e-commerce and development report 2003177 a. introduction one of the main challenges facing...

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

UNITED NATIONS New York and Geneva, 2003

UNCTAD/SIDTE/ECB/2003/1

Note

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Material in this publication may be freely quoted or reprinted, but full acknowledgement is requested,together with a reference to the document number. A copy of the publication containing the quotationor reprint should be sent to the UNCTAD secretariat at: Palais des Nations, CH-1211, Geneva 10,Switzerland.

The English version of the full report and the English, French and Spanish versions of its Overviewsection are currently available on the Internet at the address indicated below. Versions in other languageswill be posted as they become available.

http://www.unctad.org/ecommerce/

UNITED NATIONS PUBLICATION

Sales No. E.03.II.D.30

ISBN 92-1-112602-9

UNCTAD/SDTE/ECB/2003/1

Copyright © 2003, United NationsAll rights reserved

177

A. Introduction

One of the main challenges facing e-commerce ishow to resolve cross-border disputes in the electronicbusiness environment. Distances between parties, lin-guistic and cultural differences, difficulties determin-ing the applicable law, and competent jurisdiction andenforcement of judgments are among the main obsta-cles that could significantly increase the cost of doingbusiness online. Given that traditional dispute settle-ment mechanisms may not provide effective redressin e-commerce transactions, there is a need to con-sider alternative dispute resolution (ADR) mecha-nisms that would provide speedy, low-cost redress forclaims arising from online interactions. Most if not allof the same laws and principles that apply to ADR in

Chart 7.1

Types of services offered by ODR providers

Chapter 7

ONLINE DISPUTE RESOLUTION: E-COMMERCEAND BEYOND

the brick-and-mortar regime will also apply to e-com-merce disputes. When ADR takes place using compu-ter-mediated communications in the online environ-ment, it is often referred to as online disputeresolution (ODR). Both e-disputes and bricks-and-mortar disputes can be resolved using ODR. Usingdata extracted from a questionnaire administered byUNCTAD, chart 7.1 illustrates the wide range of typeof services offered by ODR provides.

The main forms of ADR are arbitration, mediationand negotiation, processes that are effective in settlingdisputes out of court and in a manner that is less for-mal than litigation in court. During the past two dec-ades, use of ADR has expanded greatly. Indeed, ADRprocesses are used much more often for commercialdisputes than litigation in court.

Source: UNCTAD questionnaire.

B2CB2B

178 CHAPTER 7: ONLINE DISPUTE RESOLUTION: E-COMMERCE AND BEYOND


Following are the chief characteristics of the threeprincipal methods of ADR:

• Arbitration - Traditional arbitration involves aneutral third party who makes a decision that isbinding on the parties. The authority of thearbitrator comes from a dispute resolutionclause in a contract that the parties have agreedto.

• Mediation - Mediation involves a neutral thirdparty, but the mediator has no authority to

Perhaps the most significant difference between liti-gation and the three primary forms of ADR is that,whereas participation in litigation more directlyassumes that participation can be compelled by thestate, participation in ADR and ODR occurs only ifthe parties have agreed, either voluntarily or throughstipulation in a contract, to find a solution to theproblem. Litigation, by definition, will not an optionwhen, for any reason, a court is not available or acces-sible. When access to courts is difficult because of theparties’ location or for some other reason, ODR maybe the only possible means of resolving a dispute.Thus, ADR/ODR may take place in any country, inany language and with arbitrators/mediators of anynationality. Arbitration/mediation is faster and lessexpensive than litigation in the courts, and hearingsare not public.

Decisions made by arbitrators generally need amethod of enforcement. The 1958 New York

issue binding decisions. Mediators work withthe parties to fashion an agreement that isacceptable to the disputants.

• Negotiation - In negotiation, there is no thirdparty present. The parties try to resolve theproblem by themselves. When unsuccessful,negotiation may be a preliminary step to arbi-tration or mediation.

• Some of the differences between the variousforms of ADR are illustrated in chart 7.2.

Chart 7.2

The dispute resolution continuum

Convention on the Recognition and Enforcement ofForeign Arbitral Awards1 allows courts in any countrythat has signed the convention to enforce an arbitralaward. For this to happen, certain formalities must befollowed. Problems may arise if any of the followingquestions cannot be answered in the affirmative.

• Does an arbitration agreement formed by elec-tronic means satisfy the formal requirements ofthe New York Convention?

• Can electronic means be used to conduct thearbitration proceedings? If so, where is the seatof arbitration?

• Can the arbitrators deliberate by electronicmeans, rather than in person?

• Can an award issued in electronic form be con-sidered to be in “writing”?


CHAPTER 7: ONLINE DISPUTE RESOLUTION: E-COMMERCE AND BEYOND 179

Despite these potential problems, there is little doubtthat online arbitration will be used more and morewidely as time passes.2

ODR has a bigger role to play in business-to-con-sumer (B2C) e-commerce than in business-to-busi-ness (B2B) e-commerce because, while an arbitrationclause can be enforced among merchants (in B2Bcontracts), it may not be binding on the consumer (inB2C contracts). It should be noted that in most Euro-pean jurisdictions, an arbitration clause contained instandard contract terms and binding the consumer tosubmit a dispute to arbitration is likely to be viewed asunfair. For this reason, a standard arbitration clausecannot be enforced against a consumer. Thus, thearbitration clause may be binding on the business butoptional for the consumer. However, if the consumerso wishes, he or she can choose to go to arbitration.

By contrast, in the United States, consumer arbitra-tion clauses are usually enforceable. The US courtswill refuse to enforce a binding arbitration clauseagainst a consumer only where it would be uncon-scionable to do so.3 This would be the case if enforc-ing the arbitration clause deprived the consumer ofaccess to a forum to vindicate his or her rights. TheUS courts have held in several decisions that an arbi-tration agreement in a consumer contract that forcesthe consumer to incur excessive arbitration fees isunconscionable. Since arbitration requires the inter-vention of a qualified and experienced human deci-sion maker, but consumer claims are mostly of smallvalue, excessive fees may be unavoidable. For this rea-son, arbitration may not be the first choice for small-and medium-value consumer disputes.

Agreements reached as a result of mediation generallydo not require a legal infrastructure to enforce them.This is because the agreements are consensual andprovide both parties at least part of what they origi-nally wanted. Mediation is thought to be the primaryADR/ODR method for small-value consumer dis-putes. There are a number of reasons for this primacyof online mediation.

• The process is flexible; the mediator essentiallyuses his or her skill to help the parties to com-municate and reach their own solution. Thishigh degree of party control means that theparties are likely to feel comfortable with theonline procedure.

• The fact that participation is voluntary meansthat the parties are more willing to participate,as they are not thereby compromising theirposition.

• Redress is not limited to monetary awards andcould include, for example, a substantial dis-count on a future purchase or something simi-lar.

ODR, like ADR, can take the form of any disputeresolution process, and the first choice that must bemade in responding to any dispute or in designing asystem is which process to use. As will be discussedbelow, for ODR to work, the parties must agree (orhave agreed earlier contractually) on a particular proc-ess. The second important question is whether thewhole dispute resolution process or only a part of itwill be online. ODR can be a stand-alone system inwhich parties never meet face to face, or it can beused to enhance processes that include at least someface-to-face meetings.

E-commerce is an arena that has already demon-strated both a need for new dispute resolutionapproaches and the fact that new approaches are pos-sible. Just as offline business is supported by an infra-structure that provides dispute resolution optionswhen disputes occur, the online environment is build-ing an infrastructure with an array of dispute resolu-tion options that take into account the special quali-ties of cross-border transactions, in which much ofthe exchange is electronic in nature. ODR, as it isincreasingly being called, was not in the minds ofearly e-commerce entrepreneurs, but during the lastsix to seven years the inevitability of disputes and theneed for ODR processes has become increasinglyclear. Recently, ODR has been acquiring new func-tionalities demonstrating its potential in an expandingrange of situations.

