REGULATION OF ONLINE DISPUTE RESOLUTION:
BETWEEN LAW AND TECHNOLOGY
RAFAL MOREK
(rafalmorek@uw.edu.pl)
AUGUST 2005
I. Introduction ................................................................................................................... 3
II. The Theory and Practice of Dispute Resolution in the Digital Age ...................... 5
What is ODR? ................................................................................................................. 5
A brief history of ODR ................................................................................................... 9
The theoretical framework ............................................................................................ 12
ODR in the context of other dispute resolution mechanisms ....................................... 14
Disadvantages and Advantages of ODR ....................................................................... 17
Building Future Dispute Resolution Systems Online ................................................... 26
III. The Four Modalities of Regulation ......................................................................... 30
Law ............................................................................................................................... 30
Norms ............................................................................................................................ 35
Market ........................................................................................................................... 40
Technology ................................................................................................................... 50
IV. Implications: Present Realities, Pressing Problems and Future Prospects......... 60
The current state of the regulatory framework for online dispute resolution ............... 60
Major deficiencies of the current ODR regulatory framework ..................................... 63
Policy Options ............................................................................................................... 70
V. Conclusion.................................................................................................................. 76
Bibliography .................................................................................................................... 77
2
I. INTRODUCTION
With the rapid development of the Internet and electronic commerce, dispute
resolution mechanisms are needed to help resolve disputes between parties located
anywhere in the world in a manner that is fair, expeditious and cost effective. Online
dispute resolution (ODR) has been labelled “a logical and natural step” for the resolution
of disputes that arise on the Internet.
This paper presents the ODR phenomenon with a specific focus on policy-making
and regulatory problems. It argues that the current regulatory framework for online
dispute resolution is, to a large extent, defective. Existing deficiencies result not only
from a lack of comprehensive ODR law, but also from the weaknesses of the other
modalities of regulation: market, norms and technology. Arguably, the current “handsoff” approach to regulating ODR has been unsuccessful, and it is time to re-examine that
position.
Part II of the paper presents online dispute resolution in a broad context including
its history, theoretical framework, and advantages and disadvantages. Part III examines
four modalities of regulation: law, norms, market and technology (architecture).1 While
the regulatory framework for resolving disputes on the Internet is partly provided by both
national laws and international agreements, a significant role might be played by other
agents: norms such as standards, guidelines, or codes of conduct; market forces related to
a global market for ODR services and electronic commerce, and technology which is
sometimes called the “fourth party in dispute resolution.”2 The paper continues with Part
IV, which analyzes the current state of the regulatory framework for online dispute
resolution in more detail. Although it shows major deficiencies of current regulation and
proposes some policy solutions, offering a detailed optimal regulatory model for ODR is
beyond the scope and ambition of this paper. Its goal is rather to present changing
1
The same criteria have been applied by several authors in different contexts. Most recently, Lawrence
Lessig in his “Free culture” analyzed them with respect to the current copyright law regime in the United
States (See: Lawrence Lessig, Free culture (The Penguin Press: New York, 2004) at 121 [Lessig]). The aim
of this paper is to consider how those agents work in the context of online dispute resolution mechanisms.
2
Ethan Katsh and Janet Rifkin, Online Dispute Resolution: Resolving Conflicts in Cyberspace (JosseyBass, San Francisco, 2001) at 91 [Katsh and Rifkin].
3
dynamics and complexity of the ODR phenomenon that must be taken into account when
drafting any regulatory scheme.
The question of whether or not ODR can be effectively developed in the current
regulatory framework, and which changes are needed, remains open to debate. Albeit in a
small way, I hope this paper will enrich this debate.
4
II. THE THEORY AND PRACTICE OF DISPUTE RESOLUTION
IN THE DIGITAL AGE
What is ODR?
The phenomenon known as online dispute resolution relates, to put it simply, to
resolving disputes on the Internet. It is happening in many forms and forums across
Canada, the United States, Europe and other countries. Today’s ODR mechanisms are
said to be early harbingers of the future global dispute resolution landscape in the Digital
Age.3
The term ODR refers to an array of dispute resolution procedures. Some are fully
automated, others, although they take place exclusively online, involve a human neutral.
A large group of processes that are included in ODR use digital technologies to lesser
degrees. Thus, online dispute resolution is not a monolithic concept – for this reason,
some authors argue that it is more accurate not to speak of ODR, but rather of ODR
techniques4, or even of “a plethora of online dispute resolution services”5 devoted to the
expeditious and speedy resolution of disputes. The term ODR is used for mechanisms as
different as dispute prevention (education, outreach, rating and feedback programs),
ombudsman programs, blind bidding, automated negotiation, early neutral evaluation and
assessment, mediation/conciliation, mediation-arbitration (binding and/or non-binding),
arbitration, expert determination, “executive tribunals” or “virtual juries”. Based largely
on traditional (offline) alternative dispute resolution6 procedures, such as mediation or
3
Many authors have suggested that the spectrum of dispute resolution mechanisms will soon encompass a
full range of “virtual” options made possible by the current revolution in information technology – see for
instance: Thomas J. Stipanowich, “Contract and Conflict Management” (2001) Wis. L. Rev. 831.
Julia Hörnle, “Online Dispute Resolution – The Emperor’s New Clothes? Benefits and Pitfalls of Online
Dispute
Resolution
and
its
Application
to
Commercial
Arbitration”,
online:
<http://www.bileta.ac.uk/02papers/Hörnle.html> [Hörnle].
5
Leon E. Trakman, “From the Medieval Law Merchant to E-Merchant Law” (2003) 53 U. Toronto L.J.
265 at 284.
6
The main forms of alternative dispute resolution (ADR) are arbitration, mediation and negotiation,
processes that are effective in settling disputes out of court and in a manner that is less formal than
litigation in court. Some authors exclude arbitration from ADR though, emphasizing amicable
(conciliatory) nature of ADR, as opposed to adjudicative procedures, such as litigation or arbitration.
4
5
arbitration, and various hybrids thereof, ODR is sometimes equivalently labelled as eADR.7 The synergy of alternative dispute resolution and information and communication
technology via the Internet is considered a dominant feature of ODR as canvassed in
legal literature.
The field of out-of-court dispute resolution has grown and flourished alongside
the rapid advance of technology for almost thirty years. Yet, a successful relationship
between ADR and technology could not have happened without the appearance of the
commercial Internet and World Wide Web a decade ago. Since then, one of the main
challenges facing the global network is how to resolve a growing number of cross-border
disputes in the electronic environment. Diverse legal and non-legal obstacles such as
physical, linguistic and cultural distances between parties, juridical difficulties
concerning the applicable law, competent jurisdiction and enforcement of judgments
make traditional methods of dispute resolution ineffective in the online environment. It
has been argued that these deficiencies may significantly hamper further development of
the Internet and electronic commerce. Although not free from similar and other concerns,
As indicated by Schiavetta, “whilst the terms ODR and e-ADR have been and can be used synonymously
it is more accurate to make a distinction” – Susan Schiavetta, “The Relationship Between e-ADR and
Article 6 of the European Convention of Human Rights pursuant to the Case Law of the European Court of
Human Rights” 2004 (1) The Journal of Information, Law and Technology (JILT) [Schiavetta]. Some other
authors have argued that because ADR systems almost always integrate some form of ICT (from using the
telephone, fax machine or word processor, to sending information on meeting times via e-mail or posting
payment forms online), we face an ADR/ODR continuum rather than a set of distinguishable categories of
dispute resolution mechanisms:
7
ADR / ODR CONTINUUM
ADR with basic electronic feature,
ADR with versatile Internets features,
such as e-mail communication or
such as tele- or videoconferences
electronic submissions
ODR conducted entirely over the
Internet, no face to face interactions
Whether a distinction should be made between proceedings exclusively conducted online (represented on
the right side of the chart) and proceedings “only” supported by different elements of ICT technology is
disputable. According to Hörnle, there is no such clear-cut distinction and ODR remains “a matter of
degree” – it must be localized on a broad spectrum of dispute resolution mechanisms, with at the one end
proceedings using hardly any online technology and at the other end proceedings heavily relying on online
technology (Hörnle, supra note 4). Rule has argued that in the future the distinction between ADR and
ODR will become even more blurry, as the technological solutions are refined and practitioners become
more aware of ODR techniques it will become more integrated – Colin Rule, Online Dispute Resolution for
Business: B2B, Ecommerce, Consumer, Employment, Insurance, and Other Commercial Conflicts (JosseyBass, San Francisco, September 2002) at 301 [Rule].
6
ODR is being depicted as the potentially optimal method to resolve disputes arising on
the Internet.
At the commonsense level, as several authors argue, if the Internet gives rise to
some disputes, it seems appropriate to employ the same medium to deal with them.8
Given that parties physically located far from each other can easily “meet” and
communicate in cyberspace, they can both cause and resolve a dispute in cyberspace. In
addition, ODR can be more effective than traditional methods in terms of time,
convenience and financial resources involved in dispute resolution procedure. 9 Thus, in
Katsh and Rifkin’s view, online dispute resolution is “a response” to the dispute and
other activities that are appearing online, and also “a user” of resources becoming
available in cyberspace. Its nature, therefore, reflects various qualities and features of the
online environment10.
ODR has qualities acquired from the online environment, but it also has traits
acquired from ADR. ODR has the same potential advantages over litigation of greater
efficiency, greater party control and lower costs.11 It is fair to say that ODR grows
directly out of the history of offline ADR – as observed by Rule – “in its earliest
incarnations” online dispute resolution procedures were unchanged ADR procedures
conducted online.12 The first three pilot projects launched to develop workable dispute
resolution techniques online (the Virtual Magistrate, the Online Ombuds Office and the
Maryland Mediation Project) were based on arbitration, mediation and complaint
assistance techniques.13 For that reason, in the opinion of some authors, the ODR
phenomenon relates simply to using the Internet to provide ADR, whether as an adjunct
to face-to-face services or in substitution of them.14 Consequently, they define ODR as
Hörnle wrote that it is “logical” to use the same medium for the resolution of disputes arisen in online
settings – Hörnle, supra note 4
9
ODR is particularly convenient and efficient where the parties are located at a distance, as distance
communication obviates the need for travelling. Part II explains the advantages of ODR in more detail.
10
Katsh and Rifkin, supra note 2 at 19.
11
Hörnle pointed out that the introduction of high technology increases these advantages of ADR over
litigation – Hörnle, supra note 4.
12
Rule, supra note 7 at 13.
13
Schiavetta, supra note 7.
14
Anne-Marie G. Hammond, “The Effectiveness of Online Dispute Resolution”, thesis completed for
Royal Roads University MA (Conflict Analysis and Management), available from author
hammond00@earthlink.net or in the National Library of Canada.
8
7
“ADR that takes place using computer-mediated communications in the online
environment”.15 They also indicate that most laws and principles that apply to ADR in
the brick-and-mortar regime will also apply to e-commerce and other Internet disputes.
Yet, although ODR is an “offspring of ADR”16, it must be pointed out that with the
development of online technology “a new dimension has been added to the dispute
resolution industry.”17 Some ODR procedures, like automated negotiation18 or facilitated
negotiation19, do not have exact offline equivalents. At this point, the conclusion reached
by Hörnle seems accurate: “In one sense, ODR is simply about the use of new tools –
information management tools and communication tools – for dispute resolution. But it is
equally true that these tools change the methods by which disputes are being solved.
ODR introduces a new paradigm of dispute resolution.”20
The growing consensus believes that online dispute resolution can be useful for
two types of disputes: those that arise from online interactions and those that arise
offline.21 Initially, the focus of ODR stakeholders was largely on consumer disputes
resulting from e-commerce transactions. This continues to be an important area for ODR,
but it has been joined by a growing number of disputing contexts. The chart below
illustrates the wide range of fields in which different services have been offered by ODR
providers.
United Nations Conference on Trade and Development, “E-Commerce And Development Report 2003
(Internet edition prepared by the UNCTAD secretariat): Chapter 7: Online dispute resolution: E-commerce
and beyond”, online: <http://www.unctad.org> [UNCTAD].
16
Hörnle, supra note 4.
17
Schiavetta, supra note 7.
18
With automated negotiation the disputants use a software programme to settle their monetary dispute.
Firstly they enter settlement figures and once the amounts come within certain proximity of each other, say
twenty per cent, the claim is settled midpoint.
19
The disputants are provided with a web platform and ICT tools for the purpose of facilitating a
resolution.
20
Hörnle, supra note 4. The relation between two fields, which ODR has grown out of, i.e. online (ICT)
technology and alternative dispute resolution movement, is far more complex than it could appear prima
facie. ADR and ICT technology certainly share some common themes: they involve processes of
information exchange and communication, and they both are attributed with resistance to government. See:
Thomas Schultz, An Essay on the Role of Government for ODR, (2003) August ADROnline Monthly.
21
Joseph W. Goodman, “The Pros and Cons of Online Dispute Resolution: An Assessment of CyberMediation” (2003) Duke L. & Tech. Rev. 4 [Goodman].
15
8
Types of services offered by ODR providers22
A brief history of ODR
Many authors break up the development of ODR into three different stages: the
first lasted until about 1995 (the elementary stage), the second dated from 1995 to 1998
or 1999 (the experimental stage), and the third to the present (entrepreneurial stage).23
Before 1995, only a few specialized dispute resolution procedures were applied
informally in specific online contexts.24 Until 1992, the Internet was largely a US-centred
network, and commercial activity was banned from it under that country’s National
Science Foundation’s acceptable use policy.25 The network was used mainly by
academics for sending email and participating in listservs and, in the case of those with
some technical expertise, for exchanging files. As the network grew, “flaming”26 and
22
UNCTAD, supra note 15
Rule, supra note 7 at 21, Katsh & Rifkin, supra note 2, UNCTAD, supra note 15.
24
For example, blocking or unsubscribing flamers on mailing lists – Rule supra note 7 at 21.
25
Jay P. Kesan and Rajiv C. Shah, “Fool us once shame on you – fool us twice shame on us: What we can
learn from the privatizations of the Internet backbone network and the domain name system” (2001)
Washington
University
Law
Quarterly
79,
online:
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=260834>.
26
The term “flaming” refers to the process of sending repeated nasty messages to individuals or about
individuals on the Internet – see: Joshi Pradyna, “Flamers Make for Unease on Net”, Milwaukee J.
Sentinel, Apr. 15, 1996, at 9.
23
9
other violations of “netiquette”27 emerged. Other early online disputes involved
individuals participating in role-playing games.28 Some online mechanisms were used to
deal with these conflicts, but there were no organized dispute resolution institutions
devoted specifically to ODR. Even the term ODR had not yet been invented. When the
ban on commercial activity on the Internet was repealed, disputes related to commerce
began to surface.29 For example, the first commercial spam case occurred in April 1994.30
The second stage coincided with the growth of the Internet, particularly as a
medium for commerce.31 The idea for ODR emerged out of a recognition that disputes
would multiply as the range of online activities grew. Thus, the origins of ODR are
traceable to a simple insight: the more online transactions there are, the more online
disputes there will be.32 As companies began exploring the Internet’s commercial
opportunities, interest grew in domain names, and many disputes arose between
trademark owners and domain name holders. With the growth of the network, new types
of disputes emerged, for example concerning the legality of linking between websites, or
other intellectual property issues related to the use and copying of information. In fact,
the more the Internet was used for any purpose, the more disputes arose. 33 During this
period, recognition grew that the Internet needed some focused online institutions to
address problems that were arising with increasing frequency. The pioneering
experiments in ODR during this phase were largely sponsored by academics and nonprofit institutions. Various projects were designed to allow those involved in a dispute to
obtain expertise from a distance. For example, in the first case mediated by the Online
Ombuds Office, an online mediation project at the University of Massachusetts, an online
“Netiquette” means common courtesy online and the informal “rules of the road” of cyberspace – see:
Netiquette Home Page, online: <http://www.albion.com/netiquette/>.
28
UNCTAD, supra note 15.
29
ibid.
30
R. Everett-Church, “The spam that started it all”, Wired News, April 13, 1999, online:
<www.wired.com/news/politics/0,1283,19098,00.html>.
31
Rule, supra note 7 at 21.
32
UNCTAD, supra note 15.
33
ibid.
27
10
mediator helped an individual website owner resolve a problem with a local newspaper
claiming copyright infringement.34
The third stage is the most recent phase, during which commercial entities began
to show interest in online dispute resolution. This stage has involved the
commercialisation of ODR systems. This has coincided with a new interest on the part of
governmental and international institutions in ODR.35 During this period, to large extent,
ODR has become accepted as a needed process in the online environment, and it has been
demonstrated that it can be employed with diverse kinds of disputes originating both onand offline. Despite high costs of building and implementing ODR systems, the number
of firms offering some form of ODR has continued to grow. Consequently, the authors of
the 2003 UNCTAD E-Commerce and Development Report conclude, there has been
growing recognition by both governmental and commercial interests that online resources
can be a solution for many problems that originate in the online environment. Thus, the
main achievement of the current phase of ODR’s development seems to be that “it is now
accepted that it is appropriate – indeed, desirable – that ODR be the process of first
choice for disputes generated in online activities”36.
Certainly, the main conclusion that could be drawn from this brief historical
analysis is that ODR is intimately tied to the expansion and development of the Internet.
The role of ODR in cyberspace will be greatest where there is a high degree of
interactivity between a wide variety of users.37 In Colin Rule’s words, the growth of the
net fuels the growth in ODR, and the slowdown in the net, temporarily, slows the growth
of ODR. Yet, in a long run, like the Internet, the expansion and refinement of ODR is
inevitable, “and it goes beyond the flavour-of-the-month attention spans of the media and
the stock market.”38
See Center for Information Technology and Dispute Resolution, “Online Ombuds Narrative I: The Web
Site Developer and the Newspaper”, online: <www.ombuds.org/narrative1.html>.
35
Rule, supra note 7 at 21.
36
UNCTAD, supra note 15.
37
E. Casey Lide, “ADR and Cyberspace: The Role of Alternative Dispute Resolution in Online Commerce,
Intellectual Property and Defamation” (1996) 12 Ohio St. J. on Disp. Resol. 193 at 193.
38
Rule, supra note 7 at 299.
34
11
The theoretical framework
Despite the fact that first online dispute resolution projects were set up a decade
ago, ODR is still in its infancy. No theory – as a systematically organized set of
principles offered to explain a particular phenomenon39 – has been created for ODR so
far. Few authors have written on the theory of online dispute resolution: in the cutting
edge book by Katsh and Rifkin, the section entitled “The Theory of ODR” does not even
fill two pages.40
This lack of theoretical reflection on online dispute resolution results mainly from
the fact that ODR is still a novelty which has not managed to attract popular attention yet.
As of June 1, 2005, altogether only 138 articles in the LexisNexis database contained the
term “online dispute resolution,” and many of them only did so in a single sentence or a
footnote reference. Another important reason is that ODR represents the gamut of dispute
resolution possibilities which are difficult to measure and classify by any coherent set of
criteria and principles. As noted by Rule, ODR may both involve automated negotiation
processes administered by a computer, or it can provide world-class experts to administer
arbitration procedures remotely, for example. “ODR systems can be legalistic and
precedent-based, like the courts, or flexible exception-handling mechanisms to act as an
extension to customer service efforts. ODR can be a multimillion dollar customer
relationship management system or a $ 75 website set up to aid a mediator with
administration of a small case. Any use of technology to complement, support, or
administer a dispute resolution process falls into the world of ODR”.41
This richness of the online dispute resolution phenomenon, inherited from ADR
albeit growing, implies that ODR could be classified into different “traditional” groups of
dispute resolution procedures. While some ODR mechanisms are “procedures of
agreement” (for example online mediation), others belong to “procedures of advice” (e.g.
tools supporting negotiation) or “procedures of decision” (e.g. online arbitration).42
39
See: Merriam-Webster Dictionary, online: <http://webster.com>.
