A. Introduction
Dispute resolution agreements (DRA) collectively refer to jurisdiction agreements, arbitration agreements, and agreements on the choice of law.Footnote 1 Each agreement serves different purposesFootnote 2 but pose similar problems and challenges. These agreements have become ubiquitous in modern business relationships, encompassing both commercial and consumer contracts.Footnote 3 They have generated substantial literature and garnered attention from policymakers over the years. Beyond the theoretical discussion on the source of power for such “legislative acts”Footnote 4—whether contractual or delegated from the state—this attention has focused on the consequences of these purported agreements once made, as well as the contract law that should determine their enforceability.Footnote 5 New developments in case law and evolving literature have shifted focus to a question previously overlooked by conflict of laws scholarship and commentary: whether consent was provided to the dispute resolution agreement in the first place. Challenges to the validity of dispute resolution agreements constitute the vast majority of cases dealing with the issue of consent in standard form contracts. Thus, this addresses the threshold contract questions that may require different treatment in certain contexts, given the nature of the rights that may be waived through a dispute resolution agreement, which, in turn, may demand a different threshold for establishing consent. The latter aspect is a common theme that emerges from the contributions to this Special Issue.
This comparative project brought together scholars from both sides of the Atlantic to explore the current understanding of the notion of consent in dispute resolution agreements and provide an outlook for future policy considerations, taking note of relevant developments. The contributions extensively cover the subjects raised and approaches to the issues involving dispute resolution agreements, serving as a call for broader discussion and interaction between the various jurisdictions. An examination of case law from the EU and the U.S. reveals a tendency towards imposing a requirement of notice for a dispute resolution agreement contained in a pre-drafted contract by one party.Footnote 6 However, the project has avoided making observations about the legal systems converging at a high level of abstraction, recognizing that differences are mainly found at the level of technical implementation. As comparative scholars have repeatedly argued, reducing the divergence to a mere question of technicalities would miss the point, as it is precisely the different legal techniques that matter when a specific contract wording has to be applied; understanding these techniques is what is helpful for the parties to a specific contract.Footnote 7
The timing of this symposium and the publication of this Special Issue is opportune, given the recent release of the Restatement of Consumer Contracts in the U.S.,Footnote 8 the ongoing work by the American Law Institute and the Restatement on Conflict of Laws reporters, as well as the reform of the Brussels Ibis Regulation in the EU.Footnote 9 Simultaneously, new case law emerging from the Court of Justice of the European Union (CJEU) and national courts in the EU, as well as the Supreme Court of the United States (SCOTUS) and state courts, challenges pre-existing conceptions regarding consent in dispute resolution agreements. In examining these developments, we have approached the topic from the perspectives of both private international law and contract law. Contract law relies on an individual’s consent as a lynchpin of enforcement.Footnote 10 However, the main challenge lies in ascertaining consent in adhesive, preformulated contracts. With adhesive business forms, the issues raised when involving dispute resolution agreements are predominantly contractual—i.e., the parties’ relationship to one another—rather than conflicts issues—the parties’ collective authority vis-à-vis the state.Footnote 11 Scholarship as well as practice has, for many years already, focused on the distinguishing features between adhesion contracts and negotiated contracts.Footnote 12 Consequently, the analysis of the courts has also shifted in an effort to establish consent in dispute resolution agreements. This Article, in summarizing the work of all contributors, will attempt to outline some of the basic themes and ideas that emerged from the Conference held in Bremen, with the aim of evaluating the prospects for a coherent regulation of the issue of consent to dispute resolution agreements.
B. Party Autonomy
Examining dispute resolution agreements as a unified construct of private international law stems from the fact that such agreements are predicated upon the principle of party autonomy, despite the different legislative instruments that might govern each of them. Under the principle of severability, they are all considered separate agreements, i.e. separate from the substantive contract.Footnote 13 While this presents a certain discomfort, it can easily be justified on grounds of commercial practicability and common sense.Footnote 14 At the same time, the question remains whether DRAs are to be seen as ordinary private contractual undertakings, thus giving rise to ordinary civil contractual consequences or whether they should be treated with sensitivity and increased attention given the international and procedural elements that are attached to them.Footnote 15 Private international law has tended towards the latter approach, with the standards for determining its legal validity being similar or identical to those applied to “orthodox” contractual terms, with the additional layer of subjecting them to special and individual restrictions not found in respect to other contractual terms.Footnote 16 This is the approach of the European Regulations on choice of jurisdiction and choice of law clauses, subjecting the principle of party autonomy to certain limitations. In Germany, this particular sensitivity is explained by defining arbitration agreements as a substantive contract concerning procedural rights.Footnote 17 Indeed, arbitration agreements are usually viewed with increased suspicion, especially in consumer contracts; nevertheless, all types of dispute resolution agreements raise equally important questions if seen as waivers of default rights.Footnote 18 Thus, dispute resolution agreements have a contractual foundation, with consent being the cornerstone of the jurisdiction of a court or an arbitral tribunal, or the law that will be applied to the merits, grounding the legitimacy of those choices. For that reason, they require increased sensitivity and potentially a “thicker” notion of consent.
The evolution of the principle of party autonomy can be viewed through various stages of development.Footnote 19 In the pre-classical era, the emphasis was on the extraterritorial effects of statutes or legal acts, rather than the individual. The classical era shifted the emphasis to the individual; however, the question was whether the individual could carry “their” law abroad. The modern era saw an emphasis on an individual’s ability to evade a country’s law by triggering the application of a foreign law. Lastly, the post-modern era under which the principle of party autonomy becomes a theoretical foundation for the whole conflicts system.Footnote 20 This latter understanding also underlines the modern conceptions of lex mercatoria whereby professional associations take over the role of state legislator.
Symeonides’s contribution focuses on the scope and limitations of the principle of party autonomy, a persistent issue, ever since the prevalence of the principle of party autonomy. In identifying the historical roots of the principle, with isolated examples from ancient antiquity, Symeonides points out that the principle is of relatively recent vintage. Symeonides emphasizes that most of the early private international law writers have not focused on party autonomy in a purposeful and systematic way but rather referred to the parties’ implied or presumed intention as an a posteriori factor that justified the application of the lex loci solutionis in derogation from the otherwise applicable lex loci contractus. The “intention of the parties” as a reason for deviating from the established choice-of-law rules was primarily invoked as a way to validate the application of the lex loci contractus rule or the law of the place of performance rule.Footnote 21 Symeonides highlights Mancini’s more lasting influence in the development of the principle. While the pro-autonomy momentum that characterized the end of the nineteenth century slowed down with the turn of the century, a second re-emergence and subsequent triumph of the principle to contemporary dominance has taken place in the middle of the twentieth century to this day. As evidence of this triumph, more than 150 countries adhere to the principle of party autonomy, leading to its universal acceptance as a general proposition.
Symeonides gives a tour d’horizon of the application of the principle of party autonomy. While this principle is nowadays universally accepted, legal systems differ in their delineation of its scope, parameters, modalities, and limitations. Symeonides highlights several factors that narrow the scope of party autonomy, including the exclusion of certain types of contracts. He also mentions the exclusion of certain contractual issues such as capacity, consent, and form. Furthermore, Symeonides notes that legal systems vary in their approach to the substantive limitations imposed on the exercise of party autonomy. These limitations fall under the rubric of public policy, but there are differences in terms of which state’s public policy should provide the yardstick and what level or threshold of public policy should be used in policing party autonomy. Policing party autonomy is often the reason for statutory protections to weaker parties because, as Symeonides points out, the principle of party autonomy “can degenerate into a euphemism for exploiting weak, unsophisticated parties.”Footnote 22
Party autonomy presupposes the free will of both parties freely expressed,Footnote 23 but, naturally, this is difficult to be maintained for contracts involving weaker parties adhering to a pre-drafted legal text prepared by the more sophisticated party. In such cases, consent has become a truism, a fiction as described by Kim,Footnote 24 presenting a challenge for the legal system to ensure the protection of contracting parties least able to take advantage of the principle of party autonomy. Indeed, scholars have argued that the widespread enforcement of choice-of-law clauses in consumer and small business adhesion contracts was not envisioned during the adoption of the principle of party autonomy in the Restatement of Conflict of Laws under Section 187.Footnote 25 While choice-of-law clauses reduce the need for individualized choice-of-law inquiries,Footnote 26 Symeonides praises the protective mechanisms adopted by the drafters of the Rome I and Brussels I Regulations, despite their shortcomings, such as overprotecting consumers and employees and underprotecting passengers, insureds, and small commercial actors.
