Building a Practical Legal
Framework for E-Commerce
Dispute Resolution
Mike Dennis, US Department of State
UNCITRAL ODR Meeting
Vienna, Austria
1
B2B and B2C e-Commerce
Expanding Rapidly
• e-Commerce has exploded over the last decade
• U.S. B2B e-commerce generated $3.1 trillion in sales revenue
in 2008, accounting for 27% of B2B transactions
• U.S. B2C e-commerce generated $225.2 billion in sales in
2008, up 5% from 2007
• Consumers are becoming a major part of international
commercial transactions for first time.
Available at
http://www.oecd.org/dataoecd/44/13/44047583.pdf?bcsi_scan_DA3493EE5FC9D524=0&bcsi_scan_filename=44047583.pd
f at para. 8, 10.
2
The Challenge: eCommerce Justice
• Traditionally business and consumer issues have found redress
in courts
• However, eCommerce issues are difficult for courts to handle
because the issues often cross multiple jurisdictions
• Traditional judicial mechanisms also struggle with eCommerce
cases because:
– the transactions are low value
– litigation is expensive
– it is difficult to enforce foreign judgments
3
The Solution: A Global ODR System
• “A simple and affordable resolution process for inevitable
disputes is essential.”
Jean Monty CEO, Bell Canada
• “A global alternative dispute resolution system is necessary to
encourage cross border electronic commerce.”
Carly Fiorina, former CEO, Hewlett Packard
• “Probably the best way out of this dilemma and an important
catalyst for consumer confidence in electronic commerce is
that Internet merchants offer [ODR] as an alternative to the
cumbersome and expensive resort to courts.”
2003 Agreement between Consumers International and the Global Business Dialogue on
Electronic Commerce
See C. Rule, Online Dispute Resolution for Business (2002) at 88, 121
4
A Decade of Progress/Refinement
• 1999: OECD publishes “Guidelines for Consumer Protection in the Context
of Electronic Commerce”
• 2000: US FTC and Department of Commerce host “Alternative Dispute
Resolution for Consumer Transactions in the Borderless Online
Marketplace” conference
• 2002: The American Bar Association releases recommended standards for
eCommerce Dispute Resolution
• 2003: GBDe / Consumers International agreement
• 2004: Global Trustmark Alliance Organizing Committee launched at GBDe
Summit in Malaysia
• 2007: OECD Recommendations call for states to establish mechanisms for
arbitration of consumer disputes
• 2009: European Committee for Standardization releases recommended
best practices for ODR
5
International Consensus
• Rome I Regulation – EU Parliament Recital on special
conflict of law rule for consumer contracts calls for
ODR
• European Parliament has cited the need to promote
ADR in the field of electronic commerce
• Several nations (e.g. US, Mexico, Chile) have already
launched and evolved alternate dispute resolution
(ADR) mechanisms for business to consumer disputes
6
Consumer and Business Advocates Agree
• 2003 ADR Guidelines Agreement between Consumers
International and the GBDe was a key breakthrough:
• “Electronic commerce, especially [cross-border] will grow
unabatedly only if consumers feel confident that their
interests are sufficiently protected in the case of disputes…”
• “[I]nternational court proceedings can be expensive, often
exceeding the value of the goods or services in dispute.”
• “Moreover, for consumers this principle may only provide
illusory protection, as in many cases the cost and complexity
of crossborder enforcement stands in the way of effective
redress.”
7
New Proposal: The OAS-ODR Initiative
• The ODR Initiative is intended to promote
consumer confidence in e-Commerce by
providing quick resolution and enforcement of
disputes across borders, languages, and
different legal jurisdictions.