ODR brings the resources of the network to the taskof resolving conflict. These network resources havethree novel elements:

1. Human expertise delivered from anywhere

2. Computer processing power delivered from any-where

3. Delivery of human expertise and technologicalpower at electronic speed

Dispute resolution is an ancient and fundamentalactivity not only of society at large but of institutionswithin society. Dispute resolution processes arepresent in state-based legal systems and in groups ofall kinds and sizes, from small families to global eco-nomic enterprises. What can vary greatly are themethods and processes used to pursue the goal ofresolving conflict. There are many different tools for



dispute resolution, and the needs of the parties andthe group or community involved determine which ofthe available tools best fit the particular situation.

The Internet, by being both disruptive and facilitative,is the source of the problem and also the source ofthe solution. All the numerous and novel ways ofinteracting online in commercially productive waysallow disputes to occur, thus heightening the need fordispute resolution systems that can assist disputantswho may be at a great distance from one another. Atthe same time, dispute resolution is an informationalactivity in which persons and groups need to identifycommon interests, share information, assess priori-ties, and evaluate areas of agreement. As technologyimproves, therefore, and as people engage in increas-ingly complex informational activities online, ODRprocesses can be expected to become more sophisti-cated as well.

The disputes that are traceable to the Internet may bemore visible and are generally more publicized thanthe solutions made possible by the Internet. Part ofthe reason for this is that new systems are often builtand implemented without anticipating the need torespond to disputes and conflicts that might arise.Fortunately, this is not always true, and notableachievements in the area of dispute resolution havealready occurred and will be discussed in the follow-ing sections.

While the need for and value of ODR have becomeclear very quickly, the technological capabilitiesneeded for broader use of ODR are expanding moreslowly. Disputes occur inevitably and often quitequickly as new kinds of transactions and interactionsemerge online. Dispute resolution processes, how-ever, must be designed and constructed. Dispute res-olution for complex disputes will also be more chal-lenging than dispute resolution for simpler conflicts.One can already point to significant successes inapplying ODR to relatively simple e-commerce dis-putes, and tools are being developed for use in morecomplex private and public disputes.

This chapter looks at the history of ODR, its natureand use in different contexts, and what role it can per-form in fostering the trusting relationships that arenecessary for e-commerce to grow in developingcountries. In addition, it considers the growth andadoption of ODR in new environments such as gov-ernment and other arenas where there is a need fornew tools to respond to more complex multi-partydisputes. The last part of the chapter focuses on thechallenges involved in implementing ODR in devel-

oping countries. That section draws on data obtainedthrough a questionnaire that UNCTAD secretariatcirculated to ODR service providers. The question-naire elicited 24 replies, including from all the majorODR providers.

B. A history of ODR

The history of ODR can be divided into three maintime periods: pre-1995, 1995 to 1999 and post-1999.

1. Before 1995

During this period, disputes arose and dispute resolu-tion was applied informally. Until 1992, the Internetwas largely a US-centered network, and commercialactivity was banned from it under that country’sNational Science Foundation’s acceptable use policy(Kesan and Shah 2001). The Internet was used mainlyby those in academic institutions for sending emailand participating in listservs and, in the case of thosewith some technical expertise, for exchanging files.“Flaming” and violations of “netiquette”4 were com-mon, and some famous disputes occurred during thistime involving individuals participating in role-playinggames.5 Various online mechanisms were used to dealwith these conflicts, but there were no organized dis-pute resolution institutions devoted specifically toODR. Indeed, the term had not yet been invented.

When the ban on commercial activity was removed,disputes related to commerce began to surface. InApril 1994, for example, the first commercial spamoccurred when two lawyers tried to recruit clients toparticipate in an immigration scam.6

2. From 1995– to 1999

The idea for ODR emerged out of a recognition thatdisputes would multiply as the range of online activi-ties grew. The origins of ODR, therefore, are tracea-ble to a very simple insight – that the more transac-tions there are, the more disputes there will be. Inaddition, as new entities began to appear in cyber-space, it was not clear what their legal liability wouldor should be. Thus, as Internet service providers(ISPs) began to provide subscribers with connectivityand storage, questions arose about whether the ISPsshould be liable for subscribers’ actions. What rightsand responsibilities did ISPs have when subscribers,



for example, used their accounts to distribute copy-righted software? Did the ISPs have to checkaccounts to see if any illegal activity was occurring?Under what circumstances could ISPs terminate sub-scriptions? Out of these concerns developed an earlyonline arbitration project called the Virtual Magis-trate.7

As companies began exploring the Internet’s com-mercial opportunities, interest also grew in domainnames. As the number of domain name registrationsincreased, disputes also arose between trademarkowners and domain name holders. In general, themore the Internet was used for any purpose, the moredisputes arose. For example, use of the Internet forthe distribution of pornography led not only to legis-lation and court cases but to disputes on college cam-puses about freedom of expression and access. Simi-larly, as the number of websites grew, disputes arosenot only about domain names but about the legalityof linking, and about various other intellectual prop-erty issues related to the use and copying of informa-tion.

During this period, recognition grew that the Internetneeded some focused online institutions to addressproblems that were arising with increasing frequency.Various experimental projects, largely university-based and foundation-funded, were designed to allowthose involved in a dispute to obtain expertise from adistance.8 For example, in the first case mediated bythe Online Ombuds Office, an online mediationproject at the University of Massachusetts, an onlinemediator helped an individual website owner resolve aproblem with a local newspaper claiming copyrightinfringement.9

3. From 1999 to the present

The last four years have been a period of significantactivity and notable achievement for ODR. Duringthis period, ODR has become accepted as a neededprocess in the online environment, and capabilitieshave been demonstrated that can be employed withtraditional kinds of disputes originating offline. Thekey question concerning ODR now involves the costof building and implementing systems, not viability orvalue. Costs have probably slowed the rate of growthin the deployment of ODR, but the number of firmsoffering some form of ODR continues to grow. As aresult, the promise, potential and future value ofODR remain high.

As an ODR industry has begun to emerge, there hasbeen growing recognition by both governmental andcommercial interests that online resources can be asolution for many problems that originate in theonline environment. Unlike five or six years ago, it isnow accepted that it is appropriate – indeed, desirable– that ODR be the process of first choice for disputesgenerated in online activities. It is also recognized thattechnologies that work for online disputes can beused efficiently for offline disputes.

Table 7.1 contains a list of ODR companies and pro-viders in March 2003. While some ODR providershave gone out of business, other companies andprojects have taken their place. For example, threeyears earlier there were 24 ODR companies, of which11 had gone out of business by March 2003. In addi-tion, most major ADR organizations, such as theAmerican Arbitration Association and the Interna-tional Chamber of Commerce, have started or areplanning to start using ODR.

Table 7.1

ODR providers as of March 2003

ADRonline Australia www.adronline.com.au

American Arbitration Association Web File United States www.adr.org

Arbitraje y MediaciÛn (AryME) Spain www.aryme.com

Asian Domain Name Dispute Resolution Centre China www.adndrc.org

Bankers Repository Corporation United States www.thebrc.com

Camera Arbitrale di Milano Italy www.camera-arbitrale.com

Chartered Institute of Arbitrators United Kingdom www.arbitrators.org

Cibertribunal Peruano Peru www.cibertribunalperuano.org



ClickNsettle United States www.clicknsettle.com

Consumers Association of Iceland Iceland www.ns.is

CPR Institute for Dispute Resolution United States www.cpradr.org

Cyberlaws.net India www.cyberarbitration.com

Cybersettle United States www.cybersettle.com

Dispute Manager Singapore www.disputemanager.com

e@dr Singapore www.e-adr.org.sg

Electronic Consumer Dispute Resolution Ireland www.ecodir.org

e-Mediator United Kingdom www.consensusmediation.co.uk

Eneutral United States www.eneutral.com

e-Settle.co.uk United Kingdom www.e-settle.co.uk

FSM Germany www.fsm.de

Global Arbitration Mediation Association United States www.gama.com

Icourthouse United States www.i-courthouse.com

Internet Ombudsman Austria www.internetombudsmannen.se

InternetNeutral United States www.internetneutral.com

Intersettle United Kingdom www.intersettle.co.uk

IRIS MÈdiation France www.iris.sgdg.org/mediation

Mediation Arbitration Resolution Services United States www.resolvemydispute.com

National Arbitration Forum United States www.arbitration-forum.com

Nova Forum Canada www.novaforum.com

Online Public Disputes United States www.publicdisputes.org

Online Resolution United States www.onlineresolution.com

Private Judge United States www.privatejudge.com

Resolution Canada Canada www.resolutioncanada.ca

Resolution Forum Inc. United States www.resolutionforum.org

Settlement Online United States www.settlementonline.com

SettleSmart United States www.settlesmart.com

SmartSettle United States www.smartsettle.com

SquareTrade United States www.squaretrade.com

The Claim Room United Kingdom www.theclaimroom.com

USSettle.com United States www.ussettle.com

WebAssured United States www.webassured.com

WEBdispute United States www.webdispute.com

WebMediate United States www.webmediate.com

WeCanSettle United Kingdom www.wecansettle.com

Word&Bond United Kingdom www.wordandbond.com World Intellectual Property Organization Switzerland www.wipo.int

Table 7.1 (continued)

The focus of ODR at the beginning of the period inquestion was largely on consumer disputes resultingfrom e-commerce transactions. This continues to bean important area for ODR, but it has been joined bya growing number of disputing contexts. Mostimportantly, it has become clear that ODR is aresource that can be used in both online and offlinedisputes.

