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The DRAFT COMMON FRAME OF REFERENCE AND ARBITRATION By Prof. Tibor Tajti (Thaythy) ©

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1 The DRAFT COMMON FRAME OF REFERENCE AND ARBITRATION By Prof. Tibor Tajti (Thaythy) ©

2 NOT The lecturer and the author of these slides was NOT involved in the drafting of the Draft Common Frame of Reference by any means so far a professor and scholar – and earlier for about ten years a corporate counsel – The presentation is thus based on the reflections of a professor and scholar – and earlier for about ten years a corporate counsel – primarily interested in international and comparative law, reform of law and the interplay between law and economy Up to this point in time the only indirect connection to the DCFR is the invitation to critically assess the consumer protection aspects of the CESL to be held in Brussels on 5 th December 2012 (EPP Public Hearing on CESL) CAVEAT

3 “That is a text serving as a source of inspiration for law making and law teaching at all levels.” “That is a text serving as a source of inspiration for law making and law teaching at all levels.” Christian von Bar Christian von Bar, A Common Frame of Reference for European Private Law - Academic Efforts and Political Realities, Electronic Journal of Comparative Law, at 1 ( ).

4 the academic teams a framework set of annotated rules legislators parties to a contract, whether cross-border or purely domestic, to incorporate its contents into their agreement “ We, the academic teams that in 2005 contracted with the European Commission to deliver […] the Academic Common Frame of Reference, hope to bring about a framework set of annotated rules to which the European and national legislators and the European and national courts, including arbitral tribunals, can refer to when in search for a commonly acceptable solution to a given problem. This ‘Common Frame of Reference’ is also drafted with a view to allowing parties to a contract, whether cross-border or purely domestic, to incorporate its contents into their agreement.”  Christian von Bar, A Common Frame of Reference for European Private Law – Academic Efforts and Political Realities, 23 Tul. Eur. & Civ. L.F. 37 (2008).

5 2003: EU Action Plan– for a more coherent contract law 2007: first publications of the cooperating Groups - Von Bar group (2005): focus on what is common - Von Bar group (2005): focus on what is common - Acquis group (2002-Prof. Ajani): focus exclusively on the law of the EU - Acquis group (2002-Prof. Ajani): focus exclusively on the law of the EU - the so-called Principles of European Contract Law were also integrated (i.e., integration of the work of the (Lando Commission) - the so-called Principles of European Contract Law were also integrated (i.e., integration of the work of the (Lando Commission) 2009: Outline edition becomes publicly available 2010: annotated text - COMMENTS (i.e., commentary with examples from national laws of EU Member States) – six volumes (publisher: Oxford University Press)

6 COORDINATORS FROM POST-SOCIALIST CEE COUNTRIES  Christian von Bar (Osnabrück)  Guido Alpa (Italy)  Hugh Beale (UK, Warwick)  Eric Clive (Edinburgh)  Maurits Barendrecht (Tilburg)  Ulrich Drobnig (Hamburg)  Ole Lando (Denmark)  Verica Trstenjak (Maribor)  Lajos Vekas (Budapest) etc.  Lubos Tichy (Czech Rep.)  Paul Varul (Estonia)  Christain Takoff (Bulgaria)  Valentinas Mikelenas (Lithuania)  Monika Jurčova (Slovakia)  Mircea-Dan Bob (Cluj, Romania)  Etc.

7 REALITY the European contract law initiative should be seen primarily as an exercise in better law-making at EU levelit is by no means clear what it will lead to in terms of practical outcomes “whilst it seems that the European contract law initiative as described in the Commission communication of 11 October 2004 (COM(2004)0651) and reported on in the Commission's First Annual Progress Report (COM(2005)0456) should be seen primarily as an exercise in better law-making at EU level, it is by no means clear what it will lead to in terms of practical outcomes or on what legal basis any binding instrument or instruments will be adopted […]”COM(2004)0651COM(2005)0456 WHAT WOULD BE NEEDED (WISHES) The European Parliament “… reiterates its conviction, that a uniform internal market cannot be fully functional without further steps towards the harmonisation of civil law […]. The European Parliament “… reiterates its conviction, expressed in its resolutions of 26 May 1989, 6 May 1994, 15 November 2001 and 2 September 2003, that a uniform internal market cannot be fully functional without further steps towards the harmonisation of civil law […]. ”

8 MAURO BUSSANI: fits perfectly with the need of the professional elite to keep the leadership over national and transnational legal affairs “The defense of the status quo [that the time … is not ripe to enact whatever Restatement or Civil Code] … fits perfectly with the need of the professional elite to keep the leadership over national and transnational legal affairs … ” Mauro Bussani, the Driving Forces behind a European Civil Code, Zbornik Prav. Fak. Sveuč. Rij. Suppl. Br. 3, xx-xx, at 11.

