Class Arbitration Under Consumer Contracts – Do Major Institutional Arbitration Rules Support Such Claims?

Judicial class actions are a common occurrence before the courts of many jurisdictions, whose laws support the advancement of such claims. Litigating a dispute over common facts, on behalf of an entire class of affected persons, can have immense time, cost and other efficiencies, in comparison with multiple individual cases, and make it more attractive and economically viable for claimants to pursue such claims, as part of the affected class.

This is particularly the case in consumer litigation, where individual consumers in a business-to-consumer (B2C) relationship may find it economically unpalatable to fund the up-front litigation costs of mounting an individual claim against a large corporate counterparty with greater financial resources – but, in sufficient numbers, with larger potential damages awards attracting consumer litigation contingency fee arrangements (CFAs), often-complex claims may become economically viable, and more attractive for consumers to pursue.

However, in recent years, a developing trend has been the inclusion of bilateral arbitration clauses in B2C contracts, requiring consumers to arbitrate any claims against the business confidentially, often in far-flung seats and jurisdictions, under governing laws that may have no direct relevance to the subject matter of the contract or the place of performance of obligations, and under institutional arbitration rules which are unfamiliar to the consumer. These arbitration agreements are often contained in general terms and conditions of the business, and are frequently accepted by consumers unknowingly, or without any real understanding of their meaning. In certain jurisdictions, such arbitration agreements have been found by courts to be void against consumers, yet in other jurisdictions, the old adage of caveat emptor¹ holds firm.

We last explored B2C arbitration agreements in the context of crypto exchange disputes in September 2023. In this article, we revisit the topic of consumer arbitration agreements and explore the question of whether class arbitrations – the arbitration equivalent of judicial class actions – can be supported under major global institutional arbitration rules, assuming that the underlying B2C arbitration agreement is valid and binding on the consumer.

What are consumer contracts, and why do they contain arbitration agreements?

Arbitration agreements have, in recent years, become increasingly common in B2C contracts. Examples can be found in the user agreements of crypto trading platforms such as Binance and Coinbase, or dating apps such as Tinder (see Swiping Right to Arbitration: An Imperfect Match? – Kluwer Arbitration Blog).

The reason for the prevalence of such arbitration agreements in consumer contracts, and particularly those B2C contracts with an international reach across various jurisdictions, is that the choice of arbitration may be a prudent one for the businesses managing these agreements. In this regard, those businesses adopt these dispute resolution mechanisms on the basis that arbitration provides greater privacy and confidentiality, thereby protecting the business’ reputation; placing the business in the position of being able to decide on a favourable forum; and allowing the business to streamline its dispute resolution procedures, and the number of potential forums in which it may face claims. In practical terms, this allows businesses’ legal teams to centralise and specialise around one area of law, as opposed to several fragmented options.

This choice will be helpful to businesses who consider themselves to be more at risk of being sued by consumers, rather than needing to sue consumers, examples include global crypto exchanges, where a near-identical service is provided to consumers in multiple jurisdictions simultaneously around the world. Organisations operating virtually and multi-nationally, such as Coinbase, have included arbitration agreements in their general terms, pursuant to which arbitrations are administered by leading global organisations including the Singapore International Arbitration Centre (SIAC), the American Arbitration Association (AAA) and the Judicial Arbitration and Mediation Services (JAMS).

At this juncture, we pause to note that there are several ways in which online consumer contracts may be formed and may incorporate arbitration agreements:

1. “clickwrap” agreements require the user to scroll through the terms of use and affirmatively click a button or tick a box stating words to the effect of “I agree” before accessing the site;
2. “sign-in wrap” agreements are where users are notified of terms that are available by way of a hyperlink, and are required to click a button, or sign in to their account on a platform, in order to access the site; and
3. “browse-wrap” agreements are where a website displays a notice or a banner notifying the user that they agree to the site’s terms of use by using the site. The user is not required to click any button, nor take any affirmative action to indicate their acceptance of the terms, and acceptance is given by conduct.

Often within the terms of these agreements, businesses would include the relevant arbitration agreement.