ODR, during the last few years, has become acceptedas being both viable and valuable for many disputes

for which no other means of dispute resolution arefeasible. This has helped sustain the growth of ODReven in a difficult entrepreneurial environment. Yet,as the following discussion about the nature of ODRwill show, there is a side of ODR that has been largelyuntapped. The value of ODR in using the network todeliver the dispute resolution skills of a third party hasbeen demonstrated. What will take longer to developare applications that enhance dispute resolution byexploiting and delivering technological capabilitiesembodied in machines at remote locations.



C. Choosing an ODR process for online disputes: The examples of

eBay and ICANN

The two most widely known and widely used disputeresolution venues concerning cyberspace-related dis-putes are the online auction site eBay and the domainname dispute resolution process designed by theInternet Corporation for Assigned Names and Num-bers (ICANN). Since March 2000, SquareTrade.comhas handled over 300,000 disputes, mostly related toeBay transactions, through wholly online processes ofnegotiation and mediation. Over 7,000 domain namedisputes between trademark owners and domainname holders have been resolved through ICANN’sUniform Dispute Resolution Policy, a non-bindingarbitration process (see ICANN 2002).

1. eBay: Assisted negotiation, then mediation

eBay is an online auction site with over 61 million reg-istered users where over 12 million items are offeredfor sale each day. eBay makes it possible for sellersanywhere to sell to buyers who may be located any-where. eBay itself is not a party to any transactionand, in general, assumes no responsibility for prob-lems that arise between buyers and sellers. eBay’s ear-liest challenge was not to find people willing to putitems up for auction or even to find buyers interestedin the items listed. It was, rather, how to design a sitewhere interested buyers would trust sellers enough tomake payment and then wait for delivery. In othercommercial contexts, brand names may build trustand, obviously, face-to-face transactions allow forimmediate exchange of goods and money. eBayneeded a system in which potential buyers would beconfident in dealing with unknown sellers. Any suchsystem would encourage purchases by indicating topotential buyers that they were dealing with someonewith whom they were unlikely to have a dispute.

eBay created a feedback rating system in which anyparty to a transaction could post an assessment ofhow smoothly the transaction had been completed.While sellers might not have been well known, therating system enabled participants to acquire a reputa-tion concerning how they handled transactions andresponded to problems. In 1999, eBay decided thathaving a dispute resolution process might furtherenhance trust. It therefore authorized the Center forInformation Technology and Dispute Resolution10 atthe University of Massachusetts to conduct a pilot

project to test the viability and value of a dispute reso-lution process that would allow parties who could notresolve a particular problem to receive expert assist-ance from a mediator.11

Any arbitral process requires a procedure for enforc-ing the decision of the arbitrator. With arbitration,there is a clear result and ruling at the end. In a con-text like eBay, the only realistic enforcer would havebeen eBay, which could have indicated that any loserwho did not do what the arbitrator ordered wouldlose his or her eBay account. This was not a role thateBay desired to play and, therefore, it viewed media-tion as a much more attractive process.

With mediation, the mediator helps the parties cometo an agreement. There are no declared winners andlosers, just an agreement at the end (or, if the processis unsuccessful, no agreement). Reaching an agree-ment signifies that there is something that each partywants and is receiving. The goal in mediation is a“win-win” outcome, one where the agreement willnot need to be enforced because the parties find it intheir interest to voluntarily do what they have prom-ised to do.

Several months after the completion of the Universityof Massachusetts pilot project, eBay selected Square-Trade.com, an Internet start-up, as its preferred dis-pute resolution provider. SquareTrade’s approach toODR built on the University of Massachusettsapproach but differed from it in two ways, each ofwhich represented an important advance in ODR.First, SquareTrade added a technology-supportednegotiation process in which parties could try toresolve the dispute themselves before requesting amediator. Second, SquareTrade employed the Webrather than email as the means for communicatingand working with the disputants.

On eBay, when a problem with a transaction surfaces(e.g. when an item does not arrive or arrives broken),buyers attempt to contact sellers and negotiate a solu-tion. SquareTrade’s dispute resolution process, there-fore, is typically invoked only after an initial negotia-tion via email or telephone has been attempted andhas failed.

SquareTrade is accessible from a link on eBay’s Serv-ices page. SquareTrade employs a website, rather thanemail, as the main tool for negotiation and has theparties try the Web-based negotiation before request-ing mediation and the assistance of a human thirdparty. The advantage of Web-based negotiation overemail exchanges is that the process is not simply com-



munication but what might be called “communicationplus” or “communication added”. The site provides amore structured set of exchanges between the partiesthan is possible with email. It provides forms that theparties fill out, and these forms clarify and highlightboth what is dividing the parties and what solutionsare desired. While parties do have an opportunity todescribe concerns in their own words, the forms andthe form summaries that parties receive inevitablyreduce the amount of free-text complaining anddemanding that occurs, a result that appears to havethe effect of lowering the amount of anger and hostil-ity between the parties.

Negotiation, by definition, occurs between the dispu-tants, with no third party present. Using the Web inthe SquareTrade manner adds a novel element to tra-ditional negotiation, a kind of “virtual presence”. The

Table 7.2

What is mediation?

site, particularly the forms that are employed, framesthe communication and provides some of the valuethat might otherwise be provided by a mediator.There are no algorithms at work that analyzeresponses, and thus this is only a first step toward amore sophisticated online negotiation process, some-thing similar to SmartSettle (see the discussion later inthis chapter). The more technology works with theparties in negotiation, however, the less clear the clas-sic distinction between negotiation and mediation willbe.

When Web-based negotiation fails, SquareTrade pro-vides a human mediator for a fee of $20. The Webinterface is still used, but the conversation is facili-tated by a neutral third party. Table 7.2 provides asummary of what SquareTrade tells users about medi-ation.

What mediation IS:

• It is a voluntary process in which the parties work with amediator (a neutral and impartial person) to find amutually acceptable solution to the problem.

• It works when both parties participate and are willing tocompromise.

• It can be very effective in resolving disputes andmisunderstanding if both parties participate in theprocess and are willing to compromise and look forcreative solution options.

What the mediator DOES

• The mediator communicates with the parties tounderstand both of their interests, perspectives andpreferred solutions, and tries to help the partiesunderstand each other’s interests and perspectives onthe issues.

• The mediator’s role is to help the parties diffuse theemotions that are often part of any dispute, focus on theissues that they can work together to solve, and, ifpossible, build an agreement that works for bothparties.

• The mediator will make a recommended resolution tothe parties only if they both agree to have the mediatordo so.

What mediation IS NOT:

• Mediation is not a court proceeding.

• Mediation is not arbitration.

• Mediation is not a process that should make younervous or uncomfortable! The mediation process isdesigned to give both parties equal roles andresponsibilities.

What the mediator DOES NOT DO

• The mediator does not make a decision.

• The mediator will not decide if one party is right orwrong.

• The mediator will not review the information or evidencethat the parties send to him/her and decide whethereither party has proven their case.

• The mediator does not act as a judge.

• The mediator does not act as an arbitrator.

