Legal Issues of Online Dispute Resolution - Essay Example

Online Dispute Resolution (ODR) Introduction Online Dispute Resolution (ODR) offers an efficient, simple, low-cost and fast out-of court solution to Internal-related disputes emanating from cross-border relations and transactions. Online Dispute Resolution involves the use of information and communication technologies to resolve claims and disputes that involves the Internet, as well as, the so-called “offline” disputes. In comparison to the court litigation and the classic alternative dispute resolution (ADR) methods, Online Dispute Resolution offers speedy low-cost resolutions and eliminates the complex jurisdictional problems associated with the old methods of solving disputes. The essay discusses the advantages and disadvantages of ODR and explains why it is the most preferable method in the modern world. The essay also discusses the efforts put in place in the EU to increase the effectiveness of ODR, for example, the Regulation on Consumer ODR and the EC Directive on Consumer ADR of 2013. In addition, the essay considers the Brussels I Regulation is explaining why ODR is the best method of dispute resolution. Description of Online Dispute Resolution (ODR) The advanced communication and information technologies have enabled resolution of disputes through videoconferencing, email, or both. ODR can be used to resolve disputes that arises from the e-commerce transactions or other disputes that are not related to the internet. Online Dispute Resolution has provided an alternative to the traditional legal ways of solving cases that involve a judge who decides the cases at the court. The conflicting parties can, as well meet in person and negotiate their disputes and at the same time, combine with online-based resolutions to enter into agreements.1 Such combinations of “online” and “offline” interactions are also considered to be part of Online Dispute Resolution. There are increasing numbers of organisations that provide Online Dispute Resolution services around the world. These organizations are growing the modern trend of easing the courts with voluminous cases by providing a simpler and low-cost platform for people to resolve their cases.2 Online Dispute Resolution takes different forms, which may include mediation, arbitration and negotiation. Mediation involves resolution of disputes between two conflicting parties using a mediator. The parties present their arguments, issues and evidence to the mediator who a neutral third party in the private and voluntary process. Mediation can be done exclusively via email and/or videoconferencing, or by physically meeting in one room. In some cases, the parties can decide to use both methods. The mediator usually doesn’t have the power to decide who is legally wrong or right.3 His/her work is to set rules and assist the conflicting parties to come into consent on their own. Once the parties reach an agreement, the mediator assists in writing the agreement, which can be enforced by a court of law. Arbitration is another method of ODR whereby the third party has the power to make a decision concerning the conflicting parties’ disputes. Thus, in arbitration, the arbitrator has the exclusive powers to decide the cases, unlike the neutral mediator who relies on the parties’ decisions. When arbitration is done online, disputes can be resolved quickly because it is even less formal as compared to traditional litigation process. The online method of conducting arbitration can take the form of videoconferencing or email where the parties present their issues to an independent and neutral entity.4 There are two types of arbitration; binding and non-binding arbitration. The binding arbitration requires the arbitrator’s decision to be effected by the court while non-binding arbitrations, the decisions of the third party are advisory in nature. The third type of dispute resolution is negotiation, which involves the informal way of solving disputes. The conflicting parties involve their attorneys in the negotiation process to reach an agreement. Negotiation does not involve third party, unlike mediation and arbitration, which make use of independent and neutral third parties. The Internet technology can be used to resolve disputes through negotiations made via email, teleconferencing or videoconferencing.5 This Online Dispute Resolution method can also combine offline and online modes of negotiations. Owing to the fact that the negotiation process is less formal, thus online dispute resolution through negotiation would be much easier and friendly to the parties. The most common negotiation process provided by organisations is the so-called blind bidding.6 In blind bidding, the parties present their suggestions to a computer system. Then the attorneys decide on the most appropriate settlement bid even without involving a third party. Characteristics of Cross-Border Transactions It is important to consider the characteristics of cross-border transactions when placing Online Dispute Resolution at its best in solving cases as compared to court litigation and the traditional classical methods of ADR. Cross-border