Are forced arbitration clauses legal in European countries?

Question

I'm curious about the legality of forced arbitration clauses in "fixed format" contracts that the general public are expected to agree to for buying goods or using services. I'm not particularly interested in "commercial" contracts between businesses, etc. Particularly:

• Can such a fixed form contract include a clause requiring all disputes to be settled only by binding arbitration, as part of the main contract? Or does the arbitration agreement have to be a separate piece of paper or checkbox? (i.e. an "opt-in").
• If the arbitration clause is part of a larger contract required to purchase a good or use a service, is there a requirement to have a procedure to opt out?
• What measures exist to ensure the fairness of the arbitration? Is there a restriction on who the arbitrator can be, who appoints them, where the proceedings are held, etc.?

Any other more general information on the subject, as it relates to EU jurisdictions (in particular Germany and France, being two major ones) would also be welcome. I'm having a hard time finding the relevant information (perhaps because of searching in English), although there is enough on the US and UK.

Answer 1

Europe

There is no generally European law on arbitration. Each state has its own laws. Most are parties to the European Convention on International Commercial Arbitration (signed on 21 April 1961).

France

Internationally, France is considered to be exceptionally arbitration friendly.

• Can such a fixed form contract include a clause requiring all disputes to be settled only by binding arbitration, as part of the main contract?

Yes. However, domestic arbitration for future disputes is only binding on a "non-professional party" if they choose to rely on it.

• Or does the arbitration agreement have to be a separate piece of paper or checkbox? (i.e. an "opt-in").

No.

• If the arbitration clause is part of a larger contract required to purchase a good or use a service, is there a requirement to have a procedure to opt out?

This is implicit for "non-profesionals".

• What measures exist to ensure the fairness of the arbitration? Is there a restriction on who the arbitrator can be, who appoints them, where the proceedings are held, etc.?

There's a law that deals with this.

French arbitration law is set out in the French Code of Civil Procedure (FCCP), as interpreted by French case law. Articles 1442 to 1503 of the FCCP apply to domestic arbitration (together with articles 2059 to 2061 of the French Civil Code (FCC)), while articles 1504 to 1527 of the FCCP apply to international arbitration. An arbitration is considered international where it “involves the interests of international commerce” (FCCP, article 1504).

French arbitration law is not based on the UNCITRAL Model Law.

The FCCP applies to all arbitral proceedings with a seat in France. Some provisions are mandatory and others only apply where the parties have not agreed otherwise.

Germany

• Can such a fixed form contract include a clause requiring all disputes to be settled only by binding arbitration, as part of the main contract?

With consumers, no. Such arbitration agreements must be separate from the main contract.

However, defects of form like that may be cured by the parties submitting to arbitration without raising objections.

• Or does the arbitration agreement have to be a separate piece of paper or checkbox? (i.e. an "opt-in").

See above.

• If the arbitration clause is part of a larger contract required to purchase a good or use a service, is there a requirement to have a procedure to opt out?

No. However, objections can be raised that an arbitral agreement violates competition law such as an abuse of market power. It's unlikely that an arms-length procedure would be found to do so.

• What measures exist to ensure the fairness of the arbitration? Is there a restriction on who the arbitrator can be, who appoints them, where the proceedings are held, etc.?

There's a law.

Arbitration proceedings in Germany are governed by the 10th book (section 1025 et seq) of the Zivilprozessordnung (ZPO), the German Code of Civil Procedure. It largely follows the UNCITRAL Model Law.