Source: SquareTrade.com 2003.



2. ODR and arbitration: ICANN and domain name disputes

While domain names, such as eBay.com, make it easyfor humans to remember Web addresses, theybecome a matter of concern to trademark ownerswhen the domain name is similar or identical to atrademark. In 1999, ICANN adopted its UniformDispute Resolution Policy, a topic that is the subjectof extended treatment in UNCTAD’s E-Commerceand Development Report 2002 (UNCTAD 2002).Both the approach ICANN chose, a modified arbitra-tion process, and the systems that have implementedthis approach represent another choice in moving dis-pute resolution online.

A domain name can be registered by anyone, and thecost is nominal. Those in charge of registeringdomain names could have avoided some conflict bymaking registrants aware that they might encounterproblems if they registered a word that was trade-marked. The US Patent and Trademark Office main-tains a Web site enabling free searches of the UStrademark database.12 Such searches have generallynot been done at registration, however, and, eventoday, anyone who wishes to register a trademarkedword can do so. Whatever problems might arise willhave to be faced later.

After ICANN took over management of the domainname system, it implemented a process for resolvingdomain name disputes. The Uniform Dispute Resolu-tion Policy (UDRP) (see ICANN 2002) providestrademark holders with a process that is faster andless expensive than litigation. However, use of theUDRP is not mandatory, nor is the resulting arbitra-tion binding. Trademark holders can still go to courtinstead of using the UDRP, and the party that losesthe arbitration can go to court after the decision ishanded down. Court cases, however, are relatively fewcompared to the number of disputes handled throughthe UDRP.

The factors affecting the outcome of a UDRP caseare evident in the decision tree in chart 7.3. Approxi-mately 7,000 cases have been decided using theUDRP. The large majority of UDRP cases are proc-essed by two providers, the World Intellectual Prop-erty Forum and the National Arbitration Forum. Theprocesses employed are interesting in a number ofways.

First, UDRP dispute resolution occurs without face-to-face meetings and, except in rare instances, withouttelephone communication. It is, in short, dispute res-

olution at a distance. However, the process used bythe current dispute resolution providers involves lim-ited use of the Internet. A now-bankrupt dispute res-olution provider, eResolution.com, did use a com-pletely online system, but it stopped handling cases in2001. The two main providers, the World IntellectualProperty Organization (WIPO) and the NationalArbitration Forum (NAF), have online systems thatcould be used and probably will be used in the future.Currently, online filings are occurring with increasingfrequency, and email is sometimes used. Unlike in theeBay mediations, however, the Web is not employed,and any added value that could be provided by Web-based processes is not yet present.

Second, the UDRP is not classic arbitration in thatthe decisions are not binding or enforceable in court.UDRP arbitrators are referred to as panelists, sincethe word arbitrator denotes someone who can makea binding decision enforceable in court. UDRP panel-lists are empowered by terms in the contract agreedto when a domain name is registered. The decisionsof arbitrators are enforced by making necessarychanges in the domain name registry. This is an effi-cient although somewhat unorthodox process, andnot without controversy.13

D. ODR for offline disputes: Enhancing ADR and unbundling

ODR

The SquareTrade and ICANN processes involve noface-to-face meetings; they are conducted wholly at adistance. The need for ODR with no physical meet-ings is most obvious in cases that arise online and sit-uations when, because of distance, it is not feasible tomeet face to face or go to court. It is not surprisingthat ODR was first directed at such disputes.

ODR is growing in use not only because there isgrowth in online activities and online disputes butbecause ODR can also be employed for traditionaloffline disputes. SquareTrade, for example, nowresolves real estate disputes between home buyersand sellers. When the power of the computer is addedto the basic transmission qualities of the network, theresult is an array of dispute resolution processes thatcan be used in any dispute, whether it arises, or is han-dled, online or offline. Any dispute resolution processcan be viewed as a series of informational compo-nents. For a wholly online process, all the compo-nents must be available in electronic form. For aprocess that includes face-to-face meetings, the medi-



Chart 7.3

The ICANN Uniform Dispute Resolution Policy decision tree

Source: 2003 Center for Information Technology and Dispute Resolution.



ator must determine the manner in which technologycan be used to enhance the process and move the par-ties towards agreement.

1. Two examples

A simple example: Automated blind bidding processes

Blind bidding systems allow parties to a dispute tosubmit settlement offers to a computer. If the offersare within a certain range (often 30 per cent) of eachother, the parties agree to split the difference. What isattractive about blind bidding is that if no settlementis reached, the offers are never revealed to the otherparty. This is intended to encourage parties to bemore truthful about what their “bottom line” mightbe.

Blind bidding can be looked at as a negotiation tool, atechnique that, if used offline and without a compu-ter, would be cumbersome. The efficiency of blindbidding is that the computer transmits and receivesinformation, processes it, and determines what infor-mation can be made public and what should remainprivate. If the offers are within the 30 per cent range,the parties are informed that there is a settlement. Ifnot, no information about the offer is revealed to theparties.

Thus far, blind bidding has been used mainly inclaims against insurance companies. Such claims aregenerally settled at some point through negotiation,but the process that has been used traditionally,involving personal injury lawyers and insurance claimadjusters, can be lengthy and inefficient. The partiesand their representatives may play phone tag and pos-ture in ways that often take up time. There certainlycould be a human third party who accepted offerssimilarly to how the computer does it, and t his isoccasionally done, but never as efficiently as in theblind bidding systems.

Blind bidding systems may be efficient and simple touse, but they are also extremely limited, since theyonly work with disputes where a single variable iscontested. This variable must also be one that usesnumbers, so that the machine can make the necessarycalculations. The insurance context is a perfect firstarena for blind bidding, since differences often focusexclusively on money and the existing system is bothexpensive and inefficient.

There are a growing number of blind bidding compa-nies, most notably Cybersettle.com and Clicknset-

tle.com. The technology underlying blind bidding isnot very complex, and there may be differences incertain details among the different systems. Some sys-tems may require representation by counsel and oth-ers not, some may allow unlimited bids and othersnot, some may allow bids in ranges and other not. Itis possible for companies to differentiate themselvesfrom other blind bidding systems, but all are built onthe same basic conception.

The future of blind bidding will inevitably broadenbeyond insurance company disputes. In many media-tions or arbitrations, there may be many differencesto start with but only a monetary issue at the end.Blind bidding technology could be helpful in such sit-uations. In other situations, it might be desirable tooffer blind bidding as an option before beginning alonger process. Blind bidding is a tool that can beinjected into any phase of a dispute resolution proc-ess. OnlineResolution.com, for example, offers blindbidding as a standard feature in its Resolution Roomprocess, considering it one of many possible toolsthat a mediator might employ.

Blind bidding was the first of what are likely to bemany applications that use not only the communica-tions capabilities of a network but the processingcapabilities of the computers connected by the net-work. Like early ODR efforts, most such efforts eventoday use the network to enable parties at a distanceto take advantage of a human mediator who is also ata distance. Thus, the network is a means for deliveringhuman expertise. This alone is an impressive achieve-ment, and the various ways in which human expertiseis being delivered have persuaded skeptics that ODRis an important approach to conflict resolution. Asthe processing power of the computer is combinedwith human expertise, even more impressive resultscan be expected.

Blind bidding is not only a tool that can be used innegotiation but a process that raises the question ofwhat else networked machines can do to assist partiesinvolved in a dispute. Blind bidding is such a simpletool that, if viewed as simply a merging of a calculatorwith a network, it can easily be taken for granted.Computers, however, are much more than calculators,and systems can be built that will be able to processand evaluate qualitative information.

A more complex example: SmartSettle

SmartSettle,14 originally called OneAccord, involvesmuch more sophisticated negotiation software thanthe blind bidding systems. SmartSettle is intended for



use in disputes that are simple or complex, single-issue or multi-issue, two-party or multi-party, com-prised of quantitative and/or qualitative issues, ofshort or long duration, or involving interdependentfactors and issues. SmartSettle will never be as easy touse as blind bidding, and common and relatively sim-ple disputes may not require it. However, it demon-strates how networked computers can be used tooffer disputants solutions that may not have beenapparent to them.