Katsh and Rifkin, supra note 2 at 10-11.
41
Rule, supra note 7 at 44.
42
On the classification of the procedures of agreement, advice and decision, see: Genevieve A. Chornenki,
The Corporate Counsel Guide to Dispute Resolution (Canada Law Book Inc., Aurora, 1999) at 7-10
[Chornenki].
40
12
Sometimes the ODR neutral plays a facilitative, non-judgemental role, and other times
they have “absolute decision-making authority.”43 ODR can take place both on an ad hoc
basis, as well on the basis of advanced agreement, dispute resolution program and –
arguably, also in the future – legislation or government mandate.44 While some ODR
processes enable integrative (cooperative) problem solving in which parties can work
together to generate new value for both sides (“expand the pie”)45, others – such as
automated blind bidding – are designed for merely splitting a difference.46 Finally, in
cyberspace, like in real space, when seeking to resolve a conflict, parties can rely both on
their interests as well as rights or power. As observed by Bordone, encouraging people to
approach dispute resolution from an interest-based rather than a rights- or power- based
perspective is not always easy, either offline or online.47
As illustrated throughout this paper, the ODR phenomenon encompasses a
collection of diverse procedures intended to prevent, manage or resolve disputes in the
online environment. Fitting them into a coherent theoretical framework suitable for
dispute resolution is certainly a difficult task. Nevertheless, given that dispute resolution
is commonly viewed as a “series of informational exchanges”48, or more specifically as
“a complex process of information management, information processing, and
communication”49 – according to several authors – information and communications
technology lends itself well to this task.50 What makes ODR particularly intriguing and
new is that some of these informational exchanges occur between human and machine,
43
Rule, supra note 7 at 44.
Chornenki, supra note 42 at 11.
45
Rule, supra note 7 at 37
46
Yet, it seems that in the realm of the Internet even the latter can bring about a mutually satisfying and
“win-win” solution, if applied in appropriate circumstances and upon parties’ consent.
47
Robert Bordone, “Electronic Online Dispute Resolution: A Systems Approach – Potential, Problems, and
a Proposal” (1998) 3 Harv. Negotiation L. Rev. 175 at 187-189 [Bordone]. See also Rule, supra note 7 at
37, suggesting that both in offline and online settings, disputes are frequently framed as “zero-sum, meversus-you affairs where any gain enjoyed by one party comes at the expense of the other party”.
48
Ethan Katsh, “Online Dispute Resolution: Some Lessons from the E-Commerce Revolution” (2001) 28
N. Ky. L. Rev. 810 at 817 [Katsh, Online Dispute Resolution].
49
Julia Hörnle, “Online Dispute Resolution” in John Tackaberry and Arthur Marriott, Bernstein’s
Handbook of Arbitration and Dispute Resolution Practice, Volume 1 (Sweet & Maxwell, London: 2003) at
783 [Hörnle, Online Dispute Resolution].
50
ibid. at 783.
44
13
rather than directly between human and human.51 Bit by bit, the newest methods of
resolving disputes, embodied in the ODR phenomenon, can change the landscape of
dispute resolution, along with its theoretical underpinnings. Theoretical reflection on
online dispute resolution is still in its infancy. This paper focuses rather on practical, i.e.,
regulatory aspects of the ODR phenomenon. The following discussion of the advantages
and disadvantages of ODR in the context of other dispute resolution mechanisms may be
helpful from both theoretical and practical standpoint.
ODR in the context of other dispute resolution mechanisms
The role of technology in mediating communication between parties is seen as the
main difference between ODR and other methods of dispute resolution.52 Yet ODR
applies technology to achieve the very same goal: helping people to resolve their
disputes.
The role of ODR in the context of other dispute resolution mechanisms has been
often viewed through the prism of achievements of the ADR movement. As noted by
Katsh & Rifkin, “over the last quarter century, ADR has proven that moving justice away
from the courthouse is often desirable and that the arena of dispute resolution, once
thought to be the exclusive domain of law and courts, is markedly different from what it
was several decades ago.”53 While ADR has moved dispute resolution away from
litigation and the courts, online dispute resolution extends this trend even further. If ADR
represents a move from a fixed and formal process to a more flexible one, ODR – by
designating cyberspace as a location for dispute resolution – moves ADR from a physical
to a virtual place54, and makes dispute resolution even more flexible and convenient. The
As observed by Katsh, “what makes the design of online processes difficult is that the range of requests
permitted to the human by the system must be flexible and broad enough to satisfy the needs of the human.
At the same time, however, any possible request must be anticipated so that a suitable and appropriate array
of responses is programmed into the machine” – Katsh, Online Dispute Resolution, supra note 48 at 817.
52
Rule, supra note 7 at 45
53
Katsh and Rifkin, supra note 2 at 27.
54
Arno R. Lodder and John Zeleznikow, “Developing an Online Dispute Resolution Environment:
Dialogue Tools and Negotiation Support Systems in a Three-Step Model” (2005) 10 Harv. Negotiation L.
Rev. 287 at 297 [Lodder and Zeleznikow].
51
14
Internet has brought ADR “directly to each individual’s personal computer.”55 ODR can
combine “the effectiveness of ADR with the comfort of the Internet.”56
ADR was the original model for ODR, and many goals and techniques of ADR
will certainly remain goals and techniques of ODR.57 As noted by Rule, ODR started out
as the administration of ADR processes online: it was seen as a way to replicate face-toface interaction when such interaction was not possible. If the face-to-face mediation
process involved three stages (such as unassisted storytelling, assisted storytelling, and
joint problem solving), then that was exactly what early online neutrals attempted to do.
The tasks of the online mediator were the tasks of the offline mediator: reframing the
discussion, keeping the parties on track, and reality-testing proposed solutions.58 Online
mediation still strongly resembles offline mediation, and it does not seem likely to
change in the not-so-distant future. Online processes can even get closer to replicating
“true” dispute resolution procedures as technology is perfected.59 Today, since highquality videoconferencing systems are not yet easily affordable, communications in
online mediation are mainly textual and asynchronous. The principal means of
communication are thus email and web-based communications, i.e. chat rooms and
bulletin boards.60 In the future, videoconferencing, and certainly also new means of
communication, will be utilized to more accurately replicate face-to-face interaction in
the online environment. Regardless of the quality and accessibility of videoconferencing
however, of course ODR will never completely replace the face-to-face encounter. ODR
should not be seen as a competitor or substitute for offline alternative dispute
resolution61, but rather a natural response to the emergence of new sphere of human
activity and, consequently, new types of conflicts.
Martin C. Karamon, “ADR on the Internet” (1996) 11 Ohio St. J. on Disp. Resol. 537 at 548.
Lodder and Zeleznikow, supra note 54 at 337.
57
Ethan Katsh, “Bringing Online Dispute Resolution to Virtual Worlds: Creating Processes through Code”
(2004/2005) 49 N.Y.L. Sch. L. Rev. 271 at 285 [Katsh, Bringing].
58
Rule, supra note 7 at 44 (noting that arbitration were even simpler).
59
ibid.
60
Thomas Schultz, “Does Online Dispute Resolution Need Governmental Intervention? The Case for
Architectures of Control and Trust” (2004) 6 N.C. J.L. & Tech. 71 at 74 [Schulz, Does Online].
61
See, for example, Joel B. Eisen, “Are We Ready for Mediation in Cyberspace?” (1998) BYU L. Rev.
1305 at 1308 [Eisen] (who noted that “electronic communication is no substitute for the ability of face-toface conversations to foster important process values of mediation.”)
55
56
15
The necessity for new methods of dispute resolution arises from the fundamental
nature of the Internet itself. First, the global character of the Internet undermines the
notion of territoriality, one of the foundations of traditional locus-based systems of
dispute resolution. Because the Internet does not correspond to the jurisdiction of any
sole existing sovereign entity, territorially defined laws and rules are difficult to apply to
the Internet and activities of Internet users.62 Traditional, state-run and territorial courts
are “too slow, too expensive, and too inaccessible to address all problems that arise on
the Internet.”63 The Internet collapses not only physical space, but also time, in many
ways. Information travels rapidly on the Web: cyberspace allows people in all corners of
the world to send and receive information 24/7. This feature has significant implications
for the world of dispute resolution. As noted by Rule, “one way that online interaction
completely changed the dispute resolution process was in the way it changed the
participants’ notion of time.”64 They can contact one another much faster and more often
than ever before. In addition, they can do it in a number of ways. New synchronous (such
as instant messaging or VoIP) and asynchronous (for example threaded discussion) ways
of communication became available, and are already widely employed in online dispute
resolution65.
As observed by Bordone, online technology brought about the vast potential for
increasing communication and understanding, and at the same time, also an increased
potential for misunderstanding. “From one’s computer terminal, it is difficult to
understand the implications of cyberspace’s annihilation of distance and space on
communication in relationships. […] In the non-virtual world, persons communicate
using much more than mere words. Tone, affect, space, and time all add to the richness of
an interpersonal communication and help us to calibrate our responses appropriately to
that of our counterpart.”66 While it is easier to communicate a difficult or unpleasant
Alejandro E. Almaguer and Roland W. Baggott, III., “Shaping New Legal Frontiers: Dispute Resolution
for the Internet” (1998) 13 Ohio State Journal on Dispute Resolution 711 at 712 [Almaguer and Baggott].
63
David R. Johnson and David Post, “Law and Borders –The Rise of Law in Cyberspace” (1996) 48 Stan.
L. Rev. 1367 at 1372-1373.
64
Rule, supra note 7 at 47.
65
ibid. According to Rule, most people do not interact at the same time over the Internet. Many
communication technologies used online were actually designed as asynchronous to allow people to log on
as they like throughout the day.
66
Bordone, supra note 47 at 180-181.
62
16
message via email, or other asynchronous means, than in person or on the telephone (the
“distance” of time and location makes such communications more comfortable for the
messenger), the impact on the receiver is not likely to be any better. On the contrary, the
ultimate effect of using a computer-mediated communication to “comfortably” deliver
“uncomfortable” messages can actually lead to more rather than less conflict between the
involved parties.67
Although online dispute resolution borrows so much from ADR, its place is in a
very different environment. In cyberspace, “communication transcends time, space, and
physical reality”.68 These unique characteristics inevitably influence the nature and type
of disputes arising on the Internet, and thereby the type of dispute resolution process best
suited for the forum.69 As the Internet grows, new forms and techniques of ODR are
being developed, such as software that helps parties to brainstorm, identify their interests
and priorities, or organize and focus their conversation. As a result, ODR becomes
increasingly independent from the world of offline ADR. There is no doubt that ODR has
already moved out of the stage where it was a mere, and inherently pale, imitation of
face-to-face interaction when such interaction was not possible.70 Online technology
presents us with opportunities to develop new tools for dispute resolution that might be
employed in both online and offline environments.71 While ODR still borrows much from
ADR, it seems that in the future ADR will also borrow from ODR.72
Disadvantages and Advantages of ODR
Disadvantages
The most frequently heard concern about ODR has been that online processes and
interactions “cannot match the richness of the face-to-face sessions that are at the heart of
offline mediation” and other traditional dispute resolution methods.73 Many authors argue
67
ibid. at 180-181.
ibid. at 179.
69
ibid.
70
Katsh, Bringing, supra note 57 at 284.
71
ibid. at 290-291.
72
Katsh and Rifkin, supra note 2 at 24.
73
Katsh, Bringing, supra note 57 at 282.
68
17
that ODR loses the dynamics of ADR because it takes place at a distance and in front of
computer screens, rather than communicating face-to-face. Although online technology
helps reduce the physical distance between participants, “an electronic distance” 74 is
imposed upon them since they cannot involve direct interpersonal contact. While a wink
can be more meaningful than a word75, the wink – unlike the word – is not easily
transmittable over the Internet. Communications online are not yet able to “express the
variable tone, pitch and volume of the participants and cannot transmit personalities or
physical cues.”76 This weakness results in several problems relating to openness of a
dialogue, trust, a neutral’s control over the process of dispute resolution, and ultimately
its effectiveness.
Those concerns seem particularly clear in relation to online mediation. As noted
by D’Zurilla, “there is almost universal agreement that mediation is most effective if the
parties to the dispute are physically present before the mediator”77, and it is needless to
say that this condition cannot be satisfied in the case of online mediation. Mediation is
normally based on an informal, face-to-face discussion between participants. For many of
them, especially in family or neighbour disputes, “mediation is about the ‘venting’ of
feelings and emotions that they would be unable to express in a more formal setting such
as a courtroom. The opportunity to tell one’s version of the case directly to the opposing
party and to express accompanying emotions can be cathartic for mediation
participants.”78 Venting feelings, confronting emotions, and empathizing with each other,
considered important parts of mediation, must appear difficult when parties communicate
via computer screens.
Many authors argue, therefore, that there are large barriers to creating an open
dialogue between online mediation participants. As noted by Goodman, it is more
difficult to evaluate not only the strength of a party’s feelings, but also their confidence
or flexibility on particular issues.79 In addition, as concerns disputes arising online, “there
74
Eisen, supra note 61 at 1310.
Katsh, Online Dispute Resolution, supra note 48 at 816.
76
Goodman, supra note 21.
77
William T. D’Zurilla, “Alternative Dispute Resolution” (1997) 45 LA. B.J. 352.
78
Eisen, supra note 61 at 1323.
79
Goodman, supra note 21.
75
18
is typically no prior connection or any personal contact between the parties, they
generally do not have an ongoing relationship (in fact, they often know little about one
another), nor is there any hope of a future relationship (most often, cyber-disputes
involve a “one-shot transaction”).”80 The lack of an established relationship or personal
connection can make it difficult for the online mediator to maintain effective control over
the process.81 The mediator, at least in the beginning, is only “a disembodied voice and
cannot use his or her own physical ‘personhood’ to set the parties at ease and create an
environment for sustained problem-solving.”82 The online environment constrains the
mediator’s ability to express “serious demeanour, professional presentation, occasional
humour, and just plain charisma.”83 Lacking the physical presence of the disputants, “the
mediator has difficulty using the intuitive cues of body language, facial expression, and
verbal tonality that are part of face-to-face mediation processes.”84 Thus, as Eisen
concluded, many mediators remain sceptical about ODR and “find it largely impossible
to translate their skills to the online setting.”85
Certainly, the rich practice of ADR cannot be easily reproduced in the online
environment. In addition to this major concern, several other factors are considered
disadvantages, or at least obstacles, in the use of ODR. Access to online computers may
pose a problem for some individuals, especially those involved in disputes that result
from offline transactions.86 Those who are less familiar with computers may be at a
disadvantage as compared to their opponents possessing higher IT skills. On the other
hand, it seems that access to information technology is increasing at a relatively rapid
80
ibid.
ibid. Goodman observed further that in the online environment, especially when using emails, it is more
“difficult for the mediator to manage or temper the tone of the interactions without sounding controlling
and judgmental”.
82
Ethan Katsh, Janet Rifkin and Alan Gaitenby, “E-Commerce, E-Disputes, and E-Dispute Resolution: In
the Shadow of ‘eBay Law’,” (2000) 15 Ohio St. J. On Disp. Resol. 705 at 714 [Katsh, Rifkin and
Gaitenby].
83
Bruce Leonard Beal, “Online Mediation: Has Its Time Come?” (2000) 15 Ohio St. J. On Disp. Resol.
735 at 737 [Beal].
84
Katsh, Rifkin and Gaitenby, supra note 82 at 714.
85
Eisen, supra note 61 at 1323.
86
Goodman, supra note 21.
81
19
rate, and the gap between IT haves and have-nots is closing.87 Another significant
concern refers to security and confidentiality of online communications. There are
different ways of eavesdropping, or surveilling, on the Internet. ODR creates more
(electronic and ultimately also physical) records than ADR. One may fear that the other
party will simply print out and distribute, for example, e-mail communications without
their knowledge and consent. As noted by Katsh, this concern may additionally hinder
the development of open and honest exchanges in ODR.88 In addition, certain alleged
disadvantages of ODR, as presented by some authors, refer to specific ODR processes.89
For instance, blind binding was criticized as a method appropriate only for very simple
disputes. These concerns do not seem valid to the extent that it is clear that “no size fits
the all”, and several disadvantages of each traditional method, if inappropriately applied,
could be also easily pointed out.
Advantages
One of the most significant advantages of ODR is that it obviates the need for
travelling and substantially reduces cost. There is also a growing consensus that ODR can
make dispute resolution more efficient, allowing for better time and cost management,
greater flexibility in procedure, and more creative solutions.90
Perhaps the most recognized benefit of ODR – as observed by Bordone – is that
the disputants do not have to travel lengthy distances.91 In the offline world of dispute
resolution, if the parties want to be directly involved in resolving a given dispute, at least
one of them would have to travel, sometimes far and wide. However, ODR enables the
parties to directly and actively participate in dispute resolution from the comfort of their
87
Benjamin M. Compaine (ed.), The digital divide: facing a crisis or creating a myth? (Cambridge, Mass.:
MIT Press, 2001).
88
Ethan Katsh, “Dispute Resolution in Cyberspace” (1996) 28 Conn. L. Rev. 953 at 971.
89
In this context, Goodman gave an example of fully automated systems that can only be used to resolve
specific types of disputes and, even then, can only handle disputes where the amount of the settlement is
the only unresolved issue. As he noted, “limiting the final stage of negotiations to determining a dollar
figure for compensation seemingly leaves out the possibility for innovative, interest-oriented, out-of-thebox negotiating that is the hallmark of many successful negotiations.” – Goodman, supra note 21.
90
See, for example, Hörnle, Online Dispute Resolution, supra 49 note at 786; and Lide, supra note 37 at
219.
91
See: Lan Q. Hang, “Online Dispute Resolution Systems: The Future of Cyberspace Law” (2001) 41
Santa Clara L. Rev. 837 at 854 [Hang] and Bordone, supra note 47 at 176.
20
offices. There is also no need to transport relevant documents and materials or rent a
neutral facility to conduct the proceedings. The Internet provides a neutral forum which
denies a one of the parties the potential to exploit the “home court advantage.” 92 Because
a neutral does not have to travel either, parties can more easily find good candidates with
specific expertise in the area of their dispute. As a result, ODR multiplies the substantial
savings provided by ADR as compared with traditional litigation93 and therefore
increases access to justice in today’s society.94 In fact, as noted by Gibbons, Kennedy and
Gibbs, ODR may be the only feasible option in many instances (for example, for
individuals involved in international e-commerce disputes for relatively low dollar
amounts).95
ODR may lead to reduced costs thanks to the expenditure of less time and, in
general, more efficient time utilization. ODR mechanisms operate around the clock:
many of them are available all day long, every day of the year. Even if other ODR
systems are not available upon demand, the turnaround time is still relatively short.96
Related to availability is the convenience of scheduling.97 Especially when parties chose
to resolve their disputes, partly or entirely, through e-mail or other asynchronous means
of communication, then any of them may post and read messages at any time, at their
convenience, thereby avoiding the hassles of trying to arrange times and places for
meetings.98
Richard Michael Victorio, “Internet Dispute Resolution (IDR): Bringing ADR into the 21 st Century”
(2001) 1 Pepperdine D.R.J. 279.
