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Loi n°92-597 du 1er juillet 1992, publiée au Journal Officiel du 2
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THÈSE
En vue de l'obtention du

DOCTORAT DE L’UNIVERSITÉ DE TOULOUSE


Délivré par Université Toulouse 1 Capitole
Discipline ou spécialité : Droit

Présentée et soutenue par LEKKAS Zissis


Le 27 avril 2015

Titre:
Disputes in the Digital era
The evolution of dispute resolution and the model ODR system

JURY
Professeur Jacques Larrieu, Université Toulouse 1
Professeur Arnaud Raynouard, Université Paris Dauphine
Professeur Patrina Paparigopoulos, National & Kapodistrian University of Athens
Professeur Michel Attal, Université Toulouse 1

Ecole doctorale : Ecole Doctorale Sciences juridiques et Politiques


Directeur(s) de Thèse : Professeur Michel Attal, Université Toulouse 1
© C o p yr i g h t 2 0 1 5 A l l r i g h t s r e s e r v e d

3
Abstract

The subject of the thesis is Online Dispute Resolution

(ODR) and the aim of the thesis is to propose a model ODR

s ys t e m based on the experience of the dispute resolution

movement. ODR is not an isolated phenomenon of recent times

but a result of the evolution of disputes and dispute resolution.

In i t i a l l y, d i s p u t e s o c c u r r e d b e t w e e n p a r t i e s w i t h g e o g r a p h i c a l

p r o x i m i t y a n d f o r w h i c h t r a d i t i o n a l co u r t s w e r e t h e p r i n c i p a l

way of resolution. However, as people started to travel further

distances and communicate from afar, disputes evolved as they

i n c r e a s e d i n n u m b e r , b e c a m e m o r e c o m p l ex a n d i n c r e as i n g l y

cross border. Dispute resolution ev o l v e d in p a r a l l el and

A l t e r n a t i v e D i s p u t e R e s o l u t i o n ( A D R ) w a s e m p l o ye d . H o w e v e r ,

d i s p u t es e v o l v e d o n c e m o r e w h e n t h e w o r l d e n t e r e d i n t o t h e

d i g i t a l e r a . N o t o n l y d i s p u t e s b e c a m e ye t a g a i n i n c r e a s i n g l y

c r o s s - b o r d e r , b u t n e w d i s p u t e s a p p ea r e d t h a t a r o s e s o l e l y i n

c yb e r s p a c e . In o r d e r t o s a t i s f y t h e r e q u i r e m e n t s o f t h e d i g i t a l

e r a , d i s p u t e r e s o l u t i o n b r o u g h t f o rt h t h e c o n c e p t o f O D R . O DR

a r o s e f r o m t h e c o m b i n a t i o n o f A D R a n d t h e In f o r m a t i o n a n d

C o m m u n i c a t i o n T e c h n o l o g y ( IC T ) o f t h e d i g i t a l e r a . A l t e r n a t i v e

m e a n s o f d i s p u t e r e s o l u t i o n w e r e t r a n s fe r r e d t o t h e v i r t u a l w o r l d

and gave birth to Online Dispute Resolution. ADR and ODR are

4
examined e x t e n s i v e l y, and the examination includes their

c o n c e p t s , t h e i r o r i gi n , t h e m a i n f o r m s o f n e g o t i a t i o n , m e d i a t i o n

and arbitration and their online equivalents, as well as their

advantages and drawbacks.

T h e t h e s i s i l l u s t r a t es t h e e v o l u t i o n o f d i s p u t e s a n d d i s p u t e

resolution from the “analog” era, when dispute resolution was

f a c e t o f a c e , t o t h e “ d i g i t a l ” e r a , w h en d i s p u t e s a r e r e s o l v e d i n

c yb e r s p a c e . It d e m o n s t r a t e s t h a t OD R i s a n e c e s s i t y o f t h e

d i g i t a l e r a b u t a l s o t h a t i t h a s t h e p o t e n t i a l t o b e a r e v o l u t i o n a r y,

effective and successful way to resolve disputes; a way that will

b e t h e f u t u r e o f d i s p u t e r e s o l u t i o n . B a s e d o n t h e e x p er i e n c e

accumulated by examining the evolution of dispute resolution

and based on the conclusions drawn, the thesis formulates a

p r o p o s a l f o r t h e OD R s ys t e m . T h e t h e s i s d e s c r i b e s t h e O D R

s ys t e m , f r o m i t s t h r e e s t e p p r o c e s s a n d t h e n e c e s s i t y o f o n l i n e

a r b i t r a t i o n , t o t h e O D R n e t wo r k , t h e r e g u l a t i o n o f t h e O D R

s ys t e m , t h e t e c h n o l o g i c a l a r c h i t e c t u r e o f O D R p r o v i d e r s , t h e i r

funding, as well as the necessary steps of creating awareness and

t r u s t s o t h a t O D R fu l f i l s i t s f u l l e s t p o t e n t i a l .

5
Acknowledgments

T h i s p r o j e c t i s t h e r e s u l t o f f o u r ye a r s o f r e s e a r c h f o r a

P h D d i s s e r t a t i o n , wh i c h I s u c c e s s f u l l y s u b m i t t e d i n N o v e m b e r o f

2014. My greatest debt is owed to the supervisor of my doctoral

r e s e a r c h , P r o f e s s o r M i c h e l A t t a l at t h e U n i v e r s i t y o f T o u l o u s e 1 ,

w h o f i r s t i n t r o d u ce d m e t o t h e s u b j e c t o f D i s p u t e r e s o l u t i o n

during my Master degree studies. His inspiration, enthusiasm,

patience and constructive criticism provided invaluable guidance

without which this project would not come true. Furthermore, I

would like to thank my family and friends who have supported

and encouraged me during this endeavor.

