to justice by simplifying cross-border small claims litigation in civil and commercial matters and reduces costs. 

The arbitrability of consumer disputes in hinged on the condition that there was properly negotiation between the parties, conducted in good faith. Practice shows however that most of such transactions are conducted with pre-drafted and concluded terms by the businesses. In arbitration, the greater public interest cannot be protect owing to its private nature; hence my submission that consumer disputes, in which there is a great public interest to protect the consumer as the weaker party, ought to be exclusively submitted to state courts.


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