Online Dispute Resolution: An Overview

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.

In both forms of negotiation, no human third party normally intervenes in the process.

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.

Whether non-binding awards fall under the New York Convention is not an interesting issue.

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.

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