Use Of Arbitration Clauses In Consumer Contracts: Fair Or Unfair?
- IJLLR Journal
- 2 minutes ago
- 2 min read
Diya Gour, Bennett University
ABSTRACT
“Look at how conflicts are managed nowadays, and there has been a minor but observable change. Arbitration, something you could have only expected to find in large business transactions between companies, has gradually found its way into our lives and your bank account agreements, your food delivery application, and even your OTT subscriptions. And, frankly, most of us do not pay any heed to them. It would be wrong for it to be termed as a choice; it is more like a reflex to avoid reading those complex and lengthy terms. That is exactly how the problem arises, as technically the consent is present, but it is not felt truly, as the consumer has not made an informed decision.
Part autonomy is one the defining and most fundamental principles of Arbitration. Party autonomy implies that parties to the arbitration proceeding have mutually consented for the dispute to be resolved in such a manner. This, in theory, sounds completely fair. However, consumer protection laws come from a very different place. It makes certain rather realistic assumptions that consumers do not negotiate even on equal terms with corporations. Then the question is: are they actually arbitration clauses that relate to choice, or are they just another term quietly slipped in, like delivery fees you only find out about at the checkout?
The paper explores that tension by taking a closer look at such laws as the Arbitration and Conciliation Act, 1996 and the Consumer Protection Act, 2019, as well as the way in which they have been interpreted by the courts. It also draws the examples of the US and the EU, as, somewhat surprisingly, they have approached the same problem in rather different ways. What begins to appear is a somewhat awkward image. Many of these arbitration provisions are not based on actual agreement, but are convenient to the party of strength. Companies write the conditions, establish the regulations, and are aware that the majority of the consumers will not ask questions as at the end of the day, people simply need the service. This said power imbalance is very significant, but if often overlooked. The entirety of the concept of consent is based on this principle.
Arbitration in itself is a very efficient practise of dispute resolution, but there might be certain fields or areas where certain limitations affect its effectiveness. It has loads of benefits and advantages as we already know. However, its incorporation in consumer contracts does not harmonise well with the concept of consumer interest protection and consumer welfare. Hence, the practise of arbitration in itself, is not bad, but its current application and incorporation in consumer contracts might actually be undermining consumer interest”
