Odr: Online Dispute Resolution: A New Way To Resolve International Commercial Disputes?

Since the dawn of civilization, disputes have been a common element throughout the different patches of history and in all parts where humans dwelt

. Hence, dispute resolution mechanisms have also been a quite a natural outcome of this. There have been mutual settlements, third party adjudicators and interveners. Developments in legal systems often led those disputes to courts.

In the United States, alternatives to litigation have existed for generations. For instance, statutes like those enacted in Pennsylvania in 1705 and 1810 provided for arbitration in matters pending in court. The United Kingdom also saw examples of consensual jurisdiction, quite similar to modern arbitration. Such procedures are referred to as the "Alternate Dispute Resolution" (ADR) mechanisms. However, ADR has a wide range of methods varying from non-intervention to one-on-one negotiations to awards from arbitrators.

The Internet and ADR

The increase in Internet activities since the late 1990s has made it possible for businesses to expand their markets and services, thus catering to large groups of e-consumers. Since physical transactions lead to problems and disputes, the same cannot be avoided for online transactions. In the e-commerce scenario, to ensure that all parties concerned can safely participate in e-commerce transactions it is imperative that there is a mechanism so that e-disputes are able to be resolved adequately. This is because uncertainty over the legal framework may generate inhibitions amongst both the service providers and also the consumers to conduct their businesses and purchasing activities over the Internet. This will eventually affect the electronic markets adversely.

For the participants in e-commerce activities, the problems might become more complex when the disputes, that is e-disputes between them, acquire a cross-border nature. It has been felt by experts that ADR mechanisms will be a more helpful in solving the growing number of disputes over the Internet. It is also opined by many that ADR will be far more efficient than regular dispute resolution methods available, which often involve lengthy and expensive legal procedures. This issue has been addressed both at national and international levels.

The OECD, in 1999, published Guidelines for the protection of consumer in the Electronic Commerce. These guidelines primarily encourage businesses, consumer representatives and also governments to work together to provide meaningful access to fair and timely alternative dispute resolution and redress, without undue cost or burden. Special attention is given to cross-border transactions and to the innovative use of information technologies in implementing ADR systems.

One of the major advantages of ADR is that it can solve the problems and complexities of conflicting jurisdictions of the different countries/players involved, it takes much less time and it can be provided at very low costs to e-consumers. However, the issue that irks many is that of compliance, that is how far would those who have "agreed"on consensual terms would follow those and what happens in cases of default?

International Developments vis--vis Online Dispute Settlement Mechanisms

The United Nations Commission on International Trade Law (UNCITRAL) has played an important role in the development of alternative dispute resolution mechanisms. Since its establishment in 1966, improving international commercial dispute resolution has been one of its priorities.

Two important developments arising from its efforts are the UNCITRAL Arbitration Rules (1976) (Arbitration Rules) and the UNCITRAL Conciliation Rules (1980) (Conciliation Rules). They are the products of the active participation of international experts from various legal, economic and social backgrounds and have made a significant contribution to the more efficient resolution of international commercial disputes.

Both sets of Rules are based on agreement between the parties, operating on a private-contractual rather than public-statutory level. This is an important point which distinguishes the Rules from UNCITRAL Model Lawon International Commercial Arbitration (Model Law). The Rules are a form of contractual trade law dispute resolution.

Some key recent events pertaining to the same have been:

43rd session of the United Nations Commission on International Trade Law (held in New York, from June 29 - July 9, 2010), where a working group was created for ODR mechanisms.

November 2010: Conference held in Vancouver, Canada to discuss the logistical and functional aspects of creating a global ODR system.

ODR 2010 took place in Buenos Aires in June, 2010 ("PeaceBuilding in the Digital Era" - International Forum on Online Methods for Alternative Dispute Resolution), and was followed by a colloquium specifically addressing the creation of a global ODR system for cross-border electronic disputes.

Methods of Online Dispute Settlement

1. Automated negotiation

When there are two disputants, the neutral parties who assist in the resolution of the dispute are often referred to as the "third parties" involved. When Online Dispute Resolution is introduced, the technology can also play a major role in managing the process and setting the agenda so, in a metaphorical sense, the technology becomes the fourth party. The role of technology is far more than simply replicating face-to-face interactions as accurately as possible. In addition to facilitating the process, as face-to-face neutrals do, online practitioners need to think through the various communication options available and design a communication environment that can best address the issues under discussion between the parties.

' Double Blind Bidding This process does not have a true equivalent in traditional ADR. Double Blind Bidding permits the parties to upload offers online. The offers and demands, typically three rounds, are automatically compared to each other in the blind, round by round. If the offers and demands are not within a range of settlement, those numbers remain confidential, allowing the participants to continue negotiations without having prejudiced their position. Additionally, a plaintiff cannot participate directly and must participate by and through his/her attorney.

Automated negotiation has been most commonly used as a tool to settle insurance claims. However, it could also prove to be a useful tool in the settlement of other types of disputes such as breach of contract claims, and employment disputes etc. Automated negotiation occurs in a secure environment that uses secure socket layer (SSL) encoding, which encrypts the data sent to the site. A trust seal from an Internet security verifier such as Verisign can add an additional layer of confidentiality. Through these, the automated negotiation sites are able to guarantee confidentiality to the participants at all times

Conclusion

People need to be made aware of the existence of online dispute resolution mechanisms. Creating awareness is a priority and it needs to be a joint undertaking by the international organizations, national governments and the business community, to ensure that not only awareness will grow, but that e-consumers trust the online dispute settlement mechanisms too.

by: Robert Neron

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