9 GREEN PAPER FROM THE COMMISSION policy options on policy options for progress towards a European Contract Law for consumers and businesses ( Brussels, , COM(2010)348 final ) Option 1:mere” publication Option 1: “ mere” publication of the DCFR (for legislators, teachers and private parties) Option 2:official toolbox for legislator Option 2: an “ official toolbox for legislator ” Option 3: incorporate the DCFR into national laws Option 3: EU Commission recommendation to Member States to incorporate the DCFR into national laws Option 4: optional instrument Option 4: DCFR as an alternative system to national laws that could be chosen by parties (“ optional instrument ”) Option 5:Directive Option 5: EU Directive with minimum common standards Option 6:Regulation Option 6: EU Regulation with uniform rules replacing national laws Option 7:European Civil Code Option 7: European Civil Code

10  While the fate of the DCFR is questionable, the EU is about to bless the CESL  Optional instrument for cross-border sales contracts (movables and digital content – as well as related services)  Heavily consumer protective  Register for cases on CESL & review of application (after 4 years, MSs will provide info – after 5 years, the EU Commission will do that to Parliament)  5 th of Dec. 2012, Brussels  5 th of Dec. 2012, Brussels – EPP Group Public Hearing: CESL – A Balanced Proposal between Consumers and Traders?

11  A document made by western-European academic elite  A document made by western-European academic elite (with simbolic contribution of experts from smaller countries – see the order and the quantity of text in the comments)  Primarily theoretically-based rather than based on input coming from the side of industries and practicing lawyers  Incomplete (e.g., inheritance and family law or real estate property law are not covered)  Non-mandatory source of law  Non-mandatory source of law (i.e., “soft law”)  Monistic  Monistic (i.e., the rules equally apply to merchants and non- merchants – though separate consumer protection rules have been added – primarily the law from EU consumer directives)  The text integrates the work of three academic groups (Lando Commission, Acquis Group and the Study Group) what often affects the quality and consistency of the DCFR

12 General provisions  Book I: General provisions  Book II: Contracts and other juridical acts Obligations and corresponding rights  Book III: Obligations and corresponding rights  Book IV: Specific contracts and the rights and obligations arising from them Benevolent intervention in another’s affairs  Book V: Benevolent intervention in another’s affairs  Book VI: Non-contractual liability arising out of damage caused to another Unjustified enrichment  Book VII: Unjustified enrichment  Book VIII: Acquisition and loss of ownership of goods Proprietary security rights in movables assets  Book IX: Proprietary security rights in movables assets  Book X: Trust  Appendix: definictions and index of topics

13 Arbitrability – business interests – corollary risks – potential for abuses

14  IS THE DCFR FITTING THE INTERESTS OF MAJOR ARBITRAL CENTERS ? - Or, to what extent matters substantive law in choosing the place of arbitration?  WHEN AND WHY IS THE DCFR SUITABLE – OR ILL- SUITED – TO SERVE AS LEX ARBITRI? - Or, how is the DCFR finding the middle-ground (e.g., culpa in contrahendo)  GOING BEYOND THE DCFR: ABUSES - What can we learn from the experiences of non-Europeans in trying to find the answer to which fields of DCFR are arbitrable and which are not? - The unhappy US experiences with arbitrating franchise and private debt collection-related disputes.

15 Is it in the interest of English, Swiss or other arbitral centers to pay attention to the DCFR?

16 LONDONTORONTO USD 40 to 50 billion  According to estimates London handles annually international arbitrations with a combined value of USD 40 to 50 billion  Lord Ashborne 1979 English Arbitration Act:  Lord Ashborne in the debate on the 1979 English Arbitration Act: as £ 500 million per year “new arbitration might attract to England as much as £ 500 million per year … in the form of fees for arbitrators, barristers, solicitors, and expert witnesses. ”  Charles Rives Associates (2012): Arbitration in Toronto: An Economic Study, at 3:  “we estimate the total impact of arbitration on the economy of the City of Toronto to be $256.3 million in 2012, growing to $273,3 million in ”