The idea of consent becoming a fiction due to the degradation of consent to mere assent, and in some cases, to a fictional or constructive notice of terms, has been noted by various scholars, including those involved in the Restatement of Consumer Contracts,Footnote 27 and particularly—and more forcefully—by Margaret J. Radin.Footnote 28 Radin points out that current contractual practice leads to the gerrymandering of the word “agreement” to include boilerplate,Footnote 29 and goes on to stress that
[i]n this process, consent is degraded to assent, then to fictional or constructive or hypothetical assent and then further to mere notice until finally we are left with only a fictional or constructive notice of terms. The ultimate result of this process is the contention by some scholarly apologists for boilerplate that if a recipient of boilerplate could reasonably have found out that terms existed, that is enough to constitute consent. And in some sense, they are right not by any measure of justice or fairness or philosophical validity but simply because some US courts will accept this rationale.Footnote 30
The identification of the historical origins of the principle of party autonomy, and its emphasis on the “intentions of the parties,” is vital for the current discourse given the difficulty in equating what is referred to as “fictional assent” with the intentions of the parties. Viewing the principle of party autonomy as grounded upon the will theory of contractsFootnote 31 should instruct approaches to the question about the existence of consent. It certainly highlights the differences between the common law of contract and the continental law of obligations.Footnote 32 The latter has been more influenced by the will theory of contracts predicated upon a more consensualist philosophy. Under this approach, the analysis of the contract formation process verifies the existence of a consensus between the parties, whereas under the common law it verifies the existence of a promise in return for consideration.Footnote 33 This metaphysical effort to seek consensus ad idem has to a great extent been limited by placing emphasis upon outward behavior in both legal traditions.Footnote 34 Nevertheless, continental jurisdictions have a more expansive conceptualization of the “will” of the parties than the one reflected under the common law.Footnote 35 As explained by Kim, consent is constructive rather than actual, i.e. the parties are seen as consenting to a contract if their outward, objective manifestations suggest that a “reasonable person” would have concluded that they intended to be bound.
I. The Requirements for Externalization of the Will of the Parties for Dispute Resolution Agreements
Contract law drifted away from the archaic conception of “consensual contracts” found under Roman law that required elaborate formalities, instead understanding formality as an additional requirement for the validity of contract, “over and above the consent of the parties.”Footnote 36 This has changed in modern times, with new formal requirements being constantly imposed for all types of contracts, especially consumer contracts.Footnote 37 The private international law instruments regulating dispute resolution agreements and their validity focus on the formal validity of those agreements as such, which is different from the issues related to the formal requirements to externalize the will of the parties. Thus, their purpose and scope is limited in dealing solely with the different issue of determining the minimum requirements to qualify the contract as “existing.”Footnote 38 The formal requirements for dispute resolution agreements reflect the realization that when entering into such an agreement the parties are put on notice, with the understanding that the person who goes through this formality has a final chance to reflect on their actions.Footnote 39 This explains the introduction of notice requirements by the CJEU in its interpretation of Article 25(1) of the Brussels Ia Regulation which provides for the formal requirements of a choice of court agreement. These formalities, however, have resulted in a tendency to equate compliance with them with the existence of real consent of the parties—a conflation highlighted by the judgment of the CJEU in El Madjoub.Footnote 40
Material validity is usually left to the contract law of the state whose law was chosen and its rules on formation of contracts.Footnote 41 For example, Article 10 of Rome I Regulation provides that the existence and validity of the contract are determined by the law which would govern the contract if it was valid. Therefore, the putative applicable law usually determines whether the parties have reached an agreement by offer and acceptance.Footnote 42 Similarly, as shown by Pertegás both Article 25 of the Brussels I Regulation as well as Article 3 of the HCCH Choice of Court Convention,Footnote 43 lay down the formal conditions that choice of court agreements must meet, with the fulfillment of those requirement not amounting to a conclusion as to the existence of consent to the agreement per se. If the requirements as to form are complied with, then the consent of the parties is inferred.Footnote 44 Nevertheless, substantive challenges as to the formation of the contract can still be raised under the law of the chosen court. Thus, if one of the parties claims that the dispute resolution clause is imprecise then such claims are to be referred to the law of the Member State of the designated court, based on European private international law. However, a recent reference for a preliminary ruling regarding an asymmetric jurisdiction clause questions whether claims of one-sidedness or imprecision of a jurisdiction clause should be determined in accordance with the autonomous rules derived from Article 25(1) of the Brussels Ia Regulation and the objective of foreseeability and legal certainty pursued within or by application of the law of the Member State designated by the clause.Footnote 45 In the former scenario, the CJEU will interpret substantive validity strictly as referring principally to fraud, error, deceit, violence, and incapacity, whereas the autonomous rules of Article 25(1) will include challenges to a jurisdiction clause on grounds of one-sidedness and imprecision.Footnote 46
In fact, as Mascha Hesse presents in her examination of the German caselaw regarding the judicial scrutiny of dispute resolution clauses contained in general terms and conditions, national law on general terms and conditions plays almost no role at all in the review of jurisdiction clauses due to the formal requirements found under the Brussels Ia Regulation and the Lugano Convention.Footnote 47 Hesse points out that national courts, in this case German courts, derive the requirements as to the existence of consent as well as issues of incorporation out of the formal requirements in combination with the caselaw of the CJEU. While the decision of the CJEU in Amazon subjected incorporation of a choice of law agreement contained in standard form contract to the transparency requirement found under the Unfair Contract Terms Directive,Footnote 48 other cases subject such incorporation to national law, in which the Unfair Contract Terms Directive forms part of.Footnote 49 Therefore, issues of incorporation have been both dealt with the rules of private international law and the formal requirements found under the Brussels and Rome regimes as well as by reference to substantive contract law.Footnote 50
In the U.S., the consent to a dispute resolution agreement and the externalization of such expression of will is dealt with under traditional contract law principles. The extent to which state contract law may find a dispute resolution agreement as materially invalid is an open question, since the Supreme Court has restricted the challenges to contract formation as only including procedural unconscionability.Footnote 51 The formal defects such as the absence of a required writing are rarely challenged in practice, however, claims for defects in the consent of one of the parties are common, particularly when it comes to adhesion contracts.Footnote 52 Therefore, dispute resolution agreements are presumptively—prima facie in the SCOTUS wording—valid as to their enforceability with unconscionability usually classified as a claim on the formation of contract rather than its enforceability.Footnote 53 Classifying it as such is relevant for identifying whether the particular state’s law will determine whether the dispute resolution agreement is materially valid. As Buxbaum suggests, the majority of states regulate forum selection agreements by adopting the Bremen rule itself or its general reasoning, whereas a handful of state courts that are hostile to party autonomy go further than that. Given that the strong presumption in favor of enforcement of dispute resolution agreements has been extended to non-negotiated and adhesive contracts, little room is left for them being invalidated as unconscionable.Footnote 54 In conclusion, as Ware explains in his contribution, states are free to require higher standards of consent when due process rights are being traded away, except where a preemptive federal statute provides otherwise.
