INTRODUCTION

Is European class arbitration an oxymoron? For the past 50 years, international arbitration has been mainly associated with international commerce and international investment. It has evolved into an extremely sophisticated dispute resolution system, that has proved quite fitting for the purposes of resolving the most complex high-stakes disputes between large multinationals. It would be fair to say that, for most arbitration practitioners at least, the resolution of mass disputes arising from abuses of uneven bargaining power and the need to protect weaker parties aggrieved by unfair commercial dealings, have not been an area of focus. But it would be equally unfair to suggest that consumer protection or "B2C" arbitration has not been a matter of academic studies. 1The future of class arbitration in Europe, however, is largely uncertain and will depend on many factors including whatever room will be left to party autonomy in a domain of the law where European lawmakers have not hesitated to regulate. One cannot help but notice the proliferation of European generated legislation regarding dispute resolution. It cannot be disputed that the administration of justice before State courts is a matter of sovereignty and as such should be regulated. Understandably, the European Union (the "EU" or the "Union") also claims to regulate and supervise matters that involve the protection of weaker parties, which lies at the very heart of the domain of class actions.

Over the past few years, the EU has adopted a global framework for collective redress and alternative dispute resolution ("ADR") in several sectors. While more than half of the EU Member States have implemented national collective redress systems, their individual features and scope differ greatly. 2For the last few decades, the introduction of collective redress mechanisms has been a matter that divided not only the legal community, but also civil societies of countries in which this issue has been raised. The EU has supported the introduction of collective redress mechanisms in its Member States while insisting on its opposition to the US class actions’ system. 3The Commission noted that: 4

[t]he primary difference of opinion concerning the benefits that could flow from introducing new mechanisms of collective redress is between citizens/ consumers and business: consumers are generally in favour of introducing new mechanisms, while businesses are generally against. Academics are generally in favour. Lawyers are divided on this issue, although those who are sceptical or opposed outnumber those in favour.

The proliferation, however, of EU law in the field of alternative dispute resolution, a domain that has traditionally been thought to be inherently contractual in nature, is more difficult for the business law practitioner to understand. The abundance of EU-led initiatives and ensuing increase of regulation in the field of dispute resolution, has become a cause for concern in the arbitration community. 5One may indeed query whether encouraging uniformity and integration in matters of alternative dispute resolution should be a priority for EU lawmakers. By looking at recent developments and trends in EU circles, one can begin to predict the future of class arbitration and whether it will have any meaningful role in an increasingly regulated world. The European approach to settlement of disputes suggests — in sometimes not so subliminal terms — that arbitration may not be an adequate forum for the resolution of disputes that inherently address public policy issues. Class arbitration is one such method brought into question.

This paper will attempt to discuss this topic and offer some — very speculative — suggestions in this regard. It may indeed be possible to suggest that arbitration may and should offer a safe and reliable means of recourse for the protection of weaker parties, and indeed the preservation of the general interest, while also ensuring fair process for all concerned.

In its assessment of the collective redress procedures available in its Member States, the EU distinguishes between injunctive relief and compensatory relief: the aim of injunctive relief is to grant to harmed parties the possibility of seeking an order to stop illegal business practices. Existing EU legislation and international agreements require that Member States have such procedures in place in certain sectors, such as the consumer and environmental protection sectors. As a consequence, all Member States have provisions that provide collective injunctive relief. The aim of compensatory relief is to award damages to victims harmed by illegal business practices. Procedures for the collective claim of compensatory relief in certain sectors have been introduced in the majority of Member States and vary widely throughout the EU. 6This paper will therefore only focus on collective compensatory relief as arbitration is best suited to this form of relief.

This paper will address the current issues relating to the development of class arbitration in Europe. Section I describes the regulated framework for collective redress mechanisms in the EU; Section II addresses the challenges and obstacles to the development of class arbitration in Europe; and Section III discusses the new challenges that the arbitration field will face due to the increasing prevalence of class arbitrations.

1. A REGULATED FRAMEWORK FOR COLLECTIVE REDRESS PROCEDURES IN EUROPE

A. Implementation of Collective Redress Mechanisms in EU Member States

In its Recommendation of 11 June 2013, the Commission stated that "[a]ll Member States should have collective redress mechanisms at national level for both injunctive and compensatory relief" by 26 July 2015. 7

By 2011, 16 EU Member States had already implemented collective redress mechanisms.8 There are significant differences in the approaches taken by Member States towards collective redress schemes: every national system of compensatory redress is unique. 9

A collective action is defined as "a procedural device allowing plaintiffs to sue not only for injury done to themselves but on behalf of other persons similarly situated for injury done to them." 10

Collective redress procedures, even those already in existence, are not set in stone. For example, several EU Member States created or amended their collective redress procedures very recently: (i) in Belgium, a representativebased collective actions regime was introduced to the Economic Law Code on 28 February 2014; (ii) in France, the Loi Hamon introduced class actions for competition and consumer law on 1 October 2014 and the French Parliament is also discussing a further class action regime for healthcarerelated physical injuries; and (iii) in the United Kingdom, a limited opt-out regime for antitrust claims has been available since 1 October 2015 under the Consumers Rights Act 2015.