SmartSettle has disputants move through severalstages, each of which clarifies what is at issue in thedispute, how strongly the parties feel about the differ-ent issues, and what ranges of outcomes might beacceptable. This information is placed on a “singlenegotiating form” that parties use to fashion propos-als and, ideally, reach agreement. In the early phases,SmartSettle provides a structure for issue clarificationand assessment that by itself can help parties reachconsensus. Most novel about SmartSettle, however, isthat it can take any tentative agreement and suggestalternative approaches that may give both sides morethan they were willing to accept in a settlement.

Blind bidding involves only one issue, and that issue isquantifiable. SmartSettle may involve many issues,and at the beginning the parties must assign values tothe different interests and demands. Once the inter-ests have been identified and prioritized, they arecombined into packages or groups, and negotiationcan occur that permits adding to or removing fromthe package or changing its nature. What is novelabout SmartSettle is that the computer can not onlystore the users’ information and transmit it electroni-cally but also suggest combinations attractive to themand that they may not have thought of themselves.

2. Technology as the “fourth party”

Email negotiations involve simply humans at twoends of a network, thus allowing quick communica-tion among parties who might otherwise not havebeen able to communicate at all. Such negotiationwith almost no overhead may remain the most com-mon method for online negotiation. What the Webpermits, and what blind bidding, SmartSettle andeven SquareTrade demonstrate, is that there is valuein adding computer-processing capabilities to thehumans at the ends of the network.

The reason for adding computers to the mix is thatthere are things computers can do better and/or

quicker than humans. Blind bidding is a simple exam-ple of this. Mediators and arbitrators are called “third-party neutrals”, and a recent book (Katsh and Rifkin2001) has suggested that technology be considered a“fourth party”, something that influences the processof communication and negotiation and adds value tothe third-party roles of mediators and arbitrators.This “fourth party” need not replace the third party,but it can displace it, in the sense that the third partywill increasingly be working with an electronic ally orassistant alongside.

The “fourth party” is a metaphor for applications thatenhance the process and thus do more than simplydeliver the expertise of the human third party acrossthe network. The metaphor views the network as a“communications network plus more”. Systems aregradually being built that will help us understand howcomputers can enhance human involvement.

Chart 7.4 suggests that there are many informationalactivities that computers can assist with that areimportant elements in what mediators and arbitratorsdo. The activities in chart 7.4 are common, but untilnow, only been when the parties were physicallytogether have these activities been performed withany degree of efficiency. For example, schedulingmeetings with several parties can be done fairlyquickly when all are in the same room and looking atcalendars, but scheduling using paper or the tele-phone becomes cumbersome as the number of par-ticipants grows. A mediator meeting face-to-face witha few parties can survey opinions and may even beable to evaluate whether consensus exists by lookingat facial expressions. When the parties are nottogether, however, ascertaining how parties feelgrows difficult as the number of parties involvedincreases.

Chart 7.4 also provides some insight into why it isgenerally easier to design arbitration systems onlinethan mediation systems. Mediation requires more fre-quent interaction among the parties and a more finelytuned system that will enable the mediator to assessemotions, interests and values. Any ODR system willconsist of a series of linked and coordinated informa-tional tasks. Arbitration systems will ordinarily requirefewer elements in the chain and a more straightfor-ward arrangement.

The three traditional ADR processes of arbitration,mediation and negotiation represent three differentinformation management systems. In the past, how-ever, they all used face-to-face exchanges, a form ofexchange that is both rich and efficient. In face-to-



face meetings, not only is information being transmit-ted but the truth and sincerity of the parties are beingevaluated, trust is increasing or decreasing, and “bot-tom lines” are being reassessed as offers and counter-offers are made.

Organizing and managing information are common-place uses of computers, and many of the tasks inchart 7.4 are straightforward information manage-ment tasks, which largely add efficiency to the disputeresolution process. US-based lawyer Randall Butlerhas recognized that the more complex the dispute,the greater the need for assistance from a “fourthparty”. Butler mediates class action suits, which caninvolve hundreds of plaintiffs represented by manylawyers. He has pointed out that “mediation hasbecome the preferred alternative for resolving mostlawsuits. With the right leadership, mediation is gener-ally faster, more effective and less expensive, stressfuland intrusive. But the effectiveness of traditionalmediation is inversely proportionate to the number ofparties to the lawsuit.”15 ButlerMediation.com pro-vides a website that allows a highly systematized proc-ess of exchanging information, freeing lawyers to par-ticipate when convenient and from any place that isconvenient.

Information processing often involves linking severalinformational tasks. Thus, blind bidding is a systemthat involves communicating, calculating, evaluatingand applying a rule to the results of the calculation.

Similarly, SmartSettle takes data that have beenentered and, using more sophisticated algorithms,evaluates and then responds to offers. The “fourth-party” approach assumes that, while face-to-faceencounters provide a very rich and flexible opportu-nity for communication, they are not perfect. The“fourth party” will grow more and more useful, andthe network will become more and more valuable indispute resolution, as people gain experience in usinginformation management and information-process-ing tools. Electronic documents will also start acquir-ing intelligence. Such “smart” documents will be ableto send communications when particular events occurand also to gather information that is needed by par-ticipants.

Thus far ODR has been used most often in simple e-commerce disputes and domain name disputes. Thesedisputes are simple in the sense that they usuallyinvolve only two parties and a relatively small set ofissues. In such circumstances, all that may be neededis a means to communicate from afar. In the domainname disputes, for example, neither informationmanagement nor information processing are used,because the dispute providers do most of the infor-mation management, and the processing or decisionmaking is done by the arbitrator.

SquareTrade’s breakthrough of being able to processvery large numbers of disputes is traceable to efficientinformation management and organization and the

Chart 7.4

The “fourth party”



displaying of information on the screen very effec-tively for the disputants. Thus, an important differ-ence between email negotiation and SquareTrade’sWeb-based negotiation is that SquareTrade provides amuch higher level of information management thanroutinely occurs with email. The purpose is not toevaluate positions and recommend solutions but toclarify issues and present information on screen in away that may highlight areas of agreement and differ-ence. What the software does is therefore very similarto what a mediator does: it keeps the parties talking toeach other in a respectful way until the contours of asolution appear.

The network provides new capabilities for monitoringperformance and enforcing the terms of an agree-ment. Monitoring performance has never been a veryefficient process. If a check has not arrived, for exam-ple, should one call the other party? Or should onehave a mediator or third party do it? How can one becertain that a check has arrived? In recent years, manyhave become accustomed to using the FedEx site todetermine where a package is and whether it has beendelivered. This is not merely a convenience providedby FedEx but a use of information to build confi-dence and prevent disputes. Obviously, the complex-ity of monitoring tools will have to be appropriate tothe complexity of the performance required. Cer-tainly, however, a “legal watchman” or early warningsystem of non-performance will be quite useful.

There are many ways in which the medium's visualcapabilities can alert us to problems. Images andnumbers can be used to show change in ways that arenot possible with print. Increases and decreases canbe demonstrated visually through changes in size,shape or color. In the contract context, for example,lack of performance might send a red flag to theattorney for one of the parties. This could be anactual image of a red flag, and the red flag, if ignored,could grow larger over time, something that would beboth meaningful and attention-getting. Various newopportunities to use visuals (e.g. images, icons, charts,tables, diagrams, maps, sketches, blueprints, andcolorful and animated graphics) will be available foruse in dispute resolution processes.

3. Government’s role in ODR

Government regulation versusself-regulation in ODR

Governments have been more involved in promotingODR than in regulating it. In the late 1990s, it

appeared that ODR was developing at an impressivepace without the involvement of government. Theeasy availability of venture capital allowed ODR com-panies to appear and grow quite rapidly, and thosecompanies educated business leaders and consumersabout the benefits of ODR systems. Many ODR pro-viders and other dispute resolution organizations sug-gested that government should adopt a hands-offapproach and that ODR services would take root ontheir own.

Europe identified the promise of ODR early, and sev-eral efforts encouraged self-regulation among compa-nies. Some observed that government regulatory pro-cedures moved much too slowly to put ODRmechanisms in place in a timely fashion, and that bythe time any law promoting or regulating ODR cameinto effect, the e-commerce environment and tech-nology would likely have changed so much that thelaw would be irrelevant at best or an obstacle toprogress at worst.