17 Making the weak points of the others visible is a weapon in the global competition of established and less- established arbitral centers Claim 1 : Making the weak points of the others visible is a weapon in the global competition of established and less- established arbitral centers Switzerland: a/ setting aside only by the Swiss Federal Tribunal (awards appr. confirmed in 93% of cases) – limited confidentiality b/ Geneva: French style – Zurich: German legal thinking France: the ‘group of companies’ doctrine (not in Switz.) & language England: a/ Often English lawyers must be consulted to understand the law b/ Less predictable as court cases are not based on a single opinion of the court but of the various individual opinions of the judges (same conclusion but different reasoning) United States: a/ United States: a/ arbitral law is a mixture of federal and State stutory and case law (State where the arbitration’s seat is) b/ In some States, foreign lawyer might even be charged for unauthorized practice of law.

18 Substantive law plays a role in promoting of a jurisdiction as an international arbitration center Claim 2 : Substantive law plays a role in promoting of a jurisdiction as an international arbitration center “The selection of the place of arbitration has impact on the pool of arbitrators, the parties’ choice of law, procedural law and enforceability of the award.” Wilske & Fox: at 384. convince his or her co-arbitrators that the substantive law of the place of arbitration is applicable for the dispute “[The] chairperson might have a strong tendency to follow his or her local practice and – in situations where the parties have not made a clear choice of law – even convince his or her co-arbitrators that the substantive law of the place of arbitration is applicable for the dispute.” Id. at 385.

19 ENGLANDGERMANY Law Society campaign - Booklet: Exporting Excellence – A Guide to Legal Services  Press release : “The brochure includes the promotion of draft clauses for insertion in to commercial contracts at the contract agreement stage to recognise the application of English law to that contract..” 2008: 2008: German counter-campaign Codification more cost- effective and reliable than contractual agreements under English or US law “ Codification enables swift and straightforward access to law. […]. Codification provides legal certainty, as legislation contains general principles and guidelines, and defines the terminology used. […]. [N]ot only are contracts under German law more concise, they are also more cost- effective and reliable than contractual agreements under English or US law.”

20  If substantive law matters (is one of the factors) in choosing the international arbitral center –  Could jurisdictions aspiring to become arbitral centers benefit from offering expertise in DCFR?  The DCFR, a soft law (i.e., optional) instrument that manages – in certain fields – to find the middle-ground between conflicting, or substantially differing, national laws?

21 The DCFR as lex mercatoria or rules applicable to the substance

22 THE DCFR AND THE INDUSTRY EU – soft – law instrument - The DCFR is an EU – soft – law instrument that may be exploited in the context of ADR: lex mercatoria rules applicable to the substance a/ as lex mercatoria or rules applicable to the substance b/ as a tool to find or understand national private laws b/ as a tool to find or understand national private laws pan-European instrument, - The DCFR is a pan-European instrument, which with its corollary documents present so far unimaginable vistas (though risks as well): teaching law a/ teaching law researching, comparing and thus applying various European national laws b/ for researching, comparing and thus applying various European national laws – and better understanding one’s own law breake the monopoly of the few major western European jurisdictions also in the context of ADR - The DCFR may (?) breake the monopoly of the few major western European jurisdictions also in the context of ADR - arbitral law is procedural but substantive law is a sine qua non - it is always the local lawyers that known local substantive & procedural law the best and profit from that

23 conventional method of ascertaining the law applicable to the merits of a dispute “The conventional method of ascertaining the law applicable to the merits of a dispute is to select a national system of law [...]. The law so chosen is then regarded as the proper law of the contract. out of touch with the realities of modern international trade It is sometimes suggested, however, that this search for the proper law is out of touch with the realities of modern international trade ; and that what is needed is not a particular national system of law, but a modern law of merchant. [...]. modern law merchant This modern law merchant goes under various descriptions, including 'transnational law', 'the international law of contracts,' ' international lex mercatoria' and 'international trade law.”