Group actions are the most common form of collective redress mechanisms in the EU and are divided into (i) group actions in which individual actions are grouped into one procedure, (ii) actions brought by groups of victims and (iii) group actions brought by an ombudsman, consumer organization or leading plaintiff. 11

The most significant issues with regard to national collective redress schemes are scope of application, types of remedies available, implementation of an opt-in or opt-out mechanism and funding. 12

Most national systems allow compensatory redress for consumers and only a few allow general standing. National laws also diverge on the question of who should receive the benefits of the remedies: the public purse, associations (e.g. consumer associations) or victims. With regard to the effects of the decisions rendered in collective redress procedures, most Member States have implemented an opt-in mechanism, pursuant to which the decisions only bind those who have expressly consented to the proceedings. A few Member-States, 13however, have adopted an opt-out mechanism, allowing for the decision to become binding for all members of the group unless they have expressly stated otherwise. 14

Funding is another main area of concern. The US class action system, which allows contingency fees and is therefore seen as facilitating the commencement of large-scale class actions whose only aim is to force settlement with the corporate defendant through mass media coverage, has attracted criticism in the EU and international legal community on the basis that it encourages claims which are cynical and sometimes meritless. Funding is therefore considered a central issue when discussing the features of collective redress procedures in Europe and one of the European institutions’ main objectives is to avoid abusive actions. 15Conditional and contingency fees are not banned in all EU Member States but, in some of the jurisdictions in which they are allowed, these fees are subject to court scrutiny. The possibility of having recourse to third party funding is unregulated in a majority of EU Member States. 16

B. Lack of Efficiency in Existing Procedures and Calls for Harmonization at the EU Level

A 2008 study on collective redress mechanisms in the EU Member States conducted by the European Commission concluded that these procedures have proved to not be fully effective. 17This study focused on the collective redress judicial procedures that had been implemented thus far in 13 Member States. Although this study did not take into account the latest developments in the field and had a limited scope (it only dealt with consumer protection), its conclusions can certainly still be considered relevant and can be extrapolated to apply to collective redress mechanisms in Europe as a whole.

The evaluation of the effectiveness of the then available collective redress mechanisms focused on: (i) the degree to which they fulfil the objectives of the implementing national laws; (ii) the incentives provided by the mechanisms; (iii) their accessibility; and (iv) the way collective actions are financed.

On these four issues, the study concludes that:

1. the majority of the collective mechanisms do not fulfil the objectives attached to them by national legislation and the direct benefit to consumers is often limited; 18

2. the existing collective redress mechanisms neither seem to ensure a change in the behaviour of potential defendants nor constitute a significant deterrent to them, yet at the same time these mechanisms do seem to discourage unmeritorious claims as a result of the application in most Member States of the ‘loser pays’ principle; 19

3. group actions that are pursued by representatives are usually relatively easy to join although low-value cases may pose joinder problems for consumers; and

4. the financing of collective actions is a very significant obstacle for their use since the budgets of all potential intermediaries are limited and the risk of severe loss is high due to the ‘loser pays’ principle. 20

The study notes, however, that "collective redress mechanisms have an added value to consumers’ access to justice in all Member States where they exist, even in those where individual litigation and ADR is easily accessible." 21From a critical point of view, it could be inferred from this statement that consumer protection in EU Member States must be very low if mechanisms that are not deemed efficient are nevertheless considered a means of improving EU consumers’ access to justice. In any event, there is no doubt that should the effectiveness of the collective redress procedures improve, consumers’ effective access to justice will be guaranteed. This is precisely the goal that EU institutions are working towards.

The work of EU institutions on collective redress has resulted in a vast number of publications, including a Green Paper (2009), several Consultation Papers (2009, 2011), a Resolution of the European Parliament (2012) and, lastly, a Recommendation of the European Commission (2013) whose first recital recalls that "the Union has set itself the objective of maintaining and developing an area of freedom, security of justice, inter alia, by facilitating access to justice, as well as the objective of ensuring a high level of consumer protection." 22

The Recommendation — although not binding — encourages Member States to implement collective redress mechanisms which should be available in different areas where EU law grants rights to citizens and companies, including consumer protection, competition law, environmental protection, protection of personal data, financial services legislation and investor protection. 23Member States should ensure that the procedures are "fair, equitable, timely and not prohibitively expensive." 24

The approach of the Commission on this topic is interestingly oriented towards a balance between two competing considerations: (i) an improved access to justice for EU citizens and (ii) the avoidance of abusive litigation. The EU’s position revolves around a strong opposition to the US’ class actions system. 25As the European Commission stated: "the European approach to collective redress clearly rejects the US style system of ‘class actions’." 26

To this end, the Commission has set forth several "European principles on collective redress" which illustrate its rejection of the US class actions system. The Commission recommends:

• the implementation of opt-in systems of collective redress, while the opt-out systems should remain the exception and should be duly justified by reasons of sound administration of justice; and

• the implementation of "procedural safeguards aimed at protecting the procedural rights of the parties and avoiding incentives to abuse the collective redress systems", e.g. the avoidance of contingency fees and punitive damages. 27

The Commission is particularly careful with regards to funding as it is one of the issues that reflects the tensions between these two competing considerations: "while lack of funding should not limit access to justice, funding mechanisms available for collective actions should not create incentives for abusive litigation." 28The Commission is particularly circumspect in relation to third-party financing and even considers that contingency and success fees constitute de facto third-party financing. 29

C. Cross-Border Implications of Collective Redress Mechanisms and the RElevance of Class Arbitration

The 2008 study conducted by the European Commission indicated that of the 13 collective redress procedures available in EU Member States, around 10% of the collective redress cases involved cross-border litigation. 30This study also pointed out that 40% of collected mass claims contained a cross-border element. 31

This issue is critical for obvious reasons: while promoting the introduction of collective redress mechanisms in the Member States, the EU did not suggest, let alone implement adequate means of processing these collective claims at a transnational level. The existing hurdles to the administration of collective claims across the Union have been known for several years. In a briefing note, the European Parliament referred to similar difficulties encountered by the US system with regards to multi-state litigation and the potential resolution of these multi-state collective claims at the federal level. 32

The Recommendation of the Commission nonetheless only contains two paragraphs on "cross-border cases." 33As the Recommendation is a nonbinding instrument, it could not provide the necessary regulations for the efficient and effective handling of cross-border mass claims. 34The guidance provided in the Recommendation will thus necessarily be of a limited scope. These provisions only address the issue of legal standing of representative entities and do not provide any guidance on how to deal with the private international law issues that may arise should cross-border elements be involved. 35These private international law issues include the determination of the competent courts to hear the case and the applicable procedural and substantive laws.

