The popularity of consumer arbitration around the world is growing by the day. Consumer arbitration enables businesses and their consumers to submit disputes to an impartial third party, such as an arbitral institution. Interestingly, it is regulated differently in the European Union and in Georgia. Let’s discuss.
Consumer Arbitration in EU
In the European Union, the procedure for conducting consumer arbitration is generally regulated by the Directive on Consumer ADR (Directive 2013/11/EU) and Regulation on Online Dispute Resolution for Consumer Disputes (EU) No. 524/2013. The European Union has established the European ODR Platform, a specifically designed platform for consumers that assists them in resolving disputes with businesses. It suggests that parties negotiate amicably within 90 days after a consumer submits an online claim through the platform. In the event of failure to reach an agreement, the parties will then have 30 days to choose an alternative dispute resolution (ADR) body. For example, such an ADR body might be the European Consumer Center Network, which unites national offices across the European Union, as well as in Iceland and Norway, and which is governed by the European Commission for cross-border consumer disputes.
The Directive on Consumer ADR has distinctive features. It applies only to complaints submitted by consumers against businesses, not vice versa. That is why the arbitration agreement that deprives the consumer’s right to bring an action before the courts and is concluded before the dispute arises should not be binding on the consumer. On the other hand, in most member states of the European Union, participation in ADR proceedings is voluntary for businesses.
As a rule, the overall term for dispute resolution under the Directive on Consumer ADR is approximately 90 days, subject to extensions based on the complexity of the dispute. Such shortened deadlines help the parties to protect their rights in a timely manner.
Consumer Arbitration in Georgia
In contrast to the European Union, there is no specific law in Georgia on consumer arbitration, and the Law of Georgia on Arbitration, which generally governs commercial arbitration, is also applicable to business-to-consumer disputes. In this respect, there are no specific provisions governing consumer arbitration. Business-to-consumer disputes are most often heard by local arbitration institutions in Georgia. Unlike the European Union’s model of consumer arbitration, Georgian legislation sets forth no obligations to refer to amicable settlement proceedings before commencing the arbitration process.
Therefore, consumer arbitration may be directly commenced based on the parties’ arbitration agreement. However, there are certain requirements that should be considered while drafting such an arbitration agreement. For instance, pursuant to the Law of Georgia on the Protection of Consumer Rights, the arbitration agreement that obliges consumers to refer to arbitration only is regarded as an unfair and void provision, provided such arbitration is not regulated by Georgian legislation.
The Law of Georgia on Arbitration requires the arbitration agreement to be made in writing and signed by both parties, provided one of the parties is a natural person, in this case a consumer. Since, in business-to-consumer disputes, consumers are considered weaker parties than business entities, such requirement of the Georgian legislation ensures consumers a full, equal opportunity to familiarize themselves with the arbitration agreement. This also reduces the risks related to the voiding of an arbitration agreement due to consumers’ lack of awareness regarding ADR mechanisms.
The Georgian legislation gives parties the possibility to execute arbitration agreements before and after materializing a dispute, in contrast to the European legislation. Moreover, once a request for arbitration is made, there is no exemption for consumers or businesses from participation in arbitration proceedings.
Prospects of Consumer Arbitration in Georgia
Considering the European legislation on consumer arbitration, there is a prospect to specific rules for the development of consumer-arbitration in Georgia. This will raise awareness regarding consumer arbitration and refine procedural mechanisms for arbitrating such disputes. Setting forth the pre-arbitration negotiation duties of the parties, as is the case in the European Union, might also help to resolve disputes amicably before even commencing arbitration proceedings. Since there is a backlog of cases in the Georgian courts, development of consumer arbitration may be the most cost and time effective resolution for the Georgian market.
