Towards Non-arbitrability of Consumer Disputes in Ukraine

On 3 February 2010 a new bill related to arbitration was introduced to the Ukrainian parliament – Verkhovna Rada. The proposed amendments change Article 6 of the Law on Arbitration Courts which governs competence of arbitration tribunals. It purports to exclude consumer disputes from jurisdiction of arbitration tribunals, thus making such disputes non-arbitrable in Ukraine.

In the past, it was a common practice for banks to include a standard clause into all contracts with their clients referring disputes to a certain arbitration tribunal or institution. It made the dispute resolution process faster. However, the practice gave rise to doubts as to the arbitrators’ impartiality, because consumers were rarely winning in such cases. All this taken together with the fact that arbitral awards can hardly be challenged on the merits, resulted in growing criticism of jurisdiction of arbitration tribunals over disputes involving consumers.

The principal goal of the amendments is elimination of the growing practice of inclusion of arbitration clauses into the standard form contracts concluded by banks and credit unions with their consumers. This in fact resulted in compulsion to choose arbitration as a means of dispute resolution. Consumer could not turn to the court of law and has to bear arbitration expenses.

The amendments also provide that consideration of consumer disputes initiated prior to its entry into force shall be terminated. More information about the bill may be found on the official web page of Verkhovna Rada.

In Russia, there is no established practice of consideration of consumer disputes in arbitral tribunals. Moreover, there has been a number of court decisions recognizing that inclusion of arbitration clauses into contracts with consumers violates the consumers’ right to choose the forum.

Sergey Korolev

Sergey Korolev is an associate with Monastyrsky, Zyuba, Stepanov & Partners in Moscow. He is a graduate of Moscow State Institute of International Relations, Faculty of Law.