The following article is extracted from the Windsor Yearbook of Access to Justice – Special Issue – Innovation and Access to Justice: Addressing the Challenge of a Diverse Justice Ecosystem – Volume 34, Number 1, 2017. It is written by Shannon Salter.

Put the public first. This is the appeal from the Action Committee on Civil and Family Justice (Action Committee), led by Justice Thomas Cromwell, former justice of the Supreme Court of Canada.

It is a deceptively simple concept and one with which we, as lawyers, would intuitively agree. If there is a unifying theme in the legal profession, it is a common desire to help the clients it serves.

However, the common law tradition is built on the notion that precedent, or what came before, is inherently better and more trustworthy than some uncertain future innovation.

This preference for past over the present, while key to the development and refinement of the principles of justice that strengthen our legal system, has also become an impediment to adopting procedural changes to our legal system that would greatly improve access to justice for the public we are meant to serve.

For other ODR providers and thoughts, you may review All You Need To Know About The Mediation Room: The Future of Dispute Resolution and Using the eBay Dispute Resolution Center: All You Need To Know About Resolving Your Online Disputes and personal thoughts on ODR.

Overview

Truly putting the public first in civil matters would require us to examine intensely the structure of our legal system and to ask ourselves, to whom does the justice system really belong?

As the Action Committee’s report argues,

“[C]ourt processes – language, location, operating times, administrative systems, paper and filing requirements, etc. – typically make sense and work for lawyers, judges and court staff. They often do not make sense or do not work for litigants.”

The Action Committee’s report concludes that the civil and family justice system is too complex, slow, and expensive to produce,

“[J]ust outcomes that are proportional to the problems brought to it or reflective of the needs of the people it is meant to serve.”

One of the promises of online dispute resolution [ODR], and technology generally, is that it will increase access to justice by removing barriers like cost, time, and information asymmetry.

In doing so, it would offer an answer to the Action Committee’s call to provide dispute resolution that is more proportional and tailored to the needs of the public.

It can also include programs or systems offered by private enterprises, non-profit organizations, governments, or a combination of these.

In support of the idea that ODR can reduce barriers to public justice processes, proponents point to the near universality of Internet access in developed countries like Canada.

They also argue that the public is overwhelmingly familiar with everyday online activities. Indeed, research in British Columbia shows people are comfortable with online banking, email, texting, and searching, for example.

Conversely, despite the very high number of Canadian adults who experience serious, difficult-to-resolve legal issues, the public is overwhelmingly unfamiliar, and uncomfortable, with traditional justice processes, such as those that take place in courthouses, tribunals, and their registries.

Evidence suggests that engaging with a civil justice process can wreak havoc on a person’s mental, physical, and financial well-being.

This, combined with the high cost of justice, discussed below, may explain why Canadians tend not to seek help for the vast majority of justiciable issues.

The CRT provides the public with access to interactive information pathways, tools, and a variety of dispute resolution methods including negotiation, facilitation, and, if necessary, adjudication.

Participants use all of these ODR services from a computer or mobile device at a time that is convenient for them. For those who are unable or unwilling to use technology to resolve their dispute, the tribunal provides paper-based or telephone-based services.

BRITISH COLUMBIA AS AN ODR EARLY ADOPTER

As a discipline, ODR is young, and in that context, its history in British Columbia is storied. The BC Ministry of Justice began exploring the use of ODR in a public justice context in 2011.

That year, Consumer Protection BC, a not-for-profit corporation for the protection of consumers and marketplace fairness, began using a Modria-based ODR system to resolve disputes between consumers and businesses.

The same year, an administrative tribunal, the BC Property Assessment Appeal Board [PAAB] began using a similar system to resolve disputes about residential property tax assessments, in conjunction with more traditional modes of administrative law dispute resolution.

While uptake was initially low for both programs, user satisfaction and resolution rates were encouraging, and these initiatives have become permanent components of both organizations.

The results from these forays into ODR in a public context prompted the BC Ministry of Justice to consider its application more broadly.

In 2012, the BC government passed the Civil Resolution Tribunal Act [CRTA] with the goal of using technology and ADR to increase access to justice for British Columbians with small claims and condominium property disputes.

Other arguments for ODR implementation in other locations such as Saskatchewan have been raised on various occasions. 

The CRTA provides that the mandate of the CRT is to provide “accessible, speedy, economical, informal and flexible” dispute resolution services for small claims and condominium property disputes.

The CRT’s role is to use electronic communication tools to facilitate the resolution of disputes by consent, where possible, and by decision, where necessary.

The CRT is required to accommodate the diverse needs of participants wherever it can and to recognize any relationships between the parties that will likely continue after the tribunal proceeding is concluded.

While the CRT was originally planned as a voluntary tribunal, there was strong demand from condominium property stakeholders to make the CRT mandatory for all parties.

In their view, a voluntary scheme would allow one party to veto the other’s ability to use an accessible dispute resolution forum like the CRT.

This would force the initiating party to use the Supreme Court of British Columbia (BC Supreme Court), which prior to the CRT, was the main forum for resolving condominium property disputes.

In response to these concerns, the CRTA was amended in 2015 to designate the CRT as the mandatory forum for condominium property and most small claims disputes in British Columbia.

The CRT is not the end of the road for ODR in British Columbia. Rather, it is a foothold, benefiting from earlier initiatives from PAAB and Consumer Protection BC and clearing the path for other tribunals and public justice processes to incorporate ODR, early dispute resolution, and public-focused design.

WHY THE CRT?

A question that arises from time to time is why the BC Ministry of Justice chose to establish the CRT as an independent tribunal rather than simply removing condominium property claims from the BC Supreme Court and placing them within the Small Claims Court.

One answer is that, as a new entity with no established culture or processes, the CRT was less constrained in pioneering a transformative approach to delivering justice services to the public.

The transformative potential of the CRT is that it starts from the principle of putting the public first, while also giving effect to the time-honored tenets of fundamental justice that are foundational to our legal system.

Using these principles, the CRT envisions a dispute resolution process that empowers people to become actively engaged participants in their justice system. 

As the Action Committee makes clear, Canadian court processes have become increasingly onerous. Civil court matters require citizens to finance court and legal fees, take time off work and pay for additional childcare.

In 2015, the average two-day civil trial in Canada cost an average of $31,330 in legal fees. Meanwhile, the average Canadian family earned a median after-tax income of $53,500 in 2013.

Not surprisingly, 90 percent of parties in British Columbia’s Small Claims Court are self-represented. Even if they could finance legal fees, many British Columbians in remote communities must travel great distances to a courthouse, burdening them with further costs.

No matter where you live or who you are, navigating the civil justice system, even Small Claims Court, can be stressful and overwhelming, and there is little support available to help with the process.

This stress is compounded by increasing delay in the system. Small claims cases in British Columbia can take up to twelve months to be heard, while condominium property disputes in the BC Supreme Court may take even longer.

These delays are costly, not just in terms of time and money, but also in terms of their effects on the health and emotional well-being of participants and on the public’s confidence in the administration of justice.

Moreover, the high cost of accessing civil justice services is not proportionate to their outcome. After all the time and money expended on a court case, less than 3 percent of BC Supreme Court civil cases actually go to trial.

Similarly, in the rest of Canada, the United Kingdom, and the United States, 98 percent of filed civil claims do not go to trial.

Research shows that, while some cases settle, many are abandoned because people run out of time, money, or energy without resolving the underlying dispute.

When trials do occur, they tend to follow one-size-fits-all processes, with little mediation or case management applied to resolve disputes early.

To be clear, the identification of procedural problems with the resolution of civil disputes is not a critique of our conscientious and committed judiciary and court registry staff in British Columbia.

Access to justice issues is endemic to the larger Canadian civil justice system. As George Strathy said on being sworn in as Chief Justice of Ontario,

“[w]e have built a legal system that has become increasingly burdened by its own procedures, reaching a point that we have begun to impede the very justice we are striving to protect.”

In the areas of jurisdiction under the CRT, these procedural and cost burdens are clear. Before the CRT began accepting condominium property claims in July 2016, these claims had to be resolved by the Supreme Court of BC.

This required the parties to invest financially and emotionally in protracted disputes with neighbors who share a common living space. Condominium property claims often involve highly emotional conflicts over matters with a relatively low monetary value – for example, parking spots, pets, rentals, and the use and repair of common property.

