Technology is insinuating itself into every area of our lives, changing our notions of how global society should operate, and how we resolve disputes will be no different.

ODR, like ADR, is a range of processes. ODR is a how not a what.

Most dispute resolution processes will likely migrate online, and ODR will be relevant to almost every kind of dispute. Professor Frank Sander’s concept of the multi-door courthouse is an apt model for ODR systems designers because online processes can offer a nearly infinite range of “doors” customized for nearly every kind of dispute. In addition, Professor Sander’s suggestion that ADR providers “fit the forum to the fuss” is also particularly relevant to ODR since there are both more “fusses” and more “forums” in the online environment, necessitating a wider range of redress processes to handle the broader spectrum of potential issues.

You may also find this interesting, Trust and Security in Online Dispute Resolution.

More Disputes

The demand for ODR comes mainly from the growth of online disputes, such as from eCommerce transactions or “on-demand economy” disputes that cannot be managed face-to-face. There is also likely an increasingly inadequate supply of mediators and arbitrators as the numbers of disputes increase and where face-to-face options might be available, but the disputes involve low values.

The following assertions contain a number of hypotheses about the growth in the number and range of disputes. The first assertion is verified largely by what we know about eCommerce disputes. Still, at least some of the other assertions in the list represent untested hypotheses and provide a framework for future research.

1. The number of disputes increases whenever transactions and relationships increase.
2. The more novel the activity, the greater the likelihood of disputes. The first iteration of an innovative product or activity rarely anticipates all the disputes it will generate.
3. The more valuable the item or issue in question, the more likely it is a problem or grievance will turn into a dispute.
4. The more data that is collected, processed, and communicated, the more opportunities for disputes. The more data that is collected, the more bad data there is.
5. Speed and time pressures lead to disputes. If value is likely to erode quickly, as is often the case with technology, pressure to protect and aggressively extend its value increases.
6. Increased complexity in relationships and systems creates more opportunities for disputes. In the words of computer scientist Peter Neumann, “Complex systems break in complex ways.” When informing shareholders about a federal investigation of problems in correcting errors, Experian stated, “We might fail to comply with international, federal, regional, provincial, state or other jurisdictional regulations, due to their complexity, frequent changes or inconsistent application and interpretation.”
7. The easier it is to complain (by filling out an online form or sending an email), the more disputes there will be.
8. The lack of transparency in algorithms leads to disputes.
9. The less attention given to preventing disputes, the more disputes there will be.

More on causes of disputes in construction: 8 Examples of Small Disputes in big Construction.

More Forums

Alongside the challenge of more disputes is the opportunity for developing more and novel avenues for resolving disputes. “More” does not simply mean a larger selection of what is already in existence. “More,” in this context, translates into the adoption of digital tools and systems that provide solutions to problems (small and large). And it is the use of information technologies in new ways that anticipate and prevent disputes.

By generating more disputes, technology has made access to injustice easy. Technology also presents opportunities to develop new forms and formats that facilitate access to justice. While some private companies may resist providing data about numbers or types of disputes handled, all have some incentive to provide information about the processes they employ to handle disputes. Facebook, for example, provides a series of screenshots of the process one can use to file a complaint.

The increasing number of ODR companies and governmental entities are also likely to post descriptions of their systems. There has recently been a growth spurt of ventures that are either already in operation or in various stages of development. They are all likely to serve as data sources. These include the following:

1. Private firms: Modria, Youstice, SmartSettle, Picture it Settled, Mediateitonline.com, NetNeutrals, Virtual Mediation Lab
2. The Hague Institute for Innovations in Law (HiiL)
3. British Columbia Civil Resolution Tribunal
4. UNCITRAL
5. EU Directive on ODR
6. UK Online Small Claims Court
7. Stop Errors in Credit Use and Reporting (SECURE) Act-Proposed legislation in the United States to facilitate error correction in credit reports.

17 Opportunities Distinguishing ODR from ADR

ODR presents so many novel capabilities and opportunities for dispute resolution that it requires a new research agenda to better define its optimal application. Simply applying prior face-to-face models for processes and ethical rules is inadequate.

There are many unanswered questions around ODR, and it will take time to both define the necessary questions and analyze data collected from ODR to determine best practices. While many new research needs will likely become apparent over time, here is an initial list of the issues researchers will need to tackle in the near future to distinguish ODR from traditional ADR practice:

1. What will be the dispute systems design in the online environment?
2. Models for building trust, convenience, and expertise via technology
3. Skills needed for effective ODR service delivery
4. Use of data for prevention of disputes when ODR provides much earlier access to disputants in the overall dispute lifecycle
5. Similarities and differences between technology-assisted negotiation and mediation
6. Areas of overlap between ODR and ADR, including the optimal use of technology inside of a face-to-face dispute resolution process
7. Use and role of apology in online processes
8. Sense of participation and voice in asynchronous, text-based interactions
9. Statistics on the percentage of agreements reached and upheld, especially in comparison to ADR and particular forms of ADR. There is a long-standing statistic that face-to-face mediation leads to agreements in approximately 85-90% of the time. Is online mediation similar? What variables can be isolated in online mediation that can affect the success rate?
10. Demographics: What are the demographics of those who are providing ODR? Is ODR replicating the same demographic patterns that ADR has been consistently critiqued for over the past 30 years: mostly white middle-class people providing services, especially when they are volunteers, for lower-income populations, disproportionately urban people of color? Is technology making headway in broadening who is giving and receiving services?
11. Breadth of data collection: it should be easier to gather data from a broad range of sectors (family, commercial, criminal, civil, education, environmental, public policy, etc.) and from across the globe. This will provide very useful comparative data. It can also provide a valuable overview of the landscape by types of technology, type of demographic, type of dispute resolution process, etc.
12. What types of technologies are being used most (i.e., video conferencing, texting, emailing, mobile phones, chat rooms, etc.)?
13. What barriers have people experienced in adopting technology or employing ODR for neutrals, for disputants? Breaking down these categories by demographics such as gender, age, race, ethnicity, language, and – for disputants – being a respondent or complainant, being an individual or a business, etc.
14. What types of processes that involve dispute resolution, but are not typically seen as ADR, are increasing in use with the help of technology? One critique of the ADR field, from those external to it, is that there are other professions that handle disputes that have not usually been included in “the ADR profession” but are routinely turned to for handling disputes. This has narrowed the field and the professionalization process. Since ODR provides even more opportunity for inclusion, access, and creativity, it is an opportunity to gather data that would help us learn about who and how people are using technology to resolve or prevent disputes.
15. Links between the collection of data in ODR and access to justice
16. Transparency in face-to-face processes versus ODR use of algorithms
17. How to conduct effective training in ODR, how it differs from ADR training, and whether ADR training should be a prerequisite for ODR practitioners

Conclusion

Looking into the future, it is clear that the lines between ODR and ADR will continue to blur until it is very hard to tell one from the other. Technology is insinuating itself into every area of our lives, changing our notions of how global society should operate, and how we resolve disputes will be no different. Eventually, ODR may be how we resolve most of the problems in our lives, with algorithmic approaches even more trusted than human-powered resolutions.

The only question is how long this transformation will take to play out. The pace of that change will largely be determined by how quickly we can consolidate the lessons learned from ODR projects to date and conduct new research to answer the remaining questions about how ODR can be made most effective. A decade ago, the notion of ODR as the default means of redress for both online and offline disputes sounded like science fiction, but with the pace of technological change, such an assertion now seems most likely.

At some point soon, it may seem obvious that such an outcome was inevitable. Human ingenuity has found solutions to previously insoluble problems for many decades. Now, as we wrestle with the ramifications of a fully and digitally connected world, we face new challenges that were unimaginable a generation ago. 

The post What Do We Need to Know About ODR? appeared first on ODR Guide.

A brief overview of the major methods of ODR, how they operate, how much they cost, and how successful they are.

ODR Methods

Online dispute resolution (ODR) is the method of dispute resolution where the major part is provided online. Most ODR methods are ADR that is provided online (i.e., they are alternatives to litigation and state justice). But not all the methods are shared by the two. Online courts, for instance, are also ODR.

The procedure does not have to happen entirely online. It would be too strict to exclude an ODR mechanism that only sends a paper copy of the agreement or the award or which accepts evidence provided offline.

You can also review detailed article on ODR here: Online Dispute Resolution: The Advantages and Disadvantages

ODR: Sui Generis Methods or ADR?

When one intends to develop, promote, or research an ODR system, there are two ways of proceeding. First, one can focus on the specifics of cyberspace and the special possibilities it offers, such as automation or facilitated access to information. It also imposes special constraints, due, for instance, to the lack of confidence many have in the online environment.

Second, one can ‘simply’ transpose traditional ADR methods into the online environment and then analyze how far the process must be adapted. In mediation, for instance, parties must be able to vent, and appropriate communication tools must be provided.

The first approach somewhat considers ODR a sui generis dispute resolution method. Sui generis is Latin for of its own kind. And in legal terms refers to a form of legal protection that exists outside typical legal protections.

 It has the benefit of taking the highest advantage of the possibilities offered in cyberspace by focusing on the core problems of dispute resolution.

But, it tends to have two main drawbacks: the insertion of ODR decisions into legal systems and the lack of lessons drawn from ADR.

The first drawback is particularly obvious in hybrid forms of arbitration. The decisions would not be characterized as arbitral awards under most arbitration laws.

The lack of lessons drawn from ADR affects all methods of dispute resolution that resemble a form of ADR, in that ADR literature and practice have improved the quality of justice of these offline forms of dispute resolution.

The second approach, which somewhat considers ODR to be ADR with some specific communication tools, has the benefit of focusing on the legal instruments developed for ADR, such as arbitration convention or the due process protocols.

The main drawback of this approach is that it is confronted with legal obstacles. In arbitration, it is still doubtful whether an arbitral award will be recognized and enforced by state authorities.

Online Negotiation

There are two forms of online negotiation: automated negotiation (aka blind-bidding) and assisted negotiation (aka facilitated negotiation). In automated negotiation, parties submit their settlement proposal in the form of a monetary figure which is not communicated to the other party.

A computer compares the offer and the demand. When they are within a given spread, the computer reaches a settlement for the arithmetic mean of the two figures.

If the figures are not within the given spread, the parties are asked to enter a new settlement proposal until the number of rounds or the time limit has expired.

In assisted negotiation, the parties are assisted by online facilities. They communicate with one another over the internet.

The providers also offer directives for developing agendas, identifying and assessing standard solutions, and writing agreements. They also provide storage means and secure sites.

Automated negotiation is quite successful. However, it is restricted to purely monetary disputes. Assisted negotiation, on the other hand, is extremely successful. SquareTrade, which has the highest caseload in ODR, handled over 225,000 thousand disputes between February 2000 and April 2019.

The fees for automated negotiation are usually determined based on the settlement amount and split between the two parties.

For a settlement amount below $20,000, the fee is typically around $100. The fees for assisted negotiation are often covered by annual membership or Trustmark fees or are charged hourly.

The fee range is between $50 and $300 per party and per hour. Time limits in automated negotiation vary between 30 days and 12 months.

In assisted negotiation, time limits are infrequent; when time limits are set, they vary between 18 and 35 days.

Online Mediation

Online mediation is simply the online form of traditional mediation.

A neutral person with no decision power tries to bring the parties to an agreement using one of the styles developed for traditional mediation, such as facilitative or evaluative mediation. The only difference is they communicate online. 

References to guidelines for offline mediation are, however, infrequent. Although the number of ODR providers offering online mediation is high, the caseload is seemingly rather low.

Although mediators frequently advertise with settlement rates and the number of disputes solved, almost no indication can be found on the websites – at least not easily.

The range of disputes that can be handled by mediation is very wide. Legally, mediation is open to all issues that a contract can settle.

Nevertheless, as electronic communication brings depersonalization, it presents a particular challenge to emotionally charged disputes, such as family law issues or when physical harm has occurred.

Fees for online mediation are usually computed hourly and range from $50 to $250 per party and per hour. Time limits are rare in online mediation, but they vary between four hours and 60 days when they are present.

Online Arbitration

Online arbitration is similar to traditional arbitration. A third party chosen by the parties or nominated by the institution chosen by the parties renders a decision on the case after hearing the relevant arguments and seeing the appropriate evidence.

A detailed article on the difference between online and offline arbitration can be reviewed in Online and Offline Arbitration: What is the Difference?

The main difference, in addition to the online communication of all parties, is that non-binding arbitration is much developed online.

Traditional arbitration produces awards that have a binding force similar to a judgment. Online, non-binding procedures are often proposed and often used.

The most notorious example is Uniform Domain-Name Dispute-Resolution (UDRP).

Whether they should actually be called arbitration may not be so important. Online non-binding arbitration would probably fall under the U.S. Federal Arbitration Act. They would certainly not fall under the European laws of arbitration.

Their non-binding character excludes recognition and enforcement by definition. More important are the advantages and drawbacks attached to both forms of online arbitration. More about the new york convention.

In online arbitration, the parties usually communicate by email, web-based communication tools, and videoconferences.

There are more than 25 ODR providers that offer online arbitration. In most cases, binding and nonbinding arbitration are available, but some providers restrict their services to the non-binding form.