online transactions would involve sale of goods and services from business people to consumers across country borders. In the European member states, business transactions cutting across borders have presented challenges where the businesses serve diverse customers speaking in different languages. Cross-border transactions are also characterised by movement of merchants and consumers across the border lines. The merchants might be distributing their goods and services to customers located in different countries and jurisdictions such as the European Union (EU). The growing trend of ecommerce across borders has created more opportunities for merchants who can now reach out to large numbers of customers worldwide. The consumers also have access to wide range of choices due to the growth of online trend. The aspect of online trade brings forth the idea of cybercrimes where businesses may fail to deliver goods to the consumer legally.7 For example, in Amazon.com, the consumers can buy books online without physically meeting with the seller. In such business transactions, disputes are common, for example, when the bookseller charges high prices or the customer fails to pay. These are some of the examples of internet-related disputes addressed by Online Dispute Resolution. Types of online disputes suited for ODR may include the e-commerce and intellectual property disputes. Types of Internet-Related Disputes E-Commerce Disputes Usually, disputes in e-commerce arise out of business-to-business and business-to-consumer transactions that are initiated over the Internet. These disputes can be resolved using the ODR because the parties involved are familiar with the Internet operations and have pre-established online financial and personal relationships. Therefore, using the Online Dispute Resolution will not be difficult for the parties to reach an agreement. The issues arising from these transactions may be concerning the delivery of goods, guarantees on particular products, warrant enforcement, over-billing and more. Most ODR providers assist the conflicting parties to reach an agreement or a settlement over the Internet.6 A good example of Online Dispute Resolution (ODR) provider is the Square Trade, which mediates consumers and business concerning many issues. Square Trade resolved a case between eBay and a purchaser. The dispute was the purchasers complain that the leather chair he bought on the eBay website smelt. In this case, Square Trade received the complaint from the purchaser and informed eBay. The ODR provider mediated the case and within one week, eBay sent a check to the purchaser for cleaning the chair. This is a good illustration of how ODR resolves the contractual disputes arising from consumers each and every day.7 Intellectual Property Disputes The growing information and communication technologies have brought about many issues among the intellectual property owners. The pirates are very common today, in that they infringe the intellectual property rights and privileges of people who post music over the Internet. The producers of songs, movies and artistic works of art are the most affected Internet users in this wave of piracy and cybercrimes.8 The copyrights and trademarks can be copied by pirates without the knowledge of the owners. Intellectual property disputes may also arise when unauthorized people frame, hyperlink or meta-tag on the Internet. Arbitration has been argued to be the best method that can resolve disputes emanating from infringement of intellectual property rights. It, therefore, means that Online Dispute Resolution (ODR) is suitable for resolving intellectual property disputes because they are easy to investigate for the ODR providers who are experienced in using the Internet.9 Advantages of Online Dispute Resolution over Court Litigation and Classic ADR Being the friendliest system of solving cases, Online Dispute Resolution has various advantages and/or characteristics, which make it better than the court litigation and traditional classic alternative dispute resolution methods. In dispute resolution, cost is considered as the most crucial factor since the parties want to reach an agreement at the lowest price possible. Online Dispute Resolution is less costly because the exchange of information is carried out via email.10 Additionally, the online proceedings move faster than the court proceedings hence saving costs. The electronic transfer of documents could be the only expense, which must be paid for in ODR.11 Court litigation and the traditional mediation, arbitration and negotiation methods would require travelling and accommodation costs. Online mediation offers a cheaper way of resolving disputes since the conflicting parties can reach an agreement at the comfort of their chairs using videoconferencing.12 For example, the case involving eBay and a purchaser who bought a smelling chair from the eBay Website. The case was resolved within one week by Square Trade, an ODR provider because no travelling was involved. Square Trade mediate the dispute via email until the two parties entered an agreement with eBay sending a $150 check to the purchaser