For the vast majority of condominium owners, taking such a claim to a superior court is not worth seriously considering. Despite this, it is clear that entrenched conflicts tear at the fabric of these small condominium communities across the province.

Over one million British Columbians live, own, or work from condominium properties, and, until the advent of the CRT, they had no accessible dispute resolution forum.

For condominium disputes, early and collaborative dispute resolution is essential to cultivate a respectful and positive communal living environment.

HOW DOES THE CRT WORK?

The Action Committee recommended that the civil and family justice system be reformed to avoid, manage, and resolve disputes in ways that are as timely, efficient, effective, proportional, and just as possible:

•  By preventing disputes and by early management of legal issues;
• Through negotiation and informal dispute resolution services; and
• Where necessary, through formal dispute resolution by tribunals and courts.

This is what the CRT aims to achieve. The CRT involves four stages, each part of a seamless, end-to-end process focused on early, participatory ODR.

Before beginning a claim with the CRT, a person with a dispute can access a free online tool called the Solution Explorer, which uses guided pathways to help a person learn more about their dispute so that they can make informed choices about how to resolve it.

The Solution Explorer asks a series of questions about the dispute and then provides information and resources tailored to that dispute.

For example, someone contesting a condominium bylaw fine might be given information about the applicable provisions of the Strata Property Act as well as a template letter to edit and send to their condominium council.

At the end of the pathway, the Solution Explorer provides a summary of the person’s claims as well as recommended resources and next steps.

If someone is not able to resolve their dispute using the Solution Explorer, the next step is to start a CRT claim, using the online intake process.

A key design feature of the CRT is that, wherever possible, a user should only have to enter information once, and the system should carry this information forward to other stages of the CRT process.

Finally, the CRT process incorporates relevant parts of the tribunal’s rules on an as-needed, when-needed basis, to avoid overwhelming parties with inapplicable rules.

After serving the others in the dispute with notice of the claim, the parties have a brief opportunity to negotiate directly with each other.

While the parties will be given some resources to help them do this, this is a low intervention area for the CRT.

The intention is to resolve a modest number of “easy” disputes very early and very inexpensively so that the parties can move on with their lives. If negotiation is not successful, the parties will enter a facilitation phase where an expert facilitator will help the participants to reach a consensual agreement.

The facilitator can use a variety of communication channels to work with the parties, including the CRT platform, email, text, phone, video conferencing, fax, and mail. Despite being online, the CRT is a very human-driven organization.

The CRTA provides for an extremely flexible and responsive facilitation phase, enabling the facilitator to use a variety of tools to help the parties settle their claims. The facilitators are generally not lawyers, although they can be.

Rather, facilitators must have strong mediation experience and skills. The focus at this stage is on helping the parties to reach a consensual agreement, wherever possible. Facilitators may help parties settle all or some of the issues, and they can caucus with a party to provide a frank evaluation of the dispute.

Settlement communications in the facilitation phase are confidential and are not disclosed to the tribunal members.

If the parties reach an agreement, the facilitator can ask a tribunal member to convert the agreement into a binding order of the tribunal, which can be enforced in court, without the parties having to sue for a breach of the agreement.

The CRT anticipates that the facilitation phase could resolve up to 70 percent of disputes.

In the event that the parties are unable to reach an agreement, the facilitator’s role includes preparing the parties for adjudication by helping them, in a neutral way, to narrow issues and organize their claims.

The dispute is then transferred to a tribunal member, a lawyer with specialized expertise in small claims or condominium property matters, who hears the parties’ arguments (usually in written form), considers the evidence, and then issues a binding decision of the tribunal, which is emailed or mailed to the parties.

If an oral hearing is necessary, due to credibility issues, for example, this is conducted though telephone and video conferencing.

The CRT’s adjudicative process is very similar to that of other large administrative tribunals, and, of course, tribunal members are subject to the same procedural fairness requirements that govern administrative tribunals generally.

The civil justice system struggles with proportionality, and the principle is often framed in opposition to fairness. However, the Supreme Court of Canada has recently endorsed the proportionality principle, finding that,

“[A] process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial. This requires a shift in culture … [t]he proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.”

From beginning to end, the CRT process is intended to take about ninety days for most cases, and the average total cost to the parties is roughly the same as in Small Claims Court, or about $200.

However, many parties will pay less than at Small Claims Court because fees are staged so that parties who resolve their disputes early pay less than those who require the full range of the CRT’s services.

Like the Small Claims Court, there are fee exemptions for those experiencing financial hardship, and the CRT has worked with community legal advocates to design an accessible process for people who need these exemptions.

The CRT’s fees are meant to reflect the proportionality principle; they are high enough to deter frivolous claims, but not so high that they are unbalanced with the interests at stake.

WHERE IS THE CRT NOW?

On July 13, 2016, the CRT began accepting condominium disputes. About a year later, on June 1, 2017, the CRT assumed jurisdiction of small claims disputes $5,000 and under.

The monetary threshold for claims within the CRT’s jurisdiction will slowly increase, by regulation, until the CRT becomes the mandatory forum in British Columbia for claims under $25,000.

Consistent with the CRT’s public-focused approach, the next phases of the technology development, namely expanding the case management system and the CRT’s communication tools, will be informed by feedback from the CRT’s early participants.

In fact, in the first forty-eight hours after beginning to accept claims, the CRT made agile and transparent changes to the CRT’s website, processes, rules, and intake form in response to feedback from participants.

Continuous improvement is a core value for the CRT, and this improvement involves consulting with the public, testing processes with stakeholders, listening closely, incorporating feedback, and then doing all of this again and again.

Opportunities and Challenges

The combination of technology and early dispute resolution presents an exciting opportunity to rebuild public justice processes around the needs of the public and truly realize the long-held promise of ODR.

However, the integration of ODR systems into a public justice process presents opportunities as well as challenges. The most significant of these are summarized below, along with the CRT’s approach to navigating them.

Briefly canvassed here, each of these issues would be a fruitful area for further study in the future.

Opportunities

1. Leveraging Access to Technology to Increase Access to Justice

Online technology is not a panacea. The dogmatic insistence that technology can resolve any problem ignores the fact that it is only one tool within a varied kit.

At times in the CRT’s development, in answer to a need that online technology will not easily accommodate, someone will eventually say: “Why not just pick up the phone in those cases?” which often turns out to be the most efficient and sensible solution to an intractable technology problem.

Requiring technology to resolve all problems often results in unnecessarily complex processes, which is, ironically, one of the justice system ailments that ODR is meant to address.

Despite its limitations, technology is able to offer a relatively inexpensive, nearly universal way of connecting people with expertise, support, and, most importantly, other people.

Among British Columbians aged eighteen to thirty-four, Smartphone ownership is nearly universal – 93 percent –  and it is 74 percent for those aged thirty-five to fifty-four. Ninety-three percent of British Columbians have broadband connectivity.

Online technology also offers a high degree of comfort, convenience, and familiarity, at least within the scope of common online activities.

A recent BC Statistics survey found that 92 percent of British Columbians use the Internet daily, including 69 percent of people over the age of seventy-four.

British Columbians are overwhelmingly comfortable with using email (94 percent), searching for information or services (91 percent), texting (89 percent), and online banking (80 percent).

Given recent studies about the public’s challenges in using the court system, it is reasonable to conclude that British Columbians access the Internet much more easily and comfortably than they do traditional justice institutions and processes.

While the overwhelming majority of citizens have access to online technology, any truly accessible justice system must also consider and address the needs of the minority.

What about people who are unable or unwilling to use CRT’s online platform? In such cases, the tribunal will assist a party with information and support in using the CRT online.

However, where a party has significant barriers to using the online platform, the CRT provides telephone-based or paper-based services.

This is consistent with the CRT’s stated commitment to build the tribunal around people, by assisting them to resolve their disputes using the communications method that best serves their needs.

2. Transforming Public Justice System Processes

By integrating the CRT with the existing justice system, the CRT model has the opportunity to fundamentally transform the justice system rather than simply augmenting or “alternativizing” it.

As discussed above, some programs that aim to increase the use of ADR in the justice system operate as “add-ons,” augmenting the existing process but never really challenging the justice system’s focus on a “day in court,” which is treated as inevitable, despite its rarity.