These points are all the more relevant if we consider that one of the natural domains of collective actions will arise from violations of EU law, 36notably in the fields of consumer protection or competition law, that are highly likely to involve cross-border elements, e.g. the victims are citizens of different Member States and want to collectively sue a corporate defendant for infringement of EU regulations. To date, the European framework for collective redress lacks guidance and clear rules on how to resolve these issues.

None of the European private international law instruments provide specific rules for collective claims: neither the Brussels I Regulation (in its 2000 or 2012 version, together the "Brussels Regulations") nor the Rome I and II Regulations deal with the particular problems of proceedings related to collective redress. 37These regulations would nonetheless be applicable by default pending the adoption of specific rules for collective redress procedures.

The first issue to arise would be the determination of the competent courts to hear the case. Applying the Brussels Regulations to collective redress procedures could lead to surreal solutions. For example: 38

• the general provision states that courts of a Member State where the defendant is domiciled have jurisdiction to hear the case;

• in disputes concerning consumer contracts, consumers can also file a claim in the courts of the Member State where they are domiciled (if they are not represented by an ombudsman or consumer association);

• in matters relating to a contract, the courts of the place where the obligation is to be performed will also have jurisdiction; and

• if several defendants are being sued, the courts where any defendant is domiciled will have jurisdiction, provided that the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments that may result from separate proceedings.

The conflicts between the above-mentioned rules would end up being unavoidable in cross-border collective redress procedures. Several courts, which would all have jurisdiction pursuant to the applicable Brussels Regulation, could be seized in different EU Member States. The complexity of cross-border collective litigation and the significant risks of inconsistent or varying determinations and adjudication in different jurisdictions have already been pointed out. 39

The provisions of the Brussels Regulations regarding lis pendens and parallel proceedings would be of little help. These provisions address the problem of parallel proceedings and irreconcilable judgments by giving preference to the court where the proceedings were first initiated. Both Brussels Regulations require not only "the same cause of action" in all proceedings, but also the participation of "the same parties." 40These provisions would therefore not apply to parallel proceedings initiated by different representative entities or by a group of individuals that could be different before each court seized.

The determination of the applicable procedural and substantive laws also raises similar issues and would involve conflicts between several EU rules that would be intended to apply to the mass claimants. Enforcement of any judicial decision rendered in the course of the collective action proceedings would also be difficult.

The private international law rules contained in the EU regulations are not designed to deal with the issues raised by cross-border collective redress procedures. Practitioners and scholars have called for a broad discussion on private international law issues relating to collective redress. 41

If the collective redress procedures implemented in the Member States at the initiative of the EU institutions cannot deal with cross-border cases, the effective access to justice of the European citizens would be questionable. So long as special rules are not adopted at the EU level to deal will crossborder cases, the collective redress procedures cannot be deemed effective. Should we regard procedures which can lead to inconsistent decisions and be paralysed with unresolved issues when used in cross-border cases as meaningfully guaranteeing EU citizens’ access to justice? The answer is certainly negative.

For now, the collective redress procedures that have been introduced in the legislations of a majority of the EU Member States are not suited for cross-border cases for all the above mentioned reasons.

Other means of resolving cross-border collective disputes therefore appear more suitable: these means have been mentioned by the Recommendation under the label "alternative dispute resolution and settlements." 42The Recommendation states that:

[t]he Member States should ensure that judicial collective redress mechanisms are accompanied by appropriate means of collective alternative dispute resolution available to the parties before and throughout the litigation. Use of such means should depend on the consent of the parties involved in the case.

Applying the poorly adapted rules of the Brussels Regulations to the collective redress procedures leaves the parties in an area filled with uncertainty and unpredictability. The uncertain outcome of this preliminary and fundamental issue, that is the question of jurisdiction, could jeopardize and complicate the whole procedure. A more effective mechanism would, to the extent possible, provide certainty by minimising the difficulties and inconsistencies that may stem from the application of default jurisdictional rules. Recourse to arbitration could achieve this aim.

Pending solutions on the topical private international law issues, when collective cases involve a cross-border element, the resolution of these disputes through out-of-court procedures appears to be a satisfactory alternative to judicial procedures. Class arbitration is one ADR mechanism available for resolving cross-border collective disputes. The Recommendation has put a focus on consent of the parties: this is consistent with the approach used in arbitration ("consent remains the cornerstone of arbitration" 43) and ADR in general.

The features of arbitration — its contractual nature, the flexibility of its procedure and its adaptability to cross-border cases — would help in dealing with cross-border collective cases. Among these features, the following would facilitate overcoming the hurdles of cross-border related issues before judicial courts:

• jurisdiction would be centralized before a sole arbitral tribunal upon consent of the members of the class (be they individuals or representative entities). Consent to jurisdiction of the arbitral tribunal could be achieved by means of pre- or post-arbitration agreement which respect the opt-in principle;

• the applicable procedural and substantive law would be determined by the parties to the dispute either before or after the commencement of the proceedings; and

• the enforcement of the arbitral award in multiple jurisdictions would be facilitated by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), thereby reducing the risks of contradictory decisions being enforced in different jurisdictions.

In such context, it might be appropriate to establish a requirement similar to that of the US class action system pursuant to which, before initiating class arbitration proceedings, it must be ascertained that resolution of the dispute through ADR "is superior to other available methods for the fair and efficient adjudication of the controversy." 44As EU law currently stands (and pending the introduction of specific rules on the resolution of cross-border collective disputes), it can reasonably be inferred that ADR and class arbitration in particular would be considered superior to judicial resolution of cross-border collective cases.