to clean that chair. With Online Dispute Resolution, disputes can be resolved within days or even hours.13 The offline ADR might take days or months to settle an issue since the parties have to travel to a common place. Thus, the speedy resolution offered by ODR makes it to be the most preferable methods in solving cases and disputes.14 The online dispute resolution overcomes the communication problems and barriers faced by parties resolving disputes from different regions. In other words, it is mandatory to resolve cases using the same language, for example, English or French. Most ODR providers operate for 24 hours, unlike the court litigation and offline ADR, which operates mostly during the day.15 For example, the case of Cable & Wireless v IBM United Kingdom Ltd of 2002 that involved a dispute over a mediation clause was resolved with few days.16 The anonymous and intangible nature of the Internet has been the problem in using this type of medium in many aspects such as trading. However, the qualities of the Internet are advantageous to the process of Online Dispute Resolution. Since the parties involved in ODR do not meet physically, thus, they may benefit from the exclusion of confrontations that usually arise in dispute resolution. In addition, the exchange of documents and information via email eliminates the “power imbalances” that are believed to favour the dominant party and oppress the less dominant party.17 Disadvantages Online Dispute Resolution also has a number of problems and inefficiencies that inhibit successful resolution of disputes. In ODR, there is lack of human interaction due to the impersonal nature of the Internet.18 The online disputes settled over the e-mail deny the parties the opportunity to interact amongst each other. As they seek to understand the feelings and concerns of the conflicting parties, the arbitrators and mediators may lack the opportunity to assess the credibility of the conflicting parties and their witnesses.19 The offline ADR is aimed at allowing private interaction between the parties, which is not possible in a court of law. However, online dispute resolution seems to have inhibited the human interactions and confidentiality offered by classical ADR methods. In arbitration of online disputes, the agreements made must be in writing. However, most domestic and national laws dispute against the aspect of using electronic means. In some countries like United States, written agreement recorded electronically cannot be enforced by law.20 It, therefore, means that ODR may not successful when such constraints are put in place. People would thus prefer the normal court litigation process. The arbitration and mediation agreements made online are difficult to enforce owing to the fact that parties often have unequal bargaining powers.21 For example, in Europe, online arbitration agreements are not enforceable as far as they deny the consumers their right to take legal actions alternative to arbitration.22 Regulation on Consumer ODR 2013 Due to the rapid growth of online trade in the European internal market, the European Commission decided to put in place the Regulation on Consumer ODR in 2013. Many traders in the market are selling their products online while more and more consumers are increasingly making purchases on the web. Thus, the Regulation Development in the EU requires a reliable alternative dispute resolution mechanism that would make the EU confident in encouraging the online transactions.23 The main objectives of the Regulation on Consumer ODR of 2013 may include contributing to the proper and efficient function of the EU internal market and ensure high level of protection for consumers. The Regulation aims at solving disputes arising from the online business transactions.24 In order to achieve the objectives, the Regulation will put in place an ODR platform that can be used by European traders and consumers. The European ODR platform will consist of a website, which will be freely accessible for all people in all the EU’s official languages. Additionally, the website will be user-friendly and would allow interaction between the consumers and traders. The ODR platform will enable out-of-court resolution of ecommerce disputes that usually arise between the traders and the consumers.25 The Regulation proposes that the consumer or the trader will be able to submit a complaint to the platform, which will then send the complaint to an ADR entity for resolution of the disputes.26 The competent ADR entity will resolve the issue through mediation, arbitration or negotiation among the conflicting parties. The Regulation on Consumer ODR 2013 illustrates that the European internal market has moved to a digital era and hence making use of online dispute resolution in resolving the rapidly increasing ecommerce disputes. The Regulation applies to the domestic and cross-border online transactions in the EU. The EU member states, which allow the Regulation do not have obligation to ensure the ADR entities involved in dispute resolution offer excellent procedures in the out-of-court resolutions.27 The European Commission will protect the privacy of