The adoption of arbitration agreements has the benefit to a business of preventing a multitude of proceedings in different forums, insofar that each and every consumer bound by the arbitration agreement would only be allowed to commence proceedings in a limited and predefined manner, in a specific jurisdiction and under specific institutional arbitration rules. This has the added benefit of reducing any unnecessary costs for the business, as it would most commonly be the consumer who would bear the cost of commencement of any arbitration action.² This is because, under several leading global institutional arbitration rules, such as those of the SIAC, it is the claimant who would bear the cost of commencing any proceedings. This serves as another deterrent on overly-litigious consumers, or those seeking to bring frivolous or vexatious claims, but also provides a barrier to the consumer achieving justice.

The current approach of arbitral institutes towards administering arbitrations under B2C contracts

The reality of B2C arbitration does lend itself to several criticisms, which include, but are not limited to, accusations of reduced protection for consumers who have no choice but to commence a costly arbitration to vindicate his or her rights. The reality of which is often that the loss suffered by the consumer does not justify the cost which will necessarily be incurred to commence arbitration. By way of example, the filing fees for a SIAC arbitration are SGD $2,000, which for consumers might represent a figure that is in excess of their claim value. Although a consumer could commence arbitration against the relevant party under the relevant arbitral rules, in actuality, the cost may not justify it.

In order to circumvent this issue, the advent of class action arbitration (Class Arbitration) is a potential alternative approach that claimants may and often have considered to vindicate their rights. A Class Arbitration is a form of arbitration that enables one or a number of parties to bring a claim before an arbitral tribunal on behalf of others in a similar position. In this regard, claimants may consider the commencement of Class Arbitration actions as a viable method to mitigate cost, whilst achieving the vindication of their rights.

However, a barrier to the advent of Class Arbitration in B2C contracts is that the very nature of arbitration, and its emphasis on mutual consent, confidentiality and party autonomy, stands in contrast with common elements of judicial class actions. In this regard, there has been debate about whether Class Arbitration actions should be “opt-in” or “opt-out”, and how that process interacts with the fundamental nature of arbitration, being a consensual process. “Opt-in” arbitrations would require parties to positively signal that they wish to be form part of the class of claimants in an arbitration, which is akin to a collective arbitration mechanism such as joinder or consolidation. In contrast, “opt-out” arbitrations take the assumption that a party constitutes part of the class in the proceedings, unless he or she positively indicates otherwise.

In any case, this is beyond the scope of the current discussion, as the question of whether Class Arbitration requires opt in or opt out is an inherently complex and nuanced topic involving other complex issues such as confidentiality in arbitral proceedings, and deserving of its own paper. What is clear is that Class Arbitration would, in order to flourish, need to be supported by carefully-considered arbitration rules or laws and, as such, we turn to look at whether some of the various major global arbitral institutions have systems in place that allow for Class Arbitration.

The approach of the AAA and JAMS

Following the US Supreme Court’s ruling in Green Tree Financial Corp v Bazzle [2003] 539 U.S. 444, two major American arbitral institutions, the AAA and JAMS, published new Class Arbitration rules, respectively the Supplementary Rules for Class Arbitrations administered by the AAA (the AAA Class Rules) and the JAMS Class Action Procedures (the JAMS Class Rules). A full analysis of both rules goes beyond the scope of this note. However, it suffices to highlight that the purpose of both sets of rules serves as an attempt to adapt the practice of judicial class actions towards arbitration. Significantly, both rules are generally only applicable to domestic class arbitration proceedings, and not to international class arbitration proceedings. We also note that the AAA has recently updated its Consumer Arbitration Rules and Mediation Procedures, effective 1 May 2025. These rules may apply in tandem with the AAA Class Rules, although where there is an inconsistency between the two, the AAA Class rules will govern.³ The amendments relevant to Class Arbitration are discussed further below.

Nonetheless, both the AAA Class Rules and the JAMS Class Rules contain a number of useful provisions which are well-adapted to the realities of both class action disputes and arbitration:

1. first, clause 3 of the AAA Class Rules (as well as the JAMS Class Rules) allows for the Tribunal to determine whether the applicable arbitration agreement permits the arbitration to proceed on behalf or against a class. Following any such decision, the arbitration is stayed for 30 days in order to allow time for a competent court to confirm or vacate the decision, upon application of a relevant party; and
2. secondly, the AAA Class Rules states that the Tribunal is mandated to write separate awards embodying the arbitrator’s decisions on clause construction and class certification. In contrast, the JAMS Class Rules provide the arbitrator with the flexibility to, “embody his or her decisions on clause construction and class certification in partial final awards subject to immediate judicial review.”.