24 LEX MERCATORIA IN GENERAL DCFR AS LEX MERCATORIA  Problem 1: determining the content of law E.g., if the meaning of a trade usage is unknown to arbitrators, the content might be proven (question: how? With what?)  Problem 2:  Problem 2: confliuct with public policy rules of a national law ( ordre public )  Problem 1: The DCFR is exact and hence easier to determine content  Problem 2: no closed list of what qualifies as public policy - As there is no closed list of what qualifies as public policy, conflict can never be excluded - Yet the risk is much smaller - Yet the risk is much smaller as the DCFR took into account what is normally in Europe in conflict with public policy

25  Moot court competition on the DCFR organized under the auspices of the Warsaw Arbitral Tribunal attached to the Polish Chamber of Commerce (8 th March 2012 ) arbitration-moot-at-the-court-of-arbitration-at-the-pcc popularize and disseminate knowledge regarding the legal texts of the Draft Common Frame of Reference “ The Court of Arbitration at the Polish Chamber of Commerce together with the European Legal Studies Institute is pleased to invite all interested students and their professors to join the International Arbitration Moot in Warsaw - a competition touching on problems concerning the Draft Common Frame of Reference (DCFR) and procedural issues in arbitration. The Moot is intended to popularize and disseminate knowledge regarding the legal texts of the Draft Common Frame of Reference prepared by the Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group), and to promote the use of international commercial arbitration to resolve international commercial disputes in accordance with the DCFR. The competition will promote knowledge of the process of European Private Law unification, and show the vital importance of the DCFR as a complete set of rules which will significantly facilitate the settlement of disputes, especially in international arbitration.”

26 Are they equally appropriate to serve as the lex mercatoria in arbitration?

27  SALES: - 45 sections (plus a number of section from general chapters)  FRANCHISE: common to 13 section a. Sections common to commercial agency, franchise and distributorship – which apply only is not provided otherwise by contract: 13 section (plus 2 on the relationship of the chapters on these three contract types) specifically on franchise14 sections b. Sections specifically on franchise : 14 sections  SECURED TRANSACTIONS LAW:  122 sections  122 sections (though: 12 on registration and 28 on enforcement of security interests – additionally the procedural law of Member States regulates court enforcement of these)

28 SALESFRANCHISE SECURED TRANSACTIONS Traditional nominated contract Stable law Stable law Differences among jurisdictions the smallest Main legal problems are known New type of contract Hybrid Hybrid Innominate (often) Often not regulated Variations though basic forms are known Legal dilemmas exist A new SYSTEM promoted (also) by the DCFR A system of various contracts (not a single type) Crucial differences exist among European laws Some of the differences may qualify as ‘public policy’ (ordre public)

29 SALESFRANCHISE SECURED TRANSACTIONS compromise among differing European systems - A compromise among differing European systems similar to the CISG default - Most of the rules are default rules THE LEAST DILEMMAS ON WHETHER ARBITRABLE - Offers a comprehensive law on franchise for Europe THE LAW IS VERY FLUID, LITTLE IS KNOWN ON ARBITRATION OF FRANCHISE DISPUTES The goal of harminising proprietary security in novable assets in Europe “ The goal of harminising proprietary security in novable assets in Europe ” Crucial novelties & huge differences on national level MOST DILEMMAS ON ARBITRABILITY

30 Black’s Law Dictionary The principle that parties must act in good faith during preliminary contract negotiations “ The principle that parties must act in good faith during preliminary contract negotiations.”

31 GERMAN LAW to deal in good faith with each other during the negotiation stageor else face liability “… contracting parties are under a duty, classified as contractual, to deal in good faith with each other during the negotiation stage, or else face liability, customarily to the extent of the wronged party’s reliance.” ENGLISH & US LAW not a/ Generally accepted view: - common law does not have a counterpart Kessler & Fine b/ Kessler & Fine : “… the doctrines of negligence, estoppel, and implied contract, among others, have … served many of the doctrinal functions of culpa in contrahendo.”

32 Uniform Commercial Code “In contrast [to Europe], the [U.S.] Uniform Commercial Code mandates good faith only during the performance and enforcement of contracts. Good faith under the civil law system means more than not breaking off negotiations in bad faith. […].” Larry A. Dimatteo, The Law of International Business Transactions (Thomson/West, 2003).

33 “[Part E] of Book IV apply primarily to contracts for the establishment and regulation of a commercial agency, franchise or distributorship.These contracts have many characteristics in common, especially their economic function – the establishment and regulation of a marketing relationship “[Part E] of Book IV apply primarily to contracts for the establishment and regulation of a commercial agency, franchise or distributorship. These contracts have many characteristics in common, especially their economic function – the establishment and regulation of a marketing relationship.” DCFR Comments, vol. 3, Point A of the comment to section IV.E. – 1:101: Contracts covered, at 2281.