When the Government of the United States con-vened its first conference on ODR in June 2000 at theFederal Trade Commission,16 it was clear that it, too,was leaning toward industry self-regulation. In thefreewheeling spirit of the Internet revolution, self-regulation seemed the logical course.

The first doubts regarding the self-regulationapproach were raised by consumer groups, which hada long history of disagreement with corporate inter-ests. Some companies were suggesting that ODR beintegrated into their e-commerce systems as a manda-tory step: that is, disputants would have to engage inODR before being permitted to go to court. Theyalso wanted to require payment of filing fees by con-sumers undertaking such a process. Some consumergroups suggested that this was merely an attempt bycorporations to make legal challenges even morecostly, time consuming, and complicated to under-take, so as to better insulate corporate interests fromclass action suits and other legal challenges. Somecorporate representatives countered that withoutclear processes and reasonable filing fees they couldbe subject to an overwhelming tide of nuisance claimswith little or no merit.

Several non-profit organizations convened workinggroups to examine these questions. In the UnitedStates, the American Bar Association’s E-CommerceWorking Group, the International Chamber of Com-merce, the Better Business Bureau and several otherprominent organizations all discussed these chal-lenges at length, and many eventually issued standards



for ODR providers that they hoped would help tobalance the competing interests of corporations andconsumers.

One suggested way to enforce these standards (whileat the same time educating the public about the bene-fits of ODR) was the widespread adoption of trust-marks. Trustmarks were visualized as graphical logosplaced on the websites of e-commerce companies orODR providers ensuring that a certain baseline qual-ity assurance standard had been met. In the case of e-commerce companies, trustmarks could attest to theavailability of ODR should a problem arise. In thecase of ODR providers, trustmarks would attest tothe quality and overall fairness of the dispute resolu-tion system offered. It was envisioned that companieswould pay for these trustmarks to encourage custom-ers to do business with them, and that the revenuegenerated from the trustmarks would fund the opera-tion of the ODR services.

Several other firms (e.g. Verisign and TRUST-e) hadalready demonstrated the viability of trustmark pro-grams in other areas. A handful of companies (e.g.SquareTrade) and large non-profit organizations (e.g.BBBOnline) had implemented trustmark programs inthe ODR arena quite successfully, eventually sellingtens of thousands of the seals and generating signifi-cant revenue. ODR was frequently packaged as acomponent in a suite of trust-enhancing packages,including fraud protection, privacy guarantees andtransaction feedback information. Some of thesetrustmark initiatives did achieve impressive penetra-tion in certain market niches (e.g. SquareTrade in theeBay community).

The increasing numbers of ODR providers and thewide variety of trustmark and seal programs led tonew problems as consumers quickly became confusedabout which ODR programs offered what services. Itwas easy for reputable programs that placed a highpriority on fairness to be lost in the maze of ODRproviders, some of which had questionable incentivesand unbalanced processes. As a reaction to this con-fusion, several in-depth studies of ODR providerswere conducted by government agencies and interna-tional organizations concerned with this new state ofaffairs. The studies often aimed at gathering detailedinformation about who funded the operations ofindividual providers, how they chose their panellists,and how they dealt with power and informationimbalances between parties in disputes that they han-dled.

Most recent activity in the self-regulation area hasbeen focused in Europe. Seed money has been pro-

vided for some government ODR projects (e.g.ECODIR) and for research centres (e.g. the JRC inItaly, which pioneered the conversation around creat-ing an ODR XML standard). Government agencies(e.g. the Italian Chamber of Commerce) began to ini-tiate construction of their own ODR platforms. Largenon-profits also began experimenting with coopera-tive ODR systems such as the proposed global ODRNetwork discussed by the Better Business Bureau,EuroChambres, and the Federation of EuropeanDirect Marketing Associations (FEDMA). The Inter-national Chamber of Commerce (ICC) forged aninnovative partnership with Consumers International(CI) to propose a global clearinghouse for e-com-merce disputes. Only ODR providers that abided bystrict quality standards developed by the ICC/CIpartnership would receive cases, and those that lettheir standards slip would be taken out of the referralqueue.

One force likely to affect future regulatory efforts isthe adoption of ODR by government agencies. Themost ODR-aware agency in the . Government of theUnited States, the Federal Mediation and ConciliationService, is using technology not for e-commerce dis-putes but for workplace matters, disputes betweenlabour and management, and regulatory negotiation.Eventually e-commerce companies may re-emerge asthe innovators and drivers in the development of theODR field, but, with a few exceptions, the most inter-esting applications of ODR in the next few years maycome from government.

E-government and ODR: From consumer disputes to multi-party public disputes

A major function of government agencies is the reso-lution of disputes between citizens and government,or between citizens and other citizens. In addition,many government functions, such as rule making,may involve trying to achieve consensus among inter-ested parties, a very familiar dispute resolution goal.While ODR has in the past few years been concernedmostly with the private sector, increasing efforts inthe areas of e-government and e-democracy arefocusing attention on the value of ODR. As technol-ogy is used to further the activities of governmentand as citizens employ the Internet to bring theirviews to the attention of government, the experienceof ODR becomes very relevant.

During the last few years, governmental activity con-cerning ODR has been concentrated in two major



areas. Initial interest in ODR by governments aroseout of concern for consumers who encounteredproblems in cross-border e-commerce transactions.As a result, between 1999 and 2003, a variety of con-ferences were held to discuss the appropriate role forgovernment in this area.17 More recently, various gov-ernments and government agencies have been explor-ing how ODR can be incorporated into offline andonline governmental activities.

Most e-commerce disputes are fairly simple in thatthey usually concern two parties and a limited set ofissues. The same types of problems turn up again andagain, usually involving money, transaction terms ordelivery problems. Disputes handled by governmentagencies range from the simple and relatively straight-forward to the highly complex. Increasingly, ODRtools have the capacity to be used in complex disputesto facilitate resolution when there are many partiesand a large set of issues.

ODR has much to offer in the multi-party context.Technology can help with information flow, making iteasier to disseminate announcements, revise propos-als and track versions of documents. Tools likethreaded discussion applications and online presenta-tion platforms can streamline many activities, makingthem more satisfying for parties and more efficient.

Complexity in dispute resolution processes oftenincreases exponentially whenever an additional dispu-tant becomes involved. Handling multi-party cases isvery work-intensive for the facilitator, as all partici-pants need to feel that they are being heard. As aresult, multi-party processes are often many timesmore complicated and involved exercises than two- orthree-party dispute resolution processes. The toolsODR provides to neutral parties may prove most use-ful in large public cases because there are so manyindividual communication channels to manage.

There are strong incentives to use dispute resolution,rather than courts, in multi-party situations. Courtsmay be appropriate when it is necessary to make find-ings of who is right and who is wrong, but they arenot very efficient at sorting out matters where theremight be dozens of involved parties. ADR is muchmore effective in these situations, because mediatorscan act as conveners and facilitators, working to buildconsensus behind a particular resolution as opposedto finding fault.

Much of the mediator’s time in a multi-party processis spent in a convening role, getting the parties

together, drafting and redrafting documents to buildparty support, and shuttling communicationsbetween the different parties. Often the deliberationsin multi-party matters are very technical, requiringsophisticated analysis and extensive research. ManyADR organizations have built an impressive trackrecord of successes during the last three decades, andODR can enhance such processes.

Public dispute resolution processes can reap manyclear benefits by incorporating ODR. Online technol-ogy can help with many of the key tasks in such proc-esses, including administrative tasks such as circulat-ing agendas and draft revisions, setting up meetingtimes and places, and tracking participants’ contactinformation. An inordinate amount of time can bespent on coordinating the process, which is all sepa-rate from the actual work of making progress towardresolving the dispute. ODR can help streamline thesetasks, freeing facilitators to focus on the substantiveissues that need to be addressed.