2. CHALLENGES AND OBSTACLES TO THE DEVELOPMENT OF CLASS ARBITRATION IN EUROPE

A. Private Interests and Policy Issues at Crossroads

The EU institutions’ main concern with regard to collective redress is ensure effective enforcement of rights and to "facilitate access to justice." 45The Recommendation of the European Commission on collective redress further states that "[i]t is a core task of public enforcement to prevent and punish the violations of rights granted under Union law. The possibility for private persons to pursue claims based on violations of such rights supplements public enforcement." 46"Rights which cannot be enforced in practice are worthless." 47The protection of weaker parties and consumers in particular is clearly considered a matter of policy and public interest.

The protection of private interests and the policy issues underlying the prosecution of infringement of the EU citizens’ rights are closely intertwined. The boundaries between public policy and private enforcement of individual rights are permeable. As Professor Strong states: "[t]he failure to pursue individual claims injures more than individual claimants. […] When that mechanism fails to operate as intended, society as a whole suffers." 48The following statement of an American court could easily be said to hold true in respect of Europe: "[t]he realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30." 49

Economic considerations are also driving the proposals to improve the enforcement of EU citizens’ rights. For example, the European Commission noted that in 2010, one in five consumers in the EU encountered problems when buying goods or services in the European Single Market, leading to financial losses estimated at 0.4% of the EU’s GDP. However, only a small fraction of consumers sought and secured effective redress. 50

Collective redress, by means of judicial and out-of-court procedures, is seen as a means not only of facilitating EU citizens’ access to justice but also to reinforce the Single Market. ADR and simplified procedures for the enforcement of the rights of the EU citizens are a major part of the EU’s initiatives. The 2013 directive on ADR for consumer disputes states in its third recital that:

Fragmentation of the internal market is detrimental to competitiveness, growth and job creation within the Union. Eliminating direct and indirect obstacles to the proper functioning of the internal market and improving citizens’ trust is essential for the completion of the internal market. 51

To this end, the Directive favours recourse to ADR for consumer disputes. Out-of-court resolution of disputes can serve as a complement to judicial proceedings as it would allow low-value disputes that would not have been otherwise submitted to a court to proceed and be resolved. 52

Whether arbitration will be able to address the needs of fair and effective collective claims resolution is not an abstract question. While no one doubts that international arbitration will continue to be the forum of choice for sophisticated dispute resolution of complex disputes arising out of high stakes transactions between large multinational corporations, one may wonder whether the same concept is flexible enough to discharge the social function that is attached to class actions. In consumer disputes, dispute resolution fulfils a corrective function: it is designed to restore the balance between the weaker party (e.g. the consumer or investor) and the dominant party that is accused of having infringed on the former’s rights. A parallel can sensibly be drawn with investment disputes: a similar concern for the preservation of the public interest has been identified in that field, in which disputes engaging public policy issues have been subject to close scrutiny by governments, institutions, non-governmental organizations and the legal community. To some extent, class arbitration and investment arbitration may be seen as sharing common issues: they require transparency, efficiency and a reinforced sense of equality between the parties. In the absence of demonstrable evidence that these features are available, the perceived legitimacy of the system will remain in question. This is cause for concern in light of recent developments in the domain of investment protection, where EU oversensitivity to political reactions triggered by anti-arbitration activists opposed to the draft Transatlantic Trade and Investment Partnership, resulted in a proposal by the EU Commission to replace an investor-state dispute settlement process with dedicated permanent courts composed of state-appointed judges. 53

Arbitration of disputes engaging public policy issues is evolving towards more regulation. While the distinctive features of arbitration are not put into question, it is possible to imagine that collective arbitration may morph into a hybrid mechanism based on (i) certain features of arbitration, mainly its contractual nature and (ii) regulatory supervision of those proceedings by state courts and/or arbitral institutions.

B. Consent

Consent may be an obstacle to the development of collective arbitration. Arbitration clauses contained in contracts entered into with consumers should preferably refer to class arbitration. Post-dispute arbitration agreements will likely enjoy a certain revival as they will be perceived as an effective means of remediating the absence or defectiveness of pre-dispute arbitration agreements.

1. Consent and National Laws of EU Member States

The various laws of EU Member States dealing with collective redress are not "particularly class-action friendly." 54The insistence by the EU on the implementation of collective redress mechanisms will likely enhance the attractiveness and efficiency of these procedures. Class litigation, however, is often seen as a prerequisite to class arbitration, if only because consent issues arise. 55

When compared with the rise of class arbitration in the United States, the evolution towards the widespread use of class arbitration in Europe will likely take a different path. In the US, the legislative instruments allowing for recourse through class-action litigation paved the way for class arbitration, although in an unexpected way: "class arbitration in the United States developed as the direct result of corporate defendants’ own efforts." 56It is indeed the inclusion of arbitration clauses in the contracts concluded by the corporate entities with their clients that led to the emergence of class arbitrations as "the only way that the parties’ agreement to arbitrate could be given effect was to permit the claimants to proceed as a class." 57The arbitration clause which had initially been designed as an "instrument of impunity" 58for corporate actors turned into a means of ensuring collective redress through arbitration, with room being left for the arbitrators to decide on the most appropriate manner of enforcing the arbitration clause. Things are likely to be different in the EU. Remaining uncertainties on arbitrability of consumer disputes across the Union probably contribute to the underdevelopment of class arbitration-compatible clauses in businessto- consumer contracts. 59Uncertainties that come from the coexistence of opt-in and opt-out legislation in Europe are probably the cause of other obstacles. The private international law issues arising with regard to cross-border collective actions before state courts may, however, induce corporations facing collective claims to invite prospective plaintiffs to turn to class arbitration as a means of resolving their disputes.

