An arbitration agreement by the click of a mouse?
It is becoming more and more common that a website contains an offer, including an arbitration clause, and invites a user to accept it by simple clicking on the “I accept” or “Yes” button. Most often the user has to fill out a standard form agreement or complete a few blank fields, whereas an arbitration clause remains “buried” among numerous other general terms and conditions.45 Even before the recent regulations on e-commerce were adopted, the scholarship tended to prove that under certain conditions an arbitration agreement can be validly concluded though a website.
To support this thesis, Hill invoked functional similarities to the transmission of data through other means of telecommunication, including those that are explicitly provided for in the NYC and the MAL. When the offer contained on the website is viewed by a buyer, the bits comprising the offer, originally stored on the seller's computer, or more accurately a website platform the seller uses, are transmitted through a network to the buyer's computer and stored (at least temporarily) on the buyer's computer46. When the buyer wants to accept such an offer, a bit stream comprising the offer and resident in buyer's computer, is modified by the buyer, and then that modified version is transmitted back to the seller. Thus, there happens an exchange of data (flow of bits) which is recognized in the literature as “entirely analogous to the exchange that takes place when e-mails or faxes are exchanged”47, and “comparable to the exchange of letters or telegrams”48. In consequence, the conclusion is reached that an arbitration agreement can be validly formed in accordance with Article II (2) of the NYC, when the seller's offer containing an arbitration clause is accepted by the buyer through a website49. It does not mean, however, that a contract will be validly concluded in every case.
Entering into arbitration agreements in certain online settings may conflict with the basic principle of international arbitration law that the consent of the parties is a conditio sine qua non to validly agree on arbitration50. When a single mouse click suffices to accept an offer with an arbitration clause, it may of course sometimes happen that an alleged acceptance does not reflect the fully informed consent of a party. The consent to arbitration is most often contested when the arbitration clause appears in general terms and conditions presented to a consumer. Manevy rightly commented that there are far greater legal concerns regarding the consent given online to arbitration, compared for example to mediation or negotiation processes51. Indeed, “the basic concern is that participants in arbitration may give up all of their legal due process rights without understanding what that means”52.
The concerns about the legal significance of the parties’ consents given online have been broadly discussed in the e-commerce literature.53 In the context of online arbitration, the problems arise from diverse factual situations, usually more complex than the models of an exchange of electronic data through e-mails or a website, as described above. In each case, the absence of a “clear and conspicuous reference” to an arbitration clause could lead to objections concerning the validity of the arbitration agreement “on the basis of lack of informed consent by the buyer”.54
As discussed, the parties may wish to conclude an arbitration agreement in many different ways involving electronic data transmission. It may occur by a fairly simple exchange of e-mail messages with the agreement either set out in the e-mails’ contents or in a file attached to them. The e-mail exchange may also refer to a separate written arbitration agreement (“incorporation by reference”). The parties may also wish to reach agreement through a website. In such case, an exchange of electronic communications occurs through the parties’ browser software. Either method (e-mail or website) will ultimately lead to the same question as to whether an electronic communication provides a required record of the agreement.55
The concepts of “writing” and “signature” have been recently significantly modernized in order to provide greater certainty to online contracts and thereby facilitate e-commerce.56 The most important step to this end was taken on the international level by the adoption of the UNCITRAL Model Law on Electronic Commerce57 (“Model Law on E-Commerce”) in 1996. It was subsequently followed by several countries all over the world implementing the provisions of the Model Law on E-Commerce to their national legal systems. Then, in 2001, the UNCITRAL Model Law on Electronic Signatures58 was adopted. Those legislative changes resulted in “a global reform of the writing requirement”.59
The Model Law on E-Commerce is based on the assumption that legal requirements prescribing the use of traditional paper-based documentation constitute(d) a serious obstacle to the development of modern means of communication and electronic commerce. Therefore, “in the preparation of this document, consideration was given to the possibility of dealing with impediments to the use of electronic commerce posed by such requirements in national laws by way of an extension of the scope of such notions as "writing", "signature" and "original", with a view to encompassing computer-based techniques”60. Thus, the Model Law on E-Commerce relies on the "functional equivalent approach", which is based on an analysis of how the purposes or functions of the traditional paper-based requirements could be fulfilled with the use of electronic techniques61. The Model Law on E-Commerce did not define a computer-based equivalent to any kind of paper document, and, in a sense, left this category open also for future technologies.
The Model Law on E-Commerce introduced instead a new concept of “data message”, which includes, e.g., e-mail and electronic data interchange (EDI)62. Article 6(1) of the Law provides also a new definition of “in writing” by stating that “[w]here the law required information to be in writing, that requirement is met by a data message if the information contained therein is accessible so as to be usable for subsequent reference”. According to Article 11: “In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.” The Model Law on E-Commerce refers also to some specific online arrangements which may affect the validity of an arbitration agreement concluded online, and that were highly disputable under the former legal framework. The Law enshrines for example “incorporation by reference” (“hyperlink”) in its Article 5 bis, in the following form: “Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is not contained in the data message purporting to give rise to such legal effect, but is merely referred to in that data message.”