The contributions to this Special Issue reveal divergences between the jurisdictions under examination regarding the requirements for such valid consent, in that, in the U.S. there is a stronger reference to contract law principles in interpreting and deciding upon the validity of a dispute resolution agreement, in contrast to the EU approach where the dispute resolution agreement is primarily dealt with the private international law rules of the Brussels and Rome regimes. There are examples from the caselaw of the CJEU, however, which converge with the approach of the U.S. courts, because they have similarly found that the fact that a dispute resolution agreement is adhesive in nature, does not render it voidable. For instance, in a case involving a pre-formulated employment contract that included a choice-of-law clause, the CJEU has noted that such standard clauses pre-formulated by the employer are not prohibited. Therefore, the parties to an individual employment contract are to be regarded as being in principle free to choose the law applicable to that contract even if the contractual clause concerning that choice is drafted by the employer with the employee merely accepting it.Footnote 55
This liberal policy is often counterbalanced in both the EU and the U.S. through the introduction of notice requirements regarding a dispute resolution clause in a standard form contract.Footnote 56 In both jurisdictions such requirements are often judge-made, and linked to the question of the formal validity of the dispute resolution agreement as mentioned above.Footnote 57 In fact, in the US state legislatures have imposed notice requirements for arbitration agreements via statute but they were found by the SCOTUS as violating Section 2 of the FAA because they place arbitration agreements “in a class apart from ‘any contract,’ and singularly limit[ing] their validity. The State’s prescription is thus inconsonant with, and is therefore preempted by, the federal law.”Footnote 58 As Ware suggests in his contribution, despite the controversy surrounding this judgment, it extended the low standards of consent that apply to other non-arbitration terms of adhesion contracts found under general contract law.Footnote 59 But should dispute resolution agreements require higher standards for establishing consent, and thus not be treated as regular terms of a contract?Footnote 60 Is the provision of notice requirements an understanding of their importance and an application of a higher standard amounting to an “informed consent”? And are such requirements an issue of formation of contract, thus mandating reference to the substantive contract law? These questions are analyzed in the following sections based on the contributions to this Special Issue.
II. Party Autonomy, Access to Justice, and Standard Form Contracts
As the contributions make clear, dispute resolution agreements belong to the most important provisions of a contract as well as the most frequently challenged as to the lack of consent.Footnote 61 Whereas the challenges as to the material validity of a dispute resolution agreement based on contractual defenses in common law jurisdictions or the law on general terms and conditions in continental jurisdictions might frequently prove unsuccessful, the situation is different when the dispute resolution agreement, which removes the matter from the jurisdiction and the law of the state that would otherwise be applicable, potentially leads to the violation of the right to access to justice or due process—under U.S. law. Such is the case, for example, when an arbitration procedure does not comply with the guarantees for a fair trial such as providing for the right to be heard.Footnote 62 In fact, it is often pointed out that in the vast majority of cases involving human rights claims arising from arbitral processes, the issues involve emanations of the right to a fair trial and access to justice.Footnote 63 Thus, depending on the rights involved, the dispute resolution agreement might pose a threat on the consenter’s autonomy due to the potential violation of their human rights.Footnote 64
Under the access-to-justice perspective of the dispute resolution agreement, explicated in the contributions of Calliess and Buxbaum, such agreement acts as a waiver to a constitutional right to remedy. An arbitration agreement amounts to a full waiver of this right, according to Calliess, while a choice of court opens access to the chosen court, limiting access to the otherwise competent courts in case of an exclusive choice.Footnote 65 This means that the parties also waive their right to sue in any forum that would otherwise have had jurisdiction over their dispute. As Buxbaum indicates, the focus on dispute resolution agreements as waivers highlights the sources of law that will police them, namely, contract law and statutory anti-waiver protection for purposes of public policy. Under the contractual dimension, Buxbaum points out that a waiver is defined as the “intentional relinquishment or abandonment of a known right” which implies that the intentionality of a party’s consent to a standard form contract is dubious given that the terms are imposed unilaterally by one party.Footnote 66 While doctrine might accept that a waiver can be established by a standard form contract—or contract of adhesion if it involves a presumptively weaker party—particular rights that are at play with jurisdiction selection require different treatment.Footnote 67
An agreement on choice of law could also pose dangers on the access to justice right by potentially limiting the otherwise applicable—ordinary—mandatory provisions. Despite such dangers, Roosevelt argues that a choice of law of a state with no relation to the parties or the transaction can overcome the objections from the Due Process clause in terms of unfair surprise, as long as the parties have consented to it. However, the Due Process clause can be defined in terms of the permissible scope of state law, and when the latter did not intend to reach the parties’ contract due to lack of contacts, then the Due Process clause is violated and the choice of law should not be respected.Footnote 68
In understanding the importance of dispute resolution agreements as waivers of default rights, the meaning of consent and the requisite robustness of the conditions for establishing such consent should be examined. According to Kim, consent typically requires three conditions: a manifestation of consent, knowledge, and voluntariness.Footnote 69 The assessment of the potential impact of a given act on the consenter’s future autonomy/capabilities is precisely what will determine the requisite robustness of these conditions.Footnote 70 Thus, in Kim’s framework, the greater the threat to the consenter’s future autonomy the higher the threshold for establishing consent. In this framework, informed consent is expressed by a robust manifestation with a similarly robust knowledge of the consequences the act entails. The voluntariness condition may be weaker in this scenario, depending on the circumstances. Kim points out that contract law generally does not require such robust consent conditions, as most transactions involve commercial, economic exchanges. However, as both Kim and Calliess argue, dispute resolution agreements often found in the boilerplate section pose a threat to the autonomy of the consenter as a result of the rights involved.
When it comes to weaker parties such as consumers, all three conditions for consent might be lacking because consumers are unlikely to have read the form, have no choice but to manifest consent to adhesive forms, and the manifestation of the consent was a mere click on an icon. As McColgan puts it, “most legal transactions happen in complete ignorance of almost all of their contents” when it comes to consumer contracting. Due to that fact, both Kim and Calliess argue in their respective contributions that given the significance of dispute resolution agreements on shaping the procedural rules that control substantive rights and determine legal outcomes, consent to them requires that the conditions for such consent are robust. Calliess highlights that for EU consumers there is no informed consent requirement because they are already protected by European private international law rules that make sure that mandatory protective statutes will continue to apply notwithstanding a dispute resolution agreement. The effect of arbitration agreements is similarly limited as a result of the Unfair Contract Terms Directive reflecting what Symeonides points out, namely the rich tradition in statutory rule-crafting prevalent in Europe.Footnote 71 Therefore, the consent of the parties and the fulfillment of the formation indicia for an agreement is irrelevant when mandatory protective statutes for weaker parties come into play. In contrast, in the U.S. and following the strong tradition of judicial independence and creativity that characterizes the American legal system any such mandatory protective statutes have been dealt with through the application of the comparative impairment doctrine.Footnote 72
All contributions emphasize that traditional notions of consent have given way since the retreat from consensual arrangements to disputes between strangers, particularly in the context of international transactions.Footnote 73 Beginning with Kessler’s article,Footnote 74 a growing body of scholarship disaggregated the theory of consent in the context of standard form contracts into two distinct concepts: assent to being contractually bound and assent to all terms.Footnote 75 These concepts have spilled over to the discourse regarding dispute resolution agreements. The proponents of the use of the notion of consent as the basis for jurisdictional and applicable law questions argue that despite the difficulties there is no alternative that performs better across the full range of cases.Footnote 76 In recognition of this, the law has increasingly focused on outward behavior and the supply of notices as a way to accept the validity of standard forms, in the absence of actual, subjective knowledge of their existence.Footnote 77 The main concern for the law has become whether the particular clause has been conspicuous and brought to the attention of the adhering party. This is clearly seen in many of the contributions to this Special Issue both in the U.S. as well as in the EU and Germany. As Kim highlights, courts have gradually replaced the reality of assent with constructive assent and then replaced the requirement of mutual assent with constructive notice. When it comes to dispute resolution agreements, the substitute of consent by the requirement for notice is clearly explained in the contribution by Coyle, who analyzes the U.S. case law establishing that notice plus proximity may serve as a substitute for consent in a forum selection agreement. Whether this notice requirement raises the threshold of consent to dispute resolution agreements is examined below.