2. Consent and Arbitral Tribunals

Arbitration clauses in business-to-consumer contracts are relatively scarce in Europe. Even when contract contain arbitration clauses, they are standard clauses that do not expressly provide for class arbitration ("silent arbitration clauses"). The first and critical issue for arbitrators with regard to class arbitration is therefore the interpretation of such clauses. On this point of interpretation, the US approach, as set out in the Green Tree v Bazzle decision, is consistent with the prevailing view in Europe, i.e. that it is for the arbitrator to decide whether the silent arbitration clause authorizes or prohibits class arbitration. 60The Court in Green Tree v Bazzle explained that this was not a question of whether the arbitration agreement was valid in the first place, but rather a question of the "kind of arbitration proceeding" that the parties had agreed to and was thus an issue of mere contractual interpretation for the arbitrator to decide. 61

Favouring recourse to post-dispute arbitration agreements is also a means to develop class arbitration. The Spanish law that allowed collective consumer arbitration takes this position and provides the parties with the ability to establish collective arbitration through post-dispute arbitration agreements. 62These post-dispute arbitration agreements would be an adequate and efficient way to overcome the obstacle of inarbitrability of consumer or employment disputes as the weaker party would consent to arbitration once the dispute has arisen. 63This analysis would be consistent with the approach that has been adopted by the EU institutions thus far, and would mirror the Commission’s Recommendation that "alternative dispute resolution procedures […] should always be available alongside, or as a voluntary element of, judicial collective redress." 64Unilateral option clauses for the benefit of consumers or employees have also been envisaged.

In the course of their analysis of the silent arbitration clause, arbitrators should also consider the relevance of the class arbitration procedure on a case-by-case basis. This is indeed one of the requirements in the US class-action system: the courts have to determine whether "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." 65This would also be in line with the Commission’s Recommendation that "judicial collective redress mechanisms [should be] accompanied by appropriate means of collective [ADR] available to the parties before and throughout the litigation." 66

3. Consent and State Courts

On all matters involving consent, state courts play a crucial role at the stage of applications for the annulment or refusal of recognition and enforcement of arbitral awards. In several jurisdictions, the parties to the dispute can also apply to state courts in the course of the arbitral proceedings. 67

Looking at the Commission’s "European principles on collective redress", one sees opposing positions on the two major obstacles that were identified for the enforcement of US class actions decisions, namely (i) the implementation of opt-in systems of collective redress and (ii) the implementation of "procedural safeguards aimed at protecting the procedural rights of the parties and avoiding incentives to abuse the collective redress systems", such as the avoidance of contingency fees and punitive damages. 68Regarding the issue of consent in particular, these European principles can easily be applied to class arbitrations by favouring recourse to post-dispute arbitration agreements. It is also quite possible that combined litigation-arbitration systems may be put in place, where for example a state court could certify a class and decide on liability, whereas questions of quantum for example would be resolved through arbitration.

3. THE NEW CHALLENGES FACED BY ARBITRATION

A. Adaptability of Arbitration to Mass Claims: Same or Different?

The recent discussions on the need of collective redress procedures, especially in the EU, together with the EU institutions’ commitment to this end leads to inevitable questions on the future of arbitration as a whole. Class arbitration is certainly a "novel form of arbitration" 69— however, arbitration in and of itself remains unchanged.

The core features of arbitration will help overcome the above-mentioned obstacles and hurdles that will undoubtedly go along with the development of collective redress procedures. These core features are its contractual nature, emphasis on consent, neutrality, independence of arbitrators and effective award enforcement in almost every jurisdiction. The adequacy of arbitration to address mass claims, regardless of the amounts at stake (the mass claim will often be an aggregate of a significant number of low-value individual claims), leaves little doubt.

One remaining issue that falls to be addressed is that of arbitrability, for if not clarified it may impair the development of class arbitration. Arbitrability is "founded upon the protection of the general interest. This is as opposed to the requirement of valid consent, which is intended to protect the private interests of the parties to the arbitration agreements." 70The uncertainties and legal obstacles to arbitrability in matters involving the imperative protection of the public interest will need to be clarified as a matter of law. It may be suggested that the case for arbitrability of matters involving economic redress is a rather straightforward one. The solution would be quite the opposite where bodily injury is at stake. It is, however, possible to suggest that even in these matters, for example in cases involving defective products or environment damage, there could be room for class arbitration in the quantification phase, after the liability phase arbitration was decided by a state court.

The debate on class arbitration is very much in line with the challenges of modernity: it is about finding new solutions to contemporary issues and also adapting arbitration as a whole to renewed stakes. In this regard, the Commission’s Recommendation states that:

[t]he modern economy sometimes creates situations in which a large number of persons can be harmed by the same illegal practices relating to the violation of rights granted under Union law by one or more traders or other persons […]. They may therefore have cause to seek the cessation of such practices or to claim damages. 71

There will be no room for class arbitration in the EU if arbitration cannot provide solutions that ensure a balanced approach to the resolution of the kinds of disputes arising in the "modern economy." Class arbitration must be perceived as a trustworthy alternative.

B. Arbitral Institutions

To date, very few arbitral institutions have implemented specific rules for class arbitrations. The two renowned institutions that have implemented such rules are the American Arbitration Association ("AAA") 72and the German Institution of Arbitration ("DIS"), the latter being limited in scope to corporate law disputes. 73

Implementation of new rules dedicated to class arbitrations will likely flow from the development of class arbitrations in Europe. These rules should be adapted to the specificities of class arbitration. Both the AAA and the DIS rules address several topical issues of class arbitration. Among these issues is the appointment of arbitrators.