For many multi-party processes the goal is to generatea document at the end of the process that all of theparticipants are willing to support. The drafting andredrafting that go into the creation of these docu-ments are often very complex, involving the synthesisof myriad comments from many different partici-pants. Simply keeping track of the suggested changes,much less integrating them into a coherent whole, canbe a challenge. Online technology can help organizethis drafting process so that the parties can makeprogress on language without relying on the facilitatorto shuttle every proposed wording change around toeveryone who might be interested. Because the delib-erative process itself is text-based, it is easier to trans-late the discussion into text that all of the participantsare likely to be satisfied with.

ODR also enables parties to make progress betweenmeetings and thereby reduce the number of face-to-face meetings. Much of the time at the beginning offace-to-face meetings is spent reacquainting the par-ticipants with each other, reminding them what wascovered in the last meeting, and filling in participantswho were absent from prior gatherings. BecauseODR happens in a more continuous way, the flow ofthe discussion does not stop for long periods of time.Also, because the discussions are automaticallyarchived, if an individual does need to be reminded ofwhat was discussed previously, he or she can easilyaccess the information. Participants who might haveto miss a meeting can consult the online record to seewhat was discussed.



ODR can also facilitate the consensus evaluationprocess. One of the challenges in multi-party disputesis the degree to which communications between thefacilitator and the participants are public. In a largegroup meeting, it is very difficult for the mediator tospeak one –on one with any of the participants,because the group as a whole needs to keep movingforward. If the facilitator wants to evaluate where thegroup is with regard to reaching agreement on a par-ticular point, online tools make it easier to poll partic-ipants, share large quantities of information, andjointly edit documents. The ability to set up subsec-tions of virtual meeting rooms permits spinning offwork groups and caucus discussions. These discus-sions can happen concurrently with the joint discus-sion so that work group members can continue toparticipate in the overall dialogue while they work intheir smaller group, unlike the procedure common inphysical meetings. The facilitator also has the abilityto simultaneously monitor multiple conversations andwork groups, as he or she has access to all the elec-tronic conversations going on.

Online communication can also open the door toinput from people normally excluded from face-to-face deliberative discussions. Often group discussionsare dominated by a handful of participants while oth-ers, perhaps even the majority, stay silent. Certainindividuals are very comfortable with expressing theiropinions forcefully in public situations, while othersare reluctant to do so. Online communication optionsoften lead to expressions of opinion by a wider rangeof people and reduce barriers for participants whowould not contribute much in a face-to-face meeting.This can enrich the process for all involved, in addi-tion to providing the facilitator with important infor-mation.

E. Challenges for the implementation of ODR in

developing countries

To assess the impact of ODR in developing countriesthe UNCTAD secretariat circulated a questionnaireto 46 organizations (see chart 7.1’s list of ODR pro-viders as of March 2003) offering ODR servicesaround the globe. The secretariat received 24 replies,including responses from all the major ODR provid-ers. The survey confirms the following:

• For developing countries the market for ODRservices is either incipient or non-existent. The

vast majority of ODR providers are located inthe United States and Europe.

• Awareness building, IT training and educationare fundamental to the widespread and effec-tive use of new technologies such as ODR. Anappropriate legal framework that facilitates theuse of out-of-court schemes, as well as thedevelopment of and adherence to trustmarks,codes of conduct and guidelines by e-businessin developing countries, constitute the mainstrategies for promoting ODR in developingcountries.

• Mediation, conciliation and automated negotia-tion are the most popular dispute resolutionsystems offered online. Arbitration remainsmore important in traditional offline ADRthan it is in ODR.

• A majority of ODR providers (56% of surveyrespondents) offer a mix of online and offlineservices, which indicates that traditional ADRproviders have begun offering ODR servicesto complement existing offline ADR mecha-nisms. The remaining 44 per cent of respond-ents provide only online services.

Chart 7.5

Means of promoting ODR




• Although ODR is not yet much used, themajority of ODR providers offer their servicesto developing countries.

For ODR to be implemented successfully in develop-ing countries, both technological and legal challengesmust be overcome

Chart 7.7

Developing regions where ODR services are offered

Chart 7.6

Online and offline services

1. Technology infrastructure

ODR is, by its very nature, dependent on the availa-bility of technology. Without easy access to comput-ers and Internet connections, the ability of parties toutilize ODR tools is extremely limited.

ODR inevitably appeals more to users who are gener-ally experienced in the online environment. It was notsurprising that eBay users took advantage of ODR,since all eBay users have some access to and facilitywith using the Internet. A recent survey of eBay sell-ers in developing countries (see table 7.3) showed thatthere are people in almost every developing countrywho use eBay as a marketplace where they can sellgoods at a distance. These vendors already have ODRoptions available to them to settle disputes, and as the



Chart 7.8

Online dispute resolution tools


number of transactions increases, use of ODR can beexpected to increase as well.

Government initiatives that accelerate citizen accessto the Internet, such as e-government projects, alsofacilitate access to ODR. It may be that some ODRplatforms and applications will need to be developedto fit particular contexts in developing countries, butmore often what has been developed and tested else-where can be imported and adapted to new entrepre-neurial environments.



2. Legal challenges

Uncertainty about the legal framework governing e-commerce may inhibit consumers from purchasingproducts or services over the Internet, and companiesfrom entering into the electronic marketplace. AsODR is primarily conducted in cyberspace, data pro-tection and security are often at the forefront ofusers’ minds. Many developing countries currentlylack the required legislative instruments (laws govern-ing e-commerce, data protection and electronic signa-tures) to provide appropriate online legal protection.The absence of legal infrastructures to support e-commerce and a resulting public lack of trust inonline transactions is one element inhibiting the useof the Internet as a business medium in the develop-ing world.

Many developing countries understand that withoutappropriate legislation, they risk exclusion from theglobal online marketplace. These countries havefound that statutory gaps related to the implementa-tion of new technologies that enable electronic con-tracting, electronic storage of data and documents,fast processing of information, and so on can even

Box 7.1.

Main difficulties faced by developing countries in implementing ODR:A representative snapshot

ODR providers surveyed by UNCTAD highlighted the following concerns:

• In many cases it is still too early for ODR to be implemented in developing countries.

• It is unlikely that people in developing countries will use ODR unless they are clearly directed there by the context of their disputes. Thiswould require the following:

The merchant provides a link and agrees to participate if anything goes wrong; or

The Government mandates and enforces participation.

• Government support and usage are a must for developing confidence in ODR.

• The cost of setting up an ODR is a major consideration.

• Promotion of ODR in developing countries should be envisaged with the collaboration of experienced ODR providers.

• People do not use online what they do not use offline; ODR services cannot interest those who have not shown an interest in conventionalADR.The biggest challenge is building a long-term self-sustainable business plan.

• Promoting ODR will prove more expensive than the technology itself.

• In many developing countries, businesspeople and lawyers over age 50 do not use computers and do not speak English, thus making itvery difficult to conduct ODR. Further education in ICT is required for managers over 50.


spill over into the offline world. Thus, the need for anappropriate legal framework that is supportive of andconducive to the practice of e-commerce has beenidentified as a prerequisite for the growth of e-com-merce in general and ODR in particular. In additionto the basic legal infrastructure recognizing the valid-ity of electronic messages and providing equal treat-ment to users of paper-based documentation andusers of computer-based information, it is importantthat Governments in developing countries becomesensitive to the need for laws that have an impact ontrust, such as those dealing with e-signatures. Enact-ment of such laws is leading to more robust trust sys-tems.

Box 7.2 describes the experience of a developingcountry, Singapore, in creating ODR programmes.

F. Conclusions

Higher levels of e-commerce and entrepreneurshipare a goal of almost all Governments. Because ODRcan contribute to building trust, it is particularly



needed in situations where new relationships arebeing formed and existing institutions for legalrecourse are lacking or inefficient. International arbi-tration options have always been built into cross-bor-der transactions of high value. ODR creates opportu-nities for new dispute resolution options in cross-border transactions of lesser value.