93
For example, with attorney’s fees being a great expense in traditional litigation, parties may be able to
save a lot of money in ODR, where hiring an attorney – even more then in ADR – is often unnecessary –
George H. Friedman, “Alternative Dispute Resolution and Emerging Online Technologies: Challenges and
Opportunities” (1997) 19 Hastings Comm. & Ent. L.J. 695 at 712 [Friedman] and Hang, supra note 91 at
855.
94
Teitz suggested that ODR could become an important vehicle for affordable justice for the middle class –
Louise Ellen Teitz, “Providing Legal Services for the Middle Class in Cyberspace: The Promise and
Challenge of Online Dispute Resolution” (2001) 70 Fordham Law Review 985 at 986-91 [Teitz].
95
Llewellyn Joseph Gibbons, Robin M. Kennedy, and Jon Michael Gibbs, “Frontiers of Law: The Internet
and Cyberspace: Cyber-mediation communications Medium Massaging the Message” (2002) 32 N.M.L.
Rev. 27 at 42.
96
Hang, supra note 91 at 855 and Catherine Kessedjian and Sandra Cahn, “Dispute Resolution On-Line”
(1998) 32 Int’l Law. 977 at 977-978.
97
Friedman, supra note 93 at 712.
98
Hang, supra note 91 at 855.
92
21
There are several other benefits that stem from the asynchronous communications
available on the Internet. Messages are not transmitted live, but can be written, reviewed,
and then sent. Thus, it may be argued that more thoughtful, well-crafted contributions
result from the ability of the parties to edit messages prior to sending them:
“asynchronous Internet communications have the advantage of being edited in contrast to
impulsive responses that often can take place in real time face-to-face mediation
discussions.”99 Experienced neutrals – as explained by Melamed – are well aware of the
benefits of asynchrony. “This is a big part of the reason that many mediators meet
separately with each party. Mediators want to slow the process down and assist
participants to [safely] craft more capable contributions. ... When the Internet is utilized
for caucus, the ‘non-caucusing participant’ does not need to sit in the waiting room or
library reading Time magazine or growing resentful at being ignored.” 100 As a result, in
ODR, the amount of idle time that disputants experience can be reduced, and the neutral
can caucus without affecting the flow of the process.101
Many other features of ODR, which have been often perceived as its
disadvantages, can actually bring about significant benefits. Despite the concerns about
confidentiality and security, the fact that records are automatically created for all online
communications has consequences for “building feedback and intelligence into the ODR
process.”102 It enables the all parties to recreate “who said what” and under what
circumstances. This may serve diverse purposes, from a neutral’s standpoint. Recreation
is a useful tool for studying the possibilities for improvement of dispute resolution
practices. It seems possible that such a record could allow for a more thoughtful
intervention by the neutral who would be able to analyse the parties’ communication
more thoroughly in order to identify obstacles to communication, determine where shared
interests may lie, and how to build on them to bring about agreement.
Lack of in-person interaction, considered the most significant disadvantage of
ODR by many commentators, may also prove to be an advantage in certain
Jim
Melamed,
“The
Internet
and
<http://www.mediate.com/articles/melamed9.cfm> [Melamed].
100
ibid.
101
Goodman, supra note 21.
102
Katsh and Rifkin, supra note 2 at 81.
99
22
Divorce
Mediation”,
online:
circumstances. Lodder and Zeleznikow argued that it can happen for disputes in which
the emotional involvement of the parties is so high that it is preferable that they do not
see each other.103 Arguably, the “impersonal” nature of online communications could
help the parties to be better able to distinguish between the person and the conflict (as is
suggested in principled negotiation104). In addition, many participants of “one-shot
transactions” do not want to enter into a closer relationship with the other party, or even
wish to remain anonymous (hidden under an online “nick name” or other kinds of
pseudonyms). As noted by Hang, “anonymity is highly valued over the Internet”, and
ODR may preserve anonymity and resolve the dispute at the same time.105
It does not mean though that online dispute resolution and, more broadly, Internet
communications are inherently emotionless. Quite the opposite, the richness of diverse
Weblogs, chat rooms and other forums where Internet users share their views, seek
advice or make friends, reveals that more and more people do not mind talking about
their lives and feelings, including often fairly intimate secrets, while sitting in front of a
computer. Frequent users of online systems get a specific sense of proximity, even
though in reality they are separated by geographic distances. 106 Thus, creating an
atmosphere in which parties trust a neutral and increasingly also each other, which is
considered vital, if not indispensable, for the effectiveness of most out-of-court dispute
resolution mechanisms107, appears difficult but not impossible in the online settings. It
presents a new challenge for dispute resolution professionals. Certainly, trust and
understanding necessary to effectively resolve a dispute can be achieved even in the
absence of physical presence. The ways to do so must, to some extent, differ from their
Lodder and Zeleznikow, supra note 54 at 302: “It can happen when parties have a history of violent
conflict, the costs of being in the same room are exorbitant, parties are in different time zones, or parties
cannot agree upon a joint meeting time.”
104
Roger Fisher, William Ury and Bruce Patton, Getting to Yes: Negotiating Agreement Without Giving In
(New York, N.Y.: Penguin Books, 1991) at 17-39.
105
Hang, supra note 91 at 858.
106
David K. McGraw, “Sexual Harassment in Cyberspace: The Problem of Unwelcome E-mail” (1995) 21
Rutgers Computer & Tech. L.J. 491. See also Katsh arguing that “cyberspace assumes that the removal of
spatial barriers combined with the high level of online interaction creates [sic] a feeling among those
electronically connected that they are indeed in the same place even though they are physically separated
by great distances.” (Ethan Katsh, “Law in a Digital World: Computer Networks And Cyberspace” (1993)
38 Vill. L. Rev. 403 at 415).
107
Eisen, supra note 61 at 1325.
103
23
offline counterparts, as cyberspace is not, and will never be, a ‘mirror image’ of the
physical world.
Pros and Cons of ODR: A Recap
Undertaking dispute resolution over the Internet has advantages and
disadvantages when compared with traditional, face-to-face methods. The most often
cited advantages include cost savings and convenience, while the disadvantages include
that it is impersonal and potentially inaccessible, in one way or another, to some
individuals.
Certainly, ODR is still a recent phenomenon and will likely become an
increasingly effective mechanism for resolving disputes as technology advances. Many
authors place high expectations on videoconferencing. Katsh, Rifkin and Gaitenby, for
example, argue that videoconferencing is an “obvious solution to the lack of face-to-face
encounters” in online dispute resolution.108 Similarly, Goodman claims that some of the
disadvantages of online mediation may be overcome as technology advances and highspeed Internet connections allow for video-conferencing.109 When video conferencing is
more cost effective and improved technologically, mediation may occur online without
losing very much of what is present when parties meet face to face.110 Finally, Beal
concluded that “online mediation will not manifest fully until videoconferencing
becomes commonplace”, that is when video cameras and microphones are built into
computers, videoconferencing software is bundled with computers, and modems are fast
enough to accommodate videoconferencing.111
Thus, ODR seems to be in a transition period, when we want and have more than
mere electronic mail, but still have to wait “until videoconferencing technology becomes
commonplace”. Certainly, oral expressions of feelings in a face-to-face setting, replicated
online by videoconferencing, can have “a richer and more meaningful context than
written expressions of feelings in an e-mail exchange.”112 However, it should be kept in
108
Katsh, Rifkin and Gaitenby, supra note 82 at 718.
Goodman, supra note 21.
110
Katsh, Bringing, supra note 57 at 285.
111
Beal, supra note 83 at 736.
112
Eisen, supra note 61 at 1311.
109
24
mind that “face-to-face sessions are prized not because the parties can see each other’s
faces but because seeing faces adds new opportunities for communicating information
and interacting efficiently”.113 This is the ongoing goal for ODR programs to gradually
increase the richness of interaction online.114 It can be done through replication of
traditional ADR practices via videoconferencing, but also many novel techniques and
methods can be of great help. In certain circumstances, “old and simple” email may be
most appropriate. Asynchronous, written means of communications, for many of us are
most convenient to express one’s thoughts and to give weight to emotion. Finally, in
many situations, especially in thousands of one-off domestic and international
transactions that take place on the Internet on a daily basis, “venting feelings” and faceto-face catharsis are simply not needed. Therefore, ODR can develop with or without
cheap and high-quality videoconferencing technology. In the future, videoconferencing
should supplement rather than replace asynchronous means of communications which
possess their own unique features. Videoconferencing will indisputably help to increase
the richness of online interaction, but its importance must not be overstated.
Cyberspace adds new opportunities for communicating and interacting efficiently.
Users have an increasing number of options for oral and written, synchronous and
asynchronous, verbal and non-verbal, expression. Paradoxically as it may seem, thanks to
ODR, that the neutral is given greater control over the dispute resolution process than in
offline world.115 This is what Rule finds the primary change that online dispute resolution
brings to ADR: “the ability to control the communication environment within which the
parties interact.”116 A neutral’s greater control over a dispute resolution process per se
appears neither an advantage nor a disadvantage of ODR. It would affect the process
negatively if the concept of parties’ self-government (which is the fundamental
theoretical justification of ADR) would be undermined in ODR. Yet, it seems that this is
not the case. Presently, the parties of ODR generally maintain control over the outcome
of their dispute to the extent comparable to ADR. On the other hand, the neutral’s greater
113
Katsh, Online Dispute Resolution, supra note 48 at 820.
Janet Rifkin, “Online Dispute Resolution: Theory and Practice of the Fourth Party” (2001) 19 Conflict
Resolution Quarterly 117 at 120.
115
Rule, supra note 7 at 45.
116
Rule, supra note 7 at 54.
114
25
control over the communication process may become an advantage. They can apply more
communication options to dispute resolution, and design a process for a particular dispute
in a more effective way. Building trust and maintaining a non-hostile environment is
doable even without physical presence. Parties do not have to travel, to see, hear and
understand each other. It seems plausible to conclude all the pros of ODR in
combination, may already outweigh its cons, and in the future ODR must become a
mainstream mechanism for resolving disputes.117
Building Future Dispute Resolution Systems Online
Even in countries with relatively developed ADR practices, litigation still
occupies a central place in a dispute resolution system and popular beliefs about dispute
resolution. Out-of-court dispute resolution mechanisms are persistently described as
“alternative” which clearly suggests that there is a primary model for settling disputes,
needless to say, litigation in court. Yet many authors argue that what are considered the
alternatives offline might become the primary models of dispute resolution online. As
observed by Katsh, especially with those disputes that arise online, “there is even less
reason to think that courts will be the choice of first resort.”118
Even if courts today are more and more eager to send cases to mediation and
arbitration, only one generation ago, “the idea of moving dispute resolution ‘out of court’
encountered concern similar to the concern expressed today about moving dispute
resolution to the arena of cyberspace.”119 Nevertheless, since then the landscape of
dispute resolution has profoundly changed, and certainly will keep changing in the future.
Many factors that have encouraged the growth of ADR offline will also be factors
affecting the further growth of ODR. Traditional courts simply do not have enough
ability, and in many cases arguably also authority, to effectively resolve disputes that
arise from online activity. As illustrated throughout this paper, the Internet’s global
nature undermines the fundamentals of traditional dispute resolution systems, such as the
117
Lodder and Zeleznikow, supra note 54 at 302.
Katsh, Online Dispute Resolution, supra note 48 at 813.
119
Katsh and Rifkin, supra note 2 at 26.
118
26
notion that legally significant actions take place in a physical location. 120 It is claimed
that the Internet is creating a new, global online society that lives by its own rules, and it
is not subject to any one particular jurisdiction.121 In this context, ODR is considered
important part of “the movement to build civic institutions online.”122 If we take into
account to what extent the Internet has already became part of our lives in one decade
only, and the ease with which the younger generation uses online tools123, we can expect
that in the not-too-distant future ODR will surpass offline dispute resolution, and will
become a central method of dispute resolution.124
There are a few existing or purely theoretical or speculative models of dispute
resolution systems in which ODR plays a main role. There is consensus that the first truly
global online dispute resolution system, albeit limited to specific cases, was adopted in
the late 1990s by the Internet Corporation for Assigned Names and Numbers
(ICANN).125 ICANN is the non-for-profit organization established to administer the
Internet domain name system. In this function it has promulgated a dispute resolution
procedure, the Uniform Dispute Resolution Policy.126 This procedure assists the
resolution of disputes between a trademark owner and a registrant of a domain name (the
UDRP is binding on the registrant of the domain name: it is incorporated into the contract
between the registrant and the registrar of the domain names). Many authors have
suggested that the development of a global system via ICANN is without historical
precedent127, and thus UDRP might be recognized as a seed of a fair global justice online
120
Almaguer and Baggott, supra note 62 at 712.
Rule, supra note 7 at 203
122
Katsh and Rifkin, supra note 2 at 19
123
See David A. Larson, “Online Dispute Resolution: Do You Know Where Your Children Are?” (2003)
19 Negot. J. 199 at 199-205 (describing how youth build intimacy and trust through on-line relationships).
See also Erik Roelvink, “The Future Has Begun!”, online: <http://www.emediation.nl/odren.htm> (“The
younger generation is of course raised with the internet. Chatting and email are a part of every day routine
for this generation. Conflicts are of all ages. For younger people it will be natural to solve a conflict
online”).
124
Lodder and Zeleznikow, supra note 54 at 337.
125
Internet Corporation for Assigned Names and Numbers, online: <http://www.icann.org/>.
126
Uniform Dispute Resolution Policy, online: <http://www.icann.org/udrp/udrp.htm>.
127
Klein, for example, wrote that creation of ICANN has been “the most significant development in the
trend to render the Internet governable.” – Hans Klein, “Private Governance for Global Communications:
Technology, Contracts, and the Internet” in Sandra Braman, ed., Emergent Global Information Policy
Regime (Hampshire: Palgrave Macmillan, 2004) 179 at 180.
121
27
scheme. Hörnle, for example, assessed that UDRP is a “successful procedure [that] can
serve as a model for ODR of other disputes”128. On the other hand, critics have pointed
out that ICANN’s success has been accompanied by several problems such as lack of
legitimacy, forum shopping, uncontrolled choice of law decisions or inconsistent
interpretation.129
One of the most interesting examples of theoretical ODR models has been given
by Bordone who called for setting up a comprehensive “dispute resolution system for the
world of Cyberspace”.130 The entry point of this system would be a Web page called the
Dispute Resolution Referral Center (DRRC), fashioned after a multi-door courthouse or
multi-option justice system that was first introduced by Professor Frank Sander in
1976.131 Under such a model, a disputant entering the DRRC would be referred to a
Dispute Diagnostic Specialist (DDS). The DDS would create a “private chat room”
serving as the secure repository for all information related to the dispute. Then, the DDS
would gather necessary information, evaluate the nature of the dispute, and recommend
to the parties several options which might prove successful in resolving it. Depending on
the nature and circumstances of the conflict, these options might include opportunities for
unassisted online negotiation, an online mediation, an online arbitration132, an assisted
negotiation/mediation hybrid using an ombudsman, further fact-finding by an
ombudsman, or if the dispute were outside the jurisdiction of the Cyberspace model,
references to territorially-based legal agencies. In the model offered by Bordone, the
DRRC would be “the mandatory entry point for all online disputes” (yet once the DDS
offers his or her recommendations, the disputants would be free to choose whichever
128
Hörnle, Online Dispute Resolution, supra note 49 at 814.
Elizabeth G. Thornburg, “Fast, Cheap, and Out of Control: Lessons From the ICANN Dispute
Resolution Process” (2001) 7 J. Small & Emerging Bus. L. 191 at 207-225.
130
Bordone, supra note 47 at 202-203.
131
Frank E.A. Sander, “Alternative Methods of Dispute Resolution: An Overview” (1985) 37 Fla. L. Rev. 1
at 12-13 (describing the multi-door courthouse model as one in which disputants would first present their
dispute to a clerk who would then refer it to one of a host of dispute resolution methods ranging from
adjudication to mediation to an ombudsman); see also Charles Ruhlin & Harry N. Scheiber, “Umpiring the
Multi-Option Justice System” (1996) 80 Judicature 58 at 58.
132
As noted by Bordone, “the arbitration option represents the adjudicative, adversarial model of dispute
resolution for the Internet. Since some disputes are appropriately decided by third parties because they are
conflicts over rights and power, it is essential that even the most ambitious and evolved interest-based
dispute resolution model offer an adjudicative option for resolving disputes” – Bordone, supra note 47 at
202-203.
129
28
process they prefer), all decisions would be logged into a case library “accessible to all
residents of Cyberspace”133, and finally sanctions would be limited to the online
community (they would include, for example, forcing a disputant to post an apology or a
correction of some specified sort, forbidding a party from sending or posting messages
for a specific amount of time, or “temporarily suspending citizenship rights in
Cyberspace”).134
In conclusion, one might argue that the models of dispute resolution systems
based on ODR have been either seriously flawed or unrealistic. Contrary to some very
optimistic predictions made a few years ago, ODR has not revolutionised the conduct of
ADR.135 Thus one may ask the question whether ODR is merely a passing fad with no
real impact on the arena of dispute resolution. The answer to this question is certainly
negative: there is a clear need for ODR in the online environment.136 The Internet and
ODR is still in a process of institution building, and even of it takes longer than originally
assumed, everything is still in place to develop a global ODR system.137
133
ibid.
ibid. at 206-207.
135
Hörnle, Online Dispute Resolution, supra note 49 at 834.
136
ibid. at 835.
137
Rule, supra note 7 at 34.
134
29
III. THE FOUR MODALITIES OF REGULATION
Law
The most common way to regulate behaviour is law. Even “a gap in the law” can
encourage or deter people from undertaking certain activities. A legislative framework is
rarely “neutral”, instead, it appears either positive or negative towards a given social
phenomenon. This chapter argues that the current legislative framework does not
promote online dispute resolution. Quite the contrary, the lack of comprehensive
government regulation and legal certainty hampers the growth of ODR.
In the early days of cyberspace, many idealists in the online community viewed
the Internet as a separate world that should develop its own laws without national
government intervention.138 A number of commentators wrote about new possibilities
and freedoms offered by virtual reality which were allegedly unencumbered by national
laws or government regulation. In addition, several opinions were voiced to support the
claim that the rise of cyberspace brings about “the Twilight of the State”139, a kind of
“Wagnerian Staatendammerung”.140 After a half millennium of dominance of the
international political and legal arena, the institution of the nation-state was allegedly
“relegated to the ash heap of history.”141 This process was supposed to happen due to the
“increasing irrelevance of the physical borders and boundaries that simultaneously
circumscribe and define [a state’s] proper sphere of action.”142 It has been argued that in
A Cyberspace Declaration of Independence has been proclaimed by Barlow: “Governments of the
Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On
behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no
sovereignty where we gather. (…) We have no elected government, nor are we likely to have one, so I
address you with no greater authority than that with which liberty itself always speaks. I declare the global
social space we are building to be naturally independent of the tyrannies you seek to impose on us. You
have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear.”
–
John
Perry
Barlow,
A
Cyberspace
Independence
Declaration,
online:
<http://web.archive.org/web/20040209123724/http://www.eff.org/barlow>.
139
Walter B. Wriston, The twilight of sovereignty: how the information revolution is transforming our
world (New York: Scribner, 1992).
140
David Post, “The ‘Unsettled Paradox’: The Internet, the State, and the Consent of the Governed” (19971998) 5 Ind. J. Global Legal Stud. at 521 [Post, Unsettled Paradox].
141
Jean-Marie Guéhenno, The end of the nation-state (Minneapolis: University of Minnesota Press, 1995).
142
Post, Unsettled Paradox, supra note 140 at 521.
