Posted: 3 weeks ago

Unveiling Georgia's Arbitration Reforms: Aligning Consumer Rights with European Standards

In a recent episode of the "Guide to Economic Reforms" podcast, supported by the USAID Economic Governance Program, Jaba Gvelebiani, Chairman of the Association of Arbitrators of Georgia, delved into the state of consumer arbitration in Georgia and the imminent reforms needed to fortify its framework. In a conversation with Gepra's Senior Consultant Soso Galumashvili, Gvelebiani outlined the findings of an in-depth study conducted by the Georgia Arbitration Association that aimed to scrutinize and optimize current arbitration practices in the country, with a particular focus on consumer arbitration.

According to Gvelebiani, the study provided a comprehensive analysis of arbitration in Georgia and zeroed in on the particular challenges and inefficiencies plaguing consumer arbitration. The term refers to arbitration cases where one party is a commercial entity, and the other is a private individual. Such disputes commonly revolve around financial, credit, or other consumer relationships. The study found that a staggering 90% of current arbitration cases in Georgia fall under this category.

However, the current legislative landscape in Georgia is ill-suited for consumer arbitration. The existing laws were crafted to address business-to-business disputes where both parties have comparatively equal standing. This results in an inherent power imbalance when the framework is applied to consumer arbitration. "Regulation does not mean prohibition or restriction. It means accounting for the specific dynamics of consumer disputes and rectifying these imbalances through targeted legislative measures," Gvelebiani emphasized.

For instance, while Georgia has enacted a "Consumer Rights Protection" law to regulate business-to-consumer interactions, no equivalent exists for arbitration, leaving consumers vulnerable. According to Gvelebiani, it's a lacuna that both civil society and the government need to address, to foster an equitable legal environment.

Another challenge lies in the enforcement stage of arbitration decisions. Although an arbitrator's ruling is binding, enforcement requires additional court proceedings, which are often prolonged, negating one of the key advantages of arbitration—speed. Gvelebiani pointed out that in Georgia, the notification-execution stage at the court often extends far beyond its intended timeline of one to two months, sometimes taking more than a year or even two.

Gvelebiani also spoke about the study’s pragmatic recommendations. It suggested that businesses must ensure 'informed consent' from consumers when they opt for arbitration over court litigation. This nuanced form of consent is central to forthcoming arbitration reforms.

On the topic of harmonizing with European legislation, Gvelebiani remarked, "The roadmap for arbitration reform will be in alignment with European standards." He further added that discussions are underway to consider factors such as fee structures and the availability of specialized legal professionals in arbitration.

In summary, the Association of Arbitrators of Georgia has ushered the conversation around arbitration into a new era of scrutiny and reform, backed by data and research. These forthcoming changes promise not only to elevate consumer arbitration but to refine the entire arbitration landscape in Georgia. The initiative also reflects a broader vision to align the nation's legal frameworks with European standards, thereby reinforcing its commitment to economic development and governance.