The issue of appointment of arbitrators is of utmost importance as it involves due process concerns. The appointment of arbitrators by mass claimants raises similar (and even more complex) issues to those raised by multi-party arbitrations involving several claimants or defendants. 74To oppose the recognition of the award, any party to the arbitral proceedings could argue that it had been deprived of its right to participate in the appointment of the arbitrators and that, as a consequence, due process had been violated in the course of the constitution of the arbitral tribunal. 75This issue would be even more important if we consider opt-out arbitration systems.

The AAA as well as the DIS Supplementary Rules almost exclusively provide default rules governing situations in which parties disagree as to the constitution of the arbitral tribunal. Where difficulties arise in this regard, both sets of rules provide for recourse to the arbitral institution in charge of the administration of the case:

• the AAA Supplementary Rules provide that if the parties cannot agree upon the number of arbitrators to be appointed, the dispute shall be heard by a sole arbitrator unless the institution, in its discretion, directs that three arbitrators be appointed; 76and

• the DIS Supplementary Rules’ approach appears to have taken into account the above-mentioned principle of equality that governs the appointment of the arbitrators. These Rules indeed provide that where either claimants or defendants do not reach an agreement on the appointment of the arbitrators within 30 days, the institution will nominate two arbitrators upon a request from either side. 77

The underlying approach of both sets of rules is to resolve situations in which the parties cannot reach agreement on the nomination of their respective party-appointed arbitrators. In these circumstances, it is appropriate to derogate from the traditional approach to arbitral appointments: the arbitral institution should appoint the arbitrators.

In situations where mass claimants or defendants are involved, there is a high risk of difficulties in the course of the appointment process. In order to prevent these risks, we should consider extending the approach adopted by both institutions described above and implement a default rule pursuant to which the appointment of arbitrators would be part of the relevant arbitral institution’s mandate. This proposal was suggested by Professor Jan Paulsson who wrote that "[u]nilateral appointments are not needed to constitute three-member tribunals. All three may be appointed by the neutral supervisory body." 78This distinctive feature would be better suited to class arbitrations and would help avoid any challenges on the grounds of improper constitution of the tribunal in the course enforcement or annulment proceedings before judicial courts.

Institutional arbitration is also likely to play a key role in the development and legitimacy of class arbitration because handling very significant numbers of parties will quite probably prove a daunting task for any ad hoc tribunal, and quite certainly an uneconomical one while institutions should be able to benefit from economies of scale.

More fundamentally, it is suggested that arbitral institutions should endeavour to strengthen their cooperation with other stakeholders such as consumer protection organizations, federations of industries and the EU. A consensus-based approach may indeed permit to reach common ground on overarching principles that should be achieved through class arbitration mechanisms. For example, an agreement on the specifications that class arbitration rules should meet could ensure enhanced predictability and greater efficiency.

C. Online Dispute Resolution: The Future of Class Arbitration?

Along with its policy in favour of collective redress, the EU has also adopted a Directive79and a Regulation80that offer new mechanisms allowing EU citizens to enforce their rights through ADR and online dispute resolution ("ODR"). To date, the EU institutions have focused on consumer disputes. The rationale underlying both the development of (i) collective redress procedures and (ii) ADR and ODR procedures are very similar as they are both working towards promotion of the same objective: offering EU citizens enhanced access to justice. The new ADR and ODR systems also take into account economic considerations pertaining to the development of the European Single Market. It is the EU’s position that developing a European area of free trade will not be possible without effective mechanisms for the enforcement of citizens’ rights. The European Commission notes that: 81

[i]t is estimated that if EU consumers can rely on well-functioning and transparent ADR for their disputes they could save around €22.5 billion a year, corresponding to 0.19% of EU GDP.

This figure only includes direct financial savings, and does not account for less tangible factors which are also important for a well-functioning market, such as increased confidence, trust, customer relations and business reputation.

The most interesting feature of these instruments is certainly the EU-wide online dispute resolution platform for consumer disputes arising out of online transactions (the "ODR platform"), which will begin operating by January 2016. The ODR platform will constitute a "single entry point" and will link all national ADR entities. The ODR platform does not itself provide for the resolution of consumer disputes by ODR. Instead, it establishes a series of rules for the resolution of these disputes through national ADR entities. 82

The ADR and ODR instruments expressly cover the resolution of crossborder disputes. 83It can be inferred that as matters stand, and bearing in mind the private international law hurdles referred to above with regard to cross-border collective redress procedures, 84the EU’s position is that out-ofcourt procedures are the most appropriate method for the resolution of cross-border disputes. Class arbitration can and should play a central role in this respect.

Could this platform serve as a model for the development of the abovementioned "novel form of arbitration"? 85The implementation of ODR platforms that would not delegate the resolution of the disputes to national entities but would itself be in charge of the administration of the procedures could definitely be the next step forward. The emphasis that has been put by the EU institutions on the "simple, fast and low cost out-of-court solution to disputes between consumers and traders" could certainly be the basis for the implementation of an online arbitration platform. The reasons underlying the creation of these ODR tools are the same: offering small claims plaintiffs a chance to proceed through out-of-court procedures, regardless of whether the claims are individual or collective.

The future of class arbitration would likely imply "B2C arbitration agreements," 86be they pre- or post-dispute agreements. It follows from the above that consumer protection is currently the most suitable domain for the deployment of class arbitration.

4. CONCLUSION

Alternative dispute resolution crosses paths with the development (and future) of the EU as an area where freedom, security and justice should coexist. The EU instruments that have been implemented to deal with both individual and collective claims all aspire to fulfil this overarching objective. The implementation of new rules to govern judicial and alternative dispute resolution at the European level also tends to indicate that disputes engaging public policy issues are subject to greater scrutiny and supervision.