138
30
both “multinational and non-national”143 cyberspace, the concept of territory “slowly
looses its substance”144, and we are inevitably led to ultimate disintegration of a territorybased state’s authority. Impliedly, taking into account that the conceptual triangle
“territory – state – law” has been traditionally taken for granted145, the role of law as a
primary regulator of human behaviour would be corrupted.
Law has been never considered a perfect tool for regulation when its subject was
characterized by high instability. In the Internet era, lawmakers are permanently
“scrambling to catch up to the innovative developments in information technology.”146
Given the speed with which innovations and changes happen, it is difficult for
legislatures or courts to establish effective rules. Technology-related laws often have a
short life duration.147 Those intended to be “technologically neutral” and survive more
than one generation of technological changes often turn out to be too broad and imprecise
to properly fulfill their regulatory role.
Despite this general weakening of the regulatory power of national governments
in the online environment148, in recent years, “national governments have sought to
extend their traditional sovereignty and national laws to the Internet”149, addressing such
issues as cybercrime, Internet gambling, taxation of e-commerce, privacy, child
protection, pornography, money laundering, and terrorism, in the context of new
challenges posed by the Internet. While some of those efforts completely failed, others
made at least moderate success. Commentators anticipate that governments will continue
143
Katherine L. Lynch, The forces of economic globalization : challenges to the regime of international
commercial arbitration (The Hague: Kluwer Law International, 2003) at 368 [Lynch]. Lynch noted that the
essence of this problem centres around the following issue: “because anything posted on the Internet can be
viewed almost anywhere on the earth, can any national court claim jurisdiction over the worldwide
network?”
144
Thijmen Koopmans, Courts and political institutions: A comparative view (Cambridge: Cambridge
University Press, 2003) at 255.
145
See, for example, Hans Kelsen, General Theory of Law and State (New York: Russell & Russell, 1973)
at 275.
146
Lynch, supra note 143 at 348.
147
Nicholas W. Allard & David A. Kass, “Law and Order in Cyberspace: Washington Report” (1997) 19
Hastings Comm. & Ent. L. J. 563.
148
Lessig, supra note 1 at 188-209.
149
Lucille M. Ponte and Thomas D. Cavenagh, CyberJustice: online dispute resolution (ODR) for Ecommerce (Upper Saddle River, N.J.: Pearson/Prentice Hall, 2005) at 137 [Ponte and Cavenagh].
31
to seek greater control over regulation of the Internet in an effort to uphold their national
interests and priorities.150
So far, as observed by Lynch, the trend has appeared to be “the adaptation or
revision of existing legislation developed for earlier technology rather than the
development of comprehensive new legal approaches to cyberspace and the new
technologies of the 21st century.”151 In the field of dispute resolution, the existing regime
is also being modified to accommodate new technologies and their application to
traditional forms of dispute resolution. This trend concerns most clearly arbitration (in
particular, international commercial arbitration) which – unlike many other out-of-court
dispute resolution mechanisms – is relatively precisely regulated by law. The current
legal framework for online arbitration is provided by multiple layers of regulation.
Besides institutional rules and private contractual agreements (which are characteristic of
other ADR/ODR as well), the regime of international commercial arbitration consists of
international conventions152, bilateral treaties, “soft” or model laws (i.e. UNCITRAL
Model Law on International Commercial Arbitration153) and finally national arbitration
laws. The central role in the system of international arbitration is played by the New
York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral
Awards154, called “the single most important pillar on which the edifice of international
arbitration rests”155, and “perhaps […] the most effective instance of international
legislation in the entire history of commercial law.”156 There has been a willingness to
“adapt” the New York Convention and other arbitration laws to incorporate and apply to
arbitrations conducted in cyberspace. Online arbitration has been the subject of a recent
150
Lynch, supra note 143 at 348.
ibid.
152
For example, the European Convention on International Commercial Arbitration of April 21, 1961, the
Inter-American Convention on International Commercial (“Panama Convention”) of January 30, 1975 and
the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards
(“Montevideo Convention”) of May 8, 1979.
153
United Nations Commission on International Trade Law (UNCITRAL) Model Law on International
Commercial Arbitration is available online at: <http://www.uncitral.org/english/texts/arbitration/mlarb.htm>.
154
Convention on the Recognition and Enforcement of Foreign Arbitral Awards is available online at:
<http://www.uncitral.org/english/texts/arbitration/NY-conv.htm>.
155
J. Wetter, “The Present Status of the International Court of Arbitration of the ICC: An Appraisal” (1990)
1 Amer. Rev. of Int’l Arb. 91 at 93.
156
M. J. Mustill, “Arbitration: History and Background” (1989) 6 J. Int’l Arb. 43 at 49.
151
32
study of the UNCITRAL Working Group on Arbitration which has suggested various
legislative and interpretative amendments to the New York Convention and the
UNCITRAL Model Law.157
Independently, for the last decade several authors have argued that online
arbitration is admissible even within the current regulatory framework.158 For instance,
they supported the opinion that it is possible to validly agree on arbitration through
electronic means, such as e-mail or by assenting to an offer on a website, to satisfy the
requirement that arbitration agreements be in writing. They claimed that arbitration
proceedings can be conducted, and arbitrators can deliberate, solely by electronic means.
They also held that arbitration awards can be issued in an electronic form, and such
electronically rendered arbitration awards are enforceable by national courts within the
existing legislative framework of international arbitration.
Even if the claim about admissibility of online arbitration is plausible, one could
not agree that the current legal framework endorses online dispute resolution. There is no
ODR law nor any other kind of government-type regulation of the ODR field at the
present time.159 Many countries currently lack any legislative instruments relating not
only to ODR but also to the Internet in general, including the basic legal infrastructure
recognizing the validity of electronic messages and providing equal treatment to users of
paper-based and computer-based information, let alone laws governing e-commerce, data
protection, etc. “The need for an appropriate legal framework that is supportive of and
conducive to the practice of e-commerce has been identified as a prerequisite for the
growth of e-commerce in general and ODR in particular.”160 Even in those countries that
adopted certain laws relating to electronic communications and e-commerce, ODR
157
See the information on the works of the UNCITRAL Working Group II, online:
<http://www.uncitral.org/en-index.htm>
and
<http://ods-ddsbackny.un.org/doc/UNDOC/LTD/V04/582/19/PDF/V0458219.pdf?OpenElement>.
158
See, for instance, Richard Hill, “On-line Arbitration: Issues and Solutions” (1999) 15 Arb. Int’l. 199,
available also online: <http://www.umass.edu/dispute/hill.htm>; Paul D. Carrington, “Virtual Arbitration”
(2000) 15 Ohio St. J. on Disp. Resol. 669; and also: H. Yu & M. Nasir, “Can Online Arbitration Exist
Within the Traditional Arbitration Framework?” (2003) 20 J. Int’l Arb. 455; Maurice Schellekens, “Online
Arbitration and E-commerce” (2002) 9 Electronic Communication Law Review 113; Gerold Herrmann,
“Some Legal E-flections on Online Arbitration (“cybitration”)” in: R. Briner, L. Y. Fortier, K. P. Berger, J.
Bredow, eds., Law of International Business and Dispute Settlement in the 21st Century (Köln: Liber
Amicorum Karl-Heinz Böckstiegel, 2001).
159
Ponte and Cavenagh, supra note 149 at 136
160
UNCTAD, supra note 15.
33
providers and users are faced with a patchwork of laws, and have to identify on their
own, through legal advice or ultimately costly court proceedings, which regulatory
scheme applies to their ODR process, and to what extent it applies.
This is a trite observation that the global and “a-territorial” nature of the Internet
complicates the application of traditional principles of law. While traditional territorial
and political boundaries have been used to define the scope of traditional laws, it is
difficult to apply those boundaries to digital information flows.161 It raises many
challenging legal issues, e.g., the lack of certainty over where the contract is concluded,
the location of contracting parties in different jurisdictions, and what is the law applicable
to the transaction. Neither legislatures nor courts have established a clear line of rules for
finding jurisdiction in online transaction cases. In this context, many authors have argued
that the necessity for an alternative system of dispute resolution that is unattached to any
specific jurisdiction “arises from the fundamental nature of the Internet itself.”162 They
have claimed – to cite Goodman – that “a key advantage of resolving disputes through
the use of [ODR] is that it avoids the issue of whether a particular court has jurisdiction
over the dispute. Since disputants can bind themselves to resolution through an
agreement, jurisdictional issues can be avoided altogether.”163 Yet one might consider
this opinion too simplistic: ODR programs do not operate in a legal vacuum
whatsoever.164 Even if the parties agree to ODR (as illustrated in the following sections
of this paper, that is not always easy, especially once a dispute arose) and therefore avoid
the problem of which court has jurisdiction over a given dispute, they will not avoid
several other legal issues resulting from the lack of clear regulation and harmonization
between different jurisdictions.
It is not at all true that law does not apply to the Internet. Instead it is more
possible that too many laws from multiple jurisdictions apply and are in conflict with
161
Lessig, supra note 1 at 82.
Almaguer and Baggott, supra note 62 at 712.
163
Goodman, supra note 21.
164
The difficulties courts face resolving cross-jurisdictional Internet disputes may not apply to ODR
process, which avoids jurisdictional questions. Although most out-of-court processes do not rely on
substantive law in resolving disputes and thus avoids jurisdictional questions, they do operate “in the
shadow of the law.” The question then arises: in the shadow of which law they operate – see: Katsh, Rifkin
and Gaitenby, supra note 82 at 705.
162
34
each other. The Internet has never operated within a legal vacuum, but its development
goes hand in hand with an uncertain regulatory environment. This presents numerous
legal – and regulatory – challenges. Many of them are unprecedented. Most importantly,
the Internet’s global nature undermines the traditional notion that legally significant
actions take place in a physical location.165 Arguably, these challenges prompt “a reassessment of the existing legal and regulatory models that may not fit within the
emerging technology.”166 Katsh argued that “our experience with cyberspace thus far has
taught us that we should not simply import our traditional ideas, practices, and
institutions to the online world.”167 Old legal concepts and standards may not be easily
transferable to online reality, and different innovative solutions may be required.
The landscape of dispute resolution is certainly evolving. The same applies to the
role of law as a primary modality of regulation. Time will tell if “in the complicated and
emerging environment of cyberspace […] the authority and role of the law in dispute
resolution processes will be less than it is offline.”168 While it is not certain whether the
role of law will actually diminish, it certainly seems possible that it will be different than
today. At the present time, however, in the field of dispute resolution, law remains the
most important modality of regulation.
Norms
“Norms” are a different kind of constraint on behaviour and modality of
regulation. Unlike “law” (legal norms), “norms” (social norms, informal social rules) are
imposed by a community, not by a state.169 Community members adhere to norms not
under compulsion of state powers and law enforcement, but due to an internalized sense
of duty, a fear of external non-legal sanctions, or both.170 The ODR stakeholders have
165
Almaguer and Baggott, supra note 62 at 712.
Lynch, supra note 143 at 348.
167
Katsh, Online Dispute Resolution, supra note 48 at 812.
168
ibid.
169
Lessig explained the role of norms in the following way: “There may be no law against spitting, but that
doesn’t mean you won’t be punished if you spit on the ground while standing in line at a movie. The
punishment might not be harsh, though depending upon the community, it could easily be more harsh than
many of the punishments imposed by the state.” – Lessig, supra note 1 at 122.
170
Daniel B. Levin, “Building Social Norms on the Internet” (2001/2002) 4 Yale Symp. L. & Tech. 9
[Levin].
166
35
compiled and established numerous norms: guidelines, codes of conduct, model
contracts, trustmarks and reliability programs. Although they are not law, to some extent
they can mirror, mimic, supplement, and perhaps also replace law in regulating online
dispute resolution.
Societal customs have followed law throughout history in almost all judicial
systems171, now, they are also “built on the Internet.”172 Norms evolve in many settings
and contexts, and there is no single theory capable of explaining all of them.173 Almaguer
and Baggott argued that social norms are the macro “outgrowth of aggregate community
behaviour.”174 According to McAdams, norms arise because people derive some
independent utility from having good reputations, and thus both value and seek the
esteem of others.175 On the other hand, a norm exists “as long as the sanctions imposed
on violators of the norm create an expected cost for non-compliance that exceeds the
expected cost for compliance.”176
On the Internet, norms emerge under different circumstances than in the offline
world. As observed by Levin, “while the traditional notion of a community contemplates
people living or working or interacting in close proximity, in cyberspace members of a
community may live and work at great distance from each other and may share no
interactions outside of the Internet.”177 The lack of physical proximity and limited scope
of the Internet interactions, however, do not imply that Internet norms come into being
rarely, or that they must be less efficient as a means of regulation. Quite the contrary,
many authors have claimed that on the Internet customary practices (netiquette), as well
as private self-regulatory measures, are increasingly important.178
It was suggested that norms have a paramount role to play in the online
environment. These great expectations were referred particularly to building trust and
171
Almaguer and Baggott, supra note 62 at 717.
See, generally, Levin, supra note 170.
173
ibid.
174
Almaguer and Baggott, supra note 62 at 719.
175
Richard H. McAdams, “The Origin, Development, and Regulation of Norms” (1997) 96 Mich. L. Rev.
338 at 340.
176
ibid. at 352.
177
Levin, supra note 170.
178
Lynch, supra note 143 at 368.
172
36
credibility among the users of the Internet in general, and ODR systems in particular,
especially in light of the perceived ineffectiveness of traditional laws in cyberspace.179
The difficulty of regulating cyberspace through conventional state orientated means – as
suggested by Lynch – has resulted in “a new institutional framework combining a public
framework with private ordering.”180 It was pointed out that the Internet has its own
customs and usage that must shape dispute resolution in cyberspace.181 An out-of-court
mechanism, grounded in custom, was “a logical and natural step for the resolution of
disputes that arise on the Internet.”182 Customs relating to dispute resolution could be
recognized as a basis of law, perhaps, one day they could even achieve the status of legal
enforceability. The notion of international custom-based law, such as for instance the
Law Merchant of Medieval Europe183, could be (somewhat paradoxically) revitalized in
the Internet era.184
Based on such theoretical background, some experts have called for selfregulation as a main regulatory vehicle for Internet dispute resolution. The self-regulation
approach suggests that ODR providers should endorse their own compliance with ODR
practice standards. This concept assumes that individual ODR providers would compete
with one another to provide their consumers with the best conflict resolution methods in
order to attract more clients. Those providers who do not meet the community’s
Almaguer and Baggott, supra note 62 at 716-717. The TRUSTE self-regulatory initiative was “designed
in part to fill the vacuum of uncertainty created by the difficult issues of jurisdiction and choice of law in
cyberspace” – Lynch, supra note 143 at 368.
180
Lynch, supra note 143 at 368.
181
Gloria Valencia-Weber, “Tribal Courts: Custom and Innovative Law” (1994) 24 N.M. L. Rev. 225 at
245.
182
Almaguer and Baggott, supra note 62 at 719.
183
The Law Merchant adjudicated disputes that arose from Medieval trade fairs. When resolving a dispute,
the Law Merchant drew its power from an enforceable set of customary practices that were “reasonably
uniform across all the jurisdictions involved in the trade fairs.” Although the enforceable customs and
practices existed apart from the “ordinary rules of law that applied to non-merchant transactions” and no
statute or other authoritative law gave rise to the existence of the Law Merchant , the Law Merchant’s
decisions were final and enforceable, having power equal to that of a decision rendered in any commercial
court. The appealing attributes of the Law Merchant were its speedy resolution of disputes, its practicality
and its adaptability to changes. – Almaguer and Baggott, supra note 62 at 718 (citing I. Trotter Hardy, “The
Proper Legal Regime for Cyberspace” (1994) 55 U. Pitt. L. Rev. 993 at 1020).
184
Almaguer and Baggott, supra note 62 at 719 (arguing that “even though Internet commerce presents
novel legal issues, those issues do not need a new and innovative solution; rather, what is needed is the
revitalization of an old and currently unused solution – custom-based law.”)
179
37
standards of quality, etc., would experience “cost for non-compliance” when their clients
choose other “better” providers.
However, some authors who generally supported the self-regulation model
expressed concerns that mere market forces might not suffice to ensure the optimal
regulatory framework for ODR, and therefore self-certification or certification programs
should be adopted.185 In the regulatory scheme proposed by the ABA Task Force, ODR
providers could voluntarily apply the Recommended Best Practices issued by the Task
Force186, and those who decide to do so would self-certify their good-faith compliance
with these standards. There would be no enforcing or supervisory body to ensure that an
ODR provider really complies with these principles in practice. Thus, there would be also
a risk that some providers certify themselves unfairly in order to attract more clients.
Certification programs have been intended to make up for such deficiencies in the
self-certification. To help provide more uniform ODR standards and ensure adequate
quality of ODR services, a specialized trustmark187 or seal program would be established.
Under such a program, a designated entity would certify that an ODR service provider
meets agreed-upon ODR standards and that it provides services of appropriate quality.
The lack of an ODR trustmark seal on an ODR provider’s website would be a clear signal
for consumers that the provider has failed to fulfill the standards.188 In the case of ecommerce companies, trustmarks could attest to the availability of ODR if a dispute
arises. It was envisioned that e-companies would pay for these trustmarks to encourage
customers to do business with them, and that the revenue generated from the trustmarks
would fund the operation of the ODR services.189
Although theoretically promising, in practice self-certification and certification
programs for online dispute resolution turned out to be a failure.190 Their regulatory
185
Ponte and Cavenagh, supra note 149 at 138.
The American Bar Association Task Force on E-Commerce and ADR, “Final Report and Recommended
Best Practices”, online: <http://www.abanet.org/dispute/webpolicy.html#2>.
187
Trustmarks were visualized as graphical logos placed on the websites of e-commerce companies or
ODR providers ensuring that a certain baseline quality assurance standard had been met.
188
Ponte and Cavenagh, supra note 149 at 138.
189
UNCTAD, supra note 15.
190
Trustmark programs have made a greater success in other fields. For example, fairly widely recognized
trustmark programs have been established for general online business practices (e.g. BBBOnline Reliability
Seal ) and protection of personal data on the Internet (e.g. BBBOnline Privacy Seal).
186
38
value, if any, is highly debateable. Consumers quickly became confused about which
trustmark proved what, when ODR providers started using the wide variety of trustmark
and seal programs.191 As of July 2005, SmartSettle has no trustmark on its website.
Cybersettle posted three different logos/trustmarks, namely: “Exclusive Online
Settlement Tool – Association of Trial Lawyers of America”, “Partnership for Justice –
NYSTLA – Business Insurance – Best of the Web” and “The Academy of Florida Trial
Lawyers – Business Friend of Eagle.” SquareTrade offers its own “seal services.”
Other norms regulating online dispute resolution come from diverse guidelines,
action plans, codes of conducts, best practices and other “soft law” documents adopted by
several domestic and international organizations in recent years. Most often they are not
specifically aimed at ODR providers, but simply recommend fast, impartial, affordable,
and effective dispute resolution mechanisms for disputes that arise on the Internet. As
early as 1999, the OECD Consumer Policy Committee, in cooperation with a group of
business and consumer bodies, drafted “Guidelines on Consumer Protection in the
Context of Electronic Commerce.”192 In these Guidelines the determination of OECD
Member States’ governments was declared to encourage “the participation of consumer
representatives in the development of effective self-regulatory mechanisms that contain
specific, substantive rules for dispute resolution.”193 A few months later, in July 2000,
leaders of the G-8 countries endorsed the OECD Guidelines in the Okinawa Charter on
Global Information Society.194 In 2001, the American Arbitration Association (AAA)
announced the eCommerce Dispute Management Protocol offering basic principles for
resolving B2B conflicts.195 The AAA has also developed Supplementary Procedures for
Online Arbitration to aid the use of arbitration over the Internet. In July 2002, the
International Chamber of Commerce prepared a Global Action Plan for Electronic
191
UNCTAD, supra note 15.