Similarly, as discussed above, despite their clear benefits to users, private ODR or ADR systems may externalize the cost and responsibility for justice system reform away from the government and the justice system.

The “alternativizing” of the justice system relieves public justice processes of the responsibility to reform and modernize to better meet the public’s needs.

By integrating with the justice system, the CRT model provides a template for how transformation and innovation can occur in a public justice context.

The CRT model goes beyond incremental measures, such as simply changing forms or allowing online filing.

Rather, it inverts the traditional public justice process model by assuming that disputes can be resolved consensually, with the right assistance and expertise. The CRT model, therefore, builds processes aimed at supporting this approach.

The goal is to provide a seamless, simple, end-to-end ODR process that is both fair and convenient for the public.

Once established, the CRT model could be adapted and applied to a wide variety of disputes. The model is likely particularly useful where:

(1) There is a high number of participants who cannot afford legal representation;

(2) The parties have an interest in building or maintaining relationships; and

(3) Existing public justice processes are highly complex or time-consuming. Family disputes, for example, fit these requirements and would likely benefit from the CRT model. The Rechtwijzer 2.0 platform, and its BC iteration, MyLawBC, are good examples of the potential for using ODR in the context of family disputes.

Whereas the Rechtwijzer 2.0 process stopped outside the courthouse doors, an integrated approach would spare families the time and inconvenience of any court process by connecting the ODR system with a binding adjudicative component, whether offered by a court or tribunal.

3. Co-Designing Justice Processes with the Public

At every stage of the CRT’s development, from the Solution Explorer, to the intake system, to fee exemptions, the CRT has worked with the public and key stakeholders, like community legal advocates, to make sure the CRT meets their needs.

The CRT’s software has been and continues to be, developed using an agile process that focuses on incrementally producing functional, user-tested software that works for the public.

Typically, CRT user testing starts with people who experience multiple barriers to accessing justice as well as with the people who support and advocate for them.

The assumption is that if a CRT process or technology component works for vulnerable people with barriers, it will likely be accessible to the wider public.

Generally, the CRT’s next step is to recruit public testers who are representative of expected users – for example, people who have had a previous small claim or condominium problem. After each round of testing, the CRT reviews the feedback and makes improvements.

One of the most important ways the CRT has built goodwill and trust with stakeholders is to report back after each consultation or testing activity.

For example, after asking for public input on CRT fee options and the CRT’s draft rules, the CRT published a blog post reporting on public feedback and explaining how the tribunal was going to apply this information.

This commitment to early public co-design has generated very positive results at later stages of user testing.

For example, after several rounds of early user testing for the Solution Explorer, including observational user testing, the CRT team launched a closed beta test, where members of the general public tested the system and completed a survey.

This survey yielded a tremendous amount of valuable constructive feedback.

It also validated the general approach to the Solution Explorer. About 90 percent of respondents said the technology worked well and that it was easy to use, while 94 percent said the information was accurate.

This overall feedback supports the theory that public co-design produces public justice processes that closely match public needs and expectations.

4. Normalizing the Integration of Plain Language in the Justice System

To be widely understood, general information for the public must be written at a grade 6 reading level.

Despite this, public legal information and court and tribunal forms routinely use complex language and “legal-eze” that assume a high degree of facility in English.

Part of the CRT’s commitment to putting the public first includes truly ensuring that CRT information and forms are as simple and clear as possible.

The CRT has worked extensively with public legal education and information providers, as well as community legal advocates, to ensure that the CRT’s platform, language, forms, rules, and processes are accessible.

Part of this endeavor includes providing some information in video or audio format for those who have difficulty absorbing written information and finding alternative ways to support participants for whom English is not a first language, including by offering free telephone interpretation services.

Technology can assist this objective in a number of ways.

For example, information from a person’s Solution Explorer exploration is used to present them with a more tailored CRT application form, which already contains some basic information about their problem, based on their answers in the Solution Explorer. The form itself asks for as little information as possible to allow the CRT to process the claim.

Wherever possible, the application form fills in information automatically. For example, if a person begins to type an address, the rest of the address is filled in for them, minimizing incorrect information.

Similarly, if someone misses a field, the application form will remind them of this omission before letting them continue, reducing possible delays that may result from later requests for this information.

Challenges

Many of the opportunities afforded by a CRT model stem from the “newness” of the initiative and the absence of any established procedures or rules, aside from those that apply to administrative tribunals generally.

However, the CRT’s newness also presents some significant challenges that require a great deal of careful thought, collaboration, and patience to navigate successfully.

1. Fear of Change

One of the fundamental concerns voiced by the legal community when the CRT was first announced was that it would subvert foundational legal principles by replacing courts with “robo justice.”

A common myth about ODR is that it relies on algorithms and avatars to decide disputes. This can be frightening particularly to justice system actors who worry that fairness and the rule of law will be sacrificed in the name of efficiency.

While some software programs, such as IBM’s Ross, or Canada’s own Blue J Legal are using artificial intelligence [AI] to build access to legal information and conduct basic legal research, most ODR platforms rely on a combination of basic AI and good old-fashioned human skill and judgment.

For example, the Solution Explorer uses simple AI by providing guided pathways to lead people to tailored legal information and tools.

However, the facilitation and adjudication phases of the CRT are conducted by humans with extensive dispute resolution skills, either in ADR or administrative decision-making.

The corollary fear is that technology will render lawyers obsolete. The CRT is being implemented at a time of considerable change and tumult in the legal profession, in part due to the profession’s reluctance to modernize its provision of legal services to the public.

With the intention of the evening the playing field for participants, the CRTA creates a rebuttable presumption of self-representation.

This was not popular with lawyers, who sometimes felt they were being excluded.

The issue of change management in public justice reform initiatives is important because the failure to engage and communicate properly with stakeholders can quickly scuttle otherwise sound initiatives.

The CRT undertook a considerable change management project to engage with stakeholders, including the public, the condominium community, community legal advocates, lawyers, mediators, and the courts. The CRT conducted public forums around the province to consult with the public.

The CRT website offers continuous updates and requests for public feedback. The CRT also established a number of working groups to gain input from various stakeholders.

In many cases, the CRT met with particular organizations over a period of time to try to address concerns and gain understanding.

The most important tools in this project were open, frequent communication, and a willingness to compromise, where doing so could build consensus without undermining the CRT’s access to justice mandate.

2. Assumptions about Dispute Resolution Processes

In addition to the assumption that a public ODR system will replace lawyers with robots, the CRT has frequently encountered assumptions about the efficacy of ODR-based dispute resolution processes as well as comparisons between ODR and more traditional court processes.

(a) Assumptions about ADR

Within the ADR community, there are strongly held views that the effectiveness and accountability of processes like mediation and facilitation lie in their format.

That is, ADR is ineffective if, for example, participants are not in the same room, if they cannot see each other’s body language, or if they have not engaged in pre-mediation conferences.

 For some, the idea that mediation can occur at a distance or over email, or that ADR services can be scaled down or up to meet the needs of the parties and the issues, rather than delivered as a full package, is anathema.

However, for many people, mediation services are almost as unaffordable or inaccessible as legal services.

Both services can suffer from some of the same access to justice barriers including high rates, travel costs, time away from work and family, and uncertain outcomes.

Distance mediation, using technology such as video and telephone conferencing, can reduce many of these barriers in the same way that technology reduces access to justice barriers generally.

Further, studies on distance mediation suggest it compares favorably with in-person mediations, both in terms of the number of settlements and the participants’ opinions about its efficacy.

In some contexts, distance ADR processes may actually have advantages over in-person ones. Antagonistic body language, for example, may discourage settlements.

Participating comfortably in one’s home may reduce anxiety or logistical hurdles for those with mental health issues or physical disabilities.

The scholarship in this area is nascent, and the CRT will be closely monitoring and analyzing which techniques seem to be most effective in different contexts and will continuously improve in this area.

(b) Assumptions about adversarial processes

 Justice system actors often hold certain assumptions about common law justice processes that can impede the development of public ODR systems. The most powerful of these is that the adversarial system, and its attendant focus on in-person testimony and cross-examination, is the ideal form of dispute resolution.