The emergence of ODR is closely linked to twotrends: the appearance of powerful electronic net-

working capabilities and the broad acceptance ofalternatives to litigation for resolving disputes. Cyber-space is an arena of both experimentation and com-petition. It is not now, and probably never will be, aharmonious place, but it is a place of rapid changeand, even today, of extraordinary achievements. Theemergence of effective online justice systems willrequire considerable creativity, but the larger andmore active cyberspace becomes, the more likely it isthat demand for ODR will grow. It has been written

Africa Asia North and Central Americaand the Caribbean

Algeria 17 Afghanistan 70 Antigua and Barbuda 3

Angola 3 Bahrain 3 Bahamas 163Benin 3 Bangladesh 74 Barbados 41Botswana 23 Bhutan 27 Belize 11

Burundi 4 Brunei Darussalam 4 Costa Rica 98Cameroon 2 Cambodia 4 Dominica 3Cape Verde 7 China 15 417 Dominican Republic 33

Central African Republic 78 India 2 667 El Salvador 28Djibouti 43 Indonesia 508 Grenada 29

Egypt 1 226 Jordan 240 Guatemala 11Gambia 23 Kuwait 61 Haiti 17Ghana 69 Lao People's Democratic Republic 3 Honduras 37

Kenya 57 Lebanon 427 Jamaica 86Madagascar 19 Malaysia 5 034 Mexico 2 696

Malawi 42 Maldives 59 Panama 54Mauritius 13 Mongolia 23 Saint Kitts and Nevis 1Morocco 15 Myanmar 7 Saint Vincent and the Grenadines 11

Namibia 8 Nepal 92 Trinidad and Tobago 13Nigeria 4 Oman 15

Senegal 4 Pakistan 49 South America

Seychelles 4 Philippines 2 016 Argentina 9 114

Swaziland 20 Qatar 23 Bolivia 72Uganda 1 Republic of Korea 1 019 Brazil 6 154United Rep. of Tanzania 6 Saudi Arabia 47 Chile 639

Zimbabwe 23 Singapore 12 809 Colombia 59Sri Lanka 61 Ecuador 188Syrian Arab Republic 304 Guyana 3

Taiwan Province of China 101 686 Paraguay 26Thailand 15 329 Peru 419United Arab Emirates 110 Uruguay 917

Viet Nam 132 Venezuela 179

Note: The data in this table were obtained by searching for items “by location” using eBay’s advanced search tool. Because some sellers enter an incorrect countryname in the location field, the numbers for some countries appear larger than they probably are. This table should, therefore, be viewed more as an indication of thelevel of activity in a particular country than as a collection of numerically accurate statistics.

Table 7.3

Number of items offered for sale on eBay (by country)



that, even though businessmen want to do businessrather than argue about it, in the business world dis-putes cannot be avoided. In the online environment,loss of time often causes loss of opportunities, andpeople involved in e-commerce will want to resolveproblems in the fastest possible way.

Cyberspace is increasingly a place offering its usersprocesses as well as information. This should not besurprising, since processes are sets of informationaltransactions and exchanges, something that should beevident from looking at websites for online auctions,stores, casinos, and the like. The emergence andincreasing use of ODR indicate that cyberspace ismaturing and that human beings have the capabilitiesto build an array of civic institutions to complementcommercial sites. It is in the interaction of civic andcommercial institutions – something that is occurringwith ODR – that opportunities for building andenhancing trust in the online environment will befound.

The value of ODR extends beyond the number ofdisputes actually resolved. Acknowledgement by amarketplace that disputes may occur, and theestablishment of easily accessible procedures to han-dle problems, become part of the trust matrix thatusers will consider in deciding whether to use a site.Convenience and cost may bring potential users to asite, but assessments of trust and of risk will shapetheir willingness to engage in a transaction.

Early online marketplaces assumed that users wouldnot require anything beyond heightened convenienceand lower costs and prices. Today it is apparent thatthe availability of ODR is an asset that users will con-sider as they assess risks of participating in a newmarketplace or other electronic environment. This isparticularly important when the location or identity ofthe seller is unfamiliar or the item being sold lacks awell-known brand. Countries focused on expandinge-commerce activities should pay particular attentionto the issue of dispute resolution.

Although ODR is still in its infancy or non-existent ina majority of developing countries, it has the potentialto grow and to provide fair and inexpensive adju-dication of disputes arising out of online transactions.Developing countries wishing to promote andfacilitate ODR as an alternative to national litigationcan consider the following recommendations:

• Treat as a priority education and awarenessraising among merchants and consumersregarding the impact and increasing impor-tance of ADR/ODR in resolving commercialdisputes. Educational programmes aimed atpromoting awareness and knowledge of out-of-court dispute settlement mechanisms indeveloping countries could play a crucial role inthe development of ODR.

Box 7.2.

Case study: Singapore

Singapore allows parties to participate in a program called e@dr. E@dr is an electronic dispute resolution process offered by Singapore’sSubordinate Courts in partnership with the Ministry of Law, the Singapore Mediation Centre, the Singapore International Arbitration Centre,the Trade Development Board and the Economic Development Board. E@dr is for disputes that arise directly or indirectly out of e-commercetransactions (e.g. the sale of goods and services, intellectual property rights and domain names). The option is available to anyone with anemail address and is relatively informal so that legal counsel is not necessarily required.

Singapore has also created the Electronic Court Dispute Resolution International (ECDRI) programme to help parties settle cross-border dis-putes. ECDRI is a voluntary electronic settlement conference conducted by a Singapore Subordinate Court Judge at the request of the par-ties. ECDRI is available for complex commercial, e-commerce, intellectual property, banking and insurance cases. Singapore’s courts do notcharge the parties additional fees to participate in ECDRI. After requesting ECDRI, parties submit relevant documents to the judge. Thejudge may request the assistance of a non-Singaporean judge at the request of the parties or if the judge considers it appropriate. The non-Singaporean judge will be drawn from a panel including judges from Australia, Europe and/or the United States. If appropriate, the Singapo-rean judge requests additional information from the parties. The two judges then communicate via email or videoconferencing and reporttheir respective views to the parties. This co-mediation forum provides an additional judicial perspective on a cross-border dispute.



• Ensure that national legislation recognizes thevalidity and enforceability of electronic transac-tions.

• Ensure that national legislation facilitates theuse of out-of-court dispute settlementschemes.

• Consider acceding to the 1958 New York Con-vention on the Recognition and Enforcementof Foreign Arbitral Awards,18 which allows theenforcement of foreign arbitral awards.

• Promote voluntary adherence by e-businessesto trustmark and reliability programmes. (It isgenerally agreed that ADR/ODR services pro-vided in conjunction with a trustmark schemeare more effective, since the threat of expulsionfrom the scheme and negative publicity for thetrustmark's website may compel the supplier tocomply with the scheme.)

• Give sufficient attention to cultural andlinguistic differences in providing ODR serv-ices.



Notes

1. Over 130 countries have signed the convention. For its full text and status, see www.uncitral.org/en-index.htm.

2. An analysis of these issues is contained in Hill (1998).

3. In a case concerning the purchase of a computer and related software products, the arbitration agreement stipulatedarbitration before the International Chamber of Commerce (ICC) Court of Arbitration. The ICC advance fee for theclaim was $4,000, of which $2,000 was non-refundable. The New York Appellate Court held that the arbitrationagreement was unenforceable and sent the case back to a lower court to encourage the parties to find an appropriatearbitration procedure for their small claims dispute. See Brower v. Gateway Inc.

4. For more on netiquette, see Shea (1997).

5. See, for example, Dibble (1993).

6. See Everett-Church (1999).

7. See http://www.vmag.org/

8. See mantle.sbs.umass.edu/vmag/disres.htm.

9. See Center for Information Technology and Dispute Resolution, Online Ombuds Narrative I: The Web Site Developerand the Newspaper at www.ombuds.org/narrative1.html.

10. See www.umass.edu/dispute.

11. See Katsh, Rifkin and Gaitenby (2000).

12. See www.uspto.gov.

13. For a critique of the UDRP see UNCTAD (2002), p. 46.

14. See www.smartsettle.com.

15. See www.butlermediation.com.

16. See www.ftc.gov/bcp/altdisresolution.

17. See www.ftc.gov/bcp/icpw/index.htm; www.ftc.gov/bcp/altdisresolution/index.htm; www.oecd.org/dsti/sti/it/secur/act/online_trust/hague-adr-report.pdf, www.gbde.org; www.law.washington.edu/aba-eadr/documentation/docs/FinalReport102802.doc; and www.unece.org.

18. For the convention’s full text and its status, see www.uncitral.org/en-index.htm.

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