Consumer Arbitration in the European Union and the United States

This article examines the differing legal treatment of pre-dispute consumer arbitration agreements in the European Union and the United States. Under the E.U. Directive on Unfair Terms in Consumer Contracts (particularly as implemented in the United Kingdom), most such agreements are invalid. In the United States by contrast, most pre-dispute arbitration agreements are valid, even in consumer contracts, unless some other provision in the arbitration agreement renders it unenforceable. In our view, the differing legal treatment likely stems from differing legal traditions between the European Union and the United States with respect to consumer protection legislation, and key differences between the legal systems in the European Union and in the United States. More specifically, in European legal traditions, consumer interests generally are more highly protected than in the United States (particularly given that the coverage of consumer arbitration by the Federal Arbitration Act evolved through court decision rather than legislative action). Meanwhile, the greater availability of jury trials, class actions, and punitive damages in the United States gives American businesses more incentive to oppose regulation of pre-dispute consumer arbitration agreements. However, increased demand for regulation in the United States, from consumer groups and trial lawyers, may result in a greater convergence of European and American regulation in the future