A similar approach can be seen in the EU Directive on electronic commerce63 that obliges the EU member states to amend their legislations in order to take away formal obstacles to electronic contracting. Article 17 of the directive provides that their legislation must not hamper the use of out-of-court schemes for dispute settlement, including appropriate electronic means, and Article 9 (1) expressly imposes on the member states a duty to ensure that contracts can be concluded by electronic means, without “being deprived of legal effectiveness and validity on account of their having been made by electronic means”64 This led Schellekens to the conclusion that “in Europe little problems are to be expected with regard to [arbitration agreements concluded online and] national legislation on arbitration”.65 Provided that similar regulations will be adopted in other jurisdiction, Schellekens’ conclusion could be true with regard to a broader frame of reference.
However, such conclusion can be fully justified only provided that, despite its rather restrictive wording, the New York Convention is commonly construed to allow electronic arbitration agreements. Neither recent laws on electronic commerce nor the MAL supplemented the NYC’s provisions that remained unchanged since 1958. Three solutions were proposed to reconcile Article II (1) and (2) of the NYC with Article 7(2) of the MAL66 and, respectively, with the e-commerce laws. First, it was suggested that Article II (1) and (2) of the NYC could be finally amended. This proposal was rejected again; an amendment might not be easily achieved since other provisions of the Convention probably would probably also be subject to discussions67. Another alternative could consist in adopting a statement addressing the modern interpretation of Article II (1) and (2) of the NYC. With that regard, some concerns were expressed that not all the states would accept such an instrument, which would in turn affect the status of reciprocity, important for the effectiveness of the international scheme for recognition and enforcement of foreign arbitral awards under the NYC. As the third, the simplest and the best solution it was recognized that the “in writing” requirement of Article II of the NYC should be interpreted liberally in the light of the subsequent the MAL and other relevant laws68.
To support this stand, many authors have tended to prove the inherently functional and “technology-friendly” of the NYC’s provisions. Schellekens, for example, argued that in 1958 the exchange of letters and telegrams was added to “make sure that arbitration could be agreed upon using the most modern means of communication”69. Therefore, wrote Schellekens, “the Convention does take into account the needs of legal practise”70. Electronic means such as e-mail and website communication may very well be seen as the modern functional equivalents of the traditional means of communications, such as telegrams or letters. Hill suggested that literally restrictive definition of “writing” in the NYC has been, and will be in the future, gradually extended in the course of technological development. Article 7(2) of the MAL has extended the NYC’s original catalogue to an exchange of telex or "other means of telecommunication which provides a record". Courts have extended Art. II(2) to telex in several cases, and “some eminent authorities believe that it should also be extended to facsimile”.71 The writers hold, therefore, that contemporary interpretation of the New York Convention, based on a functional approach, should include the electronic records in the concept of “writing”.72 Thus, for example, Article II (2) New York Convention should, despite its restrictive wording, allow arbitration agreements concluded through an exchange of e-mails or other electronic communications, as does more clearly Article 7(2) of the MAL.73 National laws that require a strict writing requirement also should be adapted accordingly.74
Decisions of courts in several jurisdictions refusing to recognise and enforce an award under the NYC, when the award is based on an arbitration agreement concluded by electronic means such as email75, may suggest that relying on the liberal interpretation of the NYC cannot suffice. Thus, possible inclusion of the NYC in the list of international instruments to which the draft convention on the use of electronic communications in international contracts would apply is currently under discussion76. An intended purpose of the draft convention is to provide a uniform regime for the use of electronic communications in the formation and performance of international contracts. In working groups, “overall support” was expressed in favour of the inclusion of a reference to the NYC in the draft convention, which was “expected to provide welcome clarity to the writing requirement contained in article II(2) and other requirements for written communications in the text of the NYC”.77 The discussions will be continued during 42nd session of the UNCITRAL Working Group II (10 - 14 January 2005, New York)78.
As discussed, though the recent e-commerce laws have “legitimized” electronic communications in the light of traditional paper-based legal requirements, it does not mean that the controversies about arbitration agreement concluded online completely disappeared. Nor could one assume that every arbitration agreement concluded by an exchange of e-mails or electronic data interchange will be valid. The means of telecommunication applied must satisfy certain conditions, i.e. provide the agreement’s record that is “accessible so as to be usable for subsequent reference”. However, even traditional forms of arbitration agreements, explicitly listed in the NYC, are not free from fairly similar requirements. To conclude, under the current legal framework an arbitration agreement concluded by electronic communications is admissible and can be fully effective, yet certain requirements must be met.