Despite class arbitration not being directly addressed by these instruments, it is necessary for the resolution of cross-border disputes. There is no doubt that the "triple benefits of flexibility, neutrality and enforceability" 87that characterize arbitration are well suited to the resolution of collective disputes. Class arbitration can also provide stability, rationality and predictability in the resolution of collective disputes. In light of the current proliferation of relevant legislation, the future of class arbitration in Europe may require some legislative clarification (inter alia, on third-party funding and arbitrability of consumer related disputes). In an ever-expanding regulatory environment, however, this future will also largely depend upon how effectively the EU will be willing to interact and cooperate with all stakeholders, including arbitral institutions. This is not necessarily wishful thinking. Should this be achieved, European class arbitration is unlikely to be an oxymoron.

1
Hanotiau Bernard, Complex Arbitrations — Multiparty, Multicontract, Multi-issue and Class Actions, Kluwer Law International, 2005; Fontmichel, Maximin (de), Le faible et l’arbitrage, Economica, 2013; Strong SI, a prolific author on that topic, see inter alia: Class, Mass, and Collective Arbitration in National and International Law, Oxford University Press, 2013; "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 183 et seq; "Does Class Arbitration ‘Change the Nature’ of Arbitration? Stolt-Nielsen, AT&T, and a Return to First Principles", Harvard Negotiation Law Review, Vol. 17, 2012, pp 201-271.

2
European Parliament, Directorate General for Internal Policies, Briefing note, "Overview of existing collective redress schemes in EU Member States", July 2011, p 13: 16 EU Member States had implemented collective redress mechanisms by this date.

3
European Commission, Memo/13/560, "Frequently Asked Questions: European Commission recommends collective redress principles to Member States", 11 June 2013, p 2.

4
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, "Towards a European Horizontal Framework for Collective Redress", COM(2013) 401/2, p 6.

5
Statement of Gabrielle Kaufmann-Kohler, "The Future — What Will Change ? Round Table Discussion" in Albert Jan van den Berg (ed), Arbitration: The Next Fiflty Years, ICCA Congress Series, Vol. 16, Kluwer Law International, 2012, p 197.

6
European Commission Staff Working Document, Public consultation, "Towards a Coherent European Approach to Collective Redress", Brussels, 4 February 2011, SEC(2011) 173 final, pp 3-4.

7
Commission Recommendation on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violation of rights granted under Union Law, 11 June 2013, paras 1.2, 38.

8
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, p 13: Austria, Bulgaria, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Lithuania, the Netherlands, Poland, Portugal, Spain, Sweden and the United Kingdom (in England and Wales).

9
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, p 38.

10
Hanotiau Bernard, Complex Arbitrations — Multiparty, Multicontract, Multi-issue and Class Actions, Kluwer Law International, 2005, para 560.

11
European Commission — DG SANCO, "Evaluation of the effectiveness and efficiency of collective redress mechanisms in the European Union", Final Report, Part I: Main Report, submitted by Civic Consulting (Lead) and Oxford Economics, 2008, pp 6-7.

12
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, pp 39-41.

13
Portugal, Denmark, Netherlands and more recently the United Kingdom (England and Wales) have adopted an "opt-out" mechanism for some or all of their available collective redress procedures.

14
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, pp 39-41.

15
European Commission, Memo/13/530, "Frequently Asked Questions: European Commission recommends collective redress principles to Member States", 11 June 2013, pp 1-2.

16
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, p 41.

17
European Commission Evaluation (2008), supra note 11, p 9.

18
European Commission Evaluation (2008), supra note 11, p 9.

19
European Commission Evaluation (2008), supra note 11, pp 9-10.

20
European Commission Evaluation (2008), supra note 11, pp 10-11.

21
European Commission Evaluation (2008), supra note 11, p 13.

22
Commission Recommendation (2013), supra note 7, recital 1.

23
Commission Recommendation (2013), supra note 7, recital 7.

24
Commission Recommendation (2013), supra note 7, para 1.2.

25
European Commission, Memo/13/560, supra note 3, p 2.

26
European Commission, Memo/13/560, supra note 3, p 2.

27
European Commission, Memo/13/560, supra note 3, p 2.

28
Communication on European Horizontal Framework for Collective Redress, supra note 4, pp 15-16.

29
Communication on European Horizontal Framework for Collective Redress, supra note 4, p 15 and Commission Recommendation (2013), supra note 7, paras 29-32.

30
European Commission Evaluation (2008), supra note 11, p 44.

31
European Commission Evaluation (2008), supra note 11, p 33; note that the study indicated that this statistic was prepared on the basis of limited information.

32
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, p 43.

33
Commission Recommendation (2013), supra note 7, paras 17-18.

34
European Law Institute, Statement on Collective Redress and Competition Damages Claims, 12 December 2014, p 36.

35
Commission Recommendation (2013), supra note 7, paras 17-18.

36
European Commission, Press Release, "Commission recommends Member States to have collective redress mechanisms in place to ensure effective access to justice", 11 June 2013.

37
European Law Institute, Statement on Collective Redress and Competition Damages Claims, 12 December 2014, p 36.

38
Brussels Regulation (EC) No 44/2001 and Brussels Regulation (EU) No 1215/2012.

39
European Parliament, Directorate General for Internal Policies, Briefing note, supra note 2, pp 42-44.

40
European Law Institute, Statement on Collective Redress and Competition Damages Claims, 12 December 2014, p 38.

41
European Law Institute, Statement on Collective Redress and Competition Damages Claims, 12 December 2014, p 36.

42
Commission Recommendation (2013), supra note 7, paras 25-28.

43
Park William W, Non-Signatories and International Contracts: An Arbitrator’s Dilemma in Multiple Party Actions in International Arbitration, Oxford, 2009, para 1.03.