III. Informed Consent as the Basis of Enforcement of Dispute Resolution Agreements
Contract formalities in the sense of a required writing were introduced in many areas as a way to protect parties in need of such special protection.Footnote 78 Thus, these formalities ensure that the party seeking protection is provided with certain information before or at the time the contract is concluded.Footnote 79 In general, the emphasis on outward behavior and supply of notices is predicated upon the information paradigm; however, “informed consent” as such is not prevalent in contract law as it is in matters involving consent to sexual activity or to medical treatment.Footnote 80 In the latter contexts, as McColgan points out, informed consent is a normative necessity. The notion of informed consent relies squarely on the will theory and as such as has a subjective basis.Footnote 81 The information to be provided should be detailed and understood before consent will be deemed to exist.Footnote 82 Contrary to this notion of informed consent, the contractual analysis in the US regarding consent to dispute resolution agreements follows predominantly the notion of “blanket assent” introduced by Karl Llewellyn in the 1960s to deal with the challenges posed by boilerplate.Footnote 83 This notion of consent argues that “blanket assent” to unknown terms constitutes assent so long as the terms are what the adhering party might have expected.Footnote 84 In this sense, and because consent to dispute resolution agreements is equated with assent to any term of a contract, dispute resolution agreements are not placed in a class apart from any other contract.Footnote 85 If that is indeed the case, then dispute resolution agreements, just like any standard form contract do not constitute a “meaningful contractual agreement” anymore, as McColgan puts it.Footnote 86
In the contract law literature, reference is also made to the notion of “knowing assent,” which is more than a signature on the dotted line and reflects the definition given by Kim. Knowing assent requires that the unbargained-for term is conspicuous; that its importance is explained so that the adhering party understands its significance; and that the adhering party objectively manifests assent to that term separately from its manifestation of assent to undertaking a contractual obligation.Footnote 87 Thus, when it comes to notifying the receiving party of the obligation, this notice should be specific to the particular term. A version of this involving dispute resolution agreements is expressed by Section 1031(5) of the Civil Procedure Code (Zivilprozessordnung - ZPO) in Germany, under which arbitration agreements to which a consumer is a party must form part of a record personally signed by the parties.Footnote 88 In a sense, this is an expression of the principle of separability or severability which provides that dispute resolution agreements are separate agreements from the main contract in which they might be contained.Footnote 89 However, this requirement of separate signing of the arbitration agreement does not equally apply to commercial contracts. That is a realization of the fact that dispute resolution agreements contained in the boilerplate of contracts that are not negotiated can be detrimental to adhering parties,Footnote 90 because the ability of the parties to change or waive the application of default rules is primarily utilized by the drafting party. However, as Thönissen points out, the effectiveness of the arbitration agreement is mainly dependent on formal, non-material requirements, whereas the projected reform will potentially eliminate formalities for both commercial and consumer arbitration agreements, leading to the eventual lowering of the threshold for establishing consent.Footnote 91
In general, this leads back to the discussion regarding formal and material validity. “Informed” consent has been minimized into a formal examination whether the information regarding the term of the contract has been clearly and conspicuously communicated despite its basis upon the will theory of contracts. Legislation such as the Directive 93/13 have contributed towards this understanding, because, while they leave the question whether the consumer’s consent is “free” to the national rules on defective consent, they are often seen as conclusively dealing with the issue of consent and incorporation of terms into the contract.Footnote 92 As Rieländer suggests, the Directive has failed to achieve the objective of removing unfair terms from consumer contracts. Nevertheless, the contributors to this Special Issue do not claim that the high standard of informed consent found under other areas of the law should equally apply to all dispute resolution agreements; they do emphasize the different approach needed when such agreements are viewed as waivers. Waiving statutory protections is usually prohibited especially for consumers.Footnote 93 As Kim makes clear in her contribution, the ability of the parties to modify and waive the application of default rules underscores contract law’s respect for individual autonomy and private ordering, with consent serving as the essential foundation for both. The elusive nature of the concept, though, raises doubts upon the whole foundation of contract. The second part of this contribution explores each type of dispute resolution in the format of the Conference in Bremen. The analysis is underlined by the discussion surrounding “standard contract terms” and the future policy considerations that are raised.Footnote 94 The threshold for establishing consent under each type of dispute resolution agreement is likewise analyzed.
C. Choice of Jurisdiction
In the U.S. generally, forum selection clauses can be challenged as invalid on the basis of formal defects such as the absence of a required writing, or defects in the consent of one of the parties. The latter situation involves cases where consent was a product of duress, fraud, and/or mistake.Footnote 95 Formal validity is rarely an issue in practice whereas allegations of duress and other similar practices are also rare. In contrast, many cases brought before U.S. courts deal with the question whether such forum selection clause was consented to in the first place and frequently challenge the validity of such clauses contained in adhesion contracts on the basis of unconscionability.Footnote 96 In cases involving parties of disparate economic and bargaining power there is a minority approach of holding such agreements invalid for overreaching. Nevertheless, the general rule is that mutuality of obligation is not required for a contract to be enforceable; thus, forum selection clauses bind both parties, despite the absence of bargaining from the adhering party.Footnote 97 In such latter cases, U.S. courts have held that notice may serve as a substitute for consent, binding a non-signatory to a forum selection clause.Footnote 98
In the EU, the CJEU has established that an agreement to jurisdiction can be inferred in case the formal requirements provided by the Regulation have been complied with.Footnote 99 This establishes a “consensus” between the parties which in turn justifies the primacy granted to the choice of a court other than the court which may have had jurisdiction under the rules of the Regulation.Footnote 100 The Regulation only grants limited scope for reference to national law,Footnote 101 because the law of the chosen court is relevant only when an agreement on jurisdiction is null and void as to its substantive validity.Footnote 102 Thus, according to the caselaw of the CJEU, the formal requirements ensure that consensus between the parties is in fact established.Footnote 103 Attempts to refer to national law in determining the substantive validity of a choice of court agreement were viewed critically as creating legal uncertainty.Footnote 104 Consequently, the caselaw of the French courts on asymmetric choice of court agreements has been heavily criticized under that premise.Footnote 105 Notwithstanding the fact that the French courts applied French law despite the law of the designated court directing to another Member State’s law, the caselaw on asymmetric jurisdiction clauses raises interesting questions regarding the scope of the substantive validity of choice of court agreements and whether any considerations for contractual imbalance are covered under it, because such a clause is completely subjected to the will of one of the parties.Footnote 106
The CJEU, in its much-anticipated judgment on asymmetric jurisdiction clauses, was called to determine whether the concept of “null and void as to its substantive validity” as referred to in Article 25 should be defined autonomously under the Regulation.Footnote 107 The Court in reiterating the fact that the concept covers the general causes of nullity of a contract, namely, those which vitiate consent such as error, deceit, violence or fraud, and incapacity to contract,Footnote 108 held that a requirement as to precision is inherent in the wording of Article 25 of Brussels Ia and should be determined by the autonomous criteria found in the Regulation.Footnote 109 The CJEU noted that “the imposition of a requirement of precision necessarily assists in the attainment of the objectives of foreseeability, transparency and legal certainty, set out in recitals 15 and 16 of the Brussels Ia Regulation.”Footnote 110