Crucially, both sets of rules have special mechanisms relating to the provision of determining the applicability of class arbitration to the arbitration agreement itself first, as well as the provision of cooling-down periods, to allow for parties to apply to court. Such measures are sensible and are well-adjusted to the applicability of class arbitration.

The approach of the German Institution of Arbitration

Certain European countries are presently adapting their legal systems to allow for judicial class action suits. For example, Sweden has adopted the 2003 Group Proceedings Act which considers an opt-in mechanism. Another example is the United Kingdom where group litigations have been allowed since the 2000s. Similarly, to Sweden, it operates on an opt-in basis.

In the realm of arbitration specifically, the German Institution of Arbitration (DIS) released its Supplementary Rules for Corporate Law Disputes, which is tailored specifically for shareholder disputes, which are a common source of judicial class action proceedings. These rules share similarities with the AAA Class Rules and the JAMS Class Rules. In particular:

1. Clause 2 of the DIS Supplementary Rules preamble states: “[t]he effects of an arbitral award extend also to those shareholders, that have been identified as Concerned Others within the time-limits provided, irrespective whether they have made use of their opportunity to join the arbitral proceedings as a party or as an intervenor. The shareholders named as Concerned Others within the time-limits provided, commit to recognize the effects of an arbitral award rendered in accordance with the DIS-SRCoLD“. To elaborate, section 2 of the DIS Supplementary Rules makes it clear that “Concerned Others” may be joined to the arbitral proceedings thereby forming a pseudo “class” for the purposes of an arbitration;
2. Significantly, clause 3 DIS Supplementary Rules preamble states that, “former shareholders remain bound by this arbitration agreement“; and
3. Section 5 of the DIS Supplementary Rules also requires that there should be continuous information of “Concerned Others“. In particular, it would be necessary for the tribunal to inform such parties of the progress of the arbitral proceedings, by delivering copies of written pleadings of the parties or intervenors as well as decisions and procedural orders by the arbitral tribunal to the Concerned Others at their indicated addresses, unless Concerned Others have expressly waived in writing to receive this information. This is significant insofar that members of the group are kept well informed of the progress of the matter.

The approach of the SIAC and the LCIA

At present, the London Court of International Arbitration (LCIA) and the SIAC (two of the world’s most frequently-used arbitration institutions) do not employ specially crafted class arbitration rules. However, the consolidation and joinder provisions in both sets of rules could potentially be strategically used to create a similar effect to class arbitration on a smaller scale.

First, the LCIA, pursuant to Article 22A(ii) of the LCIA Arbitration Rules 2020, allows for, “the consolidation of the arbitration with one or more other arbitrations subject to the LCIA Rules and commenced under the same arbitration agreement or any compatible arbitration agreement(s) and either between the same disputing parties or arising out of the same transaction or series of related transactions, provided that no arbitral tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such arbitral tribunal(s) is(are) composed of the same arbitrators“. The scope of the LCIA’s 2020 Rules allows for a broader consolidation of proceedings and in particular proceedings, “arising out of the same transaction or series of related transactions“. Significantly, this would allow for a Tribunal to effectively form a pseudo-class arbitration, assuming that separate claimants have commenced separate suits. 

In the event that a third party wishes to be joined, Article 22.1(x) of the LCIA Arbitration Rules 2020 requires that the third party and the applicant party obtain express written consent from the third party to be joined, and such consent would not be established by the third party having signed a generally worded arbitration agreement incorporating institutional arbitration rules that permit forced joinder (see CJD v CJE and CJF [2021] SGHC 61). Notwithstanding the fact that joinder could serve as an alternative route for class arbitration, the fact of the matter is that parties would need to rely on expressly written consents (akin to the opt in approach) in order to form a semblance of a class.