The idealization of the adversarial trial process can cause deep skepticism about ODR systems like the CRT, which focuses heavily on consensual dispute resolution and, failing that, uses the flexibility enjoyed by most administrative tribunals to make the adjudicative process as accessible and fair as possible.

There is no doubt that adversarial processes are sometimes necessary and have an important role, especially in criminal and public interest trials, in testing evidence and holding state authority to account.

However, an examination of public justice processes in civil cases demonstrates that, as a dispute resolution mechanism, adversarialism is less than ideal in several regards.

First, civil justice processes focus on preparing for an adversarial trial – the day in court. This forces parties to expend a great deal of time and money on preparing pleadings, undertaking discovery, bringing preliminary motions, and participating in trial scheduling conferences.

While establishing one’s case can, at times, assist parties in reaching a settlement, these activities are wasted in many of the approximately 98 percent of filed civil claims that never make it to trial.

Further, this focus on adversarial pre-trial activities tends to entrench the parties’ positions from the outset, wedding parties to positions rather than interests, and making it difficult to reach consensual agreements.

This is especially problematic given that parties tend to be happier with consensual resolutions rather than judicially imposed resolutions.

Second, social science evidence increasingly suggests that some of our assumptions about the adversarial system’s capacity to determine truth and reach sound decisions may be misplaced.

Judges and tribunal members, despite their excellent training and commitment to the rule of law, have a difficult time not being human, and they inherit the heuristics that attend that proposition.

Research suggests that, like everyone else, decision-makers are susceptible to biases and weaknesses in reasoning, which sometimes affect the outcome of the cases they determine.

Maintaining adjudication as the gold standard for dispute resolution ignores some of the limitations of human decision-making. Adversarial legal processes serve as an important check on state power in criminal cases and a powerful lever for restitution in civil ones.

However, minimizing the limits of adversarialism, while inflating its benefits, impairs an evidence-based approach to the design of our public justice processes.

In particular, this may cause us to ignore other important considerations like proportionality, the relationship between the parties, and the parties’ underlying interests in the resolution of their dispute.

3. Technology Risk

Thankfully, the CRT has not encountered any technology issues since beginning to accept disputes for resolution. Despite this, the team has devoted considerable time to ensure that the CRT is able to cope with the hiccups that are part of any new technology project.

The goal is to ensure that the CRT has strong risk mitigation strategies so that it can handle possible technology interruptions while still providing timely service to the public. A major risk mitigation strategy was deciding to build the CRT’s online services on the already well-established and widely used Salesforce platform.

This platform has been used successfully by private and public organizations much larger than the CRT, and the scale of the platform means that support and updates will be readily available in the event of a problem.

Additional technology risk-mitigation strategies include temporarily reverting to telephone-based or paper-based service, triaging claims, and escalating claims to adjudication if necessary to avoid a backlog.

However, the CRT’s biggest risk mitigation strategy is the commitment to rigorously include the public in developing and testing processes to ensure that public needs are being met.

CONCLUSION: WHAT WILL THE FUTURE LOOK LIKE?

Putting the public first is not a one-time endeavor; it is an enduring obligation. One of the CRT’s guiding principles is a commitment to continually improve by regularly asking for, and incorporating, public feedback about the CRT’s processes.

Technology enables an agile response both to measuring and increasing public satisfaction with the tribunal’s services, which will let the CRT adapt quickly to serve the public better.

The CRT will transform small claims and condominium property disputes by coupling skilled facilitators and tribunal members with new online tools to encourage accessible early dispute resolution. As the first ODR system integrated into public justice processes, the CRT will also yield valuable evidence about ODR’s capacity to increase accessibility to our justice system.

If successful, the CRT model, featuring a seamless, service-driven, flexible ODR experience, could be leveraged by multiple organizations in different jurisdictions in the future.

In British Columbia, these tools will be applied across the administrative justice system in the coming years, tailored to each tribunal’s processes and jurisdiction.

Under the BC government’s tribunal transformation initiative, the administrative justice system, led by the CRT, will increasingly focus on using technology and early dispute resolution to increase access to justice for citizens.

By putting people at the center of the dispute resolution process, rather than the periphery, the CRT will significantly increase access to justice for British Columbians and pioneer a new model for the delivery of civil justice services in Canada.

The post Canada’s First ODR: The CRT and Its evolution appeared first on ODR Guide.

This article is written by Inessa Love, who is a senior economist in the World Bank, as part of the Investment Climate Impact Project.

The ability to enforce contracts is essential to support the efficient allocation of resources and growth in an economy. The ease with which contracts can be enforced varies dramatically across economies.

According to data from the World Bank’s Doing Business project, the time required to enforce a contract, from the moment the plaintiff files the lawsuit until payment is made, ranges from about five months in Singapore and seven in New Zealand to more than four years in Guatemala, Afghanistan, and Suriname.

Meanwhile, the cost ranges from less than 10 percent of the contract value in Iceland, Luxembourg, and Norway to more than 100 percent in such countries as Cambodia, Indonesia, and Sierra Leone.

Among the reasons that contract enforcement is so inefficient in many countries are the lack of modern laws, deficient and underfunded court systems, and prevalent corruption.

So, does Alternative dispute resolution (ADR) save time and money?

Alternative dispute resolution (ADR) has emerged as an alternative to court litigation that may offer a more efficient and less expensive avenue for resolving disputes. It provides confidentiality, choice of neutral parties, more flexibility of procedure, and other benefits.

Hint: Our worldwide map for arbitration costs can assist you in estimating your arbitration fees.

This article summarizes the findings of the literature on the effectiveness of ADR mechanisms as an alternative to traditional litigation. More about ADR’s advantages and disadvantages here, Alternative dispute resolution (ADR) and it’s advantages and disadvantages and daily life use in Upwork Resentment and disputes between you and Upwork. How to win a dispute against Upwork

Other platforms in different countries such as Canada are discussed in Canada’s First ODR: The CRT and Its evolution

What is ADR?

ADR is defined as any process or procedure other than adjudication by a presiding judge in court—litigation in which a neutral third party assists in or decides on the resolution of the issues in dispute (Rozdieczer and Alvarez de la Campa 2006).

Among the many different types of ADR processes, the most common are mediation, arbitration, conciliation, and early neutral evaluation, which we will detail in the next section. Others include summary jury trial, mini-trial, and settlement conferences.

However, even the same process can be applied in many different ways. There are also differences in the extent of ADR in a country. ADR may involve a small center in a single location—or a network of large centers around the country.

ADR can involve different types of disputes—such as between businesses, between employees and management, between businesses and creditors (insolvency, restructuring), between investors and the state (investment treaty arbitration), or between businesses and the government (tax disputes).

All these differences make ADR a rich field, but they also make evaluating its effectiveness more difficult. Different processes and applications may have different impacts, making it difficult to make any general statements about the overall effectiveness of ADR.

In addition, the legal treatment of ADR processes differs in different jurisdictions, and the impact of an ADR process will depend on local laws.

It can increase the effectiveness of courts by reducing bottlenecks and improve trust in the legal system, which may increase foreign investment.

Finally, one case can differ significantly from another, and subjecting the same case to different processes is not feasible. Therefore, caution must be made in drawing conclusions.

Common Types of ADR

• Arbitration: involves using a neutral arbitrator to decide the outcome of the dispute. Once the parties have agreed to the process, arbitration is binding (the decision is final and can be appealed only on very narrow grounds).

• Mediation: a process in which a neutral mediator helps the parties discuss and find a mutually acceptable solution.

• Conciliation: a variation of mediation in which a conciliator meets with the parties separately (rather than jointly, as in mediation) and seeks concessions from the parties that would help resolve the dispute. Unlike arbitration, conciliation is not legally binding.

• Early neutral evaluation: a process in which a case is referred to an expert, usually an attorney, who provides a balanced and unbiased evaluation of the dispute and offers an opinion on the likely outcome of a trial.

More about mediation and arbitration in What are the Main Types of Alternative Dispute Resolution – ADR and Online and Offline Arbitration: What is the Difference?.

ADR Impact on Cost

Many studies have explored the effectiveness of ADR in reducing the costs of dispute resolution relative to litigation. Estimates of cost savings vary substantially from study to study, depending on the type of ADR process evaluated, the type of cases, the type of intervention, and the local conditions.