Organisation for Economic Co-operation and Development, “OECD Guidelines for Consumer
Protection
in
the
Context
of
Electronic
Commerce”
(1999),
online:
<http://www.oecd.org/document/51/0,2340,en_2649_34267_1824435_1_1_1_1,00.html>.
193
Organisation for Economic Co-operation and Development, “OECD Guidelines for Consumer
Protection in the Context of Electronic Commerce” (1999), Part III: Implementation.
194
University of Toronto G8 Information Center, “Okinawa Charter on Global Information Society”,
online: <http://www.g8.utoronto.ca/summit/2000okinawa/gis.htm>.
195
American Arbitration Association, “B2B eCommerce Dispute Management Protocol”, online:
<http://www.adr.org/sp.asp?id=22049>.
192
39
Business aimed at promoting the development of electronic commerce and the adoption
of adequate online dispute resolution mechanisms.196 Then, at the end of 2002, the ABA
Task Force released its Final Report and Recommended Best Practices for ODR Service
Providers. These Recommended Best Practices focused primarily on proper disclosure
about an ODR service provider’s conflicts of interest, credentials and training, funding
sources, security measures, and privacy and confidentiality measures.
The overall balance of these self-regulatory efforts is arguably unsatisfactory. No
uniform national or international guidelines or standards of practice for ODR have been
identified or adopted.197 Thus far, the self-regulation approach to online dispute
resolution provided Internet users with too little guidance, and even in certain
circumstances led to public confusion about ODR standards and diverse certificates of
compliance.198 In this context, the suggestion that every “online dispute resolver must
follow a professional code and clearly state which code is being followed before the
parties agree to proceed with the process”199 has become difficult to fulfill. It seems that
some “private industry based self-regulatory initiatives have been established with the
goal of minimizing government regulation”200 rather than ensuring high quality of dispute
resolution services. Thus far diverse self-regulatory initiatives could not make up for the
lack of comprehensive legal regulation. “Norms” have not been capable of replacing law
as a primary modality of ODR regulation.
Market
Market is another modality of online dispute resolution regulation. In the simplest
analytical model, markets constrain behaviour through price.201 If the price of gasoline
rises dramatically, people will drive less. Similarly, if the price of a new product, say
ODR services, is too high, the product will not become popular. To get a full picture of
how market can shape behaviour, we have to answer several additional questions, for
196
ICC
Commission
on
E-Business,
IT
and
<http://www.iccwbo.org/home/e_business/commission.asp>.
197
Ponte and Cavenagh, supra note 149 at 131
198
ibid. at 138.
199
Katsh and Rifkin, supra note 2 at 160
200
Lynch, supra note 143 at 368.
201
Ann E. Carlson, “Recycling Norms” (2001) 89 Calif. L. Rev. 1231 at 1253.
40
Telecoms,
online:
example whether a given market is competitive or non-competitive, local or international,
includes many or only a few sellers and buyers, has “free” or difficult entry, and whether
its participants have adequate or insufficient information, etc. Although dispute
resolution services are very different from gasoline and many other products and services
people consume on a daily basis, economists and lawyers often assume a market for
dispute resolution does exist.202 This chapter examines the role of market in the
regulatory framework of ODR in three different contexts: a global electronic marketplace
created by the Internet, a market for dispute resolution in general, and – finally and most
importantly – the emerging market for ODR services itself.
B2C e-commerce alone was worth an estimated $250 billion by the end of 2003.
Some authors have claimed that the lack of effective dispute resolution on the Internet
was hindering its even more dynamic growth.203 We hear repeatedly that due to
increasing use of the Internet worldwide, the number of disputes arising from Internet
commerce is on the rise. In this context, one might come to an accurate conclusion that
the market for dispute resolution on the Internet, and the phenomenon of ODR by and
large, is lagging behind. Or, if they prefer to see the glass half-full rather than half-empty,
the success of ODR appears surprisingly modest in light of the spectacular development
of electronic commerce. Having said that, full statistics on the ODR market are difficult
to establish, on the one hand, due to the fact that most dispute resolution processes are
Steven Shavell, “Alternative Dispute Resolution: An Economic Analysis” (1995) 24 Journal of Legal
Studies 1; Bruce L. Hay, “Symposium on Alternative Dispute Resolution: Procedural Justice – Ex Ante vs.
Ex Post” (1997) 44 UCLA Law Review 1803; or Keith N. Hylton, “Agreements to Waive or to Arbitrate
Legal Claims: An Economic Analysis” (2000) 8 S. Ct. Econ. Rev. 209. We often presume that disputants
are free to choose the way to resolve the dispute in a way that suits their needs: they can ‘fit the forum to
the fuss’. “The idea of disputants’ choice is widespread in the ADR literature, where self-determination is a
core belief. However, it also underlies thinking about civil procedure. The autonomy of the parties is one of
the basic values reflected in most civil procedure systems” – Maurits Barendrecht and Berend de Vries,
“Fitting the Forum to the Fuss with Sticky Defaults: Failure on the Market for Dispute Resolution
Services?” (June 2004), online: <http://ssrn.com/abstract=572042> [Barendrecht and de Vries].
203
Llewellyn Joseph Gibbons, “Creating a Market for Justice; a Market Incentive Solution to Regulating
the Playing Field: Judicial Deference, Judicial Review, Due Process, and Fair Play in Online Consumer
Arbitration” (2002) 23 NW. J. Int’l L. & Bus. 1 at 2 and Consumer 2001 at 51 [Gibbons] (noting that “the
lack of effective consumer redress when the parties are in different countries is a major barrier to consumer
confidence in dealing with all but the most well-known and trusted brands”).
202
41
confidential204, and on the other hand, arguably, because only a few ODR providers have
generated such results they would like to announce publicly.
The first ODR enterprises were established in 1996. Several websites were set up
to help resolve Internet disputes in the following years, especially in 1999 and 2000, at
the peak of the first Internet boom. A difficult investment environment for all Internet
related companies throughout 2001 and 2002 saw the end of many of these initiatives. As
surveyed by Tyler and Bretherton, of the 76 ODR websites established between 1996 and
2004, only 57 are still active.205
Chart 3.1
Year of Launch of ODR Enterprises206
The level of activity of the existing initiatives is not always easy to assess, but the
fact that many of them have ceased updating their websites must be meaningful. As for
more detailed statistics, Schulz counted there are more than twenty-five providers of
online arbitration, but most of them have difficulty getting cases.207 In so-called nonbinding online arbitration, the caseloads are generally not much higher, except for the
204
Due to this reason, for instance, although we know that there are more than twenty-five providers of
online mediation, the number of cases they actually resolve is unclear – Schultz, Does Online, supra note
60 at 74.
205
Melissa Conley Tyler and Di Bretherton, “Seventy-six and counting: an analysis of ODR Sites” in Ethan
Katsh and Daewon Choi (eds.), Online Dispute Resolution (ODR): Technology as the “Fourth Party”.
Papers and Proceedings of the 2003 United Nations Forum on ODR (2003), online:
<http://www.odr.info/unece2003/pdf/Tyler.pdf> [Tyler and Bretherton].
206
ibid.
207
According to Schulz, the most successful provider of online binding arbitration is the Chartered Institute
of Arbitrators in London, which has handled approximately 400 cases, primarily in the field of B2C –
Schultz, Does Online, supra note 60 at 75.
42
providers applying the Uniform Domain Name Dispute Resolution Policy (“UDRP”),
under which approximately 10,000 cases have been resolved.208 Cybermediation using
sophisticated software and traditional mediation using online technologies appear to have
had more limited success thus far.209
ODR projects have grown from a number of environments, including government
and international bodies, academia, consumer rights groups, business organisations and
entrepreneurial start-up dom.coms. “They have been motivated by both business
opportunities and a sense of social need.”210 Probably the most successful ODR site to
date is SquareTrade, which primarily handles conflicts between traders of the online
auction site eBay. SquareTrade is privately held and funded by professional investment
institutions including: Argus Capital, Partners of Clayton Dubilier Rice, GIP Partners and
Isis Capital, and individual investors.211 Many other ODR providers are privately held
(e.g. SmartSettle, ICourtHouse212, DRS (Dispute Resolution Services) LP213), however,
most of them do not disclose information about their shareholders. The lack of full
information about companies providing dispute resolution services raises significant
concerns. For instance, Cybersettle, which has been – as noted by Rule – “the most
prominent company in bringing ODR to the attention of the insurance industry” (since
1998 Cybersettle has handled more than 100,000 transactions, facilitating settlements for
more than $750 million), had as its earliest investor an offshore reinsurance company.214
Arguably, this fact resulted in a perceived connection of Cybersettle to the insurance
company side of the industry.
208
ibid.
Goodman, supra note 21.
210
Tyler and Bretherton, supra note 205.
211
http://www.squaretrade.com
212
http://www.i-courthouse.com
213
DRS claims to be “North America’s most comprehensive ADR service provider” – online:
<http://www.drs-adr.com/novaforum_revised.php>.
214
See: Cybersettle, “Cybersettle Fact Sheet”, online: <http://www.cybersettle.com/about/factsheet.asp>
and Rule, supra note 7 at 142-143. Rule estimated that this sector is worth $15 billion. He also explained
that the insurance industry is the largest user of automated dispute resolution mechanisms. Many insurance
cases come down to a monetary amount, and can be effectively resolved by blind-biding mechanisms. As
he noted, most insurance industry executives “will have heard of Cybersettle if they have heard of ODR at
all.”.
209
43
Several projects were based on grants and government funding. The European
Union gave a lead by establishing such initiatives as European Extra-Judicial Network
for cross-border dispute resolution (EEJ-NET)215, an ADR/ODR general clearing house,
and its financial counterpart FIN-NET216, which deals with financial disputes.217 Two
recent EU-funded ODR projects are CCform218, launched in early 2004, and Electronic
Consumer Dispute Resolution (ECODIR) providing a mechanism similar to
SquareTrade219, yet on a pilot basis and free of charge for both business and consumers.
ODR services provided entirely free of charge are quite exceptional.220 The
survey conducted by Tyler and Bretherton showed that user fees, which can take a
number of forms such as: administration and filing fees, hourly rates, a percentage of
settlement reached, or a per round bidding fee (in automated negotiation only), have been
the predominant funding mechanism for ODR.
Chart 3.2
Funding Sources221
215
European Extra-Judician Network
for
Cross-Border
Dispute
Resolution,
online:
<http://www.eejnet.org>.
216
FinNet, online: <http://finnet.jrc.it/en/>.
217
Lodder and Zeleznikow, supra note 54 at 299-300.
218
CCForm Online Complaints Platform, online: <http://ccform.interbyte.be/>.
219
Electronic Consumer Dispute Resolution, online: <http://www.ecodir.org>. See also Brian Hutchinson,
“Online Resolution of Consumer Disputes – An Introduction to ECODIR: Electronic Consumer Dispute
Resolution” (2002) (paper presented at the 2002 UNECE Forum on ODR).
220
Mediate-net, Cybertribunal, Online Ombuds and The Virtual Magistrate have also offered ODR for no
cost, usually on a pilot basis, supported through philanthropic or academic funding. These services usually
cease once the initial funding is exhausted.
221
Tyler and Bretherton, supra note 205.
44
Compared with other dispute resolution methods, by and large, fees charged by
ODR providers appear attractive.222 For example, SquareTrade’s initial resolution process
of assisted direct negotiation is offered free of charge, and if parties require a mediator, in
most cases they would be charged only $20,223 which is undoubtedly a substantially
lower sum than that charged by for-profit offline ADR providers. Substantial cost savings
may result not only due to the lower fees, but also because ODR providers usually do not
require parties to pay for additional expenses such as long-distance phone calls or
teleconferencing.224 For some other ODR providers, however, possible savings (if any)
are much lower. MARS (Mediation Arbitration Resolution Services), for example,
requires a payment of $100 conference scheduling and set-up charge (each party) and
$125 for each conference hour (each party).225 Undisputedly, with the current fees that
such websites are charging, it is likely that their services are out of reach for many
Internet disputes.226
Some platforms offer ODR services for a lower cost or free to one party only, a
consumer. Such projects are usually funded by business memberships.227 While some
authors have criticised business membership providers as potentially compromising their
independence in dealing with consumer disputes228, others accept the loss of
independence of ODR services funded by business as a trade-off for consumer access,
provided that transparency is maintained and mechanisms to ensure impartiality are put
in place.229
The ODR market appears international in terms of geographic distribution of
ODR enterprises. While the first ODR enterprises were set in North America, the number
222
ibid.
Steve Abernethy, “Building Large-Scale Online Dispute Resolution & Trustmark Systems”, ODR 2003,
online: <http://www.odr.info/unece2003/pdf/Abernethy.pdf> [Abernethy].
224
See: Friedman, supra note 93 at 712 and Hang, supra note 91 at 855.
225
See: ResolveMyDispute, online: <http://www.resolvemydispute.com/>.
226
Goodman, supra note 21.
227
For example, NovaForum’s market model has been based on subscriber-fees. See generally Tyler and
Bretherton, supra note 205.
228
Consumers International, “Disputes in Cyberspace 2001. Update of online dispute resolution for
consumers in cross-border disputes”, online: <http://www.consumersinternational.org> [Consumers 2001].
229
Department of Commerce, Federal Trade Commission, “Joint Workshop on Alternative Dispute
Resolution
for
Online
Consumer
Transactions”,
June
6
and
7,
2000,
online:
<http://www.ftc.gov/bcp/altdisresolution/> [Department of Commerce].
223
45
of projects developed on other continents, especially in Europe and Asia, is growing.
Although the first Australian ODR sites were launched in 2002,230 the Antipodes have
already made their contribution to ODR scholarship and practice.231 In 2003 and 2004,
new projects were launched in Sri Lanka232 and the Philippines.233 In China, “the idea of
mediating disputes online has captured the imagination of the dispute resolution
profession” and first experiments are now underway.234 On the other hand, the lack of
ODR enterprises in some parts of the world reflects the problem of the global digital
divide.235
Chart 3.3
Geographic Distribution of ODR Enterprises236
It is debatable whether available ODR processes sufficiently accommodate for
and facilitate diverse cultural issues between parties in the international environment.
230
Tyler and Bretherton, supra note 205.
It is enough to say that the last 2004 UN Forum on Online Dispute Resolution was held in Melbourne
with a majority of speakers coming from Australia.
232
Info Share, online: <http://www.info-share.org/doc_view.php?record_id=1&cat=2_0>.
233
The Cyberspace Policy Center for Asia-Pacific and Philippine MultiDoor Courthouse, online:
<http://www.disputeresolution.ph/about.asp>.
234
Xue Hong, “Online Dispute Resolution in China: Present Practices & Future Development” in: Ethan
Katsh, and Daewon Choi (eds.), Online Dispute Resolution (ODR): Technology as the “Fourth Party”.
Papers and Proceedings of the 2003 United Nations Forum on ODR (2003), online:
<http://www.odr.info/unece2003/pdf/hong.pdf>.
235
There is only one ODR provider in South America (See: <http://www.cibertribunalperuano.org>) and
none in Africa. Respectively, only 4% of the world’s online population are in South America, and 1.5% in
Africa – Tania Sourdin, “ODR – An Australian perspective on the digital divide”, online:
<http://www.odr.info/unforum2004/Sourdin1.doc> and “Internet Usage Statistics for Africa”, online:
<http://www.internetworldstats.com/stats1.htm>.
236
Tyler and Bretherton, supra note 205.
231
46
Rao suggested that there is a “cultural vacuum in online dispute resolution.”237 Almost
70% of ODR providers offer their services solely in English, whereas only 32.8% of
Internet users speak English.238 Out of the 76 sites surveyed by Tyler and Bretherton: 61
were monolingual (53 English only), nine were offering services in two languages
(English plus Spanish, French or Chinese), and six offered services in three languages or
more.239 The majority of multilingual ODR projects are funded by the European Union.
Ccform, for example, as of July 2005, facilitates online resolution of standard consumer
complaints in all the official languages of the “old” European Union.240 Although
providing translation into less common languages is cost-consuming, it seems important
for sparking wider interest in ODR.
The results of a survey conducted by Tyler showed a surprisingly high level of
public interest in and demand for online ADR: more than 70% of total respondents would
be willing to consider ODR both for general disputes and for disputes with an online
company. What comes as no surprise, daily and weekly computer users and people who
use banking and auction sites are most likely to use ODR.241 For e-commerce
entrepreneurs, online dispute resolution is attractive as something that can be
incorporated into their new ventures as part of an overall strategy to manage disputes, and
build trust among their clients.242 For consumers, ODR is an important and desirable tool
of redress in e-commerce.243 On the other hand, these declarations go hand in hand with a
lot of unfamiliarity with even basic aspects concerning ODR. Although the product
named “online (or Internet, cyber-, virtual-) dispute resolution” seems appealing to an
average Internet user, only few would know what ODR actually means, who provides
ODR, and how to recognize which program works well. Therefore, notwithstanding
Sharanya Rao, “The Cultural Vacuum in Online Dispute Resolution”, online:
<www.odr.info/unforum2004/rao.htm>.
238
“Internet Users By Language: Top 10 Languages Used in the Internet”, online:
<http://www.internetworldstats.com/stats7.htm>.
239
Tyler and Bretherton, supra note 205.
240
As of July 2005 CCform supports eleven languages. See: <http://ccform.interbyte.be/>.
241
Melissa Conley Tyler, “ODR: The Australian Experience” in: Ethan Katsh and Choi, Daewon (eds.)
Online Dispute Resolution (ODR): Technology as the “Fourth Party”. Papers and Proceedings of the
2003 United Nations Forum on ODR (2003), online: <http://www.odr.info/unece2003/pdf/tyler1.pdf>.
242
Katsh, Online Dispute Resolution, supra note 48 at 814.
243
Consumers 2001, supra note 228 at 15.
237
47
significant advantages offered by online dispute resolution to both businesses and
consumers, ODR systems have not been used to any great extent by either side. Even
multilingual EU-funded projects have not been very successful in attracting consumers
and businesses to their services.244 Certainly, one of the reasons for this discrepancy
between reported preferences for ODR and actual use lies in the challenge involved in
generating awareness and sufficient knowledge of, and finally building up confidence in,
the use of ODR.245 One might also argue that the idea of fast and accessible dispute
resolution procedures available online, the concept of the fourth party, etc., are against
monetary and other interests of lawyers. They have always had a big say in the way a
dispute is handled, and now ODR, more than ADR, gives them a feeling of loss of
control.
Furthermore, the rate of growth in the deployment of ODR has been slowed by
high costs of building and implementing appropriate computer systems.246 Technically
sophisticated ODR platforms, and business methods relating to them, have become
highly valued commercial assets, increasingly often protected under patent law.247 The
market for ODR technology (tied up with the market for ODR services) seems to be
relatively small, and a pursuit to develop a new platform is a difficult one.
Another explanation for “moderate success being moderate failure of ODR”
concerns some specific features of the market for dispute resolution services in general.