The SIAC Rules 2025 has similar issues to the LCIA in its adaptability for Class Arbitrations via the alternative gateways of consolidation and joinder. On the point of similar proceedings, the parties likewise have the option of consolidating or (under the new SIAC 2025 Rules) undertaking coordinated proceedings in order to resolve similar disputes of both law and fact. Similarly, the option to rely on joinder is possible but would require the agreement of all parties in order to be admitted.

However, there are several issues that prevent a true Class Arbitration from arising under either set of rules. First, attempted reliance on the joinder mechanism for this purpose would be flawed, as it would generally require the party seeking to join to obtain consent from the opposing party, or prove that the third party is bound by the arbitration agreement. This would be difficult in practice as the attempt to join significant numbers of third parties is unlikely to result in agreement from the opposing side, thereby necessitating that the joining party undertake a costly application to join each and every party.

Next, the reliance on consolidation and coordinated proceedings is likewise not appropriate as a solution for large scale class arbitrations. This is because either procedure would require that the initial arbitration has been commenced. For consumers, this is a challenging proposition as the claimant would generally need to pay the commencement fee. For example, under the SIAC, each claimant must pay the initial SGD 2,000 to commence arbitration for consumers seeking recourse for a comparatively small amount, this might not be a suitable course of action.

What updates to various institutional rules would be needed to allow for effective Class Arbitrations in consumer contracts?

As it stands the arbitral institutions might not be well placed for the adoption of class arbitrations by consumers. It should be recalled that consumers generally do not have significant financial resources that justify the commencement of action individually. This deterrent effect is significant insofar that it makes the individual less likely to attempt to vindicate his right vis-à-vis a corporate entity. However, this does not mean that groups of individuals should be able to consider a collective action to protect or enforce their rights. In the present case, groups of individuals under the commonly used SIAC and LCIA could attempt a consolidated action or joinder application to obtain a semblance of a class arbitration. Unfortunately, for the reasons mentioned above, this might not be the best manner in which parties may vindicate their rights.

Instead, there are several considerations that arbitral institutions could consider to allow for the creation of class arbitrations:

1. The creation of supplementary rules which cater for class arbitrations. These rules should encompass provisions similar to the AAA and the JAMS insofar that there should be a specified procedure for addressing class arbitrations whilst catering for appropriate time to either dispute the action or join it. The rules should also consider whether it should operate on an opt-in or opt-out basis; and
2. Any supplementary set of rules or amendments should allow for the continuous information to be provided to relevant parties.

However, it is understandable that the SIAC and LCIA do not have specific Class Arbitration rules. As mentioned above, the SIAC and LCIA rules are very attractive dispute resolution mechanisms for businesses, and it is understandable that these rules may not wish to encourage Class Arbitrations against the very businesses who use their services. At this juncture, we would also note that a balance would need to be struck by these institutions in any future consideration of adapting or creating Class Arbitration rules. In particular, we are mindful that arbitration agreements that are not consumer-friendly may well be struck down in jurisdictions with consumer protections in place. For example, the UK’s Arbitration Act 1996 read with the Consumer Protection Act 2015 and the Unfair Contract Terms Act 1977 indicate that arbitration agreements in consumer contracts may be considered unfair where a modest amount is sought. In such a circumstance, the arbitration agreement may well be struck down.⁴

Further, in contrast to the AAA Class Rules and the JAMS Class Rules, the arbitration rules of the SIAC and the LCIA are primarily targeted towards the handling of international arbitrations. By way of example, in 2024, the SIAC handled around 625 cases of which 91% were international cases.⁵ Similarly, in 2023, the LCIA’s annual casework report indicated that 96% of cases involved in LCIA arbitrations were international in nature.⁶ The international nature of the cases handled by the SIAC and the LCIA would also make them less attractive to class arbitrations, as the differing standards of consumer protectionism around the world, as well as the vastly increased difficulty of conflicts of law issues, may make enforcement of awards challenging in certain jurisdictions, where public policy considerations may be relevant.

Do Businesses want Class Arbitration?