As table 1 below shows, estimates of the total costs incurred by firms that use an ADR process range from 3 to 50 percent of the costs incurred by firms that go through a court litigation process.

One study, performed by the staff of the International Finance Corporation (IFC 2006), looked at the introduction of ADR centers in Serbia, Bosnia and Herzegovina, and the Former Yugoslav Republic of Macedonia.

It evaluated more than 1,000 cases resolved through mediation and compared the outcomes with those of similar court cases.

The study finds that in Bosnia and Herzegovina the direct costs of mediation averaged US$225, about 50 percent of the costs of litigation (about US$470).

Similarly, Jorquiera and Alvarez (2005), surveying firms in nine Latin American countries on their use of ADR, found that the firms relied on ADR in 26 percent of cases and the judicial system in 17 percent (private negotiations were used the most).

Using firms’ survey responses, the authors analyze relative costs for a hypothetical company in Argentina. The report costs US$431 for mediation, US$2,536 for arbitration, and US$14,295 for litigation.

Uniquely, this analysis attempts to factor in all costs including the cost of time invested, the opportunity costs of capital, and legal costs.

Other studies of ADR found that it saved about US$500 per party in the United States and about US$6,000 per case in Canada. However, savings in Canada varied widely, ranging from only about US$2,000 to more than US$20,000.

Wissler (2004), reviewing 27 studies of general civil mediation, also reports mixed results on cost savings.

When ADR fails

For cases that fail to reach a resolution through ADR, the total costs can be higher. Many cases that attempt to use ADR, mainly under mandatory mediation, end up in court anyway.

Genn and others (2007) study an involuntary program, automatic referral to mediation, introduced in London. Of 1,232 cases referred to the program, only 14 percent were mediated; the rest went back to court.

The settlement rate was 55 percent in no-objection cases and 48 percent in cases where parties were persuaded to mediate. The study estimates that for cases that failed to reach a settlement through ADR, total legal costs were US$2,000–4,000 higher than they would have been if no attempt had been made to use ADR.

Rosenberg and Folberg (1994) use a randomized experimental design to study early neutral evaluation (ENE) in California. They report that while about 40 percent of parties believed that they saved money with ENE, 38 percent of attorneys and parties believed that ENE added about US$4,000 on average to the cost of litigation.

ADR Impact on Time

The time it takes to resolve a dispute through an ADR process relative to traditional litigation is also of interest in evaluating the effectiveness of ADR.

This time is also referred to as time to disposition, measured as the total time from filing a complaint to settling the case. Researchers use a variety of methods to study differences in time, including surveys, archival data sources, and randomized experiments.

The estimates of the differences in time between ADR and traditional litigation vary widely among studies, again depending on the ADR mechanism. The time savings found range from one month to about a year. Table 2 below summarizes these studies.

Rosenberg and Folberg (1994), in their study of the ENE program in California, find that it shortened the time compared with a court process. Similarly, Hann and Baar (2001), studying a mandatory mediation program in Canada, find that mediation resulted in more cases being settled sooner.

At six months, for example, 25 percent of cases under the mandatory mediation rule were disposed, compared with only 15 percent of control cases.

Barkai and Kassebaum (1992) find that the court-annexed arbitration program in Hawaii was four months faster on average than traditional litigation. Wissler (2004) reports that in five studies of appellate cases, the time to disposition was one to three months shorter for cases assigned to mediation than for other cases.

Bingham and others (2009), studying outcomes of ADR use by the U.S. federal government, estimate that ADR saved about 88 hours of staff time and about 6 months of litigation time per case—showing that ADR can reduce public costs as well as private.

While there are many studies of ADR effectiveness in the United States and a few other developed countries, there are very few such studies in developing countries.

One of these is by Alvarez de la Campa (2009), who studied a reform in Colombia that made conciliation mandatory before court filings in 2001. He reports that tenant eviction cases took 15 months on average in court but only 4 months in mandatory conciliation.

Is ADR realy shortet than litigation?

Yet some studies find no significant reduction in the duration of cases with ADR.

An early study of the introduction of ADR in the United States known as the RAND report, produced in 1996, concluded that there was “no strong statistical evidence that the mediation or neutral evaluation programs significantly affected time to disposition, litigation costs or attorney view of fairness and satisfaction” (Stipanowich 2004, p. 852).

Later research questioned and criticized these conclusions. More recently, however, Genn and others (2007) reported no significant impact of mediation on total case duration.

This was the finding of a formal survival analysis of case duration using data from a randomized experiment of mediation assignments and controlling for case value, case type, and presence of counterclaim.

Wissler (2004), reviewing 27 studies of general civil mediation, also reports mixed results on differences in case duration.

Direct and Indirect Impact of Alternative dispute resolution

The direct impacts of cost and time savings for those participating in ADR are the easiest to measure. Nevertheless, ADR processes can have other direct impacts for ADR participants as well as indirect impacts benefiting even those who do not participate directly in ADR.

Among the direct impacts noted for ADR participants:

• Clients’ higher satisfaction with ADR outcomes. Others might include jobs retained rather than lost or new jobs created.

• The IFC report (2006) notes that because ADR resolutions are faster, they may allow plaintiffs to avoid bankruptcy thanks to receiving the payment earlier, and may allow defendants to avoid a negative public image.

These direct impacts are more difficult to measure (because of the lack of counterfactuals), and no empirical evidence on these impacts has been found.

Indirect impacts of ADR may include increasing the effectiveness of courts, which benefits firms that are going through the courts rather than an ADR process.

ADR can improve the functioning of the formal court system by reducing the number of court cases filed (by diverting some cases that would have ended up in court to the ADR process) and thus alleviating bottlenecks in courts.

Barkai and Kassebaum (1992) found that after the court-annexed arbitration program was introduced in Hawaii, the backlog in courts decreased. Gropper (2010) reports that after the introduction of an ADR process for tax appeals in Pakistan, the number of pending cases fell from 2,500 to 770.

In the United States, there has been a long debate on the “vanishing trials” (the pronounced decline in rates of trial in past decades), with some noting the important role ADR has played in this trend (Stipanowich 2004).

Wissler (2004) reports that a mediation program can save costs for the courts by reducing the caseloads of judges and their staff.

Intangible Benefits of ADR

ADR may have another intangible benefit: improving the perceived quality of the legal system and increasing trust in the fair resolution of conflicts. Chemin (2010) finds a causal relationship between improvements in court speed in India and outcomes for firms, such as increased investment and better access to finance.

The IFC study of Balkan countries (2006) reports survey evidence of greater trust in the legal system among clients who used mediation.

ADR may also affect investors’ perceptions. Judicial system weaknesses are often cited as a constraint on foreign investment in emerging markets (EIU 2007).

ADR can improve foreign investors’ perceptions of the business environment in a country, which may result in more foreign investment (see, for example, World Bank Group 2010).

In addition, foreign investors prefer ADR mechanisms to transnational litigation (PWC 2006), and as of September 2011, 146 parties had ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention). There is, however, no direct evidence of increased foreign investment as a consequence of introducing ADR.

Other less tangible benefits of ADR include improvements in the quality of business relationships and problem-solving skills.

The IFC study (2006) claims that introducing ADR improved professional and business relationships and supported the continuation of business relationships because of the non-adversarial nature of mediation.

Similarly, a PricewaterhouseCoopers survey (PWC 2006) finds that the continuation of business relationships is an important factor in firms choosing to use ADR.

The survey by Wissler (2004), however, reports mixed results on litigants’ relationships.

Other studies can be reviewed in CADRE and in LEXOLOGY.

Another possible effect of mediation could be an improvement in conflict resolution skills allowing parties to take responsibility for solving their problems in the future.

There is no empirical evidence on the effect of ADR on other important economic outcomes, such as investment, employment, access to credit, insolvency, and growth.

Conclusion

While some ADR processes (such as binding arbitration) offer final solutions, there is a risk that cases will go back to court, and this may increase the total cost and time.

Thus for policymakers seeking to improve the efficiency of court systems, maximizing the share of ADR cases that are successfully resolved should be a priority. Moreover, cost and time savings might be just the tip of the iceberg.

The indirect impacts—such as improvements in court effectiveness, the business environment, and trust in the legal system—could potentially be even more important in the overall contribution of ADR to economic development.