As argued by Barendrecht and de Vries, the default rule for dispute resolution is “sticky”,
which results in the fact that defaults attract the vast majority of disputes. It is very
difficult for disputants to opt out of the default, and to “buy” a neutral dispute resolution
service of a type, quality, and price that suits their preferences. The barriers to getting the
optimal dispute resolution procedure are diverse. In many aspects, the providers of
traditional default dispute resolution services, such as courts and lawyers, are effectively
shielded from competition.248 As for the disputants themselves, it is not very realistic that
244
Lodder and Zeleznikow, supra note 54 at 299-300.
Graham
Ross,
“Online
Dispute
Resolution
and
Business”,
online:
<http://www.odr.info/unforum2004/ross.htm>.
246
UNCTAD, supra note 15.
247
For instance, Cybersettle holds US Patent # 6,330,551 for the “Computerized Dispute Resolution
System and Method.” – “What is Cybersettle?”, online: <http://www.cybersettle.com/>.
248
Barendrecht and de Vries, supra note 202.
245
48
while having difficulties with communication and trust, they would agree to an unknown
procedure to resolve their dispute: “people actually do not fit the forum to the fuss ex
post.”249 Barendrecht and de Vries claim that the very existence of compulsory or courtannexed arbitration and mediation schemes proves to a large extent that ex post choice is
difficult in this area: without such pressure many disputants would be unable to find their
way to a procedure that best suits their interests.250 Court-annexed ADR programs aim at
assisting people to determine the best way to resolve a dispute. 251 It seems plausible not
only to include ODR in court-annexed ADR schemes, but also to make online dispute
resolution the default for most Internet disputes. Most scholars agree that a default rule
for dispute resolution should reflect the preferences of the majority of the parties, and one
“should not be deceived by the present use of dispute resolution services: they do not
necessarily show what the preferences of disputants are.”252
The reasons why the ODR phenomenon has not repeated the dazzling success of
e-commerce so far lie both on the supply (ODR providers) and demand (ODR users)
sides of the ODR market. Given the limited number of active ODR projects and a wide
range of prices for comparable services, the ODR market is neither competitive nor
effective.253 In this sense, it seems to be a relatively weak modality of regulation. It is
increasingly international, but still suffers from concentration on the most developed emarkets which – due to restraints of the offline world, such as high costs of shipping,
custom duties, etc. – remain geographically limited. ODR services are provided only in
249
ibid. (noting that the barriers to jointly decide on a dispute resolution procedure are likely to be
substantial, and similar to the barriers to solving the dispute itself.)
250
ibid. Barendrecht and de Vries argue further that an alternative explanation for compulsory arbitration
and mandatory mediation schemes, which they cannot be ruled out a priori, would be that such programs
are merely intended to diminish court congestion. If this were the main reason though, they would expect
more opposition from disputants.
251
“The ideal of a multi-door courthouse, however, a neutral referral point to appropriate dispute resolution
without a default option, is far off.” – ibid. See also: Frank E.A. Sander, “Varieties of Dispute Processing,
Address Delivered at the National Conference on the Causes of Popular Dissatisfaction with the
Administration of Justice (Apr. 7-9, 1976)” (1976) 70 Federal Rules Decisions 111; Jeffrey W. Stempel,
“Reflections on Judicial ADR and the Multi-Door Courthouse at Twenty: Fait Accompli, Failed Overture,
or Fledgling Adulthood?” (1996) 11 Ohio St. J. on Disp. Resol. 297.
252
Barendrecht and de Vries, supra note 202.
253
Either there is little competition or some clients do not know that they can get the same product
elsewhere for a substantially lower price. The latter seems to be at least partly supported by an observation
made by Tyler and Bretherton: “For those providers that have not attracted business, the fees charged do
not appear to be the problem: their fees are not notably more than for successful enterprises.”
49
English and a few other most popular languages. Entry into the market, on the supply
side, is difficult. The market is also “difficult” itself: suppliers are expected to answer
highly diversified needs and requests. For the largest ODR provider, SquareTrade,
dispute values have ranged from under 1 USD to over 1 million USD.254 Since online
disputes typically concern small sums of money, the cost of ODR is an important
consideration. Even the relatively modest fees may still be out of reach for many
individuals involved in e-commerce disputes.
There are a huge number of individuals and business entities that could enter the
ODR market’s demand side. These are numerous online shoppers, often dissatisfied with
the results of small and big deals they seek to make on the Internet. Since their disputes
are frequently low dollar value disputes that involve parties who are geographically
distant from one another, it is most likely that in the absence of ODR services, these
buyers would not pursue their grievances at all. Thus, most of them express interest in
and demand for online dispute resolution, yet experience significant difficulties even
when only seeking to get full and adequate information about the services available.
Given that people are not used to “buying” dispute resolution services on a daily basis,
the default (offline) options are stronger than for regular products. So far, the
development of the ODR market has been hampered mostly by deficiencies in the supply
of ODR services. Notwithstanding all these obstacles, the ODR phenomenon
indisputably has great potential for growth, and as the Internet and e-commerce grow, the
ODR market should develop as well.
Technology
If regulation in cyberspace is different than in the real world, to a large extent this
difference stems from the specific role played by technology.255 If a regulator wants to
induce certain behaviour in the online environment, they need not threaten, or cajole, to
inspire the change. In many instances what they need is to change what Lawrence Lessig
254
Abernethy, supra note 223.
In some writings Lessig referred to the broader term “architecture” which means physical constraints on
human behaviour. As Lessig puts it, “a fallen bridge might constrain your ability to get across a river.
Railroad tracks might constrain the ability of a community to integrate its social life... If a 500-pound
boulder blocks your way, it is the law of gravity that enforces this constraint.” – Lessig, supra note 1 at
122.
255
50
has called “the code”, the software that defines the terms upon which the individual can
gain access to the computer system or use the system.256 On the Internet, increasingly,
rules are enforced not by a human but by a machine. Such code is an efficient means of
regulation: often one obeys it not because one should, but one can do nothing else. As put
by Lessig: “there is no choice about whether to yield to the demand for a password; one
complies if one wants to enter the system.”257
The importance of technology as a modality of ODR regulation is growing. While
ODR is still in an early stage of its development and software applications for dispute
resolution are emerging relatively slowly, the eBay experience has demonstrated that
ODR can respond to large numbers of disputes if only appropriate software is available258
(We can also assume it will be able to respond to more and more complex disputes, and
do it in a more and more refined way, when appropriate software is available). As
illustrated throughout this section, step by step, the rules of dispute resolution get built
into the technology that operates ODR platforms. Machines are taught how to suggest to
humans fair win-win solutions in human disputes. Software is designed to support, and in
certain instances replace, “live” neutrals. Although Lessig’s words: “it is code, rather
than law, that rules”259 still fit better in the context of digital copyrights management and
“anti-circumvention measures” than the world of online dispute resolution, the role of
technology in ODR must not be underestimated.
It appears undisputed that if ODR technology is thoughtfully designed and
applied, it can be an essential component in helping parties reach optimal resolutions to
their disputes. On the other hand, if it is poorly designed and misapplied, it can be a
major obstacle to reaching agreement.260 Technology being applied for online dispute
256
Lessig explained that in cyberspace if the regulator wants to limit trespass on a system, they need not
rely simply on a law against trespass; they can implement a system of passwords. If they want to limit the
illegal use of copyrighted material, they need not rely on the threat of copyright law; they can encrypt the
copyrighted material so only those intended to have access will have access. Increasingly, there is a code
(as in software) to assure what the code (as in law) demands – Lawrence Lessig, “Surveying Law and
Borders: The Zones of Cyberspace” (1996) 48 Stan. L. Rev. 1403 at 1408.
257
Lessig concluded that “in the well implemented system, there is no civil disobedience. Law as code is a
start to the perfect technology of justice.” – ibid. at 1408.
258
Katsh, Bringing Online, supra note 57 at 286.
259
“And the problem with code regulations is that, unlike law, code has no shame.” – Lessig, supra note 1
at 148.
260
Rule, supra note 7 at 60.
51
resolution, like every other technology, is Janus-faced.261 Just as a stethoscope can be
used to hear a beating heart in crisis or to crack a safe, ODR platforms can be used to
provide access to good and bad, or true and fake justice.
In their 2001 book, Ethan Katsh and Janet Rifkin introduced the concept of
technology as the “fourth party”. While neutrals are often referred to as “third parties” in
a dispute (in addition to two sides in a dispute262), in a metaphorical sense, technology
can become the fourth party. The metaphor suggests that the novel element in ODR may
be less the online connection to a human third party than the link to technology that can
help parties reach agreement.263 It is a trite observation that the “fourth party” concept
appears much more appealing when it is referred to refined computer applications than in
the context of relatively simple tools such as e-mail or instant messaging. In each case
however, in the absence of a face-to-face encounter, ODR technology frames the back
and forth communication and provides a structure and format that allows parties to
participate in ODR.264 Therefore, there is no clear threshold for the role of technology as
the fourth party. Just as the role of the third party can vary in different contexts, so can
the role of the fourth party. In different circumstances, it can be more or less relied upon
and be more or less influential.265 In some instances, it will encroach upon and displace
techniques employed by third parties, and in other situations will enhance third party
capabilities.266 As noted by Katsh, the fourth party “can assume responsibilities for
various communications with the parties, and the manner in which the third and fourth
parties interact with each other will affect many parts of the dispute resolution process.”
Even if the fourth party may not be equal in influence to the third-party neutral (yet), “it
can be an ally, collaborator, and partner.”267
261
Janus was a Roman god who protected doors and gateways. The god is typically represented in art with
two faces looking in different directions, symbolic of entrances and departures through the gateway. Janus
also represented beginnings, thus the first month of our year is named ‘January’.
262
Even when there is a multi-party dispute with many disputants, ADR is still commonly thought to be
three sided, with all of the disputants grouped together as the two disputants, and joined the third party, the
mediator or arbitrator.
263
Katsh, Bringing Online, supra note 57 at 284.
264
ibid. at 279.
265
Katsh, Online Dispute Resolution, supra note 48 at 820.
266
Katsh, Bringing Online, supra note 57 at 286-289.
267
Katsh, Online Dispute Resolution, supra note 48 at 820.
52
The fourth party’s role in dispute resolution is based on a profound belief that
finding a resolution and maximizing benefits for all participants can be, and should be, a
rational and well structured process. Once the parties figure out all key issues in their
dispute, and rank their interests in terms of priority (increasingly often it also happens
with help of the fourth party), such information should easily be translatable to the
language of computers. Given that computers can handle mathematical algorithms – in a
sense – better than humans, they could potentially provide more effective proposals to
resolve the dispute. Of course, mathematical approaches to dispute resolution has a much
longer tradition: game theorists and economists tried to use numbers to illustrate the
dynamics of negotiations long before the Internet was widely used. 268 As observed by
Rule, “the point of these efforts was to distribute the pie as efficiently as possible. The
algorithms allowed parties to claim value that might have been left on the table without
the accurate calculations of the computer.”269 In addition, while mediators are often
reluctant to suggest possible resolutions to disputants because it may put them in the
situation of advocating a particular solution to the dispute, computers are less concerned
with such problems.270 As a result of this dynamic, solution set databases are often
integrated into ODR systems. In the simplest models, the system would merely ask
disputants what type of dispute they are engaged in, and then display a list of common
resolutions to a given type of dispute. In their advanced incarnations, the systems are able
to learn themselves: new dispute types and new perfected resolutions can be continuously
added.271
The most sophisticated fourth parties currently in use are the multivariable
resolution optimization programs.272 These highly structured and technologically
sophisticated ODR systems are based on a simple assumption that “a problem welldefined is half-solved.”273 They gather detailed information about all of the issues in a
268
For example, Ernest Thiessen, the later founder of SmartSettle, wrote a paper about technology-assisted
decision-making in water resource disputes in 1983.
269
Rule, supra note 7 at 24.
270
ibid. 56
271
One system of this kind is being used by SquareTrade, the ODR provider working with eBay – ibid.
272
ibid. at 58.
273
This saying is commonly attributed to John Dewey (see for example: “Great Quotes”, online:
http://www.henrywagner.org/quotes/quotes.htm), although Thiessen & Zeleznikow gave credits to Earl
53
dispute (in particular, clarify parties’ interests and distinguish them from parties’
positions), and organize them according to their relative importance. The issues are
identified along with associated variables that may be measured or optioned, and related
to each other with constraints or formulas.274 Once the value of swaps between the
different items is calculated, the systems can generate proposals to be accepted by each
side and then presented to the other side. After a series of proposals and participants’
answers, “armed with all the relative preference and valuation data from both sides, the
platform can deliver a mathematically optimal solution to the dispute, maximizing the
benefit that can be achieved for both parties based on the preferences they registered.
This is the best resolution that can be achieved” – Rule concludes – “something that no
human mediator or arbitrator could ever identify without the assistance of technology.”275
Currently, only a few ODR systems elicit detailed user preferences and offer
comprehensive analytical support.276 According to Thiessen and Zeleznikow,
SmartSettle277 (a Canadian company based in Abbotsford, British Columbia) offers the
most comprehensive support with features including preferred outcomes, bargaining
ranges, satisfaction functions, tradeoffs, issue importance and package ratings.
SmartSettle assists parties to overcome the challenges of conventional negotiation
through a range of analytical tools to clarify interests, identify tradeoffs, recognize party
satisfaction, and generate optimal solutions.278 The aim is to help parties better prepare
for negotiation and to support them during the negotiation process in quickly reaching an
outcome that is both fair and efficient. SmartSettle has demonstrated the benefits of this
analytical support in research and has begun to do so in application to real cases.279 Its
Nightingale – Ernest Thiessen & John Zeleznikow, “Technical Aspects of ODR: Challenges and
Opportunities”, online: <http://www.odr.info/unforum2004/thiessen_zeleznikow.htm> [Thiessen and
Zeleznikow].
274
Thiessen and Zeleznikow, supra note 273.
275
Rule, supra note 7 at 58.
276
For example, systems such as Family_Winner, Inspire, SmartSettle, Negoisst and SmartSettle that
provide a high degree of analytical support to enhance negotiation, and provide parties with a highly
structured environment – Thiessen and Zeleznikow, supra note 273.
277
See SmartSettle, online: <http://www.smartsettle.com>.
278
Ernest M. Thiessen and Joseph P. McMahon, “Beyond Win-Win in Cyberspace” (2000) 15 Ohio St. J.
on Disp. Resol. 643 [Thiessen and McMahon].
279
Thiessen and Zeleznikow, supra note 273.
54
system represents one of the most intriguing aspects of ODR: it provides possibilities
which are not available in face-to-face dispute resolution.280
It does not imply however that the fourth party could easily replace a third party.
SmartSettle still advises disputants to work with a human mediator who administers the
program. As one reason Rule mentioned that although SmartSettle “has come a long way
toward user-friendliness over the years”, its interface is still too complicated for the
average user to easily operate.281 This will not remain an insuperable obstacle in the long
run though. Most commentators are convinced that it is just a matter of time and
“eventually technology such as SmartSettle will be repackaged in a way that is simple
and user-friendly, and such tools may revolutionize dispute resolution.”282 Nonetheless,
so far the fourth party has been quite rarely placed in a position to “replace” the third
party. Rather, it has been considered to support or to “displace” the third party in the
sense that new skills, knowledge, and strategies may be needed by the third party. 283 Yet,
again, as technology is perfected, the fourth party is conquering new fields in dispute
resolution which were traditionally reserved to human neutrals. The fourth party is taught
how to mimic human mediators and arbitrators. Surprisingly often it manages to move
parties towards resolution of their dispute using many of the techniques a “live” mediator
would use, such as compelling the parties to define what the problem is and what their
desired solution would be, reframing and finding common ground. Once such software
grows more sophisticated, arguably, it might replace many human neutrals. Some ODR
mechanisms do not require a human’s involvement to operate even today. SquareTrade,
the ODR provider working with eBay, offers services that parties may utilize without the
aid of a mediator or other SquareTrade personnel, and these self-service tools achieve
over 80% successful resolutions.284 Thus, at least one commentator argued “the most
salient difference between ODR mechanisms is in their level of automation.”285
280
Thiessen and McMahon, supra note 278.
Rule, supra note 7 at 59.
282
ibid.
283
Katsh, Bringing Online, supra note 57 at 286-289.
284
Having said that, the vast majority of these cases were relatively very simple. Therefore, except for the
simplest problems, live human intervention is still a very important component for effective online
communication. SquareTrade relies heavily on highly capable ODR neutrals to help resolve disputes where
human involvement is invaluable. Claro Parlade, “Challenges to ODR Implementation in a Developing
Country” in: Ethan Katsh and Daewon Choi (eds.), Online Dispute Resolution (ODR): Technology as the
281
55
Automation may be seen as a response to growing volume of online interactions
and disputes. Its benefits include ability to handle increased volume of customer requests,
savings in turnaround time and transaction costs. While the role of automation in a justice
system by and large has been quite broadly discussed286, the direct impact of automation
on dispute resolution, and out-of-court methods in particular, has been somehow
overlooked. In the broadest meaning, automation refers to all functions in ODR
procedure that are performed without human assistance.287 A commonly automated
function is that of informing parties of activity in the case: some ODR systems
automatically notify their users of new message or submission by sending them an
email.288 Thiessen and Zeleznikow observed that the challenge lies in providing
automation that is sophisticated and intelligent. According to them, the ideal ODR system
would be fully automated and at the same time able to provide all the functions of a
human neutral.289 Needless to say, such a system would have to be supported by the
ultimate artificial intelligence (“AI”)290 which is now unattainable. Yet many authors
have argued that AI techniques would bring several benefits to legal practice.291 The
possibility of using them in the field of the law, in particular to support legal reasoning
“Fourth Party”. Papers and Proceedings of the 2003 United Nations Forum on ODR (2003), online:
<http://www.odr.info/unece2003/pdf/parlade.pdf>. See also Rule at 57.
285
Goodman, supra note 21 (noting that while some websites are fully automated and require no or little
human intervention, others involve a neutral third party as a facilitator). Some authors argue that online
ADR processes fall into two primary categories: automated processes and neutral-managed processes – for
instance: Miriam R. Albert, “E-Buyer Beware: Why Online Auction Fraud Should Be Regulated” (2002)
39 Am. Bus. L.J. 575 at 629.
286
See for example: J. Owen Forrester, “The History of the Federal Judiciary’s Automation Program”
(1995) 44 Am. U.L. Rev. 1483 (noting that “one does not have to be a futurist to predict correctly that
automation tools will overtake and rapidly change traditional methods used by lawyers, judges, and court
managers).
287
Thiessen and Zeleznikow, supra note 273.
288
ibid.
289
ibid.
290
The term ‘Artificial Intelligence’ (‘AI’) is used here in its basic meaning describing “the ability of a
digital computer to perform tasks commonly associated with intelligent beings”, as frequently applied to
the projects of developing systems endowed with the intellectual processes characteristic of humans, such
as the ability to reason, discover meaning, generalize, or learn from past experience – based on the
explanation contained in Encyclopædia Britannica Online – online: < http://www.britannica.com>.
291
Dan Hunter, “Commercialising Legal Neural Networks” (1996) 2 JILT, online:
<http://elj.warwick.ac.uk/elj/jilt/artifint/2hunter/>.