The caseload of online arbitration seems to be highly dependent on the binding character of the outcome. Binding online awards seem to be extremely infrequent, whereas thousands of non-binding decisions have been rendered (most have actually been rendered under the UDRP).

The business contexts are also different depending on the binding character of the decision. The scope of arbitrability is restricted in some arbitration to protect the weaker party, while non-binding arbitration does not raise questions of arbitrability. Fees for online arbitration are usually the same as for mediation.

They are mostly charged hourly and range from $50 to $250 per party and per hour. Under the UDRP, fees range from $1,500 to $4,000, depending on the number of domain names at stake and the number of panelists.

The fees are borne by the complainant, except when the respondent chooses a three-member panel.

There are usually no time limits in arbitration, but they vary between four hours and 60 days when there are. In the UDRP, there are several time limits bringing the procedure to an average of two months.

More about online dispute resolution here;

Other ODR Methods and Online Courts

Traditional ADR methods provided online represent the majority of ODR methods. But other less represented categories exist, such as online courts, online juries, and claim assistance.

These processes are part of the ODR movement because they provide their services almost exclusively online and seek dispute resolution.

Although online hearings are not yet provided at any court of justice, an increasing number of courts accept online filings. In Hamburg, for instance, the parties have been allowed to file their claims online since May 1, 2002.

One month earlier, the UK launched a service called the Money Claim Online Pilot, which allows the parties to only meet offline in a local court if the defendant decides to challenge the claim.

More about ODR in the UK, UAE and Canada is elaborated here; Online Dispute Resolution in the UK, Canada and UAE

There are also a few projects of proper online courts where the filings, hearings, and testimonies will all be held online.

There are two such projects in Asia, one in Malaysia called the International Cyber Court of Justice, and one in Singapore. Only limited information is available on them.

A widely developed project is the Cyber Court in the state of Michigan. The Cyber Court, which began operating on October 1, 2002, will handle disputes involving IT, software, websites, or trade secrets, and it will operate voluntarily. The proceedings will be conducted through web-based communication and videoconferencing.

Mock-trials with online juries are also a form of ODR. On a website, a case is displayed, a jury is formed, and the parties can reality-test their case exclusively online.

Providers of ODR methods often also offer additional services, such as complaint or claimant assistance (i.e., support in the search for counsel, forwarding complaints to trust-marked traders, or calling on them to take action).

Other providers offer dispute prevention services, such as checking employees before employment, standard business contracts and forms, and training employees and employers. Legal literature or portals to other services are also often provided.

An important additional service is trust marks or seals.

They help bring the parties to ODR and enforce the subsequent case outcome.

The post Online Dispute Resolution: An Overview appeared first on ODR Guide.

The issues in ODR are numerous. They influence many aspects of ODR, such as feasibility, utility, ethical implications, and acceptance in legal and economic communities.

All of these issues are discussed and examined to see how we can overcomes the drawbacks of online dispute resolution (ODR) for global adoption and acceptance.

The following article is extracted from the United Nations Economic Commission for Europe Forum on Online Dispute Resolution – Geneva, 6-7 June 2002,” Online Dispute Resolution: an Overview and Selected Issues” by Thomas Schultz.

You may want to quickly refresh your knowledge on ODR here; Online Dispute Resolution: An Overview and on Arbitration here; Online and Offline Arbitration: What is the Difference?.

Obstacles to Binding Online Arbitration

In the current state of legislation and practice, there are many obstacles to resolving a dispute through arbitration proper provided online. Obstacles arise at almost every stage of the process: the agreement to arbitrate, the arbitration procedure, and the recognition and enforcement of the award.

Validity and laws affecting the dispute

Agreements to arbitrate online face problems of validity and enforceability. First, most national laws and international conventions still require the arbitration agreement to be in writing.

Their current interpretation does not include its being recorded by electronic means. But agreements to arbitrate online are usually entered into online.

Although it is certainly time to recognize that an electronic document can be the functional equivalent of a paper document. This leads to some technical difficulties. 

The electronic document must include the identity of the parties, the agreement itself, and the content of the agreement. This information must be stored in a manner allowing its accessibility for further evidence and its admissibility as evidence.

This information must be stored using a technology that permits long-lasting compatibility and which excludes any serious risk of manipulation of the stored data. This raises technical issues, which causes legal controversies as the technological means employed may be characterized differently under different laws.

Enforceability of dispute awards

The second issue is their enforceability. Many arbitration laws limit the arbitrability of disputes where the parties have substantially different bargaining powers. They seek to protect tenants, employees, or consumers.

Since the near future of ODR is likely to involve primarily business-to-consumer (B2C) transactions, many current arbitration laws are obstacles to the development of online binding arbitration.

This problem may be overcome by using unilaterally binding arbitration agreements that would bind only the stronger party, leaving the weaker party free to decide whether to litigate or arbitrate.

But, in some cases, unilaterally binding clauses have also been held not enforceable on the basis that if one of the parties is not bound, none are.

The arbitration procedure faces obstacles of due process and electronic evidence. With due process, the problem is that one of the fundamental characteristics and advantages of ODR is speed, which implies simplified procedures and less formalism. But too few opportunities to be heard are a possible jeopardy to due process.

Exactly how much one can expedite an arbitration before violating due process requirements, meaning the award risks being set aside in court, is not a clear matter.

As electronic evidence is concerned, the issue is how to create a communication scheme allowing proportionate and effective means for the receipt of evidence. The basic principles are that the communication scheme will permit the production of documents that authenticate the identity of the parties at the time of the transaction and during the ODR procedure.

This shows that a file or program has been entirely transmitted to the buyer in the case of an online contract. And it shows the contents of a record have not been manipulated.

Recognition of the dispute award

Finally, online awards face problems of recognition and enforcement. For instance, under the New York Convention traditionally interpreted, the party moving for recognition or enforcement must supply an award that is in writing, signed by a majority of the arbitrators, and is either the authenticated original or a duly certified copy.

These conditions could be met if electronic documents qualify as writing and if an electronic signature is used because it authenticates the sender as well as the content.

But these solutions do not correspond to the current wording of the New York Convention, nor to its common interpretation. In addition, the question arises of who should send the award to the authority in charge of recognition or enforcement.

If it is the moving party, the is a risk of manipulation, because the document has been in the electronic storage of the moving party. Even if the document would be ‘frozen’ in its repository by technological means to ensure its authenticity, this does not inspire much trust.

The award could also be sent by the arbitral institution or the arbitrator(s), but they may no longer be available at the time of the recognition or enforcement. Another solution is to have the award sent by a trusted third party, such as a cybernotary or a centralized registry record.

This last solution may be the best, because such a third party could easily be state-controlled and would thereby run less risk of ceasing activity. Finally, the award must be notified to the parties, but the current email protocols are not able to produce proof of receipt.

For the perspective of UNICENRNREAL on recognition of awards, here.

Effectiveness of Non-Binding ODR Methods

Several problems encountered in online binding arbitration disappear when the process is made nonbinding. Globally, non-binding methods of out-of-court dispute settlement are subject to only a few legal formalities. They do not significantly restrict the parties’ access to state justice. Non-binding means not binding like a judgment: the case outcome can be binding like a contract, or not binding at all.

In non-binding arbitration, this usually means the parties have a right to demand a trial de novo. The most common forms of non-binding ODR are negotiation, mediation, recommendation, and non-binding arbitration, such as the Uniform Domain-Name Dispute-Resolution Policy (UDRP). But if non-binding methods are characterized by their formal liberalism, they are also characterized by a specific problem: the enforcement of their case outcomes.

If the losing party in a non-binding ODR procedure is unwilling to comply with the case outcome, one of two things can happen. If the decision is not binding at all, there is usually nothing the winning party can do to have the decision enforced.

If the decision is binding like a contract, the winning party will have to enter a judgment to enforce the outcome. This will produce costs and delays that may be high enough to deter the winning party from seeking enforcement.

Yet other solutions may be at hand:

one can either still hope for unforced compliance or one can implement alternative mechanisms of producing binding force. Unforced compliance to a case outcome produced after sound online proceedings is in fact not unlikely.

Non-binding arbitration may very well be seen as both an “advisory opinion” and a place to vent. As an advisory opinion, it helps the parties to reassess their own opinion on their position. They can test their arguments in a “trial run” and evaluate the likely outcome of adjudication.

As a place to vent, it may provide some catharsis. It may help alleviate anguish and aggression through expression and revelation. For both of these effects to take place, it is important that the parties feel they have obtained a fair hearing, and they have been handed down a decision from an expert third party who is truly impartial.

The most striking examples are UDRP decisions, the compliance rate of which is extremely high.

Possible solutions for increasing effectiveness of ODR providers

The same opinion applies a fortiori to negotiation and mediation: the parties have had a place to vent, in mediation an impartial third neutral has heard their position, and they have agreed to the decision. Alternative mechanisms of producing binding force are of one of two kinds: they can either create incentives to perform or they can provide for the self-execution of the case outcome.

In both cases, the principle is that the ODR provider ensures control of the resource that is valuable to the parties, usually money, but it could also be a reputation or a domain name.

Currently, the main form of creating incentives to perform is to trustmark web traders. A trustmark is a logo displayed on the website of the trader informing the customer that the trader has committed to complying with a number of qualitative standards or best business practices, including for instance a redress mechanism.

The trader can commit to comply with all case outcomes of a specific ODR procedure. If the trader does not execute the outcomes the trustmark is removed.

This presupposes that the allocation and the removal of the trust mark is controlled by the ODR provider, either directly or indirectly by networking with the controlling entity. The incentive to execute the decision is in this case created by the possible removal of the trustmark.

How strong this incentive would actually be is difficult to assess because the importance of a trustmark for a website is not easy to evaluate. A trustmark is meant to increase  the trust and confidence of customers in a web trader. Most people using the net declare that they would be reassured by a trustmark.

Some governments advocate for them, and many authors emphasize their importance for e-commerce. But how important is this really for the trader?

Whether it is important enough to confer jurisdiction to an ODR provider, remains doubtful. Mechanisms for the self-execution of decisions are for instance escrow accounts, judgment funds, transaction insurance mechanisms, links with credit card companies, and technological tools which enforce the decision.

With an escrow account, the buyer first submits payment to the escrow company, who verifies the payment and then authorizes the seller to ship the merchandise. The escrow company tracks the shipment and a set number of days after reception pays the seller. The escrow company acts as a secure third party holding an account on which the money transits.

Control of funds by ODR provider

In the system of judgment funds, the fund is collected prior to the dispute resolution procedure. When an agreement is reached or when a decision is rendered, the awarded sum of money is taken from the judgment fund. If the ODR provider controls this fund, he can execute the outcome of his procedure himself. The ODR provider can also ensure the parties when a solution to the dispute is reached, the provider pays the winner directly, and afterward reclaims this sum of money from the losing party.

Credit companies can operate as self-execution mechanisms in this manner: the ODR provider makes a contract with the credit card company to which the right to charge-back is determined by the outcome of the ODR procedure.

The cardholder is allowed to chargeback the trader if the ODR panel has decided so. Technological tools for the self-execution of ODR case outcomes are only possible in very specific circumstances.

The UDRP provides such a mechanism: ten days after the decision (subject to a party bringing court proceedings), the domain name is canceled or transferred by the registrar of the domain name who is contractually bound to do so.

The technological tool that does this is the control by ICANN of the database that converts domain names into IP addresses. If a domain name registrar wants his domain names converted into IP addresses, he has to accept the conditions set by ICANN, among which is the commitment to execute all decisions rendered by an ICANN-approved dispute resolution institution.

If the dispute is of low economic value, it is unlikely the losing party would seek to litigate after a decision has been self-executed.

Financial Structure of ODR Providers

In addition to the requirements of due process proper to arbitration proceedings, the providers of ODR must ensure that their financial structure does not cause problems of independence. In the current context of ODR, the funding of the provider seems to be the major problem regarding independence and impartiality. The problem is that a for-profit ODR provider and most providers are for-profit, must produce a viable income, keep user fees low enough to be proportionate to the amounts in dispute, and not be funded by a source that would raise legitimate concerns about independence.

External sources could be a university, governmental or non-governmental organization, or consumer association. Such funding provides the best guarantees for independence and impartiality because it is largely independent of vested interests. But, such a source of funding seems difficult to secure.

Bilateral user fees

Bilateral user fees are easy to implement, but they are problematic in usual B2C and customer-to-customer (C2C) cases. They are either too low to cover the actual costs of the provider, fees, and costs of the neutral included, or they are too high compared to the disputed amount. Such funding is a reasonable solution in B2B cases and in large B2C cases, but these cases are probably still infrequent in ODR.

Unilateral user fees

When the fees are charged unilaterally on the business or when they are charged bilaterally but on widely unequal terms, a sufficient income can easily be produced while keeping the fees low for the consumer. However, an appearance of bias inevitably arises. But even in case of problematic funding, there are safeguards that can be implemented to limit the risk and appearance of impartiality.

Such safeguards can be implemented at least at the levels of the panel composition, the architecture of the provider, and the dispute resolution process at large.

The panelists must be selected in a manner that balances the different interests that inevitably arise in such a procedure. The provider may wish to favor one type of party, for instance, the complainants if they are the party who chose the provider.

