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Airbnb, 2008. Uber, 2009. Pokemon GO, 2016. Whether disrupting hotels, transport, or video games, these three companies share a common theme – their arbitration clauses. Below, we explain what the arbitration clause entails and then evaluate them against the Australian Consumer Law (Cth) (ACL). 

What is Arbitration?

Arbitration is a formal dispute resolution mechanism, typically administered by solicitors, barristers or retired judges. An arbitrator’s decision will be provided in writing and can be registered with a court. Notably, the arbitrator’s decision is enforced in the same way as a court order. There are many benefits in resolving a dispute by arbitration including that they are faster and less expensive than a court proceeding.

What are Arbitration Clauses?

In short, arbitration clauses are terms in a contract that require the parties to resolve their disputes or issues through an arbitration process. The clause will usually state the country that arbitration will take place in and the governing legislation (depending on the contract, they are often titled as a “dispute resolution clause”).

It is important to note that most arbitration clauses allow a party to change the terms unilaterally. Airbnb, Uber and Pokémon GO all have clauses in their contract that allow them to alter the terms of a contract. When they do change the terms, they will inform their users that a change has occurred.

Airbnb’s Arbitration Clause

Airbnb updated its arbitration clause on 29 March 2016 to state that those who reside in the United States agree to settle disputes by arbitration and accordingly waive the right to a trial by jury or to participate in a class-action trial.

Further, the clause states that an arbitrator cannot consolidate more than one person’s claim, and an arbitrator may not preside over any form of class proceeding. Effectively, waiving the right to a “class-wider arbitration”. Notably, if your claim is below $75,000 US, Airbnb will pay all administrative, filing and arbitrator fees. Lastly, the “terms of service” allows users to opt out of arbitration by giving written notice and within 30 days of receiving notice of the update.

The location of the arbitration clause will take place in the country the user resides in.  

Uber’s Arbitration Clause

Previously, Uber had an arbitration clause that stipulated Dutch law governed its terms and conditions. Uber made it mandatory for its users (or riders) to take any dispute first to mediation. If mediation fails, the driver/rider moves on to private arbitration. It was mandatory for this arbitration to be held in Amsterdam, irresepctive of where you were in the world.

Uber’s Current Arbitration Clause

On 2 January 2016, Uber updated its arbitration clause. The clause says that the company will settle disputes through binding arbitration between the rider and Uber. The American Arbitration Association will administer the arbitration by following the Commercial Arbitration Rules and the Supplementary Procedures for Consumer-Related Disputes. The United States’ Federal Arbitration Act will govern the interpretation and enforcement of Uber’s arbitration clause.  

In comparison to Uber’s earlier arbitration clause, arbitration will now take place in the country the user resides (undoubtedly a significant improvement from the predecessor clause).

A recent US Court noted that Uber could not rely on the clause as a valid waiver to pursue a class action. Rather, it was “most plausibly read” as an explanation of rights that parties are giving up.

Pokémon GO’s Arbitration Clause

Pokémon GO’s arbitration clause reads comparatively relaxed, consider:

  1. The arbitration will take place in the country you reside in;
  2. If your claim is below $75,000 US, Niantic (i.e. Pokémon Go) will pay all administrative, filing and arbitrator fees;
  3. Even if it wins the dispute, Niantic waives its right to recover legal fees and expenses;
  4. Niantic’s “terms of service” allows users to opt out of arbitration by providing notice of disagreement within 30 days of signing up.

It is of note that before you sign up to the terms and conditions, Pokemon GO makes a user “click” through a series of screens that will put a user on notice of relevant terms.

Australian Consumer Law (Cth)

A business situated anywhere in the world, but that offers services to consumers in Australia must comply with the Australian Consumer Law (Cth) (ACL) – including complying with the ACL’s “unfair terms” provisions. The unfair term provisions attach to “standard form contracts”.  Standard form contracts are unilateral contracts like those proposed by Airbnb, Pokémon GO and Uber.  

Terms like the above arbitration clauses will be “unfair” in a situation where there is a “significant imbalance” in the relationship between the parties, and are particularly onerous, and go further than protecting the “legitimate interest” of the company relying on it.

The court in determining what is “unfair” will look at the transparency of the term. For example, the court will look favourably at a term that the business clearly presents to a party, is legible and there was an option to back out.

Key Takeaways

Pokémon GO is probably the most “evolved” of the arbitration clauses whereas Airbnb lies somewhere in the middle. Struggling behind the rest, with a “two-star” rating, is Uber. 

In summary, arbitration clauses are becoming increasingly common in unilateral contracts, and big corporations are continually refining their terms to meet acceptable standards. Although tedious and long, ensure you carefully read the terms and conditions before signing up to any service or platform. 

If you have any questions about how to draft or interpret an arbitration clause, get in touch with our disputes lawyers on 1300 544 755. 

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