56
processes, has been considered for at least thirty years.292 As noted by Susskind, despite
growing awareness and interest in the application of AI, and notwithstanding a number of
research projects293, “there has not yet been developed fully operational expert system in
law that is of utility to the legal profession.”294 Thus, so far high automation has been
“generally associated with low comprehension […] The only existing ODR systems that
are totally automated are those that mainly deliver information or those that offer a blindbidding process for simple single-issue two-party cases.”295
Blind bidding is an ODR method considered appropriate for disputes involving
parties whose interests can be easily quantified (in terms of money, time, etc.). 296 Each
party submits an offer over the network, and then a computer without human assistance
compares the offers.297 If the offers are far apart, the process can be repeated through
several rounds. It can be ended with a settlement satisfactory for both sides or neither
side having lost anything since nothing was revealed to the other party or any other
person.298 Therefore, many authors have pointed out that rules on disclosure are as much
a part of blind bidding as is a simple calculation mechanism.299 Blind bidding appears –
as observed by Katsh – “to be almost too simple to be considered any more of a dispute
resolution process than flipping a coin or drawing a card from a deck. Unlike these other
techniques, however, in which the outcome has nothing to do with the needs or interests
292
The first widely discussed writing on that topic was published by Buchanan and Headrick in 1970:
B. Buchanan and T. Headrick, “Some Speculation about Artificial Intelligence and Legal Reasoning”
(1970) 23 Stan. L. Rev. at 40-62. In this article they argued that “the time has come for serious
interdisciplinary work between lawyers and computer scientists to explore the computer’s potential in law”.
In retrospect, we might assess that their proposal was realized to some extent only.
293
Susskind counted in the nineties that there had been no more than twenty five sustained research
projects launch in this field. They sought to handle with possible AI’s applications to a broad scope of
specific legal fields: from principles of German Civil Code (Popp and Schlink’s JUDITH project),
decision-making in the process of settlement in civil litigation (Waterman and Peterson’s L.D.S.), to
drafting legal documents in general (Sprowl’s A.B.F.) – Richard Susskind, Transforming the law: essays
on technology, justice and the legal marketplace (Oxford: Oxford University Press, 2000) at 192.
294
ibid.
295
Thiessen and Zeleznikow, supra note 273.
296
Albert, supra note 285 at 630.
297
What is Cybersettle?, online: <http://www.cybersettle.com>.
298
Blind bidding could also be accomplished with a human third party who accepts the offers and makes
the calculations but the process would be more cumbersome and involvement of human neutral is not
necessary in this case.
299
Katsh, Bringing Online, supra note 57 at 286-289.
57
of the parties, blind bidding allows parties to reach an agreement, not simply an outcome
or result.”300
Does such technology that hardly differs from flipping a coin or drawing a card
from a deck deserve the name of the fourth party? The concept of the fourth party itself is
still new, and probably – for many readers – not very convincing. Even with the
relatively primitive state of our current technology though, we can see the increasing role
of technology in dispute resolution. SquareTrade alone has mediated approximately two
million disputes so far, more than a million and a half of which never involved a human
other than the disputants. This led at least several commentators to the conclusion that
“there’s a tremendous amount of evidence that there’s a great deal of efficacy in online
dispute resolution.”301 Such authors as Thiessen and Zeleznikow expect that one day
ODR systems will “outperform human beings, bringing levels of fairness and efficiency
to ODR and expanding to improved negotiation of all kinds of problems.”302 One might
argue that their optimism is completely unsupported. The academic discussion about the
“computer judge” died down more than fifteen years ago.303 Such intriguing writings as
“Can/Should Computers Replace Judges?”304 by D’Amato or “Machine-Made Justice:
Some Implications”305 by Spengler were published, respectively, in 1977 and 1963.
Today, nobody repeats the question of “what do judges know that we cannot tell a
computer?” Although over twenty years ago AI pioneer McCarthy answered
“Nothing”306 to this question, in fact “nothing” has happened to prove that he was right.
300
ibid.
“Symposium Review: Computer And High Tech Law Journal Symposium Rules & Borders –
Regulating Digital Environments: February 11, 2005: Panel 3 – Ownership In Online Worlds” (2005) 21
Santa Clara Computer & High Tech. L.J. 807 at 833.
302
Thiessen and Zeleznikow, supra note 273.
303
Mayer-Schönberger put it in the following way: “Fifteen years ago people were still talking about the
automated judge – a computer that would, after being ‘fed’ legal facts, render ‘correct’ decisions. This
naïve euphoria is gone. The substantive use of technologies and networks in the legal world has a different
focus today” – Viktor Mayer-Schönberger, “The International Lawyer in Times of Cyberspace” in
J. Drolshammer and M. Pfeifer, eds., The Internationalization of the Practice of Law (The Hague: Kluwer
Law International, 2001) 401 at 407.
304
Anthony D’Amato, “Can/Should Computers Replace Judges?” (1977) 5 Georgia Law Review 1277.
305
Joseph J. Spengler, “Machine-Made Justice: Some Implications”, in: H. W. Baade, ed., Jurimetrics,
(New York: Basic Books, 1963).
306
Joseph Weizenbaum, Computer Power and Human Reason: From Judgment to Calculation,
(Harmondsworth: Penguin, 1984) at 207.
301
58
In this context the question of whether the fourth party will be ever capable of replacing
human neutrals may sound really naïve to most of us.307
Nonetheless, it appears undisputed that even relatively simple technology can
increase the effectiveness of dispute resolution. Some authors suggest that ODR
technology should remain simple and transparent.308 They claim that it is not technology
but “the people [who] are the guts of any ODR service, and they are where successful
ODR programs begin and end.”309 Some ODR providers make a mistake when they
consider themselves technology companies first and foremost.310 “Technology is the
medium, not the message”311, and it is only a means to an end, not an end in and of
itself.312 Having said that, the truth is that the means determine the end, and often they
corrupt the end. In fact, there is also no binary choice between “the medium” and “the
message”: “the message” does not exist without “the medium” and vice versa. There is
no doubt that technology is an increasingly important modality in the regulatory
framework of online dispute resolution.
307
Even if it becomes technically possible, we come to another difficult issue: would it be desirable? An
investigation of this issue reveals a wide array of social, philosophical, etc., difficulties. On the hand, a
computer judge, arbitrator or mediator can potentially have incredible advantages. Besides obvious
practical ones measured in terms of time and cost effectiveness, we can identify several some promising
points on the field of legal theory. To take an example, if we agree that the ideal position of judge, as a
decision maker, is convergent with the ideal of tabula rasa, then a computer judge can be possibly a better
judge than any human judge.
308
Rule, supra note 7.
309
ibid. at 229.
310
ibid. at 245.
311
This is a paraphrase of Marshal McLuhan’s slogan “the medium is the message” by Colin Rule. The
original implies that technology, as the medium through which we communicate, can send its own
messages, so it is, in a certain sense, independent of its users and social institutions created by them – ibid.
at 245 and Marshall McLuhan and Lewis H. Lapham, Understanding media: the extensions of man, (New
York: McGraw-Hill, 1964) at 7-22.
312
Rule, supra note 7 at 245.
59
IV. IMPLICATIONS: PRESENT REALITIES, PRESSING PROBLEMS AND
FUTURE PROSPECTS
The current state of the regulatory framework for online dispute resolution
At the peak of the Internet boom of the late 1990s, it appeared that ODR was
developing at a satisfactory pace without the involvement of government. The easy
availability of high-tech venture capital allowed ODR enterprises to appear and grow
quite rapidly. Both governments and business stakeholders were anxious to foster
marketplace competition. Many ODR providers called for a hands-off approach from
government and argued that ODR services would “take root on their own.”313
Regulations were kept to a minimum in order to encourage new entrants and greater
consumer choice. Self-regulation initiatives, such as codes of conduct or trustmarks, were
growing “slowly but steadily.”314 E-commerce industry was encouraged to build ODR
into business practices but not required, or overseen, to do so. As reported by the
UNCTAD Report, when the US government convened its first conference on ODR in
June 2000 at the Federal Trade Commission315, it was clear that “it was leaning toward
industry self-regulation.”316 “In the freewheeling spirit of the Internet revolution, selfregulation seemed the logical course.”317
Somewhat surprisingly, even when the Internet bubble burst, the regulatory
approach to the ODR did not change.318 In 2002, it was – as noted by Rule – “very handsoff”, and government agencies both in Europe and America “seemed to be content with
313
UNCTAD, supra note 15.
Rule, supra note 7 at 272.
315
Department of Commerce, supra note 229.
316
UNCTAD, supra note 15.
317
ibid.
318
Having said that, the support for the self-regulation approach was not unlimited. For instance, in 2001
the Federal Trade Commission Roundtable on ADR, E-Commerce and Online Transactions involving
business and consumer advocates called for greater government regulation of online ADR to ensure their
fairness, effectiveness and compliance with codes of conduct. Similar efforts have been made by other
national governments.
314
60
self-regulation.”319 It is needless to say that the self-regulation approach has been always
preferred by business wishing to avoid additional regulation whenever possible. Thus,
while businesses have often supported the application of ODR, especially to B2C
disputes, at the same time they have wanted “government to avoid getting involved.”320
As discussed by Rule, “businesses mostly want to implement ODR programs to shield
them from liability and court proceedings”, for example, “many businesses are interested
in binding arbitration with their consumers and business partners for exactly this reason.
The fear of financial exposure in court is a formidable one. The fear of class action
lawsuits is also formidable.”321
The first doubts regarding the self-regulation approach were raised by consumer
groups having a long history of disagreement with business interests. These doubts arose
when some e-companies suggested that ODR be integrated into their e-commerce
systems as a mandatory step: that is, disputants would have to engage in ODR before
being permitted to go to court.322 Because most consumer groups were “steadfast in their
demand that consumers must retain access to court”323, they expressed their strong
objections to such suggestions. As a result, consumer advocacy groups became willing to
entertain the possibility of government intervention in setting and enforcing new
standards for ODR. Then, not only consumer organizations, but also other not-for-profit
entities, governments and international bodies raised concerns regarding the performance
of ODR providers, particularly in the B2C context.324 The shortcomings had to do with
the lack of transparency in the conduct of ODR providers, the lack of standards for
ensuring the neutrality of providers and neutrals employed by them, the lack of
appropriate complaint mechanisms, and the failure to accommodate cultural and
319
Rule, supra note 7 at 272.
ibid. at 273.
321
ibid.
322
UNCTAD, supra note 15.
323
Rule, supra note 7 at 273.
324
Advocacy groups, governmental agencies and multinational organizations have expressed a concern that
– as summarized by Rule – “ODR services will be shoddy, biased, and ineffective” – ibid. at 270.
320
61
linguistic differences (these deficiencies are explained in more detail in the next section
of this paper).325
Even when facing these clear deficiencies, ODR stakeholders and policy-makers
did not decide to (or were not able to) take any decisive steps to correct the regulatory
framework. By and large, their actions were limited to the sphere of norms. Diverse nonbinding and unenforceable standards for ODR service provision have been issued.
Among the organizations that have compiled these standards were the OECD, the G-8,
the European Union, governmental agencies in Canada, Australia, Japan, New Zealand
and the United States, the International Chamber of Commerce, the Better Business
Bureau, the Global Business Dialogue, and the Trans-Atlantic Consumer Dialogue. On
the one hand, it proves that the problem has really existed and attracted a lot of public
attention. On the other hand however, as noted by Rule, “it is easy to get lost in all of
these different standards documents.”326 Their regulatory influence upon ODR practice
appears debatable.
There are several reasons for governments to open the door to more aggressive
regulatory involvement. The hands-off approach, in which the driving force is the power
of the marketplace, has been unsuccessful in regulating online dispute resolution. The
power and dynamics of the ODR market forces are currently weak. The hands-off
approach could be potentially effective if the market had just emerged and many new
players were appearing. This would be also an effective approach for a developed market
where clients do derive benefits from real competition between businesses. Neither of
these is however the ODR market of today. This is a market of insufficient information
and limited client choice. ODR providers experience difficulties getting new cases. Ecompanies do not seek to attract more clients by offering them more convenient modes of
dispute resolution.
In their recent book, Ponte and Cavenagh suggested that “e-companies must tread
carefully in their selection of ODR providers. At a minimum, an e-business should
determine if the ODR provider belongs to relevant professional organizations, adheres to
current ADR ethical standards, requires specialized ODR training for its neutrals, and
Orna Rabinovich-Einy, “Balancing the Scales: The Ford-Firestone Case, the Internet, and the Future
Dispute Resolution Landscape” (2003-2004) 6 Yale J. L. & Tech 1 [Rabinovich-Einy].
326
Rule, supra note 7 at 271.
325
62
complies with the ABA Task Force’s Recommended Best Practices.”327 Although
generally plausible, “the minimum” proposed by Ponte and Cavenagh appears somewhat
troublesome, and often hardly achievable. First, there are many ADR/ODR professional
organizations and it may be difficult to find out which one is “relevant”. Second, ADR
ethical standards (again, the question arises which ones are “relevant”) will not always be
fully adequate for ODR. By trying to merely transfer ADR standards to the ODR world,
the role of technology and other unique challenges of ODR may be overlooked. Finally,
while the ABA Task Force’s Recommended Best Practices may appear important in one
way or another to ODR providers in the United States and North America, they are in fact
only one of numerous standards, and remain largely unknown worldwide.
The exclusive reliance on market forces, free competition, and privately-made
norms in the context of regulation of online dispute resolution raises important concerns.
“Dispute resolution” is not a regular product or service. It is debateable whether market
and norms, in the absence of law, are capable of providing adequate incentives to put
ODR programs in place and make them fair and effective.
Major deficiencies of the current ODR regulatory framework
There are numerous issues in online dispute resolution that presently appear
“insufficiently regulated.” As discussed, this state of “insufficient regulation” results not
only from lack of comprehensive ODR law, but also from the weaknesses of the other
modalities of regulation. Certainly, law is not always the best means to regulate. In
cyberspace, like in the physical world, law, market, norms, and architecture all interact to
regulate human behaviour. To take an example, if an ODR provider charges too much for
their services328, such a problem should rather be solved by market than by law. If the
provider ignores clients’ emails about their pricing, likewise, norms seem to be more
appropriate than law. If the provider tries to use a non-existing credit card number, they
will probably fail not because it is forbidden by law, but because a computer system will
not recognize a given number. Finally, when fraudulent charges are made to a client’s
credit card, law must come into play. Thus, law and the other modalities co-regulate the
327
328
Ponte and Cavenagh, supra note 149 at 132.
Consumers 2001, supra note 228 at 9.
63
field of online dispute resolution. Some of the deficiencies of the existing ODR
regulatory framework have been already illustrated in the previous sections of this paper,
this section highlights and explains them in more detail.
Several issues arguably ought to be regulated by law, and no other modality of
regulation seems to be capable of replacing law in these situations. Such an issue is for
instance whether an ODR clause contained in a contract, or increasingly often in a
website’s terms of use, should be enforceable. This problem cannot be satisfactorily
answered by technology, market, nor any norms other than law. It appears to be the
necessary role of legislative authorities and courts to deal with the problem of ODR
clauses’ enforceability. Likewise, such issues as whether the limitation period should be
suspended while the parties are attempting to resolve their dispute by ODR (and if yes,
under what conditions), the extent of evidential privilege (whether all or some ODR
communications are protected from disclosure in any subsequent proceedings), the (de)localization of ODR (e.g., “place of arbitration” has been traditionally needed to
establish a “territorial” link to lex arbitri329), liability of ODR neutrals and ODR
providers, and finally, enforceability of a settlement or award, also seem to inevitably
belong to the domain of law.
It should be noted that some of these issues are somewhat regulated, although
only in a few jurisdictions, and in relation to B2C disputes. In general, in disputes with
consumers, a wide range of consumer protection laws may come into play, and ODR
providers often look to a handful of existing laws concerning B2C offline alternative
dispute resolution and try to guide their conduct based on them.330 This situation is not
satisfactory for at least three major reasons, however. First, repeatedly, all parties suffer
from legal uncertainty. The mantra in this paper is that the growth of, and confidence in,
online dispute resolution are inherently dependant on legal certainty. Second, in the
online settings, the distinction between consumers and businesses becomes vague. When
entering into a standard online agreement with, say, Microsoft, the bargaining power of
small or even medium enterprises is not different from one represented by a consumer.
As observed by Lynch, “an absence of localization is highlighted by the growth of online or cyberspace
arbitrations which allow arbitrations conducted via electronic medium to be delocalized with the “virtual
arbitrators” and “cybertribunals” having no real physical seat.” – Lynch, supra note 143 at 391
330
Ponte and Cavenagh, supra note 149 at 136.
329
64
Arguably, such businesses should be granted wider protection, similar to consumer laws,
when contracting on the Internet. Finally, consumer protection laws are currently
territorially limited and differentiated which stands in stark opposition to the multijurisdictional and “borderless” nature of cyberspace.
Several important issues in the ODR regulatory framework of ODR come down to
the problem of lack of transparency and appropriate information. In this context, not only
law, but all the modalities of regulation should play their roles. At present, many
commentators observe that it is difficult “to get accurate information about ODR and
ODR providers.”331 While most ODR providers disclose information on the services they
offer, inadequate information is given on their governing structure, funding models, fees,
officials and shareholders, and finally, users and results of ODR processes. 332 Yet
transparency should be a baseline standard for online dispute resolution. As noted by
Rule, this issue “enters into dispute resolution in two different ways: on the front end,
parties need to understand what they’re getting involved in; […] on the back end, it is
also important to have transparency in ODR processes for outside observers.”333 The
latter category is certainly more problematic given the traditionally confidential nature of
out-of-court dispute resolution. However, it is important to allow outsiders to get a sense
of what mechanisms are being used to increase the overall confidence towards ODR.334
The regulatory framework should ensure that full information about both the
tools, the neutrals, and the service provider in general, etc., is disclosed. This is necessary
to enable Internet users to make truly “informed choices” concerning not only specific
ODR providers, but also websites where they shop online and different options of dispute
resolution. Since the other modalities of regulation presently fail to ensure adequate
standards and incentives, it appears plausible to impose certain minimal disclosure
requirements by law.
331
Rule, supra note 7 at 270.
Consumers 2001, supra note 228 at 10.
333
Rule, supra note 7 at 274.
334
Rule explains further that “some standards, like the TACD guidelines, go as far as to require that ODR
providers report their cases to a publicly accessible central clearinghouse. Many dispute resolution service
providers are reluctant to go that far, as they are concerned about the confidentiality of their parties and
they do not want to cede control of their data to a central clearinghouse.” – ibid.
332
65
For e-companies, in turn, information on applicable dispute resolution procedures
could become an important component of each commercial website. It is debateable to
what extent (if any) that should be enforced by law. Currently, the provisions regarding
dispute resolution are frequently “buried” at the end of the website’s terms and
conditions. Therefore, the majority of the website’s visitors have no idea of what would
happen in case of a dispute. Yet, there is no doubt that the dispute resolution procedure’s
terms should be brought to the users’ attention in an effective fashion. They could be
provided at least with an easily accessible hyperlink, or a dispute resolution icon, on the
main page of a given website which would lead directly to the dispute resolution clause.
This would allow potential customers to identify the existence of an ODR policy or
program before making any purchases. In this way, again, one could make a more
informed choice whether to continue to interact with a given website. Such a standard is
not unprecedented: many corporate websites have recently implemented similar changes
in relation to personal data and privacy policies.335 Finally, in an effort to help educate
consumers and other businesses about ODR, e-businesses could provide hyperlinks to
major ODR resource centres that offer objective descriptions of ODR processes and
specific ODR providers and services on their websites.336
Today, lack of complete information on ODR provider’s governing structure,
business connections, etc., often raises doubts relating to the independence of ODR
providers and their stakeholders, as well as the neutrality and impartiality of individual
mediators or arbitrators. The Consumers International 2001 Report has found that most
online ADR sites do not give adequate assurance of impartiality of their services.337
There is a risk that ODR providers will become too closely tied to business organizations
because the latter are the most important customers of the former. It is needless to say
that while ODR providers should stay focused on the needs of their customers, they
should not get “too close.”338 Thus, a number of authors expressed concerns about
neutrality and fairness of ODR processes. Rule observed that “ODR often encroaches on
335
Such a dispute resolution icon could link to a page that explains the ODR policy, preferably in simple
terms – Ponte and Cavenagh, supra note 149 at 124.