consumers and traders who submit their complaints to the ODR platform. The proposed system will be operational after the EU member states adopts the Directive on Consumer ADR, which is expected to occur by mid-2015. By that time, the European community will have moved to a secure digital platform for online business transactions. The Directive on Consumer ADR 2013 It is important to note the Directive on Consumer ADR 2013 and the Regulation on Consumer ODR were formulated in July 2013 and are expected to be operational in July 2015. The two complementary and interlinked legislative instruments are intended to achieve high level of consumer protection in Europe. The Directive and the Regulation contributes to the functioning of the internal market in that they offer out-of-court resolution of disputes for traders and consumers in Europe. The Directive also requires the states, which decide to transpose these legislative instruments into the national laws to perform certain duties and obligations. Each state must ensure that consumers can resolve their disputes with traders in matters concerning provision of services and sale of goods from traders to consumers. The selected ADR entities should be independent, transparent and effective in resolving consumers and traders ecommerce disputes. These entities must meet the quality criteria, for example, by having the expertise to deal with Internet-related disputes. The state shall appoint a certain authority to monitor the functioning of ADR entities. The ADR entities in the ODR system are required to resolve disputes and issues within 90 days while the simple ADR procedures will require moderate or no costs for consumers. In order to enhance consumer protection, the States can introduce more rules or maintain the ones stipulated in the Directive for Consumer ADR. Upon the transposition of the Direction into the national law, the ADR entities will use various procedures to mediate, negotiate or arbitrate disputes among traders and consumers. By mid-2015, the EU member states will have shifted to a digital platform both in business transactions and resolution of disputes.28 This trend would be much better than the traditional offline ADR, which is time-consuming, costly and may require transport arrangements even if small disputes are involved. Additionally, creation of the European ODR platform would eliminate the tedious court litigation procedures, which does not yield high levels of consumer protection. Cross-Border Litigation in the EU Cross-Border Litigation in the EU involves the resolution of disputes in courts based in the 47 member states. The most common cases revolve around civil, criminal and commercial disputes where the parties must present their cases to the court or solve their issues using the private alternative dispute resolution (ADR) methods. This section emphasises on the aspect of cross-border litigation in matters relating to the public and businesses. The Online Dispute Resolution is best placed as the only method, which can ease the language and complex jurisdictional problems that arise during cross-border litigation. Cross-Border Litigation is characterised by the use of different languages in the courts. Across the 47 EU member states, there are 23 official languages, which can be used in the court proceedings. This trend in solving cases is problematic because for completion of cases, interpreters are required to translate the legal documents to the litigants. As a result, cases solved through cross-border litigation process often take a long time and consume a lot of money.29 Online Dispute Resolution is seen as the best method to resolve disputes across all the member states because there is a provision that the ADR entities must be familiar with the official languages in the European Union. A good example of cross-border litigation law is the Brussels I Regulation of 2001, which regulates the enforcement of certain judgements imposed by EU member states in commercial and civil matters.30 The Brussels I Regulation is mandatory for all the EU members, unlike its predecessor, the Brussels Convention, which could be ratified to suit the requirements of different states. The Brussels Regulation applies disputes arising between individuals from different European Union (EU) member states. Each member state in the EU has its laws on enforcement. The purpose of the Brussels Regulation is to regulate the enforcements, which might hand down judgements in certain states and ensure that there is uniformity in law enforcement across the EU. In other words, the Brussels Regulation provides rules with respect to certain jurisdiction whereby courts are obliged to hear disputes from litigants of different nationalities. It is important to note that the Brussels Regulation applies to commercial and civil matters, in exclusion of personal status issues, bankruptcy and social security.31 The Brussels Regulation can, therefore, supplement the Online Dispute Resolution in resolving civil and commercial cases. Owing to the fact that there is regulation of enforcement of judgement across all the members hence ODR would be at its best to