There is almost no research on these indirect impacts, which are less tangible and more difficult to measure. ADR programs appear to be an attractive option in many developing countries because of their slow and ineffective courts.

ADR could also alleviate courts’ case backlogs and improve their effectiveness. Nonetheless, this should not be a prescription for reducing the importance of well-functioning courts, which remain the backbone of the justice system.

In support of that, Voigt (2009) finds that ADR programs complement state dispute resolution where a better quality of courts is associated with more frequent use of ADR services. This suggests that ADR should be developed alongside improvements in the traditional litigation processes.

The post Alternative Dispute Resolution: Does It Save Time and Money? appeared first on ODR Guide.

The emergence of Blockchain as a disruptive technology in not just the commercial industry, but also in real estate, health care, content distribution, etc., has drawn an inquiry on the applicability of the technology as a means of dispute resolution.

The phrase ‘one size fits all’ very much applies to the description of Blockchain, as it is one of the trending subjects of the 21^st century.

This is because it has a diverse and transformative potential in application in most aspects of human interaction. Regulators, academics, legal practitioners, and technology enthusiasts are all promoting the inclusion of the blockchain in various industries with arguments of numerous advantages.

This article is based on THE LEGAL PRACTICALITIES OF THE USE OF BLOCKCHAIN AS A FORM OF ONLINE DISPUTE RESOLUTION by T. Koroye.

To read more about ODR; What is ODR (Online Dispute Resolution)? What does ODR mean?. You might also find Artificial intelligence in ODR interesting too, Artificial Intelligence Acceptability in Online Dispute Resolution

The Technology Known as Blockchain

Blockchain is the foremost Decentralized Ledger Technology (DLT) that allows network members to share, store and transmit information in a continuous manner in the form of ‘blocks’. These blocks contain series of data from past transactions accessible to participants of the network with either a private or public key.

Satoshi Nakamoto introduced the concept of Blockchain in 2008 in a paper on bitcoin and the great financial revolution introduced by cryptocurrencies. However, this sparked interest in the technology itself and stretched beyond financial activities to include governance, real estate, entertainment, and voting, etc.

The types of blockchain depend mainly on the members of the network with access to the block. blockchains, therefore, divide into permissioned and permissionless, each, in turn, divided into public and private.

Blockchain performs on two principal mechanisms. The first is known as a decentralized and distributed network that ensures that the technology can survive data breaches and other malevolent attacks as there is no regulatory central authority. The second is consensus approval where new blocks are added on validated approval by members of the network.

These two mechanisms make blockchain a well secure technology for sensitive data storage and protection.

Introduction of Blockchain into Online Dispute Resolution

It is imperative to state that Smart Contracts are an essential aspect of blockchain, as they possess the computerized transaction protocol that executes the terms agreed on by participating parties in the network.

Legal scholars who hold more traditional views have postulated that Smart Contracts can never be legal contracts as they lack the foundations of a contract, such as a consensus ad idem, offer, acceptance, and intention to enter into a legal agreement. Thus they fail to qualify under the provisions of the New York Convention.

Nevertheless, the UNICTRAL model law has made a profound interpretation of Article II to include any form of communication. The communication carried out through blockchain is through algorithms, and the subsequent signing in by parties with their private keys.

This can transcribe the intentions of parties to be interpreted to cover the legal concepts of offer and acceptance.

Consequently, developed states are on the verge of incorporating blockchain into the state-recognized ODR platforms. An example of this is the application of blockchain technology by the Chinese government to the Hangzhou Westlake Court with planned cooperation by the Hangzhou Blockchain Technology Research Institute.

The aim is to use blockchain technology in preventing digital evidence tampering. In addition, the Guangzhou Arbitration Commission has issued the first arbitral award based on the ‘Arbitration Chain’.

Applying Blockchain to Online Arbitration

As aforementioned, blockchain is a buzzing topic in today’s legal sphere. Legal practitioners and technology enthusiasts deliberate on the nexus between the two spheres, especially concerning international commercial arbitration.

Arbitration practitioners have argued that blockchain is not a suitable platform to conduct arbitral proceedings, stating that the technology is “quite slow and expensive to store massive volumes of data.” 

However, while the use of a public permissionless blockchain might be slow to store such data, private permissioned blockchain is the best suited for online arbitration. It has the potential to process thousands of transactions per second with low costs.

Within the bitcoin system, users have formulated a private adjudication system that works essentially with two digital keys (public or private). Therefore, the parties can have access to the coins without dispute.

However, in case of a conflict, parties can contact a private adjudicator who will have a third access key into the network. He/she will assess the facts through the blocks and trace the origin of the dispute, to determine the case.

Blockchain is, therefore, argued to be the most practical and advanced form of online arbitration due to its technical and decentralized attributes.

Because Smart Contracts are self-executing and dispute resolution is rendered obsolete, the necessity of third-party enforcement might be approached with skepticism.

However, Smart Contracts are liable to disputes due to a number of issues such as a human error in coding, which definitely makes third-party adjudicators a necessity. More about blockchain and smart contracts here.

The Legal Practicalities of the Use of Blockchain for Online Arbitration

Aside from the technical inhibitions in the complete adoption of blockchain, such as technical know-how, space for retention of data, protection of confidential information, etc., blockchain is not currently used in all earnest for international offline commercial transactions. This is due to the legal ambiguities, some of which have been previously hinted at and addressed above.

These legal uncertainties span from the question of the legality of smart arbitration contracts (and if they fall under the ambit of forced consent of parties who decide to use blockchain as an online platform) to the enforceability of the arbitral awards.

Thus, legal uncertainties arise from the initiation of the arbitration agreement through blockchain to the recognition of the award by the State.

In this article, we will focus on the ambiguities in the applicable law of arbitral proceedings (lex situs) and the practicability of the enforcement of the award. 

I. Lex Situs in Blockchain Arbitration

An essential and admirable feature of Blockchain is its decentralized nature, as it operates on a peer-to-peer operational system above any regulatory authority. This, however, poses a legal uncertainty as to the governing law applicable to the international commercial dispute, also referred to as lex situs.

Most international arbitration statutes recognize this as provided in Article 14 of the International Chamber of Commerce (ICC) Arbitration Rules and Article 16 of the London Court of International Arbitration (LCIA) Arbitration Rules.

This position is recognized in the case of Hiscox v. Outhwaite where the House of Lords held that the seat of the award is where the contract was signed. The seat of arbitration will determine the level of state intervention in the arbitration process and the arbitrability of the subject matter. It will also determine the degree to which the arbitral award can be challenged. 

Legal jurists, hence, have criticized the practicality of the use of blockchain as a platform of online arbitration. This is because Smart Contracts are enabled through distributed nodes that cut across multiple legal jurisdictions, especially in instances of international contracts. Consequently, they obfuscate the actual lex situs.  

In rectifying this uncertainty, scholars have proposed that the arbitrators can apply the principle of ex aequo et bono by resolving the dispute on what is deemed fair and just in the case of no clear applicable law.  Hence, arbitrators in blockchain assume the powers of amiable compositeur to carry out their duties.

This position has been criticised due to the very nature of the technology itself, as it excludes parties through “forced consent” from expressly vesting arbitrators the powers to apply the principles of ex aequo et bono.

legal jurists also propose the adoption of the jurisdiction of the fifth party in the arbitration agreement, referencing the provider of the online arbitration service, as the lex situs of the dispute. 

This theory proposes that the service provider maintains a degree of responsibility as owners and maintainers of the service, and therefore, can be accorded the appropriate seat of arbitration.

II. Enforcement of the arbitration award

As stated earlier, the New York Convention stipulates in Article V the prerequisites of a valid arbitral award. It states that the award must be written for it to be recognized and enforced in another state.

This is necessary because the enforcement of an award requires judicial assistance from the state where the award is to be recognized. States are empowered to decline enforcement of an award in its jurisdiction on the ground of public policy.

Blockchain, however, provides automatic execution of the arbitral award through Smart Contracts for online disputes relating to cryptocurrencies. Advocates for the inclusion of blockchain argue that this is a redeeming factor of the technology as it is an effective and practical implementation of the award without encumbrances.

