14/09/2023

Is the consumer always right? When international arbitration meets consumer protection

In a recent trilogy of decisions – Soleymani v Nifty Gateway LLC, Payward Inc v Chechetkin and Eternity Sky Investments Ltd v Mrs Xiaomin Zhang – the English courts have considered significant and novel issues arising from the interaction between consumer protection and the support for international arbitration under English law.

Consumer protection clearly assumed primacy in these cases. Beware the party who enters into an international arbitration agreement with an individual domiciled in the UK.

Key takeaways

What clearly emerges is that English law will accord significant weight to consumer protection, even where competing policies in support of international arbitration are at play. It seems unlikely these cases will be the last word on this tension. In particular, the following issues may merit (re)consideration in future:

1. It is far from clear that part of the purpose of Section 71 of the CRA was for decisions on consumer rights to be made in the English courts wherever possible. On its face, Section 71 of the CRA merely sets out the Court’s duty to decide the fairness of consumer terms sua sponte, where parties have not themselves raised the point. On one view, section 71 of the CRA should only bite where the court already has jurisdiction; it should not negate (or not entirely) the concept of Kompetenz-Kompetenz.
2. The analysis in Payward focused on showing that the CRA represents the public policy of England. But not every public policy engages section 103(3) of the AA. It requires public policy which also reflects both “fundamental conceptions of morality and justice” and “considerations of international public policy rather than purely domestic public policy”. Arguably contravention of rights under the CRA should be considered as a question of degree, with only serious contraventions qualifying, given that there are competing pro-arbitration policies at play.
3. Should it matter that the arbitrations in Soleymani, Payward and Eternity Sky were international being foreign-seated and involved high value claims? Wealthy consumers are still consumers. But consumers who end up facing (and even making) high value claims in international arbitration are likely sophisticated individuals capable of protecting themselves. That again begs the question of whether contravention of rights under the CRA should be decisive in frustrating an arbitration or the enforcement of an award, or whether a multi-factorial balancing of the competing policies is required.

Meanwhile, any party entering into an arbitration agreement with an individual domiciled in the UK should carefully consider if the CRA is applicable and, if so, draft their arbitration and governing law clauses appropriately, in order to avoid difficulties in the event of a dispute.

Read the full bulletin, authored by David Lewis KC (assisted by Yi Jie Ho, senior associate at Wong Partnership LLP).