enforce arbitration agreements made on the ODR platform.32 It seems that some provisions of the Brussels Regulations are advantageous to the ODR in that agreements made are enforceable in the EU member states irrespective of their jurisdictions and laws of enforcements. Conclusion Online Dispute Resolution (ODR) involves the use of information and communication technologies in solving Internet-related disputes as well as the “offline” disputes. ODR resolves disputes through arbitration, negotiation and mediation. Unlike the traditional offline alternative dispute resolution (ADR) and court litigation, ODR offers fast, low-cost and efficient out-of-court resolution of disputes. The speedy resolution of issues enabled by ODR places the method at its best especially in a world where traders are increasing selling their products online and consumers make their purchases electronically. The combination of the Regulation of Consumer ODR and the Directive of Consumer ADR provides an ODR platform through which consumers and traders can place their complaints for resolution by ADR entities. The agreements made on the platform can be enforced across all member states in the EU with the assistance of the Brussels I Regulation, which regulates the enforcement of judgements across the EU. Bibliography Bell Josh, Gomez Ruben, Hodge Paul and Mayer-Schönberger Victor, “Electronic Signature Legislation: An Early Scorecard – Comparing Electronic Signatures Legislation in the US and the European Union” Computer Law & Security Report 17.6 (2003): 399-415. Boom Van, Garde Amandine & Akseli Orkun, The European unfair commercial practices directive: impact, enforcement strategies and national legal systems. (New York: Wiley, 2014). Born G, International arbitration and forum selection agreements: drafting and enforcing, (Austin [Tex.], Walter Kluwer Law & Business, 2010). Carneiro Davide, Novais Paulo & Neves Jose, Conflict resolution and its context: from the analysis of behavioural patterns to efficient decision-making. (London: Oxford University Press, 2014). Cho Soo, International commercial online dispute resolution: just procedure through the internet. (Illinois: University of Illinois at Urbana-Champaign, 2009). CIARB, Adr, Arbitration, and Mediation A Collection of Essays. (London: Authorhouse, 2014). Hill Jennifer, “The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods.” North western Journal of Technology and Intellectual Property 2.1 (2003): 231-251. Katsh Ethan & Rifkn Janet, Online dispute resolution: resolving conflicts in cyberspace. (San Francisco: Jossey-Bass, 2001). Katsh Ethan, “Online Dispute Resolution: Some Implications for the Emergence of Law in Cyberspace.” International Review of Law, Computers and Technology 21.2 (2007): 97-107. Kubota Takashi, Cyberlaw for global E-business: finance, payments, and dispute resolution. (Hershey PA: Information Science, 2008. Magnus U, Mankowski P, Calvo Calvaca A L & Blakeley J, Brussels I regulation. ([München]: Sellier European Law Publishers, 2007). Mann Bruce, Smoothing Some Wrinkles in Online Dispute Resolution, International Journal of Law and IT 17.1 (2009): 83-112. Martin Charles, “The Electronic Contracts Convention, the CISG, and New Sources of E-Commerce Law.” Tulane Journal of International and Comparative Law 16.2 (2008): 467-503. Moffit Michael & Bordone Robert, The Handbook of Dispute Resolution. (New York, NY: John Wiley & Sons, 2005). Patrikios Antonis, Online Dispute Resolution: the Role of Transnational online arbitration in regulating cross-border e-business Part II, Computer Law & Security Report 24.1 (2008), 129-138. Raines Susan, Mediating in Your Pyjamas: The Benefits and Challenges for ODR Practitioners, Conflict Resolution Quarterly 23.3 (2006): 359-369. Rosas Roberto, “Comparative study of the formation of electronic contracts in American law with references to international law” C.T.L.R. 13.1 (2007): 4-26. Rule Colin. Online Dispute Resolution For Business B2B, ECommerce, Consumer, Employment, Insurance, and other Commercial Conflicts. (San Francisco, CA: Jossey-Bass, 2002). Savin Andrej & Trzaskowski Jan, Research handbook on EU internet law. (Cheltenham, UK: Edward Elgar, 2014). Schultz Thomas, Transnational legality: stateless law and international arbitration (Oxford: Oxford University Press, 2014). Solovay Norman & Reed Cynthia, The Internet and dispute resolution: untangling the Web. (New York: Law Journal Press, 2003). Wahab Mohammed, Katsh Ethan & Rainey Daniel, Online dispute resolution: theory and practice: a treatise on technology and dispute resolution. (The Hague: Eleven International Pub, 2012). Wang Faye, “Obstacles and Solutions to Internet Jurisdiction: A comparative analysis of the EU and US laws.” Journal of International Commercial Law and Technology 3.4 (2008): 233-241. Wang Faye, “The EU Regulation on Consumer ODR and EC Directive on Consumer ADR (2013): The Rise of ODR/ADR for Resolving Intellectual Property Disputes.” Intellectual Property Forum 94.9 (2013): 93-98. Zekoll Joachim, Balz Moritz & Amelung Iwo, Formalisation and flexibilisation in dispute resolution. (Leiden: Brill, 2014). Read More