Consumer Arbitration Agreements Act 1988

England, Wales and Northern Ireland

1 Arbitration agreements

(1) Where a person (referred to in section 4 below as “the consumer”) enters into a contract as a consumer, an agreement that future differences arising between parties to the contract are to be referred to arbitration cannot be enforced against him in respect of any cause of action so arising to which this section applies except—

(a) with his written consent signified after the differences in question have arisen; or

(b) where he has submitted to arbitration in pursuance of the agreement, whether in respect of those or any other differences; or

(c) where the court makes an order under section 4 below in respect of that cause of action.

(2) This section applies to a cause of action—

(a) if proceedings in respect of it would be within the jurisdiction of a county court; or

(b) if it satisfies such other conditions as may be prescribed for the purposes of this paragraph in an order under section 5 below.

(3) Neither section 4(1) of the [1950 c. 27.] Arbitration [1937 c. 8 (N.I.).] Act 1950 nor section 4 of the Arbitration Act (Northern Ireland) 1937 (which provide for the staying of court proceedings where an arbitration agreement is in force) shall apply to an arbitration agreement to the extent that it cannot be enforced by virtue of this section.

2 Exclusions

Section 1 above does not affect—

(a) the enforcement of an arbitration agreement to which section 1 of the [1975 c. 3.] Arbitration Act 1975 applies, that is, an arbitration agreement other than a domestic arbitration agreement within the meaning of that section;

(b) the resolution of differences arising under any contract so far as it is, by virtue of section 1(2) of, and Schedule 1 to, the [1977 c. 50.] Unfair Contract Terms Act 1977 (“the Act of 1977”), excluded from the operation of section 2, 3, 4 or 7 of that Act.

3 Contracting “as a consumer”

(1) For the purposes of section 1 above a person enters into a contract “as a consumer” if—

(a) he neither makes the contract in the course of a business nor holds himself out as doing so; and

(b) the other party makes the contract in the course of a business; and

(c) in the case of a contract governed by the law of sale of goods or hire-purchase, or by section 7 of the Act of 1977, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption;

but on a sale by auction or by competitive tender the buyer is not in any circumstances to be regarded as entering into the contract as a consumer.

(2) In subsection (1) above—

• “business” includes a profession and the activities of any government department, Northern Ireland department or local or public authority; and

• “goods” has the same meaning as in the Sale of Goods Act 1979.

(3) It is for those claiming that a person entered into a contract otherwise than as a consumer to show that he did so.

4 Power of court to disapply section 1 where no detriment to consumer

(1) The High Court or a county court may, on an application made after the differences in question have arisen, order that a cause of action to which this section applies shall be treated as one to which section 1 above does not apply.

(2) Before making an order under this section the court must be satisfied that it is not detrimental to the interests of the consumer for the differences in question to be referred to arbitration in pursuance of the arbitration agreement instead of being determined by proceedings before a court.

(3) In determining for the purposes of subsection (2) above whether a reference to arbitration is or is not detrimental to the interests of the consumer, the court shall have regard to all factors appearing to be relevant, including, in particular, the availability of legal aid and the relative amount of any expense which may result to him—

(a) if the differences in question are referred to arbitration in pursuance of the arbitration agreement; and

(b) if they are determined by proceedings before a court.

(4) This section applies to a cause of action—

(a) if proceedings in respect of it would be within the jurisdiction of a county court and would not fall within the small claims limit; or

(b) if it satisfies the conditions referred to in section 1(2)(b) above and the order under section 5 below prescribing the conditions in question provides for this section to apply to causes of action which satisfy them.

(5) For the purposes of subsection (4)(a) above proceedings “fall within the small claims limit”—

(a) in England and Wales, if in a county court they would stand referred to arbitration (without any order of the court) under rules made by virtue of section 64(1)(a) of the [1984 c. 28.] County Courts Act 1984;

(b) in Northern Ireland, if in a county court the action would be dealt with by way of arbitration by a circuit registrar by virtue of Article 30(3) of the [S.I. 1980/397 (N.I.3).] County Courts (Northern Ireland) Order 1980.

(6) Where the consumer submits to arbitration in consequence of an order under this section, he shall not be regarded for the purposes of section 1(1)(b) above as submitting to arbitration in pursuance of the agreement there mentioned.

5 Orders adding to the causes of action to which section 1 applies

(1) Orders under this section may prescribe the conditions referred to in section 1(2)(b) above; and any such order may provide that section 4 above shall apply to a cause of action which satisfies the conditions so prescribed.

(2) Orders under this section may make different provision for different cases and for different purposes.

(3) The power to make orders under this section for England and Wales shall be exercisable by statutory instrument made by the Secretary of State with the concurrence of the Lord Chancellor; but no such order shall be made unless a draft of it has been laid before, and approved by resolution of, each House of Parliament.

(4) The power to make orders under this section for Northern Ireland shall be exercisable by the Department of Economic Development for Northern Ireland with the concurrence of the Lord Chancellor; and any such order—

(a) shall be a statutory rule for the purposes of the [S.I. 1979/1573 (N.I. 12).] Statutory Rules (Northern Ireland) Order 1979; and

(b) shall be subject to affirmative resolution, within the meaning of section 41(4) of the [1954 c. 33 (N.I.).] Interpretation Act (Northern Ireland) 1954.