Each party has an interest to choose a certain type of panelist. The best solution in this respect maybe a three-member panel appointed from a panelist roster which applies strict rules of independence. The architecture of an ODR provider may offer some guarantees of independence, for instance by providing an appellate process by being trustmarked or by displaying a balanced stakeholder representation.

Monitoring the ODR Provider

The process must for instance be organized according to strict procedural rules, and it must be globally transparent. The publication of the case outcomes also allows the monitoring of the general activity of a provider. But, the publication of case outcomes is a controversial issue.

First, it is controversial because it may deter some parties from participating while being a  positive incentive for others. On the one hand, some businesses may not want to disclose some of their disputes, because it means bad publicity. On the other hand, consumers may prefer that web traders are named and shamed.

Second, the publication of case outcomes is controversial because it may facilitate forum shopping. Forum shopping is rationally selecting an ODR provider who tends to rule in the favor of the party who selects the provider.

This party being either the complainant or the party with the highest bargaining power. If the parties are able to choose the provider they wish, and in cyberspace they are not limited by geography, this will certainly produce a price competition. But it will also produce a competition to attract future cases (to increase income or reputation).

Attracting future cases is done in part by showing a practice of ruling in favor of the party who selects the provider. The publication of case outcomes can then be used to monitor the practice of the ODR providers, and the party who can choose will avoid ODR providers which have an unappealing practice.

This in turn will lead to a race to the bottom in accommodating the desires of the party who chooses the provider.

This negative by-product of the publication of case outcomes may, however, be avoided by implementing still another safeguard: an ODR provider clearinghouse. The parties could refer to a central authority, the clearinghouse, which would select the appropriate provider for their case.

Technological Architecture of ODR Systems

From a technological point of view, ODR is simply a specific web service. As such, the likelihood of its use and effectiveness is at least partly determined by its technical features and architecture.

Most services offered on the web must be easy enough to use in order to be available to as many people as possible. It must be adaptable to persons who may not be using standard equipment or may be disabled. It must be able to interoperate with other web services, and it must properly secure sensitive data and communication.

This obstacle is especially significant for countries where technology is less accessible. But divides also exist in countries where the internet is more commonly used.

Such divides exist between low-tech users and high-tech users, between parties who can afford substantial investments of time and costs in dispute resolution, and between repeat players and one-shot players.

Obviously, the fewer people excluded by such a divide, the more such a system will be used and will be successful.

If an ODR service is to be accessible by low-tech users, it must be exploitable by tools as elementary as possible. For instance, parties must be able to participate in an ODR procedure even if they only master email.

If it is to be accessible to parties who can only afford small investments in time and money, the system must be operational without the parties having to study in detail how the system works and without them having to acquire expensive software or hardware.

If an ODR service is intended for one-shot players, it must be very easy to figure out what the system offers, how one must proceed, and what its advantages are. In other words, for a system to meet the largest possible users, its architecture must be as simple as possible.

In addition, the simplicity of the architecture of an ODR service induces trust. It allows the costs to remain relatively low. It levels the playing field, and it eases the monitoring of the procedure by the parties.

Simplicity is a necessary condition for an ODR system to be easily accessible and to be successful.

But in many cases, it may not be a sufficient condition. Some parties and some disputes require specific communication capabilities.

In addition, evolution can be expected regarding the disputes handled, the technology at hand, and the parties involved.

ODR systems must be adaptive, in terms of system architecture and applications to new conditions of interaction with users.

Drawbacks of ODR systems

The particularities that ODR systems have to be able to adapt to are for instance spontaneity, typing and technical skills of the parties, time zones, emotional stress, socioeconomic and cultural differences, or the scale of investments by the parties that is reasonable and feasible.

In some cases, real-time communication sessions, be it by email or web-based communication tools, are best because they force the parties to be more spontaneous.

In other cases it creates power imbalances, such as when parties have different typing skills. Sometimes, holding conversation in a turn-based and delayed manner, like one day between each communication, is best because the parties live in very different time-zone or because it reduces the risk of the parties overreacting to statements of the other party.

Sometimes videoconference is needed because it reveals details of cultural and ethnic background, age, and gender. Moreover, complex proceedings will be easier to implement in ongoing relationships where both parties are repeat-players.

An evolution that can be expected, and to which ODR systems will have to adapt, is that ODR methods will be used in more diverse contexts and in more complex disputes with higher amounts at stake.

Requirements for successful application of ODR

ODR is likely to extend to multiparty and multi-issue disputes. It will have to allow witnesses, legal counsels, and experts to participate. As a consequence, more sophisticated and powerful applications will be developed, and ODR systems must be adaptable enough to use them rapidly.

Sometimes the parties and the dispute require a higher intervention of what Katsh and Rifkin call the “fourth party,” applications that help the third party “enforce, draft, survey, evaluate, schedule, store, and discuss.”

An ODR system must also be able to interoperate with other systems. Information has to be exchanged with web traders and possibly with courts.

The ODR proceedings have to be linked with prior and subsequent events and procedures. Evidence has to be gathered, and the enforcement authority has to be contacted. For these communications, data exchange standards are necessary.

The data collected on the website of the trader can easily be used by the ODR provider, and the agreement or decision can easily be sent to a court or any other entity.

Sometimes cases have to be transferred from one provider to another or from a mediator to an arbitrator. Such data exchange standards are technically called “Exchange Markup Languages,” or XML88 and in the ODR context ODR-XML. Much work has been done to promote the interoperability and transferability of cases by the Joint Research Commission of the European Commission.

Finally, an ODR system must be secure enough to protect the parties’ interests and induce confidence in the dispute resolution mechanism. The features to be protected are the transmission and storage of information. The risks against are the access of the information and a fortiori, its alteration.

There are several tools to protect the transmission of information. Emails, for instance, can be protected by digital signatures, by the Secure Multipurpose Internet Mail Exchange Protocol (S/MIME), and by Pretty Good Privacy (PGP).

Unfortunately, digital signatures and S/MIME require a certificate which is often too expensive for small transactions. PGP is difficult to install by laymen. Web-based communication may be easier to protect by using the Secure Sockets Layer (SSL) which secures the Hypertext Transfer Protocol.

For the protection of stored data, the most frequently used devices are firewalls, some of which are freeware.

Globally, secure emails are used less frequently in ODR systems than protected web-based communications and firewalls. Security is still a major aspect of online confidence and trust.

But although it is true that absolute security online is not possible, that it is always limited in time, that a system is only as secure as its weakest link, and that, on the internet, everything can be faked, one must keep in mind that in the offline world security is never perfect either.

ODR still has probably as many obstacles as it has advantages, and these obstacles would benefit from being addressed before the current enthusiasm disappears.

The post Online Dispute Resolution: Obstacles and Solutions appeared first on ODR Guide.

Users of ODR must have a feeling of trust and security in the system.

“Trust” has deep roots in dispute resolution, and stretching it to include technological aspects has strained its meaning somewhat. Likewise, “Security” has deep roots in the field of computing and online communications, but applying it to issues in dispute resolution requires some refining. We believe there are four categories of trust as it relates to Online Dispute Resolution (ODR).

For more interesting articles about key issues for the success of dispute resolution methods; Key Issues for Successful Online Mediation.

The following article was extracted from the Hamline University’s School of Law’s Journal of Public Law and Policy – Volume 36 – Issue 2 – Fairness, Trust and Security in Online Dispute Resolution, by Noam Ebner and John Zeleznikow.

1. ODR as a Trust Provider/Facilitator

Incorporating ODR into systems such as e-commerce is expected to raise consumers’ level of trust in the system. The continuing development of the internet, from a financial perspective, has always depended on the success of e-commerce.

This, in turn, is absolutely dependent on trust. Colin Rule’s statement summarizes this fragile condition,

2. User’s Trust in ODR

ODR must be marketed. Its technology must be constructed so that the public will trust it as an efficient and effective way of managing their disputes. This is no small challenge. All forms of ADR have, historically, encountered public distrust at one point or another.

In our experience, conducting these processes online often kindles strong distrust even from practitioners of ADR. Many view dispute resolution as a process requiring warmth and human interaction. Professionals may find it hard to imagine that internet communication – seen as cold and distance-creating – could support the process.

There is no reason to expect higher levels of trust amongst the general public. As a field, ODR must convince users that they can trust that technology will be used benevolently or, at least, in a  neutral manner. Practitioners must convince the user that the technology will:

 a). will not fail or freeze-up

b). will be able to support their dispute

c). will be competent in performing as promised

d). will not involve time or costs beyond what the consumer envisions

e). will be, in general, user-friendly

3. Interpersonal Trust

Parties utilizing ODR experience many areas of distrust. There is a level of distrust inherent in most conflict situations. There is also distrust between parties and between the parties and their neutral. All of these are triggered by the nature of online communication and of the online environment.

4. Trust in Content Offered by the System

If an ODR system is going to provide advice about dispute resolution norms (such as the outcomes of similar cases, information regarding the legal or marketplace norms affecting the dispute, or likely court outcomes), how can trust in the advice be enhanced? Untrusted advice will not have the effect the system was designed to encourage.

If the system is going to advise about trade-offs or optimizing agreements, how can we ensure a sufficient degree of trust in the processes? If the system is going to provide an outcome (such as the result of an automated blind bidding or an automated decision on whether the type of claim raised is legitimate or is actionable in the first place,) how do we enhance users’ trust in these outcomes?

Obviously, a powerful connection exists between users’ trust in the content and the degree to which the system is perceived as “fair.” This demonstrates the need for close examination of these concepts and the ways they interact in ODR systems.

Security in Online Dispute Resolution

Similar to the term “trust,” “security” has applications in the world of computer science as well as in ADR. The world of computing has always been interested in protecting systems and data from malfeasant access. As the internet developed, new forms of threats to systems and data have emerged, resulting in a never-ending cycle of security measures and breaches.

In traditional mediation, the term “security” might be related to information security, such as confidentiality or privilege (which the law often grants to protect mediation conversations, documents, and testimony from making its way into the courtroom).

In addition, the term security might denote a sense of wellbeing and comfort. This might span “emotional security,” where parties feel safe, in competent hands, dealing with a neutral they can trust.

They feel protected from their counterparty’s abuse. It might also be related to physical security – in the sense that the setting and the ground rules are designed to prevent things from getting out of hand (e.g., in situations where violence is/has been an issue).

As these worlds converge in the practice of ODR, it is important to separate different connotations of the term. We have developed a framework for differentiating between the four types of security:

Get up to speed on ODR in Online Dispute Resolution: The Future of Justice

1. Information Security: 

This is the security of the ODR process in terms of protecting parties’ information from being shared by outsiders. Included are familiar dispute resolution issues such as a mediator’s duty to keep what she learns to herself, parties’ contracting with each other to keep a process confidential, and the legal notion of privilege, protecting information from being uncovered by parties or judges in the course of a legal process.

2. Data Security: 

This focuses on the protections set in place around the communication channels, the software, the servers, and any hardware used for ODR. Such protection aims to prevent external people from hacking the system and obtaining non-public information, whether this is directly related to a dispute or not. Additionally, focusing on this aspect of security would suggest internal limitations be in place ensuring that parties or their neutrals cannot access areas or information they are not allowed to view (e.g., protecting a conversation held in a private caucus chat room between one party and a mediator from being viewable by the other party).

3. Personal Security: 

Here, security is providing safe and clearly defined processes to protect users from actual harm, whether physical or emotional. In ODR, the risk of physical harm is reduced because of the parties’ physical separation. ODR can serve an important function in providing ADR services in cases where there is the potential for domestic violence. For this reason, we have noted that some disputants want to use ODR but prefer not to utilize available video conferencing. The reduced social presence of their counterparty, it seems, lends to an enhanced sense of personal security on an emotional level.

4. System Security: 

System security is the degree to which users feel confident that the ODR service they are using – the technological platform or its human operators – is not utilizing their information, participation, behavior, or data in any way. Specific uses that a user might be concerned about or might certainly like to be consulted about might include:

1. using their data without permission;
2. using data in ways they might not like;
3. data mining for any purposes;
4. learning about conflict behavior (beyond what is needed to service their dispute)
5. Learning about bargaining behavior (beyond what is needed to service their dispute);
6. learning about typing speed, time spent on particular pages, or advertisement-clicking preferences and;
7. any other use of data.

To become a more mature domain, Online Dispute Resolution (like its older sibling Alternative Dispute Resolution) needs to develop theoretical models as well as implement practical solutions. Prevalent amongst these theoretical issues are the concepts of fairness, trust, and security in ODR. We have noted that for ODR systems to be considered fair, we must ensure that such systems are transparent, give advice about the shadow of the law and alternatives to negotiation, as well as provide some degree of transparency. 

The post Trust and Security in Online Dispute Resolution appeared first on ODR Guide.

Even when people lose, they feel better about the loss when they experience procedural fairness. And, when they win, they do not feel as good about the outcome without procedural fairness. 

To update your information on Alternative dispute resolution; What are the Main Types of Alternative Dispute Resolution – ADR and it’s pros and cons Alternative dispute resolution (ADR) and it’s advantages and disadvantages

The following article is extracted from the JOURNAL OF DISPUTE RESOLUTION – Volume 2011 – Procedural justice and the rule of law@ Fostering legitimacy in Alternative dispute resolution, by Rebecca Hollander-Blumof and Tom R. Tyler.

