The Canadian Supreme Court finds Uber’s arbitration clauses to be unreasonable.
In 2017, Uber’s contracted drivers in Ontario, Canada, jointly filed for a class action suit against Uber, whom they say violated the Ontario Employment Standards Act, 2000, S.O. 2000, c. 41. (ESA), by claiming that Uber did not treat them as employees and did not provide them with benefits and protection as provided under such law. Uber has attempted to pursue a standard contract through arbitration for each driver based on the condition that; The drivers are required to proceed with Uber’s contractual dispute resolution process through arbitration in the Netherlands. The mediation and arbitration process are subject to fees of up to US$14,500 and excludes the cost of administrative fees, additional incidents, attorneys’ fees, or other costs that may arise in the course of the proceedings. The plaintiffs have argued that such arbitral clauses are not enforceable.
Later on June 26, 2020, the Supreme Court of Canada ruled in the Uber Technologies Inc. v. Heller case that Uber arbitration clauses were unreasonable, mainly due to Uber’s requirement that designated the Netherlands as the seat of consideration, as well as incurring a fee of up to US$14,500, which is a substantial amount compared to the trivial amount of the disputed funds.
However, the Court said it still respected the arbitration process as a valid dispute resolution process, as it was “a cost-effective and effective method for resolving disputes”. On the other hand, when an arbitration agreement is “practically unattainable”, the Court can intervene in the process. Moreover, The Court also addressed the impropriety of the International Commercial Arbitration Act (ICAA) on labor and employment disputes. Also, it provided advice on when the Court will have the power to determine the jurisdiction of the arbitral tribunal in connection with the dispute.
It is evident that to implement a resolution through arbitration, the contracting party, particularly regarding contracts that are drawn up from standard contracts, should be aware of the possibilities and the fact that the application of arbitration is enforceable and does not cause undue difficulties.
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Background of the verdict
Firstly, the Court addressed the inequality of bargaining power between Uber and Mr. Heller (the victim). The Court stated that, in addition to the fact that Uber is a complex company that possesses much more bargaining power than Mr. Heller, the provisions of the arbitration clauses are difficult for the general public to negotiate or change. In addition, Uber did not include a copy of the ICC’s Arbitration Rules, thereby making the contracting party unable to recognize the associated arbitration fees even after considering the entire contract.
Secondly, the Court found that the arbitration clauses compelled the victim to pay fees of up to US$14,500 upfront, which is comparable to almost an Uber driver’s full-year income, were unreasonable. It was also an unreasonable burden for the victim to travel to the Netherlands to proceed with the arbitration.
Overall, the Court ruled that the arbitration clauses made Mr. Heller’s contractual rights illusory.
The significance of the Technologies Inc. v. Heller case
The ruling in the Uber Technologies Inc. v. Heller case is a significant improvement in arbitration principles, that is
It creates guidelines on whether national or international arbitration law is in effect.
It is the development of the principle of arbitral jurisdiction (competence-competence principle).
It reiterates the principle of unreasonability.
However, the Court still views the arbitration process as an effective dispute resolution process. Additionally, the Court also respects the parties’ independence in choosing to use the arbitration process as a dispute resolution alternative. On the other hand, if the arbitration process cannot achieve its objectives, it should not be in the jurisdiction of the arbitrator to decide the dispute.