The Internet has increased the frequency and scope of cross-border transactions dramatically, but processes for resolving any issues that may arise have not kept pace. Online transactions can crisscross several jurisdictions in mere milliseconds, making the determination of which legal rules should apply extremely difficult. In addition, the speed of traditional mediation and arbitration processes is often too slow to provide effective resolutions in the always on, 24/7 world of online transactions.
In response to these realities there has been a global move over the past ten years to develop online dispute resolution (ODR) platforms and systems to offer resolution options more appropriate to this new, wired world. ODR is widely viewed as a logical and necessary evolution of ADR because it can move more quickly and be significantly less costly than traditional ADR, which often is not practical or cost-effective for online transactions or for "smaller" B2B transactions.
CPR is currently engaged in several cutting-edge initiatives to leverage ODR in business relationships.
1. B2B ODR Pilot Projects
CPR is matching its in-depth knowledge of ADR requirements and ability to provide experienced neutrals skilled in handling matters in certain business contexts with the skills and experience of Modria.com, an ODR platform based in Silicon Valley run by many of the leading minds in ODR. Colin Rule, Modria’s CEO, was the first Director of Online Dispute Resolution for eBay and PayPal, where he built systems that resolve more than 60 million disputes per year. Ethan Katsh, Chairman of Modria’s Board, is the founder of the National Center for Technology and Dispute Resolution at UMass-Amherst, and the author of the book that named the field, Online Dispute Resolution (Jossey-Bass, 2001).
Modria, has licensed and further developed the ODR platform used by eBay and PayPal to enable its use in other business contexts. Modria’s ODR platform was launched in 2008 and improved continuously since, so it can be adapted to support a wide variety of B2B ADR processes, from negotiation to mediation and arbitration. CPR is working closely with Modria to develop online processes and rules that can be customized to fit a range of B2B disputes. We are constantly working to identify B2B pilot opportunities for these tools, focusing primarily on defined forms of transactional disputes. We aim to move the dispute resolution process online to speed resolution process and, thereby, reduce the costs and business disruptions of those disputes.
The technology to do this is already supporting a wide range of dispute resolution in international consumer contexts (see http://www.ebaycourt.com, http://www.paypal-court.com, and http://gebruikersjury.marktplaats.nl for examples) and is fully capable of addressing domestic and cross-border B2B frameworks. Moreover, because conventions for cross-border dispute resolution and enforceability of awards already exist, B2B ODR pilots are ready to begin now.
The second ODR initiative is CPR’s participation in the ongoing efforts of UNCITRAL Working Group III focused on developing generic rules and procedures governing ODR for business-to business and business-to-consumer transactions. A key objective of the UNCITRAL effort is to better enable global commerce by providing a globally recognized framework for dispute resolution.
In 2010, UNICTRAL established Working Group III with representatives from 60 member states to develop an agreed international standard on ODR. The Working Group goal was to provide a practical way to resolve disputes arising from the low-value, high-volumes transactions worldwide that need a rapid, effective and low-cost dispute resolution response. The Working Group is developing a single set of Generic Rules to be used in both B2B and B2C contexts.
In 2009, UNCITRAL established a group to study online dispute resolution in cross-border electronic commerce transactions, with a view to addressing:the types of e-commerce disputes that might be solved by online dispute resolution;
- the appropriateness of drafting procedural rules for online dispute resolution;
- the possibility or desirability to maintain a single database of certified online dispute resolution providers; and
- the issue of enforcement of awards made through the online dispute resolution process under the relevant international conventions.
The Working Group has met four times, twice in Vienna (Fall 2010 and Fall 2011) and twice in New York (Spring 2011 and Spring 2012). To date, much progress has been achieved:
- Production of four instruments are under consideration:
- fast-track procedural rules which complied with due process requirements; accreditation standards for ODR providers;
- substantive principles for resolving certain cross-border disputes; and
- a cross-border enforcement mechanism.
- Four principles have been advanced to guide design of the system:
The next meeting of the Working Group is December, 2012. The intention is that the Group will advance the draft Generic Rules to the stage where they can be adopted by the UNCITRAL Commission on an interim basis. Following such adoption, the working group will address:
- Arbitral decisions must be binding on the parties to ensure effective enforcement;
- When being offered a choice to accept the procedural rules, whether pre- or post-dispute, buyers must be given a separate, clear and adequate notice about ODR;
- Online sellers should be obliged to implement the decisions, and should have the right to bring claims against non-paying buyers;
- Rules or guidelines should set out best practices for providing online notices to the parties, and adequate measures should be devised to ensure that claims would be brought to responding parties’ attention.
- Guidelines for neutrals
- Minimum standards for ODR providers, and
- Substantive legal principles for resolving certain disputes.
More detail can be found at: UNCITRAL Working Group III
If you are interested in participating in these exciting pilot projects and global systems design discussions, please reach out to Beth Trent at CPR. We are looking both for panelists with relevant expertise as well as corporations and firms willing to try out some of these new approaches. We believe this is a unique opportunity to develop new forms of dispute resolution appropriate to the needs of the 21st century, and we’d love to have you participate.