Alternative dispute resolution vs Judicial

Alternative dispute resolution (ADR) when compared to their judicial counterparts, often shows to poor advantage, particularly on the grounds of procedural fairness. Owen Fiss famously argued against the negotiated settlement of certain important disputes related to fundamental rights. Deborah Hensler criticized the use of mediation because it might not appear fair to some disputants because it did not promote a resolution based on public norms.

Critics have suggested that a judicially-based dispute resolution system may be fundamentally at odds with a non-judicial-based dispute resolution system, such as arbitration, mediation, and negotiation. But others have responded by suggesting that the rule of law is less in tension with ADR than critics imagine. They both aim for the same goal – the pursuit of justice.

This difference of opinion is aided by the definition of the term “rule of law.” Its definition includes tenets as distinct as non-retroactivity, generality, certainty, protection of individual rights, and lack of discretion by government actors.

We find that the tenets of the rule of law are neither at odds with ADR nor completely reconcilable with it. We suggest that procedural justice provides a good look at how ADR systems can help maintain societal values that are consistent with the rule of law.

Just as the rule of law has historically and philosophically been considered a central component of a legitimate governmental system, so procedural justice is a central component of how people make judgments about the legitimacy of authorities.

Because procedural justice, just like rule of law, is perceived as legitimate, we suggest the assessments of procedural justice by disputants in ADR systems are a critical element. They ensure that ADR exists in harmony with rule of law values. At the same time, ADR, by its very terms, does not produce resolutions that arise directly from the rule of law per se.

This is because people’s everyday understanding of what procedural justice means conforms to many of the key elements that define the rule of law.

If people were simply economic actors whose evaluation of legal procedures was based on the outcomes derived from those procedures, they would evaluate their results in ADR processes based on how favorable their outcomes were. Judgments related to the rule of law would be irrelevant.

That is, if satisfaction with ADR, which is less rule-based and judicially regulated, was based largely on outcomes, then rule of law would appear not to matter. However, in reality, studies consistently suggest that people’s evaluations of legal procedures, both formal and informal, are strongly shaped by issues of procedural justice.

People tend to act as naive legal philosophers. They evaluate their experiences and views about the general operation of the legal system against a template of fair procedures involving neutrality, transparency, and respect for rights. These are issues that also form the basis for the rule of law.

The Psychology of Procedural Justice

Procedural justice refers to the fairness of a process by which a decision is reached. In contrast, procedural justice in psychology captures the subjective assessments of the fairness of a decision-making process.

Judgments about procedural justice differ from those about distributive justice (the fairness of the outcome) and from outcome favorability (how good the outcome is).

Research involving social psychology shows that perceptions of procedural justice have important effects on how people think about and behave with the outcomes received in legal disputes.

Procedural justice drives the satisfaction people have with their outcomes. It also predicts how they will adhere to future outcomes and agreements.

The earliest research on the psychology of procedural justice found that the positive effects of procedural justice happened in formal legal settings with third-party, neutral decision-makers. Other research found that in trials and proceedings before other legal tribunals, procedural justice makes a significant difference in how people evaluate their outcomes.

 Even when people lose, they feel better about the loss when they experience procedural fairness. And, when they win, they do not feel as good about the outcome without procedural fairness. 

This effect is not limited to the civil adjudicative. Research suggests even defendants in felony cases care deeply about the fairness of the process used to determine the outcome of their cases. This also goes for procedural justice effects in arbitration, where an arbitrator instead of a judge makes a decision.

More recently, researchers have turned their attention to other, less formal settings like mediation and negotiation. In these, there is no third-party decision maker, and there are far fewer rules. In both of these areas, researchers have found that procedural justice drives satisfaction with the outcome.

The justice perception and the outcomes of dispute

For example, Pruitt and his colleagues looked at mediation from the perspectives of both parties. They examined how favorable they felt the outcomes were and how fair they felt the process was.

When Pruitt followed up six months later, the biggest driver of whether the parties had held to the mediated outcome was the procedural fairness experienced during the mediation, rather than the favorability or fairness of the outcome.

Recently, we explored procedural justice in negotiation over legal disputes. In a study involving a simulated negotiation by law students over a contract dispute, we found fairness of process and fairness of treatment by the other party drove satisfaction with the outcome, even without a third-party neutral present. It also drove how enthusiastic the attorneys were about adhering to the agreement and recommending a negotiated outcome to their clients.

This does not mean that people do not care about distributive justice or the favorability of their outcome. The fairness of a process is a separate, independent construct, distinct from how fair or how good an outcome is. Procedural justice has a separate and independent effect on how people feel about their results, apart from how fair or how good the outcome is.

Fairness of the dispute process and trust

 So, while fairness and favorability of outcome do matter, the fairness of the process is an independent driver of satisfaction with agreements and adherence to them in both judicial and ADR mechanisms.

 It is especially important that people care about procedural justice even when they “lose” their case. Those who do not receive what they want or feel they deserve are still more likely to defer to those outcomes if they believe they were achieved through fair procedures. Psychologists have studied how people from assessments about whether they have been treated fairly, and there is a consensus around the importance of four critical factors.

First, individuals care whether or not they have had an opportunity to present their own stories. In the case of a third-party neutral procedure, parties or their attorneys typically present evidence to a decision-maker.

Second, people assess whether or not the decision-maker was neutral. This involves issues such as impartiality, the ability to gather and assess the information needed to make appropriate decisions, openness about the procedure, and consistency in the application of rules over people and across time.

Third is the question of whether or not the third-party authority was trustworthy. Trust is the least overt aspect of fairness. It involves inferences of the parties that the authority was sincerely trying to do what was right and was motivated to do what was good for the people involved.

Because trust is an inference, it is shaped by how the authorities act. When the authorities provide evidence that they have listened to and considered the views of the parties and tried to take them into account when thinking about how to respond to the issues, they are viewed as more trustworthy.

Finally, individuals consider whether or not they were treated with courtesy and respect. This involves both common respect and courtesy and respect for people’s rights.

Those rights are both human rights (treatment with dignity) and legal rights (standing to bring a case to the authorities and have it treated seriously).

These four factors clearly guide procedural justice assessments about fair treatment in settings with a third-party decision-maker.

In other settings where such a decision-maker is not present, research has suggested a strong role for both voice and courtesy, and respect. It has presented mixed results with respect to the potential effects of neutrality and trustworthiness.

Theories and case studies

Theorists have suggested three distinct rationales for the importance of procedural justice. Originally, Thibaut and Walker believed that people cared about the fairness of the process because it would necessarily lead to good and fair decisions.

This instrumental theory suggested that people valued fair process because of its actual effect on the bottom-line outcome.

Tyler and Lind provided support for the group engagement model, suggesting that the instrumental theory was inadequate in accounting for the role that procedural justice plays.

They argued that people care about the fairness of treatment because it provides them with important information about their status within their group.

Fair treatment by an authority can reveal whether one is a valued or unvalued member of a group. This has the potential to affect one’s self-esteem, sense of self-worth, and social identity.

Most recently, Van den Bos and colleagues suggested a theory for the reasons behind procedural justice’s importance: “Fairness heuristic theory” suggests that fairness judgments help reduce uncertainty because individuals rely on procedural justice cues to make assessments of satisfaction in the absence of distributive justice or outcome favorability information.

Procedural justice research suggests that people are more satisfied with the results of a fair decision-making process; and they are more likely to defer to the decisions and judgments of authority and comply with those judgments in the long term when they perceive that the authority has made those decisions according to a fair process.

Psychologists have explored the roots of this increased deference and compliance. They conclude that they occur because the procedural justice of the decision-making process leads them to believe the decision-making authority is legitimate.

Psychological researchers have repeatedly shown that people follow rules when they believe that the authority that made the rules is legitimate.

In turn, they have also shown that people think authorities act legitimately when they have experienced procedural justice. In situations where individuals feel that a decision-maker is neutral, trustworthy, has given them the opportunity for voice, and has treated them with courtesy and respect, they are more likely to feel that the process was procedurally just. That the decision-maker has legitimate authority, and they ought to defer to that decision-maker.

 For example, in one study, Tyler explored the question of whether individuals largely made assessments about legitimacy based on whether they received a favorable outcome or on whether they received procedural justice. In particular, he examined whether the relational treatment that had the potential to affect participants’ sense of status within their group played a role in the assessment of legitimacy.

His results suggested that the relational factors dominated the instrumental factors.

Regression analysis showed that the relational factors had almost twice the effect as the instrumental factors. Because a system of command and control, with reliance on complete surveillance, enforcement, and punishment, is not feasible in a society of our size and complexity, a system of voluntary deference to authority is critical to the functioning of society.

It is important to recognize that such deference can be affected by the degree of procedural justice – and so the legitimacy experienced by individuals.

When individuals feel that authorities are making decisions in procedural fairways, they view the authorities as more legitimate, and they are more willing to defer to the authorities’ decisions. Less command and control are needed, and individuals can rely more on self-regulation in settings where authorities act in procedural fairways.

The legitimacy of government authorities is central to the ability of the government to function. The legitimacy of dispute resolution systems is fundamental in gaining individuals’ voluntary deference to the resolution of their disputes and preventing them from engaging in self-help measures that undermine social stability.

The post Procedural Justice and the Rule of Law appeared first on ODR Guide.

Successful online mediation requires trust, privacy, and a willingness to comply.

It is often thought that one of the most essential reasons mediation can be successful is because of the face-to-face contact between the parties and the mediator.

Mediators are supposedly experts at reading body language, but there is no face-to-face contact with online mediation.

The mediator obviously needs to possess other skills besides that of reading body language. Offline mediators are trained to help people tell their stories and manage the mediation sessions’ conversational process.

They are trained to remain impartial, summarize, and reframe.

They use techniques of active listening and are experts in agreement writing, but not all of these skills are equally suitable for online mediation. With online mediation, there are many skills essential for making it successful. Let’s take a look at the key issues for online mediation.

For more on Online Dispute resolution, What is ODR (Online dispute resolution) ?

This article is extracted from “ ONLINE DISPUTE RESOLUTION AS A SOLUTION TO CROSS-BORDER E-DISPUTES – AN INTRODUCTION TO ODR” by Esther van den Heuvel.

Trust

An essential aspect of mediation, whether online or offline, is trust. A good mediator must be able to establish trust between himself and the disputing parties. In face-to-face mediation, this trust is established during the mediation sessions. With online mediation, this trust can be far more challenging to establish, although no less important.

Offline mediation often takes place between parties who have an ongoing relationship and history together. The mediator can use information about their history for everyone’s benefit.

Their common goal is to reach a solution that will be acceptable to both parties and will not damage the relationship any further. This is important to both of them.

In the online mediation process, parties often do not know each other and do not have an ongoing virtual or real-time relationship of any kind. The parties have been involved in an electronic commerce transaction, in a consumer/merchant relationship (onlinemediators.com), or a consumer/consumer relationship (eBay.com).

In most cases, these parties have not had dealings with one another before the dispute. The mediator can not draw on the relationship or ask about the background of the dispute in relation to previous interactions between parties because there have not been any.

The fact that there is no face-to-face contact, but communication takes place via e-mail or real-time online makes it difficult for the mediator to manage or temper the tone of the interactions or use his skills in reading body language. It is, therefore, far more challenging to establish and maintain trust.

Identity and Digital Signatures

There are several trust-related problems where online transactions and online mediation are concerned. First, the identity of the person being dealt with is not always clear. How can you be sure the person is who they claim to be? Here, digital signatures can play an important role.

There EU legislation in the form of a directive was implemented in all EU member states in 2001. In the U.S., on June 30, 2000, President Clinton signed into law the ‘Electronic Signatures in Global and National Commerce Act,’ which became active on October 1, 2000.

This act gives a signature or record sent through cyberspace the same legal validity as a pen-and-paper document. The fact that a digital signature and digital records have the same legal validity as written documents makes it far easier to check someone’s digital identity.

In fact, it might well prove more difficult to falsify digital signatures than written signatures. A digital signature is an authentication method that uses public-key cryptography.

The digital signature plays an essential part in ensuring the authenticity, integrity, and non-repudiation of data communication, thus enhancing trust.

Data Security and Confidentiality

How can you be sure that the data being sent and received has not been tampered with, and how can you be sure that no unauthorized third parties have access to the information? 

Here again, encryption plays an important part in ensuring confidentiality and data security. Encryption makes it possible for the mediator and the parties to communicate without the risk of unauthorized third parties having access to their communication, thus creating secure data communication.

For a mediation procedure to be successful, confidentiality is essential. In an offline mediation procedure, confidentiality is not really a problem.

Most communication is oral; transcripts of conversations are usually not made. Any written documents that do exist only circulate in a very small group of people.

This is different from online communication. First of all, communication takes place in written form over insecure networks. To transfer the data over the internet, there are numerous temporary copies made along the way. This is inherent to the nature of the internet.

It is necessary to make copies on the routers when transferring data from one computer to another and to make copies when downloading or uploading information.

In cyberspace, communication takes place through constant copying. This is something of which the mediator must be aware.

He must take all possible precautions to ensure that ( automatic ) backups are kept no longer than necessary and are not accessible to unauthorized third parties. Even these precautions do not guarantee complete confidentiality.