Whether consent of the parties to a jurisdiction clause is to be determined by reference to the autonomous European law regime or by the putative applicable law of the contract or by a mixture of the two was a question posed before the UK Court of Appeal in Aeroflot.Footnote 111 The UK Court made reference to the case law of the CJEU which, in interpreting Article 17 of the Brussels Convention—Article 25 under Brussels Ia—held that the concept of “agreement conferring jurisdiction” is to be regarded as an independent concept, not one fashioned according to different national laws.Footnote 112 As Pertegás points out, the reference to an “agreement” instead of “consent” is crucial in the context of new forms of contracting using current technological developments as well as digital transactions. Challenging the substantive validity of the jurisdiction agreement, under a rule of the putative applicable law of the contract is, however, questionable. The UK Court referred to Briggs and Rees who point out that the CJEU “has persistently stated that the formalities required by [Article 25(1)] are a full, perfect and sufficient guarantee of the existence of consent or consensus.”Footnote 113 In summarizing the case law of the CJEU, the UK Court of Appeal decided that the jurisdictional validity and effect of a jurisdiction clause is to be assessed by reference to Article 25; that the agreement of a party—to the litigation and not necessarily to a contract—is not bilateral or contractual but unilateral; and that the tests of whether there has been the necessary unilateral agreement are those set out in Article 25, viz. a “written manifestation of consent” or other sufficiently formal act of agreement.Footnote 114
The question then remains if contract law’s low standard for establishing consent are equally reflected with regard to jurisdiction agreements. The “written form” requirement of Article 25(1) (a) of the Brussels Ia Regulation has been supplemented with notice requirements under a line of cases as it relates to both electronic and standard form contracts, in general. In particular, in the Tilman case the referring court asked the CJEU whether the conditions to which the proof of Tilman’s genuine consent to the jurisdiction clause is subject have been satisfied, taking into consideration that the clause was included in Unilever’s general terms and conditions which were not directly annexed to the contract. The CJEU ruled that an express reference to the specific terms is required and such express reference may be checked by a party exercising ordinary diligence. The CJEU noted that the requirement is met only if the contract expressly refers to the General Terms and Conditions containing a jurisdiction clause and if it can be proved that the other party actually received them.Footnote 115 As the CJEU highlighted “[t]he formal requirements laid down in [Article 25] reflect a wish not to impede commercial practices but to override the effects of clauses which might go unnoticed in contracts, such as conditions which appear in printed forms […] and which have not been accepted by the party against whom they operate.”Footnote 116 Whereas this does not imply a condition that the jurisdiction clause should be a subject of negotiation,Footnote 117 mere reference to the terms and conditions of purchase within which such a jurisdiction clause is contained, might not satisfy the requirements of Article 25(1).Footnote 118 Thus, the reference should be express; it must be established that the party has actually received the general terms and conditions containing a jurisdiction clause; and these general terms and conditions must be available to the contracting parties at the time of conclusion of the contract at the latest.Footnote 119
The supplementation of the written form with notice requirement reflects the effort to establish a higher threshold for (formal) consent, particularly in cases where the signatory is highly unlikely to have read the clause and, hence, consented to it. This is even more the case when it comes to digital contracts.Footnote 120 As Kim points out, the intangibility of digital contracts makes it easier to escape the adherent’s attention, a fact that leads to the imposition of further notice requirements. In the U.S., while there is no single “rule” for choice of court agreements, as Coyle explains, certain courts have refused to enforce jurisdiction clauses due to some failure relating to notice, despite the existence of formal consent.Footnote 121 Nevertheless, as stated by Symeonides, federal courts in the U.S. are more deferential to choice-of-court clauses than the Brussels I regime. This is despite the fact that in the U.S. forum selection clauses are considered permissive instead of mandatory.Footnote 122 In contrast, under the Brussels I Regulation and the Hague Choice of Court Convention, forum selection clauses are considered mandatory, that is, as conferring exclusive jurisdiction regardless of the language.Footnote 123 When it comes to weaker parties the Brussels I Regulation does not allow pre-dispute choice-of-court clauses disfavoring consumers or employees whereas federal courts usually enforce such clauses with little hesitation. This has led Symeonides to conclude that American courts are the most liberal in the world with respect to enforcing choice-of-court clauses.
D. Choice of Law
As Roosevelt points out, the ability of parties to a multistate contract to choose the law that governs their relationship has become universally accepted. At the same time, there is an increased prevalence of choice-of-law clauses in contracts which displace the need for individualized choice-of-law inquiries for individual cases. As noted by the Reporters to the Restatement of the Conflict of Laws (Third) such clauses are becoming more and more common in all contracts and nearly universally present in standard-form contracts.Footnote 124 Despite its universal acceptance, the topic has generated much controversy during the process of drafting the new restatement.Footnote 125 Little views this as a result of clash of ideologies, on the one hand libertarianism, which is suspicious of any governmental intervention, and on the other hand of command and control liberal democracy which places greater trust and considers it essential to have well-designed regulation. In the end, Chapter 8 of the Restatement (Third) of Conflict of Laws reflects an effort in balancing the values of party autonomy and economic efficiency on the one hand and respect for democratic sovereign governance on the other.
Roosevelt views choice of law as a method of giving regulatory authority over a particular issue to the most appropriate law.Footnote 126 Viewing it this way, according to Roosevelt, assists in understanding the justifications for party autonomy as well as defining its limits. Party autonomy, from that perspective, can promote right answer values because the justified expectations of the parties can be protected by allowing them to choose the law that will govern the contract.Footnote 127 However, it may threaten right answer values when the chosen law has a lesser interest or less significant relationship to the transaction. In terms of systemic values, party autonomy promotes certainty and predictability while being a simple rule. Therefore, certain limits on party autonomy should be placed to ensure that the undermining of right answer values is kept at a minimum. This is endorsed by the case law of the U.S. courts. For example, in Nedloyd Lines BV v. Superior Court, the Court noted that if the chosen state’s law is contrary to California’s fundamental policy, the court must then determine whether California has a “materially greater interest than the chosen law in the determination of the particular issue.”Footnote 128 If California has a materially greater interest than the chosen state, the choice of law shall not be enforced.Footnote 129
A choice-of-law analysis, even in the presence of a choice-of-law clause, poses difficulties, e.g. in characterizing a rule as default or mandatory, whether a statute indeed requires that forum law is applied and whether public policy bars the choice of the parties.Footnote 130 Particularly the distinction of mandatory versus default rules is important because it is generally accepted that parties may not elect out of applicable mandatory law.Footnote 131 However, in the U.S. such displacement is accepted so long as the law the parties substitute mandatory national law with “vindicates” similar rights and does not subvert the general policy of the displaced law.Footnote 132 Thus, if the choice-of-law clause is found to be valid as regards the existence of consent, it may still be invalidated for public policy considerations. In Wiseley v. Amazon, for example, the U.S. Court of Appeals for the Ninth Circuit held that a choice-of-law provision contained in an adhesion contract was valid despite the claims for procedural unconscionability because there was sufficient notice to create a valid contract; at the same time, the claimant failed to sufficiently support their argument that their home jurisdiction consumer protective laws will be substantially impaired by the application of the chosen law.Footnote 133 As the Court noted, the consumer protection laws of both jurisdictions appear to be substantially similar.Footnote 134
In the EU, the consent to a choice-of-law clause included in a standardized contract is a debated issue as explained by Segger-Piening in his contribution. The CJEU has pointed out that certain national courts consider a clause in a business-to-consumer contract choosing the applicable law that is pre-drafted and included in general terms and conditions as void because it has been imposed by the professional to the consumer and does not result from an agreement freely entered into between the parties.Footnote 135 However, according to the CJEU, neither Article 3(1) of Rome I nor the case law of the CJEU preclude the existence of standardized terms in the general terms and conditions of contracts.Footnote 136 Such a clause in a standard contract should not mislead the consumer by giving them the impression that only the chosen law applies to the contract, and should moreover inform them about the rule contained in Article 6(2) of the Rome I Regulation.Footnote 137 This is in line with the general approach of the CJEU towards the transparency of terms included in standard contracts which, as Rieländer points out, has emphasized that the consumer must be informed before the conclusion of the contract about its terms and the consequences arising out of it. These consequences include, according to the Amazon judgment, the effects of a choice-of-law clause and the fact that the consumer would still be protected under the law of the country where they have their habitual residence.Footnote 138 As Segger-Piening emphasizes, “transparency may also require that certain circumstances are actively explained if the consumer would otherwise run the risk of being misled.”Footnote 139