• Model law/cooperative framework and rules
govern OAS-ODR Initiative
8
OAS-ODR Initiative: How It Works
• Consumer initiates process on the Central Clearinghouse
website by completing Initiation Form
• First phase: Parties given 20 days to negotiate settlement
• Second phase: If no settlement, case may escalate to 3rd
party resolution
• National Administrator selects ODR provider from list of
approved ODR providers
• ODR provider achieves resolution
– via online facilitated settlement (mutual agreement)
– via online arbitration (evaluation)
• Administrator or state designated authority or payment
processors enforce outcome where Vendor located
9
OAS-ODR Overall System Design
Sellers each
opt-in to
the system
voluntarily
Central Clearinghouse
Seller
ODR
Providers
Seller
Seller
National
Administrator
OAS
Case
DB
Key Components:
A Central
Clearinghouse, who
maintains the case
database; National
Administrators; and
ODR providers
approved by the
National
Administrators
ODR providers apply
and are approved
individually
National
Administrator
10
Jurisdiction & Enforcement
• Each National Administrator opted into the system selects an
online ODR provider
• Buyers file with a local ODR provider in their home country
• The seat of arbitration for the process is the Vendor’s State
• The National Administrator in a vendor’s home country is
responsible for pursuing Vendor’s compliance by
– taking direct enforcement action,
– requesting assistance from payment networks, or
– referring cases to collection agencies
• This design avoids complex issues around forum selection
11
Can OAS-ODR expand to UNCITRAL?
• Perhaps UNCITRAL could establish similar model
rules for ODR utilizing fast-track procedures which
comply with due process requirements
• A cross-border enforcement protocol like that
outlined in the OAS-ODR Initiative might be drafted
by UNCITRAL
• Perhaps these decisions could be enforceable under:
– the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (New York, 1958);
– the Inter-American Convention on International Commercial
Arbitration (Panama, 1975); and
– the European Convention on International Commercial
Arbitration (Geneva, 1961).
12
Conclusion
• E-commerce cross border disputes:
– will form a significant proportion of complaints in
coming years;
– require tailored mechanisms that do not impose
cost, delay and burdens that are disproportionate to
the economic value at stake.
• The time is now to build a global ODR system to
address these challenges, and extend justice to
issues that are not served by existing systems
13
Building a Practical Legal
Framework for E-Commerce
Dispute Resolution
14
Appendix
15
Rome I Regulation – EU Parliament Recital on special
conflict of law rule for consumer contracts
• “With reference to consumer contracts, recourse to the courts must be
regarded as the last resort.”
• “Legal proceedings, especially where foreign law has to be applied, are
expensive and slow. . . .”
• “The protection afforded to consumers by conflict-of-laws provisions is
largely illusory in view of the small value of most consumer claims and the
cost and time consumed by bringing court proceedings.”
• “As regards electronic commerce, the conflicts rule should be backed up by
easier and more widespread availability of appropriate online alternative
dispute resolution (ADR) systems. . . ”
•
Available at
http://www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/juri_oj(2007)1119_romei_am_/juri_oj(2007)1119_romei
_am_en.pdf
16
Rome I Regulation -- Review Clause
• Article 27 of Rome I Regulations requires that by 2013 the EC
provide special report to the European Parliament on
application of the special Rome I rule for consumer contracts.
• European Parliament cites need to promote inter alia “ADR in
the field of electronic commerce and . . . to review to what
extent on-line ADR schemes might be used . . . to increase
consumer confidence in electronic commerce and obviate the
need for court proceedings”
• Special report may be accompanied by proposals to amend
the special Rome I rule for consumer contracts.
–
EU Parliament Final Compromise Amendment 104 Article 23(b) (new), available at
http://www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/juri_oj(2007)1119_romei_am
_/juri_oj(2007)1119_romei_am_en.pdf
17
State ODR Models
• In some OAS member states, state-run alternate dispute
resolution (ADR) mechanisms for business to consumer
disputes are very well developed, offering dispute resolution
services for a wide range of consumer disputes.
• In Mexico, Concilianet, has been established to provide a
government run online dispute resolution platform. The
Federal Consumer Protection Law promotes and protects the
rights of consumers without distinction based on nationality
or other considerations.
Available at: http://concilianet.profeco.gob.mx/concilianet/faces/inicio.jsp.
• In Chile, a similar online platform has been established.
http://www.sernac.cl/tramites/index.php
• The US Federal Trade Commission launched
www.econsumer.gov to refer consumer cross-border cases to
ODR providers
18
CIDIP VII: Proposals
• States considering 3 proposals on consumer
legal protection for CIDIP VII:
– Brazil: Convention on Jurisdiction and Applicable
Law
– Canada: Model Law on Jurisdiction and Applicable
Law
– United States: Legislative Guide and Model Laws
on Dispute Resolution and Redress
19
Building A Practical Framework for
Consumer Protection
U.S. Proposal
1.
2.
3.
4.
5.