The only way to protect data and guarantee confidentiality is through encryption. Encryption is the automated process of making data inaccessible to unauthorized people by means of an algorithm and a key.

Decryption is the reverse process. A popular method to guarantee confidentiality is the so-called asymmetric cryptosystem: this system uses two different keys (a public and a private key) for encryption and decryption of data. This means that without the right key no one can read the message.

The key, needed to read the message, is sent to the recipient separately from the message and reaches him by another route than the message.

When confidentiality has been guaranteed by means of encryption, the fact that the internet is built up from copies also has its advantages.

The complete written file is accessible to both parties and to the mediator at all times if they need to check certain details or to see how things are. It is not necessary to take notes because everything is already written down.

Privacy

Another important issue that needs to be addressed in online mediation is privacy.

Where privacy is concerned, parties should be made aware of the ways their privacy is protected and how personal information is stored or used by the mediator or mediation company.

It is imperative that the mediator or the mediation firm have a privacy policy that addresses a number of issues.

Any dispute they receive via a website must be treated in accordance with the rules of confidentiality. The disputes must be known only to the parties involved in the dispute, including the mediator.

All personal data must be recorded and used with great care. By making strategic use of security possibilities, it is possible to guarantee that the personal privacy of all parties involved in an online mediation procedure is respected. Here again, encryption plays a key role.

In a privacy policy, parties must also be made aware that the mediation site will probably make use of cookie technology. They need to be told that if they do not want any cookies to remain on their hard disk, they can use their browser options to switch off the cookie technology.

There are several privacy policy generators on the internet that can help the mediation organization make its own privacy policy. For example, since August 2000, the OECD Privacy Policy Statement Generator has been made available.

In The Shadow of the Law

Another important aspect of offline mediation, and indeed for ADR in general, is it always takes place ‘in the shadow of the law.’ This means that the disputing parties trying to find a solution through alternative dispute resolution are aware of the legal rules governing the area of their dispute.

The outcome that the law will impose if no agreement is reached gives each party a reasonably good idea of its bargaining position. Parties will take the law into consideration when setting out a strategy in the ADR procedure.

For e-disputes there is the problem that it is not obvious what law applies, especially with cross border e-disputes.

In his article ‘Governing Cyberspace,’ David Post writes: “There are, appropriately enough given the binary nature of the information traveling in cyberspace, two radically different processes through which order can emerge in this environment…. [One] involves an increasing degree of centralization of control, achieved by means of increasing international coordination among existing sovereigns, through multilateral treaties and/or the creation of new international governing bodies along the lines of the World Trade Organization, the World Intellectual Property Organization, and the like. If the choice of law is hopelessly confusing, in other words, we can eliminate the choice by imposing a single, uniform legal standard worldwide.

“[The other] invokes a radical decentralization of law-making, the development of processes that do. Some of these decentralized processes will look familiar to us as a kind of ‘electronic federalism.’ In this model, individual network access providers, rather than territorially-based states, become the essential units of governance; users in effect delegate the task of rule-making to them – confer sovereignty on them – and choose among them according to their own individual views of the constituent elements of an ordered society. The ‘law of the internet’ thus emerges, not from the decision of some higher authority, but as the aggregate of the choices made by individual system operators about what rules to impose, and by individual users about which online communities to join. Mobility – our ability to move unhindered into and out of these individual networks with their distinct rule-sets – is a powerful guarantee that the resulting distribution of rules is a just one; indeed, our very conception of what constitutes justice may change as we observe the kind of law that emerges from uncoerced individual choice.“

In the eBay project that I describe below, researchers from the University of Massachusetts concluded that the context of the dispute resolution system provides the relevant “law” that will encourage parties to participate in online mediation and make sure they comply with the outcome of the procedure.

This is consistent with the second process the Post describes. For more on ODR advantages and disadvantages, Online Dispute Resolution: The Advantages and Disadvantages

The eBay ODR Experiment and the Shadow of eBay Law

At the end of 1998, eBay, the largest auction site in the U.S., approached researchers at the University of Massachusetts to conduct a pilot project in order to find out whether online dispute resolution could be a useful means of solving problems occurring on their site.

The researchers began their project in 1999, choosing mediation over arbitration because of the voluntary nature of mediation. The researchers wanted to ascertain how effective an online mediator could be without face-to-face meetings.

The eBay experiment showed that the number of disputants willing to participate in online mediation was 75% whereas in other experiments with offline mediation the number of participants willing to participate was around 50%. In all instances, mediation was explained to be a voluntary process.

The reason so many eBay users were willing to participate was not so much the wish to reach a mutually acceptable outcome, but rather the wish to continue using the eBay site in the future. eBay is a virtual marketplace where buyers and sellers meet.

Public safety is therefore very important and is achieved through several means, among which a ‘feedback rating system’ is the most important.

After any transaction is completed, buyers and sellers can post feedback as to the conduct of the buyer or seller. If you wish to buy an item, you can easily check the feedback rating of the seller before you bid on an item. If you find a possible buyer, you can check his rating also.

It is therefore very important to eBay users to acquire a positive feedback rating if they wish to remain active on the eBay site.

Taking part in a voluntary dispute resolution service can help both buyers and sellers to keep a good rating. This means their future in the eBay marketplace will be safe, which is important to them.

The Massachusetts researchers stated that mediation on the eBay site takes place in the ‘shadow of eBay law.’ The ‘eBay law’ is the ‘law of the internet’ mentioned above by Post.

It emerged as the aggregate of the choices made by eBay as the individual system operator about what rules to impose, and by the eBay-users in choosing to join the eBay community.

Compliance

Another important issue for online mediation, and one closely linked with the concept of the shadow of the law, is compliance.

How can you be sure the other party will comply with the outcome of the dispute resolution process? Offline mediation compliance is high because the mediation agreement that is usually the outcome of the process can be made legally binding according to the applicable law.

As the researchers found out in the eBay project, compliance with the result of an online mediation procedure was high because of ‘eBay Law.’ The party that ‘lost’ did not want to jeopardize his or her position in the eBay community and was therefore willing to comply with the outcome.

The researchers also noted that if a virtual marketplace chose online arbitration or some other form of binding rulings, compliance could be achieved by using the threat of exclusion from the virtual marketplace.

This of course would be another form of the ‘law of the internet’ and would also assure compliance with the outcome of the dispute resolution procedure.

Where binding advice is used in offline consumer complaint resolution, the same mechanism of the threat of expulsion is used to achieve compliance from companies.

In the eBay experiment, it proved not necessary to obtain a writ of execution to achieve compliance. The Squaretrade initiative, which resulted from the eBay experiment, uses the same basis of people not wishing to jeopardize their position in the eBay society.

The online mediator initiative is not restricted to e-commerce transactions; parties can either accept the outcome as it is or assure compliance by making the outcome legally binding in a contract.

The post Key Issues for Successful Online Mediation appeared first on ODR Guide.

Online arbitration can provide a very flexible means of dispute resolution that can be tailor-made in accordance with the parties’ needs, and at the same time, be recognized as a legally valid process.

Online arbitration differs from traditional arbitration not only because the process may be held online but some of the core elements can be different. Online arbitration’s main advantages are speed, accessibility, and cost-effectiveness. Mutual consent to arbitration, due process, and the binding decision will either not be present in online arbitration or they may be formed in a different way.

The common thought that online arbitration is just combining online mechanisms and traditional arbitration is not true. To define online arbitration accurately, it is helpful to look closely at the component elements of traditional arbitration from which it evolved. Naturally, there are many commonalities across the two forms and relevant differences in the details of the component elements of both. And, there are some component elements of each that are not shared with the other. 

For more on Alternative dispute resolution methods, What are the main types of Alternative Dispute Resolution – ADR and potential impact of Covid-19 on ADR methods, The Impact of Coronavirus on Arbitration and ODR

The following article is extracted from ” Online Arbitration Definition and Its Distinctive Features by Farzaneh Badiei”

The Two Most Common Elements of Online and Offline Arbitration

Arbitration elements often vary in different legal systems, so it can be challenging to provide an accurate and singular definition that applies everywhere. But some elements of arbitration are broadly similar. Numerous definitions exist for arbitration, but the following are of most use to us:

1. According to “Law and Practice of International Commercial Arbitration” by Alan Redfern and Martin Hunter, “Two or more parties, faced with a dispute which they cannot resolve for themselves, agreeing that some private individual will resolve it for them and if the arbitration runs its full course … it will not be settled by a compromise, but by a decision.”
2. According to “Arbitration in International Trade” by Rene David, “Arbitration is a device whereby the settlement of a question, which is of interest for two or more persons, is entrusted to one or more other persons – the arbitrator or arbitrators- who derive their power from a private agreement, not from the authorities of a State, and who are to proceed and decide the case on the basis of such an agreement.”

Gary Born in “International Commercial Arbitration” presents a definition of arbitration that draws from both definitions above. He defines arbitration as “a process by which parties consensually submit a dispute to a non-governmental decision-maker, selected by or for the parties, to render a binding decision resolving a dispute with neutral, adjudicatory procedure allowing the parties to be heard.”

So, for a process to be recognized as arbitration, it should have these elements:

• Mutual consent to submit to arbitration
• Choice of arbitrators
• Due process
• A binding decision

Other Discussions on online and virtual hearing cab be read at Offline or Online? Virtual Hearings or ODR?

It Takes Two: Mutual Consent to Submit to Arbitration

Mutual consent is considered one of the fundamental principles of traditional arbitration, and it is crucial to the legitimization of the arbitration process. It is well-established that the parties should not be forced to arbitrate. Instead, they should freely agree to that particular mode of dispute settlement.

But, entering into an online (or non-traditional) arbitration agreement might not always be consensual. Sometimes, the participants may not have truly consented to the arbitration clause.

They may have been indirectly forced into entering into an arbitration agreement. Some commentators have even gone so far as to say that the freely consenting party is a legal fiction in many situations.

For example, such a lack of choice might happen where there is a monopoly of power or a pre-dispute arbitration clause in a Business to Consumers (B2C) agreement. The weaker party has to choose between entering into an arbitration agreement or forgo contracting in such cases.

Because of the power imbalance found in such cases, the parties may be considered to have been indirectly forced to enter into an arbitration agreement. We have to ask ourselves whether the non-existence of consent to arbitrate invalidates the arbitration clause.

It has been argued that where there is a lack of choice to enter an arbitration agreement, it is better to accept that consent to arbitrate does not exist because other requirements, such as fairness, may reasonably replace consent.

So, it is probably best not to emphasize the existence of true consent in such arbitration agreements and to focus instead on insisting on fairness in the process.

Choice of Arbitrators: Look for Independence and Impartiality

Arbitrators in traditional arbitration are not government representatives or state judges. Instead, they are funded by private means. Decision makers in arbitration are either chosen by the parties or on behalf of them. Those selected by, or on behalf of, the parties should be independent and impartial.

In “The Independence and the Neutrality of Arbitrators,” the term independent is defined as “one which measures the relationship between the arbitrator and the party’s personal, social, and financial relation. The closer the relation in any of these spheres, the less “independent” the arbitrator is from the party.

The independence of the arbitrator should be determined before the arbitration, and it is good to make sure the arbitrator chosen can do his job independently and that he dares to disappoint either party if necessary. Impartiality is the absence of bias in the arbitrator. 

Independence and impartiality are pivotal elements of any arbitration definition. This is due to arbitration being an adjudicatory process.

Arbitrators cannot be parties’ representatives, and they have to remain impartial and independent; otherwise, they cannot adjudicate between the parties with “full legal authority.”

The arbitrators’ independence and impartiality should be considered two of the main characteristics of arbitrators involved in online arbitration.

In any arbitration process, strict compliance with procedural principles is required, and independence and impartiality are so central to the process, that online arbitration cannot be characterized as true arbitration without them.

The independence and impartiality of arbitrators and such elements should not be compromised unless agreed to by both parties.

Due Process vs. Cost and Speed

Due process is a vital component of any arbitration definition. It is so essential, that a procedure lacking due process cannot be recognized as arbitration. Due process in arbitration has to do with the right to be heard, the right to adversary proceedings, and the right to be treated equally.

In online arbitration, however, complying fully with all the requirements of due process could have an adverse effect on the cost-effectiveness and speed of the online arbitration process. 

Speed and cost-effectiveness are two advantages that make online arbitration more desirable than litigation or traditional arbitration.

While due process is an essential element in online arbitration, keeping the process affordable and speedy is also an important factor. So, while due process is considered vital for any definition of online arbitration, the degree of compliance might vary.

Some “shortcuts” might be taken to keep the process from stalling and costs from rising. Some academics argue that due process is a flexible principle, and the degree of required due process may vary depending upon the case or category of cases and that the arbitration tribunal or institution can adjust the degree of compliance according to the nature of disputes.

Binding Decision

The binding decision, in traditional arbitration, is one of the most important elements that determine whether the procedure can be considered arbitration.

By agreeing on arbitration, the parties are assigning the arbitrators a judicial role. They will adjudicate between the parties and issue an award that is as effective as a court’s decision.

The binding decision distinguishes arbitration from other dispute resolution procedures, and it is the purpose of the whole process. To learn more about it, please read What is Binding Arbitration? Is it better than Court?

Decisions in online arbitration may not always be binding. The arbitration award may be non-binding for either of the parties, or it may be unilaterally binding.