Legal scholars, who are of the view that this is a deviation from traditional commercial practice, have criticized this. They claim that it will automatically enforce the award (this mostly involves the transfer of cryptocurrencies from one wallet to the other) by bypassing the public policy position of the state.

This school of thought also argues that such enforcement will disregard the principle of favor debtors. This principle protects the interests of the debtor of the award to ensure that his rights are not violated in enforcement.

Conclusion

As contractual relations become autonomous through novel technological platforms, the role of dispute resolution is also expected to adapt to these changes.

While legal skepticism and uncertainties are obstructing the adoption of blockchain as ODR or its implementation in offline transactions, all developed states are anticipated to incorporate it in their state recognized ODR platforms.

To overcome these uncertainties, the “Oracle” can be used in the blockchain platform to serve as an interface between technology and the real world, which can restrict the automatic nature of blockchain during arbitral proceedings. This makes it more suitable to resolve offline commercial issues. In turn, it resolves most of the highlighted legal issues.

You may find other research such as Decentralized Justice: A Comparative Analysis of Blockchain Online Dispute Resolution Projects to be of interest too.

The post Online Dispute Resolution and Blockchain Technology: What Do We Know? appeared first on ODR Guide.

COVID-19’s global adoption helps to promote electronic commerce across the world. Artificial intelligence and online dispute resolution have naturally been integrated as a result of the growth of high volume and low-value internet commerce (ODR). The following are the findings of research by Yongkyun Chung (2020) on the impacts of Artificial Intelligence acceptance in online dispute resolution:

1. Customers familiar with Online dipute resolution are still apprehensive to pick artificial intelligence at the current time as framework for resoling disputes.
2. ODR users think that using artificial intelligence into dispute resolution might help to speed up the process.
3. Artificial Intelligence may have the cognitive capacity to manage internet commerce conflicts, but not the sympathetic or emotive aptitude.

More about issues affecting Oline Dispute Resolution in Online Dispute Resolution: An Overview and Online Dispute Resolution: Obstacles and Solutions.

E-Commerce and Oline Dispute Resolution

COVID 19’s global impact helped to promote electronic commerce across the world. To prevent the risk of infection, most consumers choose to buy goods online rather than offline. Electronic commerce’s growth of ‘high volume, low value‘ transactions has promoted online dispute resolution in consumer complaints.

In practice, it is unreasonable to expect that customers seeking redress for products or services acquired for $100 in a cross-border e-commerce transaction will traverse borders and go to a foreign court to have their claims addressed.

However, one disadvantage of online dispute resolution is that it is less trustworthy due to the lack of face-to-face conversation in negotiating purchasing and selling activities.

According to Loutocky (2016), just 18% of EU customers utilized the Internet to buy goods from another country in 2014, before COVID 19.

The primary reason for this is that people are hesitant to purchase online. According to the Media Richness Theory (MRT), face-to-face contact transmits more meaningful messages than other forms of communication.

Video conferences and face-to-face communication have a high level of media richness, whereas email and fax have a low level of media richness. In a nutshell, most academics acknowledge that online dispute resolution has inherent flaws when it comes to communication.

Nonetheless, efforts to integrate technology into conflict resolution in a broad sense have continued.

Artificial intelligence in conflict resolution is not a new concept. According to Bruno Latour (1991; 1999) and others, humans and things coexist since humans are inextricably linked to objects like computers and cellphones in everyday life.

Artificial Intelligence in Online Dispute Settlement Literature solely looks at the “supply” side of artificial intelligence in online dispute resolution. The final question is whether most customers believe artificial intelligence can handle small-value, high-frequency e-commerce conflicts effectively.

The research on arbitrator acceptability has already looked into age, gender, and education. Similarly, the use of AI in Online Dispute Resolution is the subject of various studies. It should be noted that consumers (who might use ODR) are not homogenous because youthful college students are digital natives, but elderly individuals who did not get formal information, communication technology (ICT) education are digital immigrants.

Thus the study referred to earlier aims to prove the age effect on the acceptance of Artificial Intelligence in the context of online dispute resolution across the age spectrum.

For other studies on AI use in ODR platforms; Here.

Artificial Intelligence and Online Dispute Resolution

The emergence of online dispute resolution is concurrent with the rise of cross-border electronic commerce.

The motivation for establishing a global redress system for cross-border electronic commerce disputes is the sharp increase in the volume of e-commerce in the 21st century. At the same time, most of the value of conflicts is held by a tiny group of people. As a result, consumers avoid/ can’t go to a national court to resolve their disputes.

Cortes (2010), Rule et al. (2010), Duca et al. (2012), Cortes and Rosa(2013), Raymond(2014), and Tan(2019) are among the latest academics that propose a worldwide ODR system to manage cross-border e-commerce disputes.

Although there have been many online consumer complaints, the worldwide redress mechanism for cross-border electronic commerce disputes has two limitations.

First, because of the large number of transactions in internet commerce, humane neutrals can’t deal with too many instances originating from around the world.

Second, maintaining fairness in dealing with the diversity of customers globally, in terms of age, gender, ethnicity, education, and nationality, is difficult for human neutrals. That is one of the primary reasons why artificial intelligence is used in online dispute settlement.

Accordingly, various scholars look into a variety of artificial intelligence applications in conflict resolution. They weigh in on the advantages and disadvantages of decision support systems, expert systems, Case-Based Reasoning (CBR), and legal ontologies.

Mania (2015), a recent book, looks at online conflict resolution from the standpoint of the future of justice. Others such as Pandit (2019) investigates the influence of artificial intelligence on the legal profession.

Moreover, most of the prior research has focused chiefly on the supply side of the problem and the technological feasibility of implementing Artificial Intelligence in online dispute resolution.

One unresolved challenge in online dispute resolution stems from the demand side of artificial Intelligence.

Do customers embrace Artificial Intelligence as a neutral or issue solver in online dispute resolution? This type of problem has been addressed in previous arbitrator acceptance literature over several decades.

The previous model of arbitrator acceptance looked into whether arbitrator qualities are essential in arbitrator selection. Age, gender, education, and prior employment arbitration experience are all factors to consider.

The results are inconclusive. The favorable link between arbitration background and arbitrator acceptance is supported by Briggs and Anderson (1980).

The link between them is not supported by Bemmels (1990). The second-generation model aimed to provide a theoretical model that might explain arbitrator acceptance (Posthuma and Dworkin, 2000; Houghton and Elkin, 2013; Chung and Ha, 2016).

They put antecedents like experience, knowledge, and procedural justice to the test, as well as arbitrator acceptability.

Nowadays, the relevance of the age spectrum of customers is underlined when it comes to artificial intelligence acceptance because consumers are expected to demonstrate disparities in online dispute settlement. Digital natives’ behaviors differ from those of digital immigrants.

Digital natives are exposed to a variety of influences as they grow up. As a result, their brains are most likely to operate differently because they think differently than digital immigrants.

Because artificial intelligence is a byproduct of the computer era, digital natives are supposed to have a comfortable relationship. Digital native literature suggests that digital natives are inclined to accept artificial Intelligence as impartial in online dispute resolution, whereas digital immigrants are apprehensive.

Artificial Intelligence: Electronic commerce disputes and online transaction

There are several behavioral distinctions between digital natives and digital immigrants. The importance of information and communication technology has been stressed in the literature (ICT).

The majority of digital natives have no trouble utilizing information technology-enabled devices such as cellphones, laptop computers, etc.

Digital immigrants, on the other hand, struggle to use embodied information technology goods. We believe that digital natives and digital immigrants behave differently. As a result, the primary premise of this article is that digital natives and digital immigrants have different views on the role of artificial Intelligence in cyberspace dispute resolution.

Validity, trust, competency, speed, cost-savings, and expertise are the six criteria used to distinguish the differences and similarities between college students and adult age groups regarding the use of artificial Intelligence in resolving e-commerce disputes.

Acceptability 

1. Does Artificial Intelligence help to resolve disputes in small value online transactions?
2. Are you willing to accept Artificial Intelligence as a decision-maker in small value cross-border electronic commerce disputes?

In the literature on arbitrator acceptance, acceptability is a critical variable. The conventional model of arbitrator acceptability explores whether the qualities of arbitrators, such as age, gender, education, and experience, are essential determinants in arbitration selection.