The integration of transparency control and information obligations within the system of private international law is not without criticism.Footnote 140 As Calliess points out, the preferential law approach established by Article 6(2) of Rome I is triggered only by a valid choice of law under Article 3.Footnote 141 Decisions by national courts further complicate the issue of validity of a choice-of-law clause. The German High Court (Bundesgerichtshof – BGH) in a recent decision involving a choice-of-law clause in a consumer contract did not examine the unfairness of the clause because it considered that regardless of the effectiveness of the choice of law clause, the most favorable approach under Article 6(2) results in the application of German law to all relevant legal issues of the case.Footnote 142 Nevertheless, if the chosen law is more favorable to the consumer, the consumer should be free to adhere to the choice of law in the absence of information as required by the Amazon judgment.Footnote 143
In conclusion, the threshold for consent to choice-of-law agreements seems to be higher in both jurisdictions when the issue relates to weaker parties such as consumers. The application of the comparative impairment doctrine in the U.S. may render similar results as the restrictions on the choice imposed by Rome I Regulation. Nevertheless, differences exist as to the extent of party autonomy, whereby in the U.S., the Second Restatement allows party choice based on a substantial relationship to the parties or the transaction or any other reasonable basis without restricting such an analysis to multistate cases.Footnote 144 Contrary to that, the Rome I Regulation requires no connection to the chosen law in multistate cases, it requires, though, an internationality requirement for its provisions to be triggered.Footnote 145 Certain courts have, however, interpreted this requirement, to include elements pointing to the contract having an international aspect.Footnote 146
E. Arbitration Agreements
It is a fundamental principle under both examined jurisdictions that arbitration is a matter of contract.Footnote 147 In the interpretation of arbitration agreements, courts in the US frequently turn to rules on contract interpretation whereas in the EU to procedural law. However, legal systems differ based on whether the effort is to find the common intentions of the parties or whether an objective approach for interpreting an arbitration agreement prevails. While not a member of the EU per se, Switzerland is very important for arbitration in Europe given the presence of the Court of Arbitration for Sport (Lausanne). Under the Federal Act on Private International Law (PILA), Article 178 (1) provides that an arbitration agreement is valid as to form if it is made in writing.Footnote 148 Article 178 (2) provides that an arbitration agreement is valid, in substance, if it meets the conditions laid down by either the law chosen by the parties, or the law governing the subject matter of the dispute and the law applicable to the main contract. This provision thus enshrines three alternative connections in favorem validatis.Footnote 149 The Swiss Federal Tribunal in its caselaw has emphasized that under Swiss law, the interpretation of an arbitration agreement is made according to the general rules of contract interpretation, with the purpose of ascertaining the real and common intention of the parties.Footnote 150 In that process, evidence of this is not only the declarations of intentions but also the general context, i.e. all the circumstances surrounding the case that enable the adjudicator to discover the will of the parties, whether these include declarations at the precontractual stage, draft contracts, exchange of correspondence, or the conduct of the parties after the conclusion of the contract.Footnote 151 This subjective interpretation is based on the assessment of the evidence. If it proves conclusive the result drawn from it, that is, the finding of a common and real intention of the parties, falls within the realm of facts and is therefore binding on the court.Footnote 152
On the one hand, such a subjective approach to the interpretation of arbitration agreements can be seen as being in line with the will theory of contracts and, hence, party autonomy. An objective approach to contract interpretation, on the other hand, risks the application of the easily satisfied standards of consent of general contract law, as Ware suggests. In the U.S., courts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms.Footnote 153 Whereas arbitration agreements in the U.S. may be invalidated by generally applicable contract defenses such as fraud, duress, or unconscionability as regards their substantive validity, any other defenses that apply only to arbitration or derive their meaning from the fact that an agreement is at issue are not permitted based on the caselaw of the SCOTUS.Footnote 154 Despite the “liberal federal policy favoring arbitration”Footnote 155 in the U.S., explicated in the contribution by Ware, it was historically the case that the common law courts of both of the U.S. as well as England and Wales invoked a doctrine of “ouster” to void contractual arbitration clauses as unlawful circumventions of judicial jurisdiction and as denials of judicial justice.Footnote 156 In this environment of widespread judicial hostility towards arbitration agreements the Federal Arbitration Act (FAA) was enacted in 1925.Footnote 157 The FAA and its rule of presumptive enforceability extends to agreements between consumers and merchants.
In the EU, arbitration agreements are not regulated by a general European framework similar to other dispute resolution agreements, but arbitration agreements in consumer contracts are subject to the unfairness test of standard terms, and are either forbidden or regulated by statute in the Member States.Footnote 158 The European Commission has repeatedly emphasized that out of court procedures cannot be designed to replace court procedures given that access to courts is a fundamental right that knows no exceptions.Footnote 159 The Unfair Contract Terms Directive provides that an exclusive arbitration clause is prima facie unfair.Footnote 160 The provision allows for arbitration when it is covered by legal provision, however, many Member States have adopted legislation that renders arbitration clauses in standard form contracts as unfair and, thus, invalid.Footnote 161 As Thönissen points out though, with regard to German law, the existence of an arbitration agreement does not, per se, constitute unfair treatment; it rather depends on the general rules of procedure that apply to arbitration.Footnote 162 This understanding has been reflected in the case law of the CJEU as well.Footnote 163
The UNCITRAL Model Law on International Commercial Arbitration, and the 1958 New York Convention both provide that the arbitration agreement shall be in writing.Footnote 164 That is mainly in order to ensure that such agreements do not become part of the contract without being noticed by the parties, proving initial consent while at the same time having a cautionary function, making the parties aware of the agreement’s special significance. In that sense, the parties should reconsider whether they want to renounce their constitutional rights. However, as seen in the contribution by Thönissen, the Draft Bill for the Modernization of Arbitration Law in Germany,Footnote 165 will eliminate the form requirement for business-to-business agreements.Footnote 166 This is an approach seen in other countries as well. Be that as it may, substantive validity is to be determined under the law to which the parties have subjected the agreement or, failing any indication thereon, under the law of the seat of arbitration.Footnote 167
In the US, restrictions are imposed for the arbitration of consumer disputes in the form of rules on the substantive validity of such agreements rather than the non-arbitrability of those disputes.Footnote 168 Unconscionability is often the grounds for examining such substantive validity and it involves a determination as to whether the procedure includes any prohibitive upfront costs, whether the tribunal is distant and inconvenient, whether foreign law will be applicable, as well as whether important implications of the clause were effectively concealed. In general, an arbitration agreement triggers the application of the FAA as well as the case law of the SCOTUS interpreting the Act which was done in a pro-arbitration manner, strongly preempting state law even in adhesion contract settings.Footnote 169 Nevertheless, state contract law defenses remain valid, with the doctrine of unconscionability being widely used by state courts. The treatment of the question regarding the validity of agreements to arbitrate does not differ whether that involves B2B or B2C contracts despite any challenges as to their substantive validity based on state contract law. In both scenarios, they are presumptively valid, subject to restrictions based on principles of unconscionability and due notice.Footnote 170 However, restrictions on the formal validity of arbitration agreements by some states were struck down by SCOTUS. In particular, the legislative establishment of special notice requirements for arbitration agreements by the state of Montana was found as inconsonant with the FAA and the presumption of arbitrability established under Section 2 of the Act.Footnote 171 In this case, the arbitration clause, although not distinguished by capital letters as provided under the legislation in question, it was not concealed, but rather contained in ordinary type on page nine of the agreement. According to the SCOTUS, arbitration agreements under the FAA were placed under the same footing as other contracts; imposing further requirements places them in a class apart from any contract and singularly limits their validity.Footnote 172 Thus, the SCOTUS refused the notion that arbitration agreements due to their being seen as waivers to certain constitutionally granted rights require a higher threshold for establishing consent.