34 1 1.Transfer of IP & know-how (business package) 2.Training, assistance and advising 1.Payment of royalty & fees 2.Duty to strictly follow instructions UNIFORMITY ASYMMETRY

35 UNREGULATEDREGULATED  EU:: some franchises are caught by competition law  Pronuptia case1986: – division of territory problematic  Most of national laws have nothing specifically on franchise  DCFR: Chapter 4 – nominated contract  Italy: Law No.129/2004  Spain: s. 62 Retail Trade Act and a special law  France: Loi Doubin (1989) & Decree No  2006: Belgium  2006: Sweden  Romania: Decree No (amended by ) plus the new Civil Code of 2011  Ukraine: defined in two codes (2003) but the act on registration of franchise not passed yet

36 How is the Weaker Party (Franchisee) Protected in Europe? Through Regulation - Mandatory norms disclose - Lists on what to disclose - US: a.Agency oversight (FTC) b.Some franchise systems: SEC - In Europe: Belgium, France, Italy, Romania, Spain and Sweden. Industrial Standards Code of Ethics - Code of Ethics voluntary disclosure and fair dealing - voluntary disclosure and fair dealing - Austria, Lithuania, Germany and Portugal (good faith law systems) Private law remedies Two variants: - Two variants: nominated contract a.Countries in which it is a nominated contract (Lithuania) Not nominated: where general rules may be exploited b. Not nominated: where general rules may be exploited (Hungary, Poland, ex-YU)

37  More than 500 businesses claim to be a franchise systems on the website of the Hungarian Franchise Association e.g., “FORNETI” – autochtonous Hungarian franchise system (frozen pastry products)  Yet franchise is not regulated in Hungary – the drafters of the new Civil Code decided not to make a nominated contracts out of it (allegedly to vague & hybrid transaction) - as a result, courts have to apply by analogy to provisions on most similar contracts; concretely to: - as a result, courts have to apply by analogy to provisions on most similar contracts; concretely to: 1. sales (“ adásvétel ”) or 2. agency (“ megbízási szerződés ”) or 3. enterprise contract (“ vállalkozási szerződés ”) or 4. licencing contract.  RESULT : UNPREDICTABILITY AS TO THE RIGHTS AND OBLIGATIONS OF THE PARTIES

38 Problem of determining the legal nature of franchise: Discretion or subjectivity? - Unwritten rule is that in case of non-nominated contracts that law should be applied the elements of which DOMINATE in the given franchise contract ( Discretion or subjectivity? ) - E.g., the obligaitons of the franchisee are not the same depending on the rules of which nominated contract are applied by analogy: agency a/ If the rules on agency are applied: NO PARTICULAR RESULT - acting with due diligence is requested but NO PARTICULAR RESULT must be achieved entrepreneurship contracts : b/ If the rules on entrepreneurship contracts are applied : some concrete result must be achieved - due diligence is INSUFFICIENT – some concrete result must be achieved (e.g., gathering of a predefined number of clients)

39 Is this Case from Poland Instructive to the Entire CEE? (Court of Appeals, Katowice, 1998)

40  Is asymmetry a natural corrolary (sine qua non) of franchise contracts? A. If not: how to determine which contract is voidable? Which clauses to take into account in determining that? E.g., given that normally franchisors draft the contract – is the mandatory arbitration clause automatically void? Or, the abuse must be proven? B. If YES: 1. Can the DCFR model taken as the European model of franchise asymmetry? Especially as most European countries has no franchise regulation. 2. What to do with clauses that were dictated by the franchisor but are not listed in the DCFR? Are they per se void? E.g., the DCFR does not contain a clause on arbitration of franchise disputes.

41 DCFR GLICKMAN MODEL CONTRACT  Audit and inspection limited by reasonableness ( Comments: in reasonable time of the day and with reasonable frequency )  Nothing on mandatory insurance taxes  Nothing on the franchisee’s duty to pay all taxes and other encumbrances  Nothing on the prohibition of the transfer of the contract  Nothing on arbitration  Art 2:302 – equal right to termination the contract  No such limitation on audit and inspection  Franchisee must pay such insurance and to indicate the franchisor as the beneficiary  Franchisee must pay all taxes without delay – if breached: franchisor has the right to terminate  Prohibition of contract transfer: standard  Arbitration: standard  Franchisor has bigger termination rights

42 STRATEGIC ADVANTAGES STRONGER CONTRACTUAL POSITION  Financially stronger  Bigger expertise  Dictates the tempo: a. Entry fee: $ 10,000 b. Only duty to disclose on risks (duty to deliver the manual 14 days before)  Drafts all legal acts  Dictates applicable law, place of arbitration or court procedure a. Right to dictate the terms of the IP license b. Right to audit c. Right to monitor the operations of the franchisee d. More favorable rights for termination

