Canada currently has a number of different dispute resolution mechanisms. In the consumer field, some of these mechanisms are in conflict with each other, for example: class actions and binding arbitration. The former stems from the law, the latter from contract. We have noticed that companies are increasingly including mandatory arbitration clauses in their contracts.
The aim of companies such as Rogers, Fido and Dell is to prevent consumers with pending disputes from filing class action suits against them. This new way of drafting contracts and providing for mandatory recourse to arbitration is of concern to several consumer associations. In our view, this trend is worrying because it reduces access to justice for consumers who want to settle a consumer dispute, and undermines the credibility of our justice system.
In response to this trend, a new dispute resolution mechanism has emerged in the United States: class arbitration. This mechanism exists in California, for example. The American Arbitration Association, a private arbitration center, has adopted a minimum acceptable standard for consumer arbitration, the Consumer due Process protocol. These guidelines provide a framework for the new dispute resolution mechanism of class arbitration. Should a similar standard be adopted in Canada?
Canadian courts are increasingly the scene of situations where class action proceedings and binding arbitration clash. In Canada, the courts have handed down decisions on conflicts between class actions and arbitration. For example, the Ontario decision against Rogers Cable, where the arbitration clause defeated a class action. The Quebec class action against Dell Computer, where the Supreme Court of Canada decided to hear the appeal.
Ontario's new Consumer Protection Act neutralizes all clauses that attempt to make consumers waive their rights or prevent them from going to court. Unless their contract dates from before July 30, 2005, all such clauses in contracts are null and void. Consumers have no obligation towards them, even if they have accepted the agreement. The new section 8 of the Act does not prevent consent to arbitration, but only after a dispute has arisen. Consumers cannot therefore be forced to use arbitration instead of the courts.
In December 2006, Quebec's Consumer Protection Act was also amended to prohibit mandatory arbitration clauses. The new section 11.1 stipulates that: "A stipulation is prohibited if it imposes on the consumer the obligation to submit a dispute to arbitration, restricts the consumer's right to institute legal proceedings, in particular by prohibiting the consumer from instituting a class action, or deprives the consumer of the right to be a member of a group covered by a class action. If a dispute arises after the conclusion of the contract, the consumer may agree to submit the dispute to arbitration. Clauses prohibiting the institution of a class action have thus become invalid.
In both the U.S. and Canada, the debate over class actions and class arbitration is not yet over. We are awaiting important decisions from the supreme courts in both countries. The main problem posed by this new hybrid procedure is the degree of judicial intervention in the class arbitration process.