When an online arbitration award does not bind either party, it cannot be recognized as a true arbitration. The decision is unlike a judgment because the arbitrator does not have a judicial role.

It could be considered a true arbitration if the party admits that the award has a binding effect after its issuance. Some legal systems explicitly allow the parties to agree that the arbitration awards have a different effect (i.e., be conditionally binding).

In other judicial systems, conditionally binding arbitration might be recognized as true arbitration if the procedural standards that apply to arbitration have been met.

Online Arbitration

An online arbitration proceeding can be conducted totally online, or it can be partly online with a combination of online and offline means.

In an entirely online arbitration, the entire process is conducted online using email, video conferencing, and web-based communications.

Partly online arbitration is conducted using a combination of the communications mentioned above plus offline features such as in-person hearings and other technology for the submission of evidence, communication between the arbitrators, and deliberation of the award.

The post Online and Offline Arbitration: What is the Difference? appeared first on ODR Guide.

Without access to secure, trusted, and fair online dispute resolution systems, consumers would be reluctant to purchase products over the World Wide Web, whether from eBay, Amazon, low-cost airlines, or other companies.

In integrative negotiation, fairness might be considered meeting the interests of all parties involved equally. Thus, those parties will most likely express an interest in “being treated fairly.” In distributive negotiation, where one party gains only if the other party loses something, one of the parties involved might offer to split things down the middle – fairly. Both integrative and distributive negotiation tend not to focus on an objective legal measure of “fairness” – that is, legal justice

For more on ODR and justice, Is ODR “Online Dispute Resolution” the future of justice ?. and What is the Most Efficient and Fair Platform for Online Dispute Resolution?

When is legal fairness in negotiations the most important?

We cannot live without “things.” Neither can we live without family or employment, two of the most important things that cannot be held in one’s hand. When these two are involved negotiation and legal fairness are very important. 

In Australian Family Law, the child’s interests are considered paramount, so the interests of the parents are negligible in negotiations between them. Similarly, in employment

law, individual bargaining between employers and employees might lead to basic needs and rights, such as recreation leave and sick leave, being whittled away. In both cases, parties have restricting standards of “fairness” imposed on them by law and the courts, limiting their negotiation range.

What would a judge say?

The question, “What would a judge do in the case?” is always looming over parties involved in ODR and other out-of-court negotiation sessions. This is how legal norms find their way into negotiation sessions. And it is not only the threat of a judicial decision that can shape the rules of negotiation. There are also the standards legitimized by the law or society and not only by one party’s say-so.

From integrative negotiation principles negotiation was formed. Principled negotiation focuses on the main interests of both parties and uses those to lead the negotiations. It decides issues based on their merits rather than through a haggling process focused on what each side says it will or will not do. 

In this same vein, Mnookin and Kornhauser introduced the notion of bargaining in the shadow of the trial (or law). For example, in the case of divorce law, they contended that the legal rights of each party are bargaining chips that can affect the settlement outcomes. 

Outcome Fairness vs. Procedural Fairness

The role of fairness and justice in negotiation and other ADR processes is complex. Fairness can include several different aspects, but the biggest divide is between distributive (or outcome) fairness and procedural fairness. Add the internet into the mix, and these complexities are compounded.  

One challenge with adding “legally just” elements into ODR systems is the notion that ODR systems, by their nature, lean toward trans-jurisdictional situations and interactions. Of course, Negotiation Support Systems created for particular situations/jurisdictions (such as for Australian Family Law) can be more easily calibrated in this regard. This means that specific parameters can be pre-set according to law, and topics requiring resolution under the law can be designated as mandatory fields in the system.

On the other hand, contexts or marketplaces where there is no generally applicable set of legal norms might greatly benefit from the development of such measures, or, at the very least, principles for the construction of negotiation support systems. Alternatively, these

marketplaces could benefit from creating dispute systems designs that resemble legal “justness” and “fairness.”

3 Important Factors in Fair Negotiations

Zeleznikow and Bellucci (2012) thoroughly examined various domains, including international conflicts, family law, and sentencing and plea bargaining. And they developed a set of important factors that should be incorporated into “fair” negotiation support processes and tools. They are:

• Transparency – For a negotiation to be fair, it is essential to understand – and, if necessary, replicate – the process in which decisions are made. In this way, unfairly negotiated decisions can be examined, and if necessary, be altered.

• Highlighting and clarifying the shadow of the law – In legal contexts, awareness of the probable outcomes of litigation provides parties with guideposts or norms for the commencement of negotiations. So, bargaining in the shadow of the law provides standards for adhering to legally just and fair norms. It provides disputants with advice about likely court outcomes by incorporating such advice in negotiation support systems that help support fairness. In non-legal contexts and contexts where multiple legal norms compete and clash, which norms cast this shadow? Without answering this question, we suggest that considering it and, if possible, providing parties with a set of rules that will determine outcomes might promote a sense of fairness.

• Limited discovery – Even when the negotiation process is transparent, it can still be flawed if there is a failure to disclose vital information. Discovery processes increase settlements and decrease trials by organizing the voluntary exchange of information. This benefit is often lost in a negotiation, especially if important information is not disclosed, or even worse, hidden.

Conclusion

As we have seen, fairness is a concept that parties have come to expect in ORD – not only in areas such as family law. ODR is essential to every aspect of day-to-day interactions. One might conclude that without access to secure, trusted, and fair online dispute resolution systems, consumers would be reluctant to purchase products over the World Wide Web, whether from eBay, Amazon, low-cost airlines, or other companies. Lacking trust in their counterpart or the neutral assisting them, individuals might not participate in a mediation process. Wary of insecure communications platforms, they may refrain from disclosures that could quickly be resolved. conflicts. Further, concerned that a technological platform is programmed to be unfair to them, they may not accept its advice. Hence, to advance the field of ODR, we need to consider and develop issues of fairness, trust, and security.

The post ODR: Keeping Things Fair appeared first on ODR Guide.

Online mediation offers a wide range of implementation methods, confirmed by its fastest-growing branches: consumer and family law.

There could be no Online Dispute Resolution (ODR) without the internet. A short description of the history of the internet shows the speed of development of the network, which has transformed from an academic project to the most powerful medium of the 21st century. 

The following article is extracted from “Online Dispute Resolution: The Future of Justice by Karolina Mania“

Internet History

The internet began as a U.S. military prototype network called ARPNET. In 1968, the Defense Department established the federal Advanced Research Projects Agency (ARPA), which worked toward the development of military technology in the fields of defense and security in cooperation with the academic world.

In 1980, the military, until that operated under the name ARPNET was disconnected from the academic unit that was named INTERNET.

In 1990, the Defense Advanced Research Projects Agency (DARPA) (transformed in 1972 from ARPA) formally completed its work on developing a civilian network. The internet was managed at the time by U.S. federal institutions and acquired the status of a public good in 1991.

The number of internet users has never ceased to grow. The International Telecommunication Union (ITU), an international organization that manages the telecommunications market, monitors the development of the internet.

According to statistical data and a report published on 23 December 2014, under the title “World Telecommunication/ICT Indicators Database 2014 (18th Edition),” the number of users of the network exceeded 3 billion, compared with under 14 million in 1993.

The internet is a 21st-century medium that has revolutionized many areas of life. It fulfils many functions, and, as a common source of information, communications tool, and global trading platform, it has become the engine for introducing modern technological solutions within existing fields of activity. The internet has had an impact on many areas of public life, including law.

Its fast expansion has caused many positive phenomena, such as the computerization of certain areas of law. However, it has also highlighted the non-compliance of the legal framework with new realities, such as in the scope of intellectual property rights.

The global character of the internet has changed how we access information, which impacts copyright and press law. The absence of borders online has highlighted that many provisions concerning private international law are out of date.

The development of electronic national and international commerce has made it necessary to introduce new regulations.

Despite these problems, new methods of communication have improved many areas of law, including modernizing processes for the out-of-court settlement of disputes, such as online dispute resolution. 

Online Dispute Resolution: Preliminary Issues

There have been four phases in the development of online dispute resolution (ODR). The first, which ran from 1990 to 1996, was an amateur stage, where electronic solutions were tested. From 1997 to 1998, ODR developed dynamically, and the first commercial web portals offering services in this area were established.

The next phase (business) ran from 1999 to 2000. Given the favorable period of economic development, especially in IT services, many companies initiated projects based on electronic dispute resolution, but a large number no longer operate on the market.

The year 2001 marked the beginning of an institutional phase during which ODR techniques were introduced into the courts and administrative authorities.

One of the first cases of ODR took place in the U.S. The opposing sides decided to seek a new method to settle their dispute. The case was pending before the Online Ombuds Office at the Center for Information Technology and Dispute Resolution at the University of Massachusetts.

Ethan Katsh and Janet Rifkin, who founded the entity and are considered leading promoters of the ODR issue, started mediation procedures via e-mail. This eventually resulted in a settlement being signed.

Among others, the Online Ombuds Office offered mediation services for auction portal eBay. In 1999, this collaboration transformed into the SquareTrade portal, one of the first commercial ODR providers in the area of consumer disputes in the U.S. market. Among its most prominent services was online mediation, which was initiated by filling in a complaint form that indicated the methods for dispute resolution.

After voluntary acceptance of the electronic method for resolution, the other party would respond by choosing the relevant option. If a settlement could not be reached, the parties would go to the negotiation phase. This was supported by the mediator, who communicated with them using e-mail.

Another example of an early portal that offered automated online mediation is CyberSettle. It was established in the U.S. in 1998. Its main advantage was the functionality of creating a network of specialized internet applications that enabled various forms of communication.

The system enabled negotiations to be conducted online. These start with logging in and providing basic information such as first name, surname, e-mail address, date of the event, and type of case.

The party would then issue an invitation to participate in a so-called out-of-court blind-bidding process by specifying the maximum amount it would claim in the event of signing a settlement.

Once accepted by the other party, offers were collected by the interested parties. The number of proposals would not exceed three, but until the other party proposed an equal or lower amount, they were not disclosed to the other party.

The adopted solution allowed the settlement of disputes regarding specific values of claims, excluding consideration of the issue of legal liability.

When the parties reached a consensus, the offer would be mutually presented. The confidentiality of the procedure provided significant value, particularly if there was a failure to reach an agreement, and it was referred to court. The portal also offered support from the mediator, who communicated with each party separately without disclosing the contents of their offers.

Many factors explain the decreasing number of ODR entities after 2000. Establishing electronic platforms enabling the transfer of dispute-resolution processes to the internet has many upfront costs, even when choosing licensed technological solutions of the SaaS variety.

To ensure the security of the system, it is necessary to introduce safeguards against loss of data and hacking, which significantly increases starting costs. Moreover, in most cases, ODR systems were created in the U.S. In the European Union, such services started to appear at the start of the 21st century, so their adoption was less dynamic.

It seems that the number of those providing ODR services will increase in the EU. Existing examples, such as the ombudsmen in Austria and Germany and online mediation systems in Italy and the UK, might in the future be replaced with new forms of ODR systems.

Trends can be seen for small claims procedures and legal advice systems in the Netherlands. And, with the implementation of EU regulation of the European Parliament and Council on 21 May 2013, and the launching of the platform for ODR services for consumer disputes in January 2016, it can be assumed they will be increasing in number, especially in Europe.

Looking at the history of ODR development, we see that the first web portals established at the end of the 1990s were replaced with new competitive platforms that used more modern technologies and constantly improved the services offered, replacing outdated solutions.

A current market leader in ODR is the portal Modria.com, established in 2011. It cooperates with eBay, among others, and offers a vast range of tools to customers. The platform allows mediation and arbitration and keeps all activities simple and intuitive.

The success of the Modria Resolution Center has been linked to its constant expansion in scope and services offered. One example is a project started in mid-2014 involving cooperation with the American Arbitration Association (AAA) and acting as a service platform for the insurance cases of “New York No-Fault Insurance (NYNF)” – estimated to number more than 100,000 per year.

The Definition of Online Dispute Resolution

ODR is a form of online settlement that uses alternative methods for dispute resolution (alternative dispute resolution). The term covers disputes that are partially or fully settled on the internet, having been initiated in cyberspace but originating offline.

The terms electronic ADR (eADR), online ADR (oADR), and internet dispute resolution (iDR) are treated as synonymous.

There is no system for reporting the number of entities that use ODR. Published research focuses mainly on showing the levels of alternative dispute resolution (ADR) use in specific countries.

However, there is no similar record on entities offering its online form—the number of ODR providers changes with the years. Conley Tyler found no less than 115 in 2004. By 2010 this number had decreased to 70% to less than 40 active ODR systems.

ODR and Technology

ODR uses existing forms of ADR, which makes it usable on the internet. The presence of a third party during the process of reaching an agreement remains unchanged. However, this is done differently with the use of modern forms of communication.

Now, there are indirect ways of submitting requests or evidence, as well as of carrying out a fully online process complete with the issuing a judgment at the end of the proceedings.

In the case of ODR, technology is crucial for the process to be effective. ODR systems may be divided according to the forms of communication used.

Entities may communicate with each other in real-time using Messenger or Skype. Or, if communication is not conducted at the same time, via e-mail, for example, it is less direct, such as with using the services of the National Arbitration Forum.