Ware’s contribution affirms the conclusion that U.S. courts will likely enforce an arbitration agreement in an adhesion contract even though such agreement might trade away due process rights. Ware refers to contradictory outcomes in the case law of the SCOTUS where the waiving of due process rights as a result of a clause in an adhesion contract was rejected due to the parties being in an unequal bargaining power, but in later case law with identical facts was considered as a valid waiver of the right to a pre-deprivation hearing.Footnote 173 Nevertheless, he identifies that only bench trial clauses require a higher threshold for establishing consent, by requiring a “knowing” consent standard.Footnote 174
F. Policy Implications – A Coherent Framework?
This section will explore the policy implications that arise from the contributions to this Special Issue and provide ideas for a legal framework regulating dispute resolution agreements. As a general conclusion, it may be argued that the hostility towards dispute resolution agreements that was prevalent in the past is, to a certain extent, having a reemergence in particular sectors of the economy as a response to the predominance of standardization.Footnote 175 This has led some private international lawyers to suggest that we are experiencing a paradigm shift in private international law, a return to localization and, arguably, the ancien régime.Footnote 176 Under this paradigm, family matters are lifted from regulatory oversight whereas in cross-border economic matters there are systematic interventions and ad hoc protections.Footnote 177 This hostility is justifiable when it comes to weaker parties such as consumers—in which case all three conditions for consent as explicated by Kim might be lacking due to adhesive forms and the simplification of the concept of manifestation of consent. Voluntariness, in particular, is at the core of contract law, its absence, however, is often seen as enabling artificial intelligence systems expressing (objective) consent.Footnote 178
Calliess highlights that for EU consumers there is no framework for an informed consent requirement because they are already protected by European private international law rules that make sure that mandatory protective statutes will continue to apply notwithstanding a dispute resolution agreement. This has led some of the participants to suggest that more robust consumer protection laws, or substantive regulation in general, should be the way forward, instead of focusing on proxies for assent for establishing consent. Buxbaum, though, emphasizes the importance of enforcement of (pre)dispute resolution agreements in consumer contracts for the purposes of a functioning online dispute resolution system, efforts which may be undermined by applying the home forum of the adhering party in all cases.Footnote 179 This reflects the understanding that the procedural dimension of consent to dispute resolution agreement is not limited to the shaping of procedural rules that control substantive rights and determine legal outcomes in the individual case, but can also be viewed under a wider perspective as it relates to the functioning of the civil justice system and the attempt to institutionalize alternative forms of dispute resolution in both the EU and the U.S. as a remedy to “overcrowded courts.”Footnote 180 Consequently, a coherent legal framework would attempt to deal with the issue of, or lack of, consent while also promoting alternative dispute resolution mechanisms in an effort to alleviate the burden upon (state) courts.Footnote 181
Post-dispute consent is generally recognized as having been informed and is naturally afforded greater weight and adhered to even in cases of waiving away rights. In Japan, for instance, the Arbitration Law renders such agreements valid for consumers who, however, have the right to “cancel their agreements to arbitrate future disputes with businesses prior to the first oral hearing of the arbitral tribunal.”Footnote 182 This falls in line with the control model as explicated by McColgan, who argues that ex post contractum the incentives to engage with contract terms are much higher.Footnote 183 In fact, Advocate General Øe in his Opinion in the case XZ v. Ibercaja Banco SA stated that:Footnote 184
[…] [W]here a problem has arisen in that contractual relationship and […] serious doubts have arisen as to the potential unfairness, within the meaning of Article 3(1) of Directive 93/13, of a particular contractual term, and there exists, as the case may be, a dispute between the parties in that regard, the fact that the consumer waives the right to rely on the non-binding nature of that term must not be viewed with the same severity. In such a situation, the consumer is likely to grasp the importance of the protection afforded to him by that directive and, consequently, to understand the scope of that waiver. In other words, I am of the view that a consumer has the option, in certain circumstances, of subsequently waiving, by contract, the rights which he derives from that directive.
Thus, the time of contracting is not the most opportune moment for transmitting information to adhering parties, as McColgan indicates.Footnote 185 Adhering parties are more likely to affect the terms of their transactions long after the formation of contract.Footnote 186 A right of withdrawal, under the Japanese model, may offer a solution to issues of consent for (pre)dispute resolution agreements. Similarly, the possibility for the consumer to ex post facto choose the law that is most favorable to their interests—be it the chosen law or the law of their habitual residence—despite the lack of certain information at the precontractual stage, has the equivalent result.Footnote 187 Maintaining the option to choose at the most opportune moment for transmitting information enhances the consenter’s autonomy.Footnote 188 As Kim highlights, consent is dynamic and always involves the present. Thus, adjusting consent to better fit the cooperative context, particularly for transactions that extend beyond a single interaction, better reflects the nature of the rights potentially waived via a dispute resolution agreement, whereas it can prove useful for reimagining consent for artificial intelligence systems.Footnote 189
Another potential solution drawn from the contributions of this Special Issue would be the German approach of dealing with consent to standard form contracts when the dispute touches upon human rights. As McColgan points out, when issues of human rights are involved, the information model, i.e. the “informed consent” threshold, becomes a normative necessity.Footnote 190 This is in accordance with the extension of the proportionality principle as proposed by Calliess to apply to dispute resolution agreements: The greater the degree of impossibility of realization of the constitutional right to a remedy, the more informed the consent as a justification for an infringement of that right.Footnote 191 The doctrine of separability recognizes the separate legal nature of dispute resolution agreements and as such justifies the application of special rules as to their formation despite contained as a clause in a standard form contract.
I. Inequality in Bargaining Power and its Procedural Implications
When the issue of contract standardization is examined, it is inevitable to avoid the Mainean “status”-speak.Footnote 192 As Vanessa Mak recently put it “[r]ules of consumer protection have, from a contract lawyer’s perspective, been construed as expressions of a general principle of equality.”Footnote 193 Under this conception, contract law is an instrument for rebalancing equality in the individual contract, because this equality is inherent in the general principle of autonomy, in turn expressed by the general principles of freedom of contract and the equality of the parties.Footnote 194 As such, the principle of equality ensures that the conclusion of a contract is done on an equal footing, hence, it prescribes rules safeguarding the position of “weaker” parties.Footnote 195 In particular, many scholars identifying the problems with standard form contracts and the asymmetry in bargaining power between contracting parties suggest that further differentiation between types of consumers is warranted.Footnote 196 This will inevitably lead to further sectoral fragmentation in contract law,Footnote 197 and eventually harming “the [basic] need of a legal system for overall coherence and consistency as a prerequisite for the administration of justice.”Footnote 198 This differentiation rests upon the idea that the heterogeneity of a particular group—such as consumers—should be taken into account by the legal system in devising rules for the respective group. In risking the linearity criticism of such reference to Maine’s status/contract dichotomy, a potential further differentiation due to the heterogeneity of a certain group leads to further categorization of people by reference to some abstract criterion that reflects their status.Footnote 199 Indeed, it is reflective of the tension between freedom of contract and constitutional paternalism, as well as perfect contracting solutions and second-best alternatives. These tensions are underlined in the contributions to this Special Issue.