ODR Initiative
ADR Through Payment Cards
Small Claims Procedures
Collective Complaints
Government Obtained Redress for Deceptive
Practices.
20
Building A Practical Framework
http://ec.europa.eu/c
onsumers/redress_con
s/docs/cons_redress_E
U_qual_study_report_
en.pdf
21
OAS-ODR Initiative Phases
Consumer/
Enforcement
Merchant
Arbitration
Facilitated
Mediation
Settlement
Negotiation
Diagnosis
ODR
Provider/Arbitrator
Administrator
(Consumer
Coordinating
Agency)
22
Each phase acts like filter resolving
percentage of disputes
Consumer/
Enforcement
Merchant
Arbitration
Facilitated
Mediation
Settlement
Negotiation
Diagnosis
ODR
Provider/Arbitrator
Administrator
(Consumer
Coordinating
Agency)
23
OAS-ODR Initiative -- Applicable Law
• Draft ODR Initiative Rules provide “If a solution is not
found in the terms of the contract, the Arbitrator shall decide
such claims and grant such relief on an equitable basis, based
on an interpretation of these rules and without referencing or
requiring proof of applicable law.”
• Consistent with
– ICANN Rules for Uniform Domain Name Dispute
Resolution Policy
– AAA-ICDR Online Protocol for Manufacturer/ Supplier
Disputes.
24
List of ODR Providers
• Secretariat might explore whether it would be possible or desirable to
maintain a single database of certified ODR providers, like that suggested
in the OAS-ODR Initiative.
• The U.S. FTC and consumer protection agencies in other countries
contribute to an International ADR directory containing contact
information of dispute resolution service providers
– Available at http://www.econsumer.gov/english/resolve/directory-ofadrs.shtm.
• The EC maintains a central database of ADR bodies which are considered
to be in conformity with the Commission's Recommendations on Dispute
Resolution.
– Available at
http://ec.europa.eu/consumers/redress_cons/adr_en.htm.
25
WORLD INTERNET USAGE
World Regions
Africa
Population Internet Users Internet Users Penetration
Growth Users %
( 2009 Est.) Dec. 31, 2000 Latest Data (% Population) 2000-2009 of Table
991,002,342
4,514,400
67,371,700
6.8 %
1,392.4 %
3.9 %
3,808,070,503
114,304,000
738,257,230
19.4 %
545.9 %
42.6 %
803,850,858
105,096,093
418,029,796
52.0 %
297.8 %
24.1 %
202,687,005
3,284,800
57,425,046
28.3 %
1,648.2 %
3.3 %
340,831,831
108,096,800
252,908,000
74.2 %
134.0 %
14.6 %
Latin
America/Caribbean
586,662,468
18,068,919
179,031,479
30.5 %
890.8 %
10.3 %
Oceania / Australia
34,700,201
7,620,480
20,970,490
60.4 %
175.2 %
1.2 %
6,767,805,208
360,985,492
1,733,993,741
25.6 %
380.3 %
100.0 %
Asia
Europe
Middle East
North America
WORLD TOTAL
Source:Internet World Stats www.internetworldstats.com
26
Benefit From Cross-Border
E-Commerce
• October 2009 European Commission conducted
11,000 cross border online searches for 100 popular
products (e.g. CDs, computers, digital cameras,
books, and clothes)
• Substantial Cost Savings - For over half of product
searches, consumers found offer in another EU
country at least 10% cheaper (delivery and other
costs included).
•available at http://ec.europa.eu/consumers/strategy/docs/EC_e-commerce_Final_Report_201009_en.pdf.
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Cross-Border Barriers
• Yet, the study found that 61% of cross border online orders were refused
because traders refused to serve buyers located in another EU country.
• While 51% of the EU27 retailers sell via the internet, only 21% currently
conduct cross-border transactions, down from 29% in 2006.
• The Commission reported that the main regulatory barrier to operating on
a pan-EU basis was the application of fragmented national laws, including
consumer protection laws, through the conflict of laws rules in the Rome I
Regulations:
– “The effects of the fragmentation are felt by business because of the
conflict-of law rules, and in particular the Rome I Regulation, which
obliges traders not to go below the level of protection afforded to
foreign consumers in consumer’s home country”.
http://ec.europa.eu/consumers/rights/docs/impact_assessment_report_en.pdf
.
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