Research shows that the second form is the most frequently used (42%), but as many as 48% of ODR providers use the two forms jointly.

Low usage levels of online forms, such as chat (10%), suggest that ODR systems fail to fully exploit the IT possibilities of extensive programs.

Each form of ODR may use a different technological system. Online mediation can take different forms, from a fully automated internet platform using a portal based on electronic chat or videoconferencing (TheMediationRoom.com) to exclusive use of an asynchronous form of communication (i.e., through methods such as e-mail).

The first option involved video meetings or online conversations (chat), where the possibilities for dispute resolution are analyzed with the mediator – a more direct form of ODR.

The second option is used, for example, in mediation within the scope of monetary obligations. Using a system of submitted offers, the parties agree on an acceptable amount for all parties without the need to meet directly. Electronic arbitration, which refers to amicable proceedings conducted via the internet, may take either a synchronous (Smartsettle) or asynchronous form (Settle Today).

ODR techniques can be used in many ways, with different levels of integration into proceedings.  Systems that have an intensive impact on proceedings may “support” parties by suggesting arguments or assessing their levels of satisfaction at each stage.

Using advanced technologies allows the creation of computer algorithms that analyze all data entered into the system.

Online Mediation and Electronic Arbitration

The number of electronic forms of alternative methods for dispute resolution changes over time, but mediation (74% of ODR providers) and arbitration (40% of ODR providers) are the most frequently used. Just behind these is negotiation. Modern hybrid forms of ADR differ from classic models by being based on chosen elements of mediation and arbitration that constitute innovative and alternative joint methods.

The leading examples are Med-Arb and a mini-trial. At a European level, modern solutions have not been adopted to the same extent, giving way to classic models.

To analyze the legal grounds for using online mediation, it is necessary to refer to regulations regarding alternative methods of dispute resolution. The EU’s move to create freedom, security, and justice correlates with the promotion of ADR, with special reference to mediation.

The main normative act on mediation (excluding arbitration) consists of a document published on 19 April 2002 by the Commission of the European Communities titled “Green Paper on alternative dispute resolution in civil and commercial law.”

The main objective of this was to “initiate a broad-based consultation of those involved in a certain number of legal issues which have been raised as regards alternative dispute resolution in civil and commercial law.”

Positive reception to the “Green Paper” accelerated the work of the European Commission in regard to new regulations in the area of ADR, among which the most important is Directive 2008/52/EC of the European Parliament and Council of 21 May 2008.

It involved certain aspects of mediation in civil and commercial matters. This legal act does not refer to electronic solutions, so the legal grounds for their application are a result of an interpretation of the regulations in force. 

There are two meanings of the term “online mediation.” The first relates to the place in which the legal relation for the dispute was created, and the second has to do with the online tools used to resolve the dispute, regardless of the place of its creation.

A typical model for the process of online mediation starts when an email is sent to the parties that contains basic information on the proceedings.

Virtual meetings are conducted in so-called “chat rooms,” virtual versions of meeting rooms. These can be carried out separately with each party or simultaneously with all parties. The electronic tools used for communication improve on the classic form of ADR and enable increased flexibility because virtual mediation sometimes becomes electronic negotiation and vice versa.

Online mediation is usually conducted through text-based communication, and meetings in real-time, such as teleconferences, happen more rarely.

Mediation executes one of the main functions of law – the resolution of disputes – while remaining consensual and non-binding. The electronic form enables new possibilities, such as the simultaneous presence of many parties without the hindrance of needing personal attendance at a specific place and time.

In accordance with quoted research, asynchronous online mediation is the most popular form, allowing greater flexibility because of 24-hour access to the platform.

Cost-savings from not needing the presence of a professional proxy or the delivery of documents are also important. Moreover, online mediation conducted via an electronic platform allows the whole process to be recorded and replayed.

Online mediation is not appropriate for all types of disputes. Use the internet changes the rules of communication, taking away face-to-face interaction. In extreme cases, the mediating person may be replaced with an electronic tool, distorting the nature of mediation to a significant extent. 

Most concerns of the parties involved in in-person mediation are the same as those involved in the online version – the lack of impact on the course of proceedings, excessive costs, or the protractedness of the process.

The main feature that distinguishes classic ADR from the online type is the location of mediation proceedings. Classic meeting rooms are replaced with a virtual space.

The mediating person, with whom relations are built in a classic way, is transformed into an electronic, intangible form, which can be concerning among the participants. A lack of direct contact results in reduced personal dynamics in the overall process, which leads to problems with creating mental connections of the participants.

This could result in a lack of wanting to settle it amicably. In virtual reality, it is important to build a high level of trust in mediators as well as the IT tools used.

Electronic Arbitration

Regulation on the written form of agreement on arbitration in international trade was introduced in article II, clause 1 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The regulation was eased through the introduction of clause 2 that extended the definition of the term “written form” with “exchange of letters or telegrams.” This introduced possibly concluding an agreement on arbitration with other ways of sending statements of will while preserving their contents, including e-mail.

The interpretation of Article II clause 2 of the convention, which indicates minimum requirements that allow more liberal provisions in given countries, has been increasingly highlighted in the doctrine.

Electronic arbitration is less popular than online mediation, even though it is allowed on the basis of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and directive on electronic commerce.

Amended regulations of the United Nations Commission on International Trade Law (UNCITRAL) began on 15 August 2010. The provisions take into consideration the impact of the internet on the reality of conducting arbitration proceedings in international trade – for example, regulation on deliveries using electronic communication – so international tendencies should be reflected in national legislation. 

The most common use of online arbitration is in disputes over internet domains. On 24 October 1999, the Internet Corporation for Assigned Names and Numbers (ICANN), the institution responsible for granting the names of internet domains, adopted the Uniform Domain Name Dispute Resolution Policy (UDRP).

This was set out in two documents: the Uniform Domain Name Dispute Resolution Policy, which consisted of a collection of substantive rules for resolving domain-name disputes; and the Rules for Uniform Domain Name Dispute Resolution Policy, which constituted the rules of procedure before arbitration courts.

The rules related to specific domain addresses, such as .com, .org, and .net, being applicable in relation to entities that had unlawfully registered an internet domain that endangered or infringed the rights to protection of trademarks of third parties.

The UDRP sets the rules for concluding agreements on registration and administration of domains, including regulations that oblige disputes to be settled amicably to avoid problems involving the jurisdiction of courts.

Disputes over domains are settled by accredited entities. The most important one in Europe is the World Intellectual Property Organization Arbitration and Mediation Center, established in 1994. It has conducted electronic arbitration proceedings since 2010.

The asynchronous process begins after a complaint is submitted via electronic means, which is confirmed by feedback sent by WIPO. A formal examination of the complaint is then carried out for up to three days, including the paying of the fee, the number of domain names involved in the complaint, and the type of panelist (a complaint compliance review).

If there are any deficiencies, the complainant can remove them within five days. After confirmation of the correctness of a complaint, the administrative proceedings begin. The other party is informed via electronic communication. The other party can submit a response within 20 days.

If this is not submitted, the panel deciding on the dispute will make a decision based on the evidence provided by the complainant.

After a 20 day response period, the Center will appoint an administrative panel consisting of one or three people. Upon the consent of both parties, a single-member panel can be appointed. If one of the parties raises an objection, the complainant and the other party are entitled to choose three people from the list of panelists.

The Center will try to appoint one panelist from the list of candidates provided by each party, with a third panelist appointed individually.

The panel will send its decision on the complaint within 14 days to the Center, which then delivers the decision to the parties, the registrar, and ICANN. Within ten days of receipt of the decision, the registrar is obligated to transfer the domain name, in accordance with article 4(k) of UDRP.

A positive example of ICANN introducing new out-of-court methods for resolving trademark disputes is the procedure for a uniform rapid suspension (URS) system.

Applied for the first time in February 2013, by the National Arbitration Forum (FORUM), its main purpose is to create a fast and inexpensive way of resolving online disputes of intellectual property rights. URS makes it impossible for third parties to run websites that breach those rights.

The system for instant suspension of the domain name begins with the submission of a complaint by the holder of rights to protection of the trademark to an entity accredited by ICANN, and that offers URS services. Formal requirements with regard to the complaint are equivalent to those specified in the UDRP and are examined within two days of the complaint’s submission.

If the outcome is positive, the entity responsible for registering the agreement’s conclusion with the Registry is notified the following day, and the contents of the disputed domain address are then blocked.

The party in breach is notified and has a period of about 14 days to submit a response. A negative outcome (such as a lack of response) results in automatic suspension of the domain name. The system does not, however, allow the transfer of domain rights to the holder of rights to the trademark until the end of the period of unlawful registration, when the domain is blocked, despite the fact that the registered entity remains unchanged.

The main difference between URS and the UDRP is that the new system has a narrower personal scope, and under this system, it is not possible to execute the transfer of the domain name. In the case of URS, there are no appeal proceedings.

The costs in the case of URS are lower, leading to shorter proceedings, a narrowing of proceedings to simple (uncontested) cases, and a very limited number of means for carrying out procedures over the electronic system.

As a result, the cost of proceedings varies from $300 to $500. The cost for UDRP proceedings is $7000. This means there is growing interest in URS procedures.

All the elements of URS mentioned accelerate overall proceedings, but the limited personal and material scope of such proceedings and a lack of the possibility to enforce the domain’s transfer discourage potential users.

The settlement of domain name disputes in an environment identical to the initial environment of the domain is an excellent example of the implementation of ODR techniques.

The system of creating advanced networks for arbitration courts that use the internet more frequently not only to communicate but also to settle disputes is a positive example of specialized legal methods based on modern internet tools.

In disputes on internet domains, the use of online arbitration is effective and, thanks to a constant broadening of the range of services within the scope of ADR by ICANN and WIPO, it looks likely that the number of cases resolved in an amicable manner will increase in the coming years.

The crucial issue is whether each type of dispute that might be resolved using alternative methods will be subjected to proceedings conducted online.

Does virtual reality have a nature that does not affect the result of proceedings? Would the process of dispute resolution and – most importantly – its outcome be the same in the case of traditional ADR and modern ODR? The addition of an electronic tool changes the traditional ADR model and might have a decisive impact on the shape of the process.

Automatic data blocking, user verification, the management of meetings, and the hearings schedule might simplify the process for issuing decisions and have an impact on significantly decreasing the complementary role of a third party.

The use of ODR techniques should take place only in areas in which parties are not deprived of rights, and such rights are not limited. Such implementations are effective for people who want to save time and money if the size of the claim does not correspond with the possible costs of proceedings.

Barriers that slow down the common implementation of the ODR techniques are not based only on technological aspects. The attitudes of the conflicting parties play a key part in alternative methods for dispute resolution, including their electronic forms.

The voluntary nature of such processes must have a basis in a high level of trust towards the supporting person (mediator) or the person who decides on the issues disputed (arbiter).

It should never be limited, as indicated by the practice of implementing UDRP principles throughout the world. Computer programs might improve communication, which is crucial for entities separated by a significant distance.

However, they might also constitute a barrier that cannot be accepted – particularly within the scope of cases that have emotional involvement, such as family matters.

The public perception of ODR should encourage the use of modern forms, and formal legal obstacles should be reduced offering the opportunity to those who are not afraid to settle disputes by using them.

ODR in Consumer Disputes

The protection of consumers depends on the EU and member states. This obligation is all the more important because of the existence of the European internal market, which should ensure unified protection of consumer rights. A guarantee of this is provided by ADR and ODR systems, which allow quicker and less expensive settlement of disputes (in comparison with common courts).

Each member state implements competition and consumer-protection policies individually, resulting in differing levels of access to ADR services.

The European Commission’s recommendation no. 98/257/EC of 30 March 1998, on the principles, applied to those responsible for out-of-court settlement of consumer disputes, is an important piece of regulation in the area of consumer disputes.

The Commission’s recommendation no. 2001/ 310/EC published in 2001, which amended previous conclusions within the scope of activity of the aforementioned bodies and promoted ADR is another important document in this area.

The resolution of consumer disputes that arise out of commercial transactions by means of electronic communication is an example of the effective implementation of ODR techniques.

The creation of a system that enables the conclusion of disputes between a consumer and trader using the same medium over which the purchase or sales transaction was made – that is, the internet – is a logical extension of introducing e-commerce.

Characteristics of ODR in the Case of Consumer Disputes

A report by the European Commission, which monitor’s the community’s consumer market, titled “Consumer Markets Scoreboard 10th edition – June 2014,” showed that the level of protection in the consumer market differs among member states.

As a result, internet shoppers have limited trust in traders from other EU countries. At the same time, many consumers have no knowledge of legal systems for dispute resolution in the event of nonconformity of goods with a contract.

Despite concerns, the proportion of consumers who participated in cross-border e-commerce increased from 20% in 2004 to 45% in 2012, with the effect of increasing the number of complaints in this area. As indicated in the report from 2013, “As many as 45% of European consumers have made at least one online purchase in the past year. This represents an increase of 2 percentage points since 2011 and a 5-point increase since 2010.

With this growth rate, the proportion of internet shoppers will have met or exceeded 50% by 2015, in line with the target set out in the Digital Agenda for Europe.”