44
US Federal Rules of Civil Procedure, Article 23(3).

45
Commission Recommendation (2013), supra note 7, recital 1.

46
Commission Recommendation (2013), supra note 7, recital 6.

47
European Commission Staff Working Document, Public consultation, Towards a Coherent European Approach to Collective Redress, Brussels, 4 February 2011, SEC(2011)173 final, p 2.

48
Strong SI, "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 196.

49
Carnegie v Household Int’l, Inc., 376 F. 3d 656, 661 (CA7 2004)

50
European Commission, Memo/13/193, "A step forward for EU consumers: Questions & answers on Alternative Dispute Resolution and Online Dispute Resolution", 12 March 2013, p 1.

51
Directive 2013/11/EU of the European Parliament and of the Council, on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC, 21 May 2013, recital 3.

52
Bernheim-Devaux Sabine, "Litiges de consommation — Reglement extrajudiciaire et reglement en ligne", La Semaine Juridique Entreprise et Affaires, n° 27, 4 juillet 2013, 1402.

53
European Commission, Press release, "Commission proposes new Investment Court System for TTIP and other EU trade and investment negotiations", 16 September 2015.

54
Nater-Bass Gabrielle, Class-Action Arbitration: A new Challenge?, ASA Bulletin, Vol. 27, 2009, p 686.

55
Nater-Bass Gabrielle, Class-Action Arbitration: A new Challenge?, ASA Bulletin, Vol. 27, 2009, p 686.

56
Strong, SI, "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 196.

57
Strong, SI, "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 197.

58
Fontmichel Maximin (de), "Arbitrage et actions de groupe — les leçons Nord-Américaines", Revue de l’Arbitrage, Vol. 4, 2008, p 650.

59
Poudret Jean-François, Besson Sébastien, Comparative Law of International Arbitration, Sweet & Maxwell, 2007, p 333.

60
Green Tree Fin. Corp. v Bazzle, 539 US 444 (2003), 23 June 2003.

61
Nater-Bass Gabrielle, "Class-Action Arbitration: A new Challenge?", ASA Bulletin, Vol. 27, 2009, p 675.

62
Real Decretoley 231/2008 de 15 de febrero, por el que se regula el Sistema Arbitral de Consumo ; see Strong Sacie I, "Collective Consumer Arbitration in Spain: A Civil Law Response to US-Style Class Arbitration", Journal of International Arbitration, Vol. 30, 2013, p 497.

63
Consumer disputes are generally considered arbitrable: Poudret Jean-François, Besson Sébastien, Comparative Law of International Arbitration, Sweet & Maxwell, 2007, p 333.

64
Commission Recommendation (2013), supra note 7, recital 16.

65
US Federal Rules of Civil Procedure, Article 23(3).

66
Commission Recommendation (2013), supra note 7, para 26.

67
The French Arbitration Decree e.g. provides that should difficulties relating to the constitution of the arbitral tribunal arise, the "juge d’appui" could be seized to help resolve these difficulties.

68
European Commission, Memo/13/560, supra note 3, p 2.

69
Strong, SI, "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 197.

70
Gaillard Emmanuel, Savage John, Fouchard/Gaillard/Goldman on International Commercial Arbitration, Kluwer Law International, 1999, para 478.

71
Commission Recommendation (2013), supra note 7, recital 2.

72
American Arbitration Association’s Supplementary Rules for Class Arbitration, effective on 3 October 2003.

73
DIS Supplementary Rules for Corporate Law Disputes, in force as from 15 September 2009; for a detailed commentary of these rules, see Strong Sacie I, "Collective Arbitration Under the DIS Supplementary Rules for Corporate Law Disputes: A European Form of Class Arbitration?", ASA Bulletin, Vol. 29, 2011, pp 45-65..

74
Nater-Bass Gabrielle, "Class-Action Arbitration: A new Challenge?", ASA Bulletin, Vol. 27, 2009, p 683.

75
The principle of equality pursuant to which each party has the same rights in the appointment of the arbitral tribunal has notably been established in France: Cour de cassation, 7 janvier 1992, Dutco, Revue de l’Arbitrage, Vol. 3, 1992, pp 470 et seq, note Pierre Bellet.

76
American Arbitration Association’s Supplementary Rules for Class Arbitration, Article 2(b).

77
DIS Supplementary Rules for Corporate Law Disputes, Article 8.3.

78
Paulsson Jan, "Moral Hazard in International Dispute Resolution", Inaugural Lecture as Holder of the Michael R. Klein Distinguished Scholar Chair, University of Miami School of Law, 29 April 2010, p 8.

79
Directive 2013/11/EU of the European Parliament and of the Council on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC ("Directive on consumer ADR"), 21 May 2013.

80
Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC ("Regulation on consumer ODR"), 21 May 2013.

81
European Commission, Memo/13/193, supra note 50, p 3.

82
European Commission, Memo/13/193, supra note 50, p 2.

83
Directive on consumer ADR, recital 7 and Article 2 pursuant to which it "shall apply to procedures for the out-of-court resolution of domestic and cross-border disputes concerning contractual obligations stemming from sales contracts or service contracts between a trader established in the Union and a consumer resident in the Union"; pursuant to its Article 2, the Regulation on consumer ODR only deals with "online sales or service contracts between a consumer resident in the Union and a trader established in the Union."

84
See supra, section I.C.

85
Strong SI, "Class arbitration outside the United States: Reading the Tea Leaves", Dossier of the ICC Institute of World Business Law: Multiparty Arbitration, 2010, p 197.

86
Kaufmann-Kohler Gabrielle, Schultz Thomas, Online Dispute Resolution — Challenges for Contemporary Justice, Kluwer Law International, 2004, p 169.

87
Statement of Campbell McLachlan QC, "The Future — What Will Change ? Round Table Discussion" in Albert Jan van den Berg (ed), Arbitration: The Next Fiflty Years, ICCA Congress Series, Vol. 16, Kluwer Law International, 2012, p 193.