As mentioned above, Class Arbitrations (such as those in the Binance case) may not be particularly desirable for businesses, as is apparent from the class arbitration waivers present in some arbitration agreements in B2C contracts. In comparison, consumer protectionist jurisdictions are less keen on upholding unfair arbitration agreements in consumer contracts. Against such a backdrop, it is clear that a balance would need to be struck, and businesses may now wish to consider whether adopting specific consumer Class Arbitration rules would be preferable to attempting to rely on traditional bilateral institutional arbitration rules, and live with the increased risk of such arbitration agreements being voided in certain jurisdictions.⁷

In light of this, leading arbitral institutions may wish to consider crafting specific, consumer-focused, Class Arbitration rules that provide a greater degree of fairness to consumers than their standard rules. Such rules may be important tools for persuading consumer-protectionist jurisdictions of the reasonableness of arbitration agreements in B2C contracts, thereby mitigating attempts to strike them down. Overall, the advent of Class Arbitration is an evolving space, and something that would need to be actively and carefully cultivated and developed.

Is Class Arbitration a viable means of international dispute resolution?

To conclude, while certain existing arbitral rules are able to accommodate smaller scale pseudo-class arbitrations, the majority, and particularly those focused on the resolution of international disputes, are not presently capable of replicating the arbitral equivalent of judicial class actions. For Class Arbitrations to become a viable means of international dispute resolution, changes in law may be required in certain jurisdictions or, as a minimum, the development of specialised sets of institutional arbitral rules best suited for the unique peculiarities of Class Arbitrations, to ensure fairness of treatment of consumers. This in turn may reduce the risk of arbitral agreements in B2C contracts being declared void, or arbitral awards being set aside at the enforcement stage, in consumer-protectionist jurisdictions.

The number of B2C containing arbitration agreements is high, and is only increasing. As demonstrated by the increasing number of class actions around the world, consumers are increasingly savvy in their approaches towards protecting their rights and seeking recourse. Equally, many businesses would clearly prefer their disputes to be resolved through arbitration, rather than before a consumer’s domestic courts. As such, an examination of the question of whether institutional arbitration rules could support Class Arbitration is timely and, if implemented correctly, Class Arbitrations may prove to be a popular future means of international dispute resolution under B2C contracts.

Footnotes

1. Translated as ‘buyer beware’.
2. For reference, the AAA Consumer Arbitration Rules and Mediation Procedures Administrative Fee Schedule makes it clear that for consumer arbitrations, an individual is required to pay USD 225 to commence an arbitration, while a business is to pay either USD 375 or USD 500, depending on the number of arbitrators present, and once the individual claimant meets the filling requirement.
3. Please see Rule 1(b) of the AAA Class Rules.
4. This point was recently addressed in the English Courts in the case of Soleymani v Nifty Gateway LLC [2022] EWCA Civ 1297 (Soleymani)in which the Court of Appeal declined to stay English proceedings in a consumer arbitration notwithstanding the fact that the agreement catered for arbitration in New York. In coming to this decision, the Court held that Mr Soleymani was relying on his consumer rights. The Court highlighted the public policy concern that consumer rights should be decided in public court and that the English Courts are better placed to adjudicate on domestic consumer protection rights then a foreign tribunal. The case of Soleymani was considered in the recent cases of Eternity Sky Investments Ltd v Zhang [2024] 1 ALL ER (Comm) 486 and Gagliardi v Evolution Capital Management LLC [2023] ICR 1377. Finally, Soleymani was distinguished in the case of Payward Inc and others v Chechetkin [2024] 1 ALL ER (Comm) 455 on the facts but the court agreed with the public policy reasoning of hearing consumer rights disputes in public.
5. Please see Press-Release-SIAC-Records-Steady-Growth.pdf.
6. Please see LCIA News: Annual Report on 2023, LCIA Court and African Users’ Council updates, EDI initiative, LCIA Director General news.
7. Notably, the updated AAA Consumer Arbitration Rules and Mediation Procedures provide that the AAA may, in its sole direction, decline to accept a Demand for Arbitration where the parties’ consumer arbitration agreement does not comply with the Consumer Due Process Protocol (see R-10). Furthermore, R-9 of the updated rules clarifies that, where a claim is within the jurisdictional limit of the appropriate small claims court, either party may choose to take their own claims directly to the small claims court, without first filing with the AAA. These rules highlight that unfair or inappropriate arbitration agreements in consumer contracts will not always be upheld.