E-commerce disputes are non-personal, so ODR techniques free from direct interactions are tools that allow effective dispute resolution. As a result, consumer disputes constituted the main focus of services provided by portals such as SquareTrade and CyberSettle. Their customers included popular auction portals.

This trend continues to date, with some disputes coming from transactions made using the eBay portal still settled by external entities that offer ODR services, such as Modria.com. At the same time, autonomous systems have been created (for example, eBay’s Resolution Centre).

Each auction platform uses its own ODR system or finished solutions in cooperation with other auction platforms. To tackle consumer problems regarding goods and services purchased on the EU’s internal market, the directive of the European Parliament and Council on alternative resolutions for consumer disputes and regulation on online resolutions for consumer disputes were produced.

New regulations apply to disputes between consumers and traders of contractual obligations from sales or service contracts in all economic sectors – with some exceptions –that are concluded via or outside the Internet.

Such solutions involve establishing a network of institutions that provide high-quality ADR services for consumers and a system that provides the general public with information on out-of-court methods.

On 18 June 2013, directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/ 2004 and Directive 2009/22/EC (Directive on consumer ADR) and the Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR) were published. Member states were obligated to implement the legal acts until July 2015, with a date of January 2016 set for launching the ODR platform.

The ADR directive and ODR regulation for consumer disputes are aimed at improving the retail market by introducing a complex system of alternative options for resolution and internet solutions for out-of-court methods.

The legislative changes will enable stabilization of the EU’s internal market by providing consumers with an alternative to the common judiciary and traders with a tool to avoid multi-annual processes.

The ADR directive applies to procedures for the out-of-court resolution of domestic and cross-border disputes concerning contractual obligations from sales or service contracts between a trader established in the EU and a consumer resident in the region – setting the material scope for ODR regulation.

The directive does not introduce a definition of the forms of ADR in consumer disputes, but mediation is included in this term.

Article 2 determines a wide material scope for the directive, not excluding out-of-court proceedings. However, in clause 29 of the preamble, which refers to the principles of confidentiality and privacy, the wording of the provision suggests that arbitration proceedings should be treated as separate from ADR proceedings.

The advantage of the ADR system is the exclusion of the problematic aspect of the choice of law. In accordance with article 6 clause 2 of the regulation of the European Parliament and Council no. 593/2008 of 17 June 2008, parties can choose the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with article 3. Such a choice may not, however, deprive the consumer of the protection given him through provisions that cannot be deviated from under the law that, in the absence of choice, would have been applicable.

Pursuant to article 44 of the directive’s preamble, in a situation involving a conflict of laws and in which the law applicable to the sales or service contract is determined in accordance with articles 6(1) and (2) of the Rome I regulation, “the solution imposed by the ADR the entity should not result in the consumer being deprived of the protection afforded to him by the provisions that cannot be derogated from by agreement by virtue of the law of the Member State in which the consumer is habitually resident.

In a situation involving a conflict of laws, where the law applicable to the sales or service contract is determined in accordance with Article 5(1) to (3) of the Rome Convention of 19 June 1980, on the law applicable to contractual obligations, the solution imposed by the ADR entity should not result in the consumer being deprived of the protection afforded to the consumer by the mandatory rules of the law of the Member State in which the consumer is habitually resident.”

Exclusion of the application of article 6 clause 2 of the Rome 1 regulation should be based on specific rules that ensure the consumer’s protection at levels equivalent to statutory legislation.

The assumptions adopted in the directive allow the problem of clashes between the legislation of member states to be resolved, improving and speeding up the entire ADR process. In accordance with the directive, proceedings with regard to resolving out-of-court consumer disputes are based on the principles of transparency, voluntariness, and fairness of treatment.

Article 7 of the directive introduces the requirement of transparency for ADR entities, which are obligated to provide parties with clear and easily understandable information, such as contact data (for instance, postal and e-mail addresses) and information about whether or not the parties can withdraw from the procedure.

The voluntariness of proceedings is referred to in article 10 of the directive, emphasizing that a decision on the choice of the procedure remains solely with the parties and does not deprive them of the right to bring an action before the courts.

Fairness of treatment can be understood as a number of obligations imposed on ADR entities with regard to information (article 9 of the directive).

Furthermore, article 5 clause 2 determines a list of obligations that a member state should impose on an ADR entity, among which is an obligation to enable the exchange of information between the parties via electronic means or, if applicable, by post.

The material and personal scope of the ODR regulation in clause 9 of the preamble and in the article 2 clause 1 relate directly to the provisions of directive 2013/11/EU of 21 May 2013, on ADR, with the exception of disputes between consumers and traders that arise from sales or service contracts concluded offline and disputes between traders specified in clause 15 of the preamble.

Under the directive, the procedure for filing complaints should only take place on the internet via a dedicated electronic platform available in official EU languages.

After filling in the complaint form, the seller will be notified about its contents so that within ten calendar days they can choose an entity that provides ADR services – to which the consumer is entitled to grant consent within the next 10 days. 

The ODR platform automatically delivers the complaint to the ADR entity or entities previously chosen by the parties. Such entities should immediately notify the parties about the receipt of the complaint or refusal to deal with a given dispute pursuant to article 5 clause 4 of the directive.

If the parties fail within 30 calendar days of submission of the complaint form to agree on an ADR entity, or the entity refuses to deal with the dispute, the complaint will not be processed further under this procedure.

The ADR entities will be assessed by the European Commission so they can be entered into the registry of entities competent to settle consumer disputes out of court.

This enables the creation of an ODR contact points network related to the existing European Consumer Centres Network by organizational (national) structure. The provisions of article 6 of the directive impose quality requirements, emphasizing that it is necessary that ADR entities “possess the necessary expertise and are independent and impartial.”

The assumptions cited suggest that in many member states, including Poland, it would be necessary to introduce a deep reform of the existing ADR system for consumer disputes to allow the unification of requirements applicable to natural persons conducting, for example, mediation proceedings.

The outcome of ADR proceedings has no binding force, and in accordance with article 9 clause 3 of the directive, different solutions might be adopted in national law. 

The issue of binding force with regard to the outcome of proceedings for parties is determined in clause 43 of the preamble: “An agreement between a consumer and a trader to submit complaints to an ADR entity should not be binding on the consumer if it was concluded before the dispute has materialized and if it has the effect of depriving the consumer of his right to bring an action before the courts for the settlement of the dispute.

Furthermore, in ADR procedures that aim at resolving the dispute by imposing a solution, the solution imposed should be binding on the parties only if they were informed of its binding nature in advance and specifically accepted this. Specific acceptance by the trader should not be required if national rules provide that such solutions are binding on traders.”

In terms of guaranteeing the confidentiality and protection of personal data of the entities that constitute an ODR platform, the resolution refers to the provisions of the Directive of the European Parliament and of the Council of 24 October 1946, on the protection of individuals with regard to the processing of personal data and on the free movement of such data,  and Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000, on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data.

The solutions that will be introduced under the new regulation should have a significant effect on consumers, who would be provided with fast and inexpensive ways of settling disputes with traders. Traders would incur additional costs at the start but would be forced to improve existing internal systems for deciding on complaints to ensure a high level of functionality and effectiveness.

New legal regulations will be connected with a number of changes in the scope of the law of member states at the level of statutory legislation. It will be necessary to introduce material provisions that regulate the area of out-of-court consumer disputes, procedural provisions that enable the amendment of existing acts to offer a different scope of competence for entities that provide out-of-court settlement systems for disputes, and institutional provisions.

Institutional provisions will be directly related to article 5 of the directive, which outlines member states’ obligation to ensure that consumers have access to alternative methods for the resolution of disputes that involve a trader established in the territory of a given member state.

The material and personal scope for using ODR methods is not unlimited. Online mediation offers a wide range of implementation methods, confirmed by its fastest-growing branches: consumer and family law. However, many legal issues, such as classifying violations or legal liability, cannot be resolved through electronic mediation. A lack of direct contact in the course of mediation does not favor the creation of trust, which is the basis for directing a claim to be settled by any out-of-court processes.

Electronic communication, despite its apparent accessibility, might also create a number of mental barriers that prevent effective mediation.

However, the provisions of the cited directive and regulation will provide an effective impulse to popularize alternative methods of dispute resolution, with unified quality requirements in each member state. A developed network of institutions that provide mediation services will help to relieve the justice system and comply with the principles of a fair process conducted in a reasonable amount of time. Furthermore, it will contribute to ensuring sectoral and geographic filling of the market of out-of-court methods for dispute resolution in the EU.

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Our interest in the construction industry is driven by two factors: the continued importance of the construction industry to the global economy and the prevalence of small claims in construction.

Construction is an industry upon which we all depend. If done properly, we go through our day-to-day lives without giving it much thought. But, when disputes arise that bring portions of that industry to a halt, infrastructure and even the economy are affected. Not all disruptive disputes have to be large. Taking one small link out of the chain makes the whole useless. We will explain below what a small and low-valued dispute is and how online dispute resolution (ODR) can get the construction industry back to work. But for now, here are seven examples of small disputes that can break the chain: 

• The construction industry is complex. Disputes can arise when those complexities were not fully examined at the planning stage. 
• The industry is fragmented. There is a range of varying approaches that can be employed to purchase construction products and services. Any of these transactions have the potential to become a dispute.
• Contractual relationships can deteriorate. Disputes arise when two or more project stakeholders behave in an opportunistic manner incompatible with the business interests of the other party. 
• Construction project stakeholders often have misconceptions about performance.
• Hidden requirements and changes in orders often hinder construction projects. 
• Often, construction operations are made up of smaller projects which are also conflict-prone.
• The projects making up construction operations are often hurried so work can proceed to the next level or a project allowing for mistakes and therefore disputes. 
• Risks are not adequately identified or allocated, leading to disputes when they emerge.

It is suggested that construction disputes primarily come from a conflict of interests of the disputants, often the project stakeholders. The disputants may begin by referring to contractual provisions which the other party will reject. 

It is not unusual for construction industry disputes to be expensive and have far-reaching consequences, not only for the parties involved but also for the economy in general. A dispute can possibly derail construction, and thereby disrupt economic activity. An article by Arcadic (2015) suggests that, globally, the average value of construction disputes in 2014 was approximately £39 million, with each dispute taking an average of 13.2 months to resolve.

For more on ODR in other countries and systems Online Dispute Resolution in the UK, Canada and UAE

What is a Small and Low-valued Dispute

What constitutes a small and low-valued claim varies widely across different legal jurisdictions. In England and Wales, small and low-valued claims are determined as property and monetary claims with a value of less than £25,000. While in the DIFC they are where the amount of the claim or the value of the subject matter of the claim does not exceed AED 50,000.

And in 2009, a European Union-wide small claims procedure focused on improving and simplifying procedures in civil and commercial disputes up to a value of 2,000€.

Although historically, scholars have regarded small and low-valued claims as a distinct area of the civil justice system, there are no special procedures for adjudicating them in England and Wales. The basic characteristics of small and low-valued disputes and claims adjudication are:

• Compared to litigation, proceedings are conducted in a much simpler and more informal format that lay people can readily understand.
• Legal representation during small claims hearings tends to be discouraged or, in fact, prohibited.
• Proceedings are conducted in an inquisitional manner with the adjudicator playing a proactive role in eliciting evidence.
• In most cases, rules of evidence and procedure are designed to enable parties and adjudicators to decide on how to proceed and reach a fair decision.
• Disputants are largely expected to bear their own cost irrespective of the outcome or decision of the proceedings.

While the discourse on small and low-valued claims adjudication and resolution has a long history in England and Wales, special procedures for adjudicating such claims was recently enacted.

After investigations by Lord Woolf, a series of Civil Procedure Rules was published by the UK government. Similar measures have also been adopted in various common law legislative authorities around the world including the Emirate of Dubai, South Africa, and Zimbabwe.

Read about top construction dispute cases in 2018 at Construction case law update – Top 5 construction cases of 2018.

The Construction Industry and Small and Low-Valued Disputes

Due to the limited focus on the making of public policy, we expect the adjudication of small and low-valued project claims and disputes in construction will remain simple, and the adjudication and resolution of disputes will not exceed the value of the claim. 

In effect, the underlying philosophy of ‘small and low-valued claims’ is that ordinary citizens should be able to have their disputes settled with minimal or no expense, little time delay, and in a manner that is not procedurally complex or technical.

Our interest in the construction industry is driven by two factors. The first is the continued importance of the construction industry to the global economy. Second, it is reasonable to argue that the prevalence of small claims in construction has ‘rule of law’ and ‘justice’ implications. There are two such possible considerations. The first relates to scenarios where the cost of adjudication and resolution exceeds the value of the claim.

The average costs of small and low-valued project claims and disputes can, on occasion, represent more than the full value of the claim.

This is a theme viewed by Lord Bingham as core to the constitutional principle of the rule of law in that “…means must be provided for resolving without prohibitive cost or inordinate delay, bona fide civil disputes which the parties themselves are unable to resolve.”

For this reason, small and low-valued claims and dispute adjudication are conducted in a less formal legal setting. The second rule-of-law consideration has been highlighted by Vestal (1965) and relates to the need for certainty in the law as it relates to disputes that would otherwise be ongoing and long-drawn-out litigation.

If you are going into a construction claim or dispute, please read our guide on writing notices in Writing a Construction notice of dispute. Free sample letter

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