In terms of acceptability, we want to know if respondents think artificial agents can resolve e-commerce conflicts. Is Artificial Intelligence as a decision-maker in conflicts is difficult for disputants to accept?

Trust

Is Artificial Intelligence software effective in resolving cross-border e-commerce disputes?

On the topic of trust, we imply that disputants must have faith in artificial intelligence software to solve the problem. Trust is a crucial component of a human buyer-seller connection in their relationship.

According to the human-computer interaction (HCI) literature, human-computer contact is conceivable. As a result, we believe that trust is necessary for disputants to rely on artificial Intelligence in ODR. As a result, we assume that a human being must have faith in an artificial intelligence agent.

Competence

1. Does Artificial Intelligence have the cognitive competence to understand the contents of cross-border e-commerce disputes?
2. Does Artificial Intelligence have the adequate competence to understand the contents of cross-border e-commerce disputes?
3. Does Artificial Intelligence have the sympathetic competence to understand the contents of cross-border e-commerce disputes?

Competence is one of the critical factors in the research on arbitrator acceptance that influences disputants’ decision-making on arbitrator acceptability. Competence is split into two elements: cognitive and affective competence.

Because artificial Intelligence is invisible software with no physical substance, we anticipate that customers’ views will change depending on their cognitive and emotional sides.

Speed

Does Artificial Intelligence have the speed in solving e-commerce disputes?

The majority of the literature on alternative dispute resolution (ADR) emphasizes speed as an essential factor in deciding which routes to pursue from various alternative dispute resolution mechanisms.

According to arbitration literature, the primary advantage of arbitration over litigation is speed. Unlike offline ADR, ODR has the potential to resurrect the wisdom of speed in dispute resolution since the online framework guarantees speed when compared to the offline environment.

Cost-Saving

Is Artificial Intelligence the cost-saving technology in solving the small value cross-border e-commerce disputes?

The cost element is a necessary component of embracing AI as a problem-solving tool.

Expertise

Is an Artificial Intelligence mediator capable of solving e-commerce disputes?

Does artificial intelligence(AI) mediator have the expertise in solving e-commerce disputes?

Expertise is mentioned in the literature on arbitrator acceptance as an essential factor when choosing an arbitrator. The use of technical experts as arbitrators is necessary because they provide the best possibility for the parties’ different viewpoints to be heard.

On the other hand, a new area of research, such as the use of artificial intelligence in dispute resolution, is still in its early stages. As a result, generating hypotheses for testing is complex.

Based on results and output, here is the conclusion made:

1.Acceptability

On the acceptability of artificial Intelligence for settling disputes in small-value online transactions, all respondents across all age categories of the study have good opinions about artificial Intelligence.

Table 1 shows that most respondents, regardless of age group, agree that artificial Intelligence may assist in resolving disputes in low-value online transactions. One interesting finding is that in the “strongly agree” column, the youngest age group had the highest frequency. Compared to other age groups, digital natives strongly embrace artificial Intelligence as a neutral in conflict settlement.

On the other hand, respondents’ opinions about the other measure of acceptability are a little bit different. The majority of respondents had a “moderate” view toward artificial intelligence as a decision-maker in conflicts rather than humans. However, a sizable percentage of respondents are enthusiastic about artificial intelligence’s potential as a dispute-resolution tool. However, It is clear that a sizable proportion of respondents are skeptical about artificial intelligence as a neutral in conflict settlement.                         

2. Trust

Across all age categories, the most significant percentage of respondents pick “medium” from a 5-item scale. It suggests that most respondents in our sample are unsure if artificial intelligence software is suitable for cross-border e-commerce conflicts, regardless of age. One interesting finding is that across age groups, the 20-29-year-old group had the highest frequency in the “strongly agree” area. It suggests that, as compared to other age groups, digital natives are more likely to trust artificial intelligence.                                                         

3.Competence 

Let’s look at the first criterion of artificial intelligence competency, cognitive competence. Table 4 shows that the majority of respondents chose medium from a list of five options. It suggests that most people are unsure if artificial intelligence has the cognitive ability to comprehend the details of cross-border e-commerce conflicts. The youngest age group had the highest frequency in the “strongly agree” section among all age groups is a common occurrence. Compared to the other age groups, digital natives are more inclined to believe that artificial intelligence possesses cognitive ability.

In the practical ability of artificial intelligence, respondents in the 40-49 and 50-59 age groups pick “medium” out of five-item assessments at a higher rate than those in the 20-29 age groups. It suggests that some elderly individuals are cautious about saying if artificial intelligence can grasp the details of cross-border e-commerce conflicts in practice. One noteworthy finding is that conservative beliefs are prevalent across all age groups. In other words, the majority of respondents do not select a “strongly agree” option from a list of five options. The “strongly agree” even the lowest age group does not choose metric.   

Furthermore, the study investigates whether respondents believe AI is capable of empathy. It’s worth noting that most respondents in the youngest age range had a definite negative response, which is consistent with prior affective measure results.

On the other hand, the medium answer is preferred by the 40-49 and 50-59 age groups. It shows that they are hesitant to respond. These findings suggest that digital natives see a clear dividing line in their thoughts between cognitive and dynamic artificial intelligence capability. One idea is that as people get older, they become more generous with their environment. These findings demonstrate that digital native hypotheses are not straightforward. They have a more delicate dynamic structure instead.                              

4.Speed

Alternative dispute resolution (ADR) literature has demonstrated that ADR, to some extent, is better than litigation in resolving e-commerce issues because mediation or arbitration is faster than litigation. All age groups across three age spectrums are supportive of artificial intelligence’s quick procedure.

Table 7 demonstrates that respondents of all ages agree on the quickness with which e-commerce issues are resolved. It suggests that the artificial intelligence-based architecture of the ODR platform prioritizes the role of ensuring quick resolution.                                                            

5.Cost-Saving

Except for the 40-49 age group, the youngest age group and the 50-59 age group favor artificial intelligence’s cost-saving qualities. When it comes to cost-cutting and speed-measures, the youngest age group of 20-29 years old has the highest frequency in the “strongly agree” area compared to adult groups.

These findings suggest that, compared to older age groups, the younger generation of digital natives is more likely to value the practical aspects of life, such as cost and speed.                             

6.Expertise

Except for the 40-49 age group, both the 20-29 and 50-59 age groups think that using artificial intelligence to resolve e-commerce conflicts is professional. Furthermore, the highly agree item pattern reveals that the 20-29 age group has the highest frequency. Second, the 40-49 age group is second, followed by the 50-59 age group, which accounts for 2.3 percent of the entire sample.                                                    

Conclusion 

Because of the widespread COV19 virus, most individuals choose to acquire commodities online rather than in person. Because face-to-face contact is lacking in the negotiation of purchasing and selling behaviors in electronic commerce, one of the primary impediments to the expansion of e-commerce is that dispute resolution is less trustworthy.

Because artificial intelligence ensures speed and cost-saving in dispute resolution, artificial intelligence may minimize disagreements among partners in an online shopping platform.

Therefore, one can conclude that:

• First, seven of the nine variables included in this study demonstrate a consistent dynamic pattern over the age range.
• Second, the medium response makes up a sizable part of the responses to nine study questions. At present, it appears that a significant number of Korean respondents are apprehensive about using artificial intelligence as a neutral in conflict settlement.
• Third, most respondents believe that incorporating AI into dispute resolution will help speed up the process.
• Fourth, while most respondents think that artificial intelligence (AI) has cognitive abilities, AI lacks the empathy and affective abilities needed to resolve electronic commerce conflicts.
• Fifth, in terms of cost-cutting, respondents generally have favorable opinions.

In general, the youngest age group, so-called digital natives, have consistent attitudes that appear to be sympathetic toward artificial intelligence neutral in online dispute resolution; this implies that an ODR platform augmented with artificial intelligence will be possible to design and construct in the future.

On the other hand, the online redress system isn’t ideal for dealing with online consumer grievances. First and foremost, the ODR platform must hold the consumer’s information.

As a result, customer privacy is likely to be jeopardized. Furthermore, dealing with cultural elements is difficult for artificial intelligence. These issues must be resolved to break one of the major obstacles affecting ODR adoption.

The post Artificial Intelligence Acceptability in Online Dispute Resolution 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.

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