The homogeneity of solutions with regard to a certain group, such as consumers, is also reflected in the access-to-justice argument of dispute resolution agreements. As Ben-Shahar argues, while indeed boilerplate surrenders procedural rights and effective remedies, usually in favor of mandatory arbitration, consumers are not “a homogenous army of competent litigators eager to burst out of the no-litigation chains, but rather as a heterogeneous class that includes a potentially large subgroup of less sophisticated and unlikely-to-sue people.”Footnote 200 Based on this argument, only elite groups of litigious consumers are adversely affected from the limited access to courts through the enforcement of dispute resolution agreements as rational waivers.Footnote 201 Viewing dispute resolution agreements in such scenarios as rational undertakings undermines the institution of contract;Footnote 202 their enforcement in cases of inequality of bargaining power is unlikely to represent the joining interests of both parties. While some argue in favor of the principle of protection of reasonable expectations as a vehicle to safeguard against irrational waiving of rights,Footnote 203 others argue in favor of the extension of the significant imbalance test, first developed under consumer law, and recently extended to commercial contracts.Footnote 204 The significant imbalance test raises questions regarding its application to dispute resolution agreements.Footnote 205 In fact, the discussion regarding the enforceability of asymmetric jurisdiction clauses is seen through this prism, given that the effort is to remedy any imbalances due to the lack of consent. For this reason, the “Study to support the preparation of a report on the application of the Brussels Ia Regulation” contemplates the possibility for extending the protective rules of the Brussels Ia Regulation to small and medium sized enterprises (SMEs).Footnote 206 This is the central thesis of the contribution by Rieländer who favors the unfairness control be extended to protect SMEs.
A potential solution to the problem of consent to dispute resolution agreements and bargaining power, is the use of the French notion of contrat d’ahesion, pointed out by Rieländer, and often used by the courts of Louisiana.Footnote 207 Based on this notion, not all contracts in a standard form are adhesionary but rather the fact of a standardized contract, any existing small print and the existence of unequal terms call into question the consent of the non-drafting party with a potential for a finding of lack of consent or error which vitiates consent rendering the contract unenforceable.Footnote 208 In such cases, the courts examine the nature of the transaction in question in order to identify whether it was a necessary transaction that in turn establishes whether the non-drafting party was compelled to enter it.Footnote 209 As Rieländer explains, the intention is to compensate for the weaker position of the adhering party vis-à-vis the business, whereas in Germany the Civil Code (BGB) strictly monitors all mass-contracts.Footnote 210 Because the fiction of assent permeates all modern transactions involving standard contracts, the traditional rules of contract law and its basis on consent only make sense for parties with relatively equal bargaining power. The competence and ability of courts, however, to assess individual bargaining power in each situation was a common concern for the contributors.
When these inequalities remain, they are then transmitted to the process before the adjudicating body. Under the principle of equality in the civil procedure realm, understood in the sense of equality of arms, the court may undertake an active role to secure procedural equality between the parties.Footnote 211 The ex officio doctrine, an expression of a corrective court, as developed by the CJEU, provides that the court should raise the issue of unfairness of a term included in a non-individually negotiated contract even if the unfairness is not raised by the consumer.Footnote 212 This rule goes against the general doctrine of ignorantia juris non nocet, a doctrine familiar to most countries, which is equally extended to private contracts.Footnote 213 Notwithstanding the conclusions from the behavioral law and economics literature, this general doctrine of ignorantia juris non nocet cannot be maintained in the cross-border scenario, especially given that individual litigants and SMEs—let alone consumers—usually lack the resources to make an appropriate choice of procedural rules and thus profit from the competition among jurisdictions.Footnote 214 This competition arguably has the potential to lead to inequality of arms and denial of access to justice for at least one of the parties to a dispute.Footnote 215
As a realization of the latter problem, the German Constitutional Court in the Pechstein judgment, in examining the validity of the arbitration agreement, emphasized the fact that the Court of Arbitration for Sport process does not comply with the fair trial standards found under Article 6 of the European Convention on Human Rights.Footnote 216 Thus, if the imbalance in the contractual framework cannot be remedied by the lack of competition between adjudicatory bodies, then the framework of such monopoly bodies should reflect state protections with regard to fair trial. In other words, the procedural framework should not reflect an institutionalized power imbalance. Such challenges to the enforcement of the agreement deal with the fairness of the procedure, regardless of whether consent was expressed or not.Footnote 217 Similar approaches may be seen in the U.S. where it was held that when the substance of the arbitration provision is unduly burdensome and extremely harsh in providing the drafter of the standard contract the option of pursuing other remedies for themselves with no equivalent right to the non-drafting party, then such an arbitration agreement might likewise be found unconscionable and, hence, unenforceable.Footnote 218 Thus, a scrutiny of the fairness of the process has a bearing on the fairness and eventual validity of the dispute resolution agreement that is contained in a standard form contract.Footnote 219 That conclusion is irrespective of the constructiveness of the notice provided to the non-drafting party.
G. Conclusions
The understanding that consent is a fiction has become widespread. In the deliberations for the Restatement of Consumer Contracts in the US, this understanding was reiterated by many of the participants, however, the final text adopts the manifestation of assent doctrine to the adoption of standard contract terms.Footnote 220 In fact, in the deliberations it was pointed out that the development of the rule of notice and opportunity to review promotes this legal fiction of consent.Footnote 221 Warnings against the development of such a rule can be found from the 19th century, before the advent of standardization, when Sir Frederick Pollock, as plaintiff-counsel in the case of Parker v. SE Railway, cautioned that the rule will lead to the introduction of wholly unreasonable terms.Footnote 222 While the reporters of the Restatement of Consumer Contracts praise the adoption of standard terms rule as preserving the convenience of streamlined contracting while providing the consumers with reasonable opportunity to scrutinize the standard contract terms,Footnote 223 it is clearly an unsatisfactory approach for dispute resolution agreements which require a higher threshold for consent.Footnote 224
This Article, in collecting the findings of the Conference and this Special Issue, identified some convergences and divergences in the treatment of consent to dispute resolution agreements. Whereas in the EU there is a greater focus on the procedural aspects that such agreements raise, in the U.S. they are mostly dealt with the principles of contractual interpretation. Some EU scholars suggest that European private law, through provisions such as Article 10 of the Rome I Regulation and Article 25 of the Brussels I (recast) Regulation, purports to ensure that real consent of the parties exists, if the contractual clause is very important.Footnote 225 Whether the fulfillment of formal requirements for validity is sufficient and the extent to which notice may serve as a substitute to consent was a question approached by most authors in this Issue. The majority of the contributions clearly point to the failure of notice and the information paradigm when it comes to dispute resolution agreements and, most importantly, to the need for such higher threshold when dealing with macro-level situations of systemic threat. Applying the “easily satisfied consent standards of general contract law” to all dispute resolution agreements is clearly dangerous. This was also expressed by decisions of state courts in the U.S., where it was pointed out that unlike a basic contract of sale, “arbitration and forum selection clauses materially alter the substantive default rights [of the adherent].”Footnote 226 Preserving party autonomy should, at the same time, remain the underlying principle of private international law. The balance could be struck through the use of legal principles such as proportionality or via contract law doctrines without the need for further regulation and eventual fragmentation.
Alternative avenues for future treatment of the problem of consent were also addressed. Given the inadequacies of current tools, it is anticipated that technology will supersede the current contractual model of consent. Whether artificial intelligence will, indeed, supersede it by rendering such notices more comprehensible or simply automating notices and choice selection is yet to be seen.Footnote 227 McColgan indicates that other technological advancements seen as offering deus ex machina solutions and remedying the information dynamics of form contracting, have failed to deliver.Footnote 228 Thus, the potential for AI as panacea should always be taken with a grain of salt. This contribution shares the view of the experts in the field who point out that AI-enabled consent can be realized through a process of continual and cooperative consent,Footnote 229 whereas AI-infused contracting if it does not accentuate pre-existing knowledge and power asymmetries by replicating biases inherited from existing contracting practices can indeed assist in overcoming the problems caused by the existing approaches to the drafting, management and implementation of contracts.Footnote 230 Nevertheless, the relevance of AI in ameliorating the information dynamics of form contracting may be a topic for another day, or another conference.
Competing Interests
The author declares none.
Funding Statement
The author is deeply appreciative of the German Research Foundation (Deutsche Forschungsgemeinschaft) for funding this project (grant number, DFG project 445777127), as well as the Conference in Bremen (grant number GZ: CA 231/3-1, 542829315).
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