336
See for example the Conflict Resolution Information Resource (http://www.crinfo.org) and Ponte and
Cavenagh, supra note 149 at 125.
337
Consumers 2001, supra note 228 at 9-10.
338
Rule, supra note 7 at 277.
66
legal rights, such as due process.”339 In addition, on the Internet, consumers can easily
trade-off fairness of a dispute resolution procedure for other, primarily economic, values.
The Internet enables online shoppers to look for better prices all around the world. When
they do so, they frequently forget about other aspects of each offer, such as whether and
how a dispute would be handled. Certainly, all the modalities of regulation have their
roles to ensure that ODR processes are fair, impartial and transparent – technology,
because – as suggested by Thiessen and Zeleznikow – the quality of neutrality can be
improved with automation340; markets, because the fair terms of handling complaints and
dispute resolution may attract more clients; finally, norms and especially law, to protect
the fundamental rights.
Only law is capable of protecting the right to trial, however. ODR programs by
and large are currently neither binding nor mandatory based on law; nonetheless, many
businesses want them to be mandatory, if not by virtue of law, then as a result of other
norms (most often diverse contractual obligations). Consumer groups argue that the
reason why businesses want ODR to be a compulsory stage for online disputes is that “it
provides an additional step in the process that might dissuade some consumers from
escalating their complaint.”341 In addition, ODR programs which are not entirely
voluntary appear problematic in light of the fact that many Internet users still do not have
convenient access to technology or do not have sufficient IT skills. The validity of
mandatory ODR clauses is largely untested and “it is unclear whether or not such predispute clauses will also find judicial support.”342 In this context, law appears to be the
only modality of regulation that can guarantee that consumers will not lose their ability to
obtain redress in a public forum like a court.
Law should also be an ultimate means to regulate liability of the individuals or
entities responsible for ODR processes. As observed by Rule, so far regulatory
discussions have focused on the administrative organizations, including most importantly
339
ibid. at 270.
Thiessen and Zeleznikow, supra note 273.
341
Rule at 273.
342
Ponte and Cavenagh, supra note 149 at 120. Although offline businesses and consumers have sought to
challenge mandatory pre-dispute ADR clauses in the US courts, the court usually have upheld such clauses
unless they were clearly unfair.
340
67
ODR providers.343 Yet, this approach tends to overlook the role played by other ODR
stakeholders. First and foremost, it appears crucially important to set enforceable
standards applicable to all ODR neutrals. While ODR providers usually have brick-andmortar offices incorporated in one jurisdiction or another, and might be relatively easily
held accountable for any irregularities, online mediators and arbitrators can work and
travel anywhere in the world, subject to a wide variety of different laws and
jurisdictions.344 Accountability of online neutrals is therefore harder to ensure.345 In
addition, it is easier for them to make mistakes than in ADR, especially, when they use
sophisticated technology.346 Moreover, an ODR process is shaped not only by “live”
participants but also by online architecture and software tools designed by “anonymous”
software engineers. Many rules of ADR practice presume that the process is being run by
a human, and in the world of ODR, they must be reformulated. A central problem is no
longer solely how to combat human neutrals’ tendencies to be inefficient, erratic, or
biased. The problem is getting more complicated: in ODR, inefficiency, errors or bias can
be hidden under nicely crafted computer interface, in the way a program was
constructed.347 Liability for any “errors” in ODR software will be often a multi-faceted
issue. Rule wrote that “having your own technological platform is like owning an
elephant; yes, you own it, but you still have to feed it every day and find a place for it to
sleep at night. And every day the elephant gets a little older.”348 For that reason, many
ODR providers prefer outsourcing ODR technology than building it themselves. Such
ODR technology is often protected by patents349 and copyrights. Providing a clear set of
rules concerning liability for errors and mistakes in ODR processes is difficult, albeit
desirable.
For example, while all the debate about ICANN’s Uniform Domain Name Dispute Resolution Program
have focused on the ICANN system, its approved service providers and the forum shopping problem, the
concerns about standards for UDRP neutrals have been rarely addressed. This problem is not limited to
domain name disputes though.
344
Rule, supra note 7 at 271.
345
Katsh and Rifkin, supra note 2 at 160.
346
Even in a very trivial way, Katsh and Rifkin gave and example of an online mediator who accidentally
sent a copy of an email to a third party who is unconnected to the case – ibid.
347
Rule, supra note 7 at 55.
348
ibid. at 245.
349
Cybersettle is the holder of US Patent # 6,330,551 for the Computerized Dispute Resolution System and
Method – see: online <http://www.cybersettle.com/>.
343
68
Other technology-related regulatory issues in ODR are data security and
confidentiality. While the former relies primarily on technology and the latter – on law
and norms, in fact they seem closely interrelated. The security of currently utilized ODR
platforms and techniques (and as a result confidentiality of ODR processes as well) raises
some concerns. For example, unencrypted email which is now widely used is extremely
vulnerable to interception. Confidentiality is a key concern in any dispute resolution
process. In the field of ODR, parties need to have full confidentiality guarantees not only
from a neutral but also an ODR provider, and all other persons who can have electronic
access to information the parties do not wish to disclose. Data protection methods,
including encryption, secure servers, or password protocols, must be important
components of ODR programs. Again, some analogies to privacy laws come to mind. It
seems plausible that ODR providers should be required to commit themselves to similar
standards and efforts as those who run personal information databases under privacy
laws. There is consensus among scholars and practitioners that “because of the often
sensitive nature of the information shared in online dispute resolution procedures, system
administrators must put the highest priority on top-level security and data protection.”350
Finally, last but not least, lack of trust, in the context of the Internet sometimes
referred to as e-confidence351, is another consequence of “insufficient regulation” in the
ODR field. Lack of trust is viewed as one of the main obstacles to the continuing growth
of the Internet’s global marketplace in general, and the ODR phenomenon in particular.
These two aspects are closely interrelated: if e-commerce is to reach its full potential,
consumers must have confidence in ODR.352 Even if there are no insuperable legal
obstacles to online arbitration or mediation within the current legal framework353, lack of
legal certainty and public confidence in online dispute resolution hampers the growth of
ODR. While in the traditional environment, trust is earned mostly through a neutral’s
350
Rule, supra note 7 at 246.
Building trust is an important component of any dispute resolution process. For many successful ecompanies, including SquareTrade, the largest ODR provider, building trust in online relationships has
been always seen as the highest priority. – Ponte and Cavenagh, supra note 149 at 132.
352
Teitz, supra note 94 at 993-94.
353
Lodder and Zeleznikow, supra note 54 at 298.
351
69
behaviour during the dispute resolution process354, online, the process of building trust
can be redesigned and enriched. It has been argued that it could be “more informational
than behavioural.”355 Building trust is a function of all the modalities of regulation: law,
norms, market and technology are all important.
Policy Options
The existing deficiencies of online dispute resolution raise important questions
about the best mode of regulation. There has been a wide divergence in views on future
regulation of ODR.356 Some experts have called for greater government regulation and
adoption of new laws to provide the optimal regulatory framework. Others have opted for
greater use of trustmark programs and other self-regulation mechanisms, or argued that
new international governing bodies need to be established.357 Although the current state
of the regulatory framework for online dispute resolution is considered unsatisfactory, at
this point in time, it is still difficult to predict which trend in ODR regulation will prevail.
Policy makers have three major options.358 First, governments may elect a laissezfair approach and permit e-commerce to develop institutions that support a market for
dispute resolution services and permit that market to define the standards for ODR. This
would imply that the current “hands-off” approach is continued. Second, governments
may affirmatively regulate ODR by “traditional” means based on national laws, for
example by accrediting ODR providers and establishing binding and enforceable
standards for ODR services. Between these two extremes, there is a wide range of hybrid
approaches. This paper argues that some of them, generally referred to as “coregulation”, are the most appropriate solution.
Richard Salem, “Trust in Mediation”, online: <http://www.beyondintractability.org/m/trust
mediation.jsp>.
355
Katsh, Bringing Online, supra note 57 at 286-289. In the online settings, it is possible to address
additional issues which are implicit in the trust building process. Katsh wrote that “questions implicit in the
trust building process, such as how it can be guaranteed that communications will be kept confidential, and
what experience and expertise does the mediator have, can be responded to online not by verbal assurances
but by software that can provide information, and monitor and secure messages.”
356
Ponte and Cavenagh, supra note 149 at 136.
357
ibid. at 137.
358
See also generally Gibbons, supra note 203 at 5-6.
354
70
The first approach is based on the cyber-libertarian governance model according
to which the operation of market forces and minimum government intervention may lead
to the most effective online dispute resolution system. 359 Several organizations have
recommended that governments allow more self-regulation to demonstrate its efficacy.
They argued that increased competition will result in a race to excellence in order to
ensure e-confidence and attract more clients. However, as plausibly concluded by Lynch,
“while the cyber-libertarian governance model has a certain appeal in view of a
decentralized mode of governance, it is not rooted in practical reality.”360
Thus far market forces have been a weak and ineffective modality of ODR
regulation. The regulatory power of such norms as guidelines and good practices, in the
field of ODR, is also highly disputable at present. Finally, the last modality of regulation,
ODR technology, is increasingly sophisticated and – besides many benefits – brings also
the potential for abuse. Thus, it is hardly possible that in a long run the international
community could afford to tolerate “the risks and uncertainties associated with a
complete withdrawal of national governments from the system.”361 Such a “hands-off”
decentralized system would probably encounter difficulties in guaranteeing the principles
of fairness and due process. The free-standing purely “private” regime of online dispute
resolution, lacking, for instance, any enforcement powers provided by territorial
sovereign authorities, could not work well. Therefore, a de-regulated market for online
dispute resolution without some national government intervention – especially at the
stage of enforcement of settlements or awards – would be deficient and unlikely.362 Selfregulation alone is not capable of providing a comprehensive solution to regulation of
Internet transactions and dispute resolution.
The second approach is based on the assumption that online dispute resolution
requires greater institutional support which can be provided only by national laws made
and enforced by governments. In terms of public declarations, many governments are
clear on their support for ODR. For example, the European Commission and the US
Federal Trade Commission and Department of Commerce have issued several statements
359
Lynch, supra note 143 at 389.
ibid.
361
ibid.
362
ibid. at 390.
360
71
indicating that online dispute resolution should be the default means of providing redress
in B2C e-commerce. In practice, however, this favourable attitude has been supported by
only a few concrete initiatives. In particular, as noted by Rule, “the government has
stopped short of referring cases to ODR providers.”363
While several experts call for affirmative actions of governments in the field of
ODR, others argue that national laws should not become the main regulatory vehicle for
ODR. Ponte and Cavenagh have observed that “efforts to preserve national sovereignty
and laws collide with the desire to develop uniformity on the Web, to simplify business
obligations, and to improve the ease of commercial transactions for all parties.” 364 The
rapidly evolving technological environment makes it difficult for national legislation “to
keep abreast of the new developments.”365 As a result, given that the tradition of “bottom
up” governance366, unique dynamics and decentralized nature of cyberspace, pose several
challenges for any national government trying to effectively control phenomena which
take place online, diverse forms of international cooperation in the field of ODR are
needed. A mere reliance on national laws could only further complicate the use of ODR.
To be effective, any regulatory scheme for cyberspace communications in general, and
online dispute resolution in particular, must be agreed upon by the international
community, and then implemented with support of several Internet and ODR
stakeholders.
The third multilateral and multifaceted approach to online dispute resolution
seems most appropriate. This model would rely on careful consideration of all the
modalities of regulation and the way they interact with each other to co-regulate ODR. It
would also seek to involve a wide range of stakeholders and mechanisms to ensure the
optimal regulatory scheme for online dispute resolution. This is a pragmatic approach
recognizing that state governments still have an important role to play in regulation of
ODR367, but also taking into account the need to involve different stakeholders, including
363
Rule, supra note 7 at 272.
Ponte and Cavenagh, supra note 149 at 137.
365
Lynch, supra note 143 at 353.
366
US Working Group on Electronic Commerce, “1 st Annual Report” (1998), online:
<www.doc.gov/ecommerce.pdf>.
367
See generally: Schultz, Does Online, supra note 60 at 72 (arguing that ODR requires governmental
intervention to develop fully).
364
72
ODR providers, ADR organizations368, e-commerce and IT businesses, consumer
advocates369, international organizations and the community of Internet users.
Arguably, such a new regulatory scheme for ODR is needed and ought to be
provided in a multi-step process. Both governments and the other stakeholders must
engage in an effort to generate international coordination on ODR regulation. It is a trite
observation that while state governments alone might provide for general rules
controlling living together in the real world, they are not able to solve the problems
arising on the Internet without a method for achieving broad international consensus. The
regulatory framework for ODR, like the Internet, by its very nature, transcends political
and territorial boundaries. Thus, it is necessary to find ways in which regulatory policy
could be made operable across nation states. Several issues, such as what exactly this
international arrangement should include, or whether a global ODR clearinghouse or
other institutions need to be established or vested with some powers in the field of ODR,
are open to debate. Suggesting details of the optimal ODR regulatory framework is
beyond the scope and ambition of this paper, although it presents the changing dynamics,
challenges, current deficiencies, and complexity of the ODR regulatory framework that
arguably must be taken into account when drafting any new ODR regulatory scheme.
Once agreed upon by the international community, the ODR regulatory scheme
would be ready to be implemented by individual states. National governments should
maintain – at least for the time being – ultimate authority over the enforcement
mechanisms, the issues of fairness and due process, and the majority of other problems
that are most effectively regulated by law, such as the extent of evidential privilege or
suspension of limitation periods.370
368
As observed by Rule, the dispute resolution field has been largely absent from the discussions around
how ODR systems should work. No ADR organization “has made a strong push into the ODR area.” While
the ODR initiatives and standard-setting efforts have been started and run by entrepreneurs, large non-profit
organizations, and international institutions, ADR organizations have been surprisingly passive in this area
so far – Rule, supra note 7 at 271.
369
Consumer advocates generally support the development of online dispute resolution schemes and
national and international standards for B2C ODR, although they also argue for retaining the right of
redress in national courts – Lynch, supra note 143 at 369.
370
Gibbons suggested that governments should provide incentives such as safe harbour provisions to
encourage the development of processes and procedures that will result in “due process” and “fair play.”
Gibbons, supra note 203 at 6 (citing Richard A. Posner, Economic Analysis of Law, 20.3 (4th ed. 1992)).
73
As illustrated throughout this paper, “no size fits the all”, and law is not the best
means of regulation for each and every problem in ODR. The other mechanisms could
also ensure that ODR programs do not go awry. Rules, standards, incentives and
constrains can be supplied and enforced not only by virtue of law, but also by market,
norms and architecture. Depending on how these modalities interact at a given time,
certain powers and responsibilities would be transferred within this uniform and general
framework. Presently, the lack of solid legal framework for ODR is a particularly
significant obstacle for the growth of online dispute resolution. The weaknesses of the
other modalities of regulation exacerbate negative consequences resulting from the lack
of ODR law. As a result, it appears that adoption of internationally harmonized ODR law
would not hamper the development of market, norms and technology, but rather support
their proper growth.
There is no doubt that future regulation of online dispute resolution depends
largely upon an overall approach to regulating electronic commerce and the Internet. At
present, there is no comprehensive legal regime governing not only dispute resolution on
the Internet, but also electronic commerce transactions and the Internet by and large,
either at the international or domestic level. As observed by Geist, countries around the
world have become engaged in an increasingly tense battle over “Internet governance”
which has quietly simmered for a couple of years, but now appears headed for a
culmination at the last Internet Corporation for Assigned Names and Numbers meeting of
2005 in Vancouver.371 The International Telecommunications Union, a Geneva-based
United Nations agency, is expected to set out a new vision for Internet governance with
the release in July 2005 of the Report of the Working Group on Internet Governance. 372
If the new international governing bodies for the Internet are established, it is arguable
that they should be vested with certain responsibilities also in the field of ODR.
Internationally coordinated changes in law are needed to bring about more legal certainty
which is necessary for the growth of e-commerce and ODR. They are needed to boost
overall confidence in online transactions and to help promote high quality of ODR
services on the Web. It appears unrealistic to close the gap between the need and
371
372
Michael Geist, “The battle for control of the Internet”, 11 July 2005, The Toronto Star.
The Working Group on Internet Governance, online: <http://www.wgig.org/>.
74
potential for effective dispute resolution mechanisms on the Internet and their actual use
without such changes.
It is true that “ODR service providers are not currently regulated for quality.”373
From a broader perspective, the field of online dispute resolution seems to be not
sufficiently regulated. Neither by law, nor by the restrains set by other norms, market or
technology. Given the current weaknesses of the modalities of regulation, online dispute
resolution requires greater institutional and international support.374 It also awaits greater
education, awareness and legal maturity.375 While it remains to be seen which trend in
ODR regulation will prevail, it must not be overlooked that the development of the
Internet has changed the dynamics of the regulatory environment and “facilitated the
emergence of new institutional mechanisms for rule making.”376 The co-regulation
approach recommended in this paper is different from both traditional state-orientated
models of regulation and self-regulatory systems.377 Arguably, this is the optimal model
for regulation of online dispute resolution under current circumstances.
373
Ponte and Cavenagh, supra note 149 at 134.
American Bar Association's Task Force on Electronic Commerce and Alternative Dispute Resolution,
Final
Report,
Aug.
2002,
online:
<http://www.law.washington.edu/ABAeADR/documentation/docs/FinalReport102802.pdf>.
375
Nicolas de Witt, “Online International Arbitration: Nine Issues Crucial to Its Success” (2001) 12 Am.
Rev. Int’l Arb. 441 at 441.
376
Lynch, supra note 143 at 397
377
Rabinovich-Einy, supra note 325.
374
75
V. CONCLUSION
Online dispute resolution has its sceptics and its enthusiasts. The sceptics say
given that ODR has not revolutionized dispute resolution yet, it is nothing more than a
passing fad. The enthusiasts see an opportunity to develop new resources to resolve
conflicts more effectively than today and argue that the Internet and ODR are still in a
process of institution building – even if it takes longer than originally assumed – time
will come to develop a global ODR system.
This paper contends that the lack of a spectacular success of online dispute
resolution projects stems from significant flaws of their current regulatory framework.
There is no comprehensive legal regime governing dispute resolution on the Internet, and
as a result online dispute resolution suffers from the lack of legal certainty and public
confidence. The absence of ODR law is exacerbated by the weaknesses of the other
modalities of regulation: market, norms and technology. Arguably, a solid legal
framework is needed to allow for the proper growth of online dispute resolution with its
norms, market and technology.
Over the past decade, Internet law in Canada and many other countries has
evolved significantly with the introduction of new privacy, e-commerce, and copyright
legislation. One constant, however, has been governmental support for a hands-off, selfregulatory policy approach for online dispute resolution. Given the unsatisfactory effects
of this approach, it is time to re-examine it. While it remains to be seen which trend in
ODR regulation will prevail, it must be kept in mind that the development of the Internet
has changed the dynamics of the regulatory environment. The reasonable policy-making
must rely on careful consideration of all the modalities of regulation. The best, and in fact
the only presently effective solution, is co-regulation, a combination of both private and
national and international mechanisms, working in a coordinated effort to provide the
optimal regulatory framework of online dispute resolution.
76
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