43 - Franchisee wanted to terminate because his outlet was non- profitable ; - His arguments - His arguments : a. The contract was asymmetric – to wit, the outlet bankrupted because everything was dictated by the franchisor b. Franchise contracts as asymmetric contracts are contrary to the principle of freedom of contract and good faith. - First instance: for the franchisee - Appeal cour - Appeal cour t: for the franchisor as the first instance decision was based on “ from the past inherinted conceptions of what is moral and fair in business life. ”

44 Are the unhappy experiences with arbitrating franchise disputes from the US instructive to Europeans?

45  2007 Bill  2007 Bill : Arbitration Fairness Act  The bill wanted to PROHIBIT arbitration of: 1. disputes with consumers 2. employment disputes, and franchise disputes 3. franchise disputes.  Reason:  Reason: these categories of parties have no real possibility of freely deciding on whether to arbitrate  What is the legal nature of franchise and is that of relevance in deciding?  Is the DCFR’s system a properly balanced system or rather a too- franchisee tilted one?  Is asymmetry a sine qua non of franchise contracts?  If yes, what level of asymmetry should be accepted? US Experiences GENERAL QUESTIONS

46 “Rules on the substantive aspects of security in movables would be toothless, or would fail to achieve the goal of harmonising proprietary security in movable assets in Europe, if they left enforcement of those rights entirely to the – diverging – procedural laws and rules of the Member States.” DCFR Comments to Article IX.- 7:101: Secured Creditor’s Rights after Default, at 5613.

47 Philip R Wood Law and Practice of International Finance Philip R Wood, Law and Practice of International Finance (Sweet & Maxwell, Thomson, 2008, University Edition), point arbitration is almost never used in financial contracts, especially bank loan agreements “ Unlike ordinary commercial contracts, arbitration is almost never used in financial contracts, especially bank loan agreements or bond issues. The main objections are The main objections are : having nothing to arbitrate; very limited appeals; time and delays involved in setting up the arbitration tribunal; not necessarily less expensive; looser procedures, and sometimes decisions are made on the merits otherwise than in accordance with the strict principles of law ”

48 BANKS NON-BANKING FINANCIAL ORGANIZATIONS  Philip R Wood is right that banks are hesitant to resort to ADR  BUT  BUT in CEE disputes of banks and consumers IS being directed to arbitration and mediation Hungary : there is a PANEL FOR MEDIATION attached to the Agency on Financial Supervision (FSA – Pszaf)  Contracts with RETAINED OWNERSHIP a. consignment b. leasing (operational and financial) c. sales contracts (esp. cross- border ) of suppliers  Factoring  Pawnshops  Pledging investment property controlled by brokers

49 “It appears that in many European countries there is an increasing movement seeking an alternative to the traditional method of enforcing security rights because of [the] delays, costs and often disappointing results [of enforcement through courts]...” Von Bar i Eric Clive, Komentar Nacrta (Oxford, 2010), tom šesti, strana 5614.

50 See, e.g., Alabama Title Loans, Inc. v. White, 80 So.3d 887(Ala. 2011). shall survive the repayment of all amounts owed relate[d] to this Agreement or the Vehicle The clause in a car loan agreement provided that the arbitration clause (agreement) “ shall survive the repayment of all amounts owed ” and that it extended to all claims, including tort claims, that “ relate[d] to this Agreement or the Vehicle ;” (i.e., not only those arising directly from the loan agreement). Based on such formulation of the arbitration clause, the court ordered arbitration of the debtor’s claims against the repossession agency that had repossessed after the loan had already been paid.

51  See the FTC document Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration (2010); ( ; “[…] the current [US] system for resolving consumer debts is broken, […] because consumers are not adequately protected in either debt collection litigation or arbitration  The document concludes that “[…] the current [US] system for resolving consumer debts is broken, […] because consumers are not adequately protected in either debt collection litigation or arbitration.” Id., Executive Summary, at i.

52 WHAT ALREADY IS EVIDENT NO EVIDENCE ON …  Presence of private collection industries  Growing number of countries regulates them  Indirect evidences on abuses  Whether arbitration is resorted to? factoring  Yet private collection agencies – often ‘ factoring ’ companies – qualify as financial organizations, hence, should resort to mediation panels (e.g., Hungary)


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