6
List of abbreviations and acronyms

AAA A m e r i c an A r b i t r a t i o n A s s o c i a t i o n
ABA American Bar Association
ADR Alternative Dispute Resolution
AI Ar t i f i c i a l In t e l l i g e n c e
AOL Am e r i c a O n l i n e
BBB Better Business Bureau
B IO A B r i t i s h a n d Ir i s h
Om b u d s m a n A s s o c i a t i o n
CERD C e n t r e f o r E f fe c t i v e D i s p u t e R e s o l u t i o n
CLI C yb e r s p a c e La w In s t i t u t e
CRDP C e n t r e d e re c h e r c h é e n d r o i t p u b l i c
C IE T A C C h i n a In t e r n a t i o n a l E c o n o m i c a n d
T r a d e Ar b i t r a t i o n C o m m i s s i o n
ECC-Net European Consumer Centre Network
E C O D IR Electronic Consumer Dispute Resolution
EDI E l e c t r o n i c D a t a In t e r c h a n g e
FAA Federal Arbitration Act
G U ID E C General Usage for
In t e r n a t i o n a l D i g i t a l l y E n s u r e d C o m m er c e
HTTP H yp e r T e x t T r a n s f e r P ro t o c o l
IC A N N In t e r n e t C o r p o r a t i o n f o r
As s i g n e d N a m e s a n d N u m b e r s
IC C In t e r n a t i o n a l C h a m b e r o f C o m m e r c e
IC D R In t e r n a t i o n a l C e n t e r f o r
Dispute Resolution
IC S ID In t e r n a t i o n a l C e n t r e f o r t h e

7
S e t t l e m e n t o f In v e s t m e n t d i s p u t e s
IC T In f o r m a t i o n a n d C o m m u n i c a t i o n s T e c h n o l o g y
IM In s t a n t M e s s a g i n g
IS P s In t e r n e t S e r v i c e P r o v i d e r s
JAMS J u d i c i al A r b i t r at i o n a n d
M e d i a t i o n S e r v i ce s
LC IA Lo n d o n C o u r t o f
In t e r n a t i o n a l A r b i t r a t i o n
NAF N at i o n a l A r b i t r a t i o n F o ru m
N C A IR National Center for Automated
In f o r m a t i o n R e s e ar c h
ODR On l i n e D i s p u t e R e s o l u t i o n
OECD O r g a n i z a t i o n fo r
Economic Co-operation and Development
OOO Online Ombuds Office
PKI P u b l i c K e y In f r a s t r u c t u r e
SSL S e c u r e S o c k e t La ye r
TACD Trans-Atlantic Consumer Dialogue
U C IT A U n i f o r m C o m p u t e r In f o r m a t i o n
T r a n s a c t i o n s Ac t
UDRP U n i f o r m D o m ai n N am e
Dispute Resolution Policy
UETA U n i f o rm E l e c t r o n i c T r a n s a c t i o n s A c t
U N C IT R A L United Nations Commission on
In t e r n a t i o n a l T r a d e La w
VMP Virtual Magistrate Project
W IP O W o rl d In t e l l e c t u a l P r o p e r t y O r g a n i z a t i o n
WTO World Trade Organization

8
Contents

Introduction … … … … … … … … … … … … … … … … … … … . p . 1 5

Part 1: From the analog to the digital era … … … . . p . 2 3

Title 1: The Analog era … … … … … … … … … … … … … . . p . 2 5


Chapter 1: Alternative Dispute Resolution………………p.27

Section 1: What is ADR?..................................................p.27

Section 2: The birth of ADR………………………………….....p.31

Section 3: The 20th Century Rebirth of ADR…………………..p.39

C h a p t e r 2 : Fo r ms o f A D R … … … … … … … … … … … … … … p . 5 1

Section 1: Negotiation…………………………………………….p.52

Section 2: Mediation……………………………………………….p.61

A. Wh a t i s M e d i a t i o n ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p . 6 1

B. Choosing Mediation…………………………………………p.69

C. T h e M e d i a t i o n p r o ce s s … … … … … … … … … … … … … … . . p . 7 6

D. The Mediator…………………………………………………p.78

E. The settlement……………………………………………….p.86

S e c t i o n 3 : A r b i t r a t i o n a n d t h e h yb r i d f o r m s … … … … … … … … p . 8 8

A. Wh a t i s A r b i t r a t i o n ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p . 8 9

B. Choosing Arbitration……………………………………..p.103

C. The Arbitrator……………………………………………..p.105

D. The Arbitral award………………………………………..p.106

E. T h e h y b r i d f o r ms … … … … … … … … … … … … … … … … . . p . 1 0 8

9
i. Conciliation………………………………………………..p.108

ii. Mini-Trials………………………………………………….p.112

iii. Med-Arb……………………………………………………..p.118

iv. Ombudsman…………………………………………………p.122

C h a p t e r 3 : A d v a n ta g e s a n d d r a w b a c k s o f A D R … . … … . p . 1 2 6

Section 1: Advantages of the traditional ADR methods…….p.126

A. Confidentiality……………………………………………..p.127

B. Time and cost savings…………………………………….p.128

C. Conciliatory function……………………………………..p.129

D. Flexibility…………………………………………………..p.132

Section2: Drawbacks of the traditional ADR methods………p.134

A. For the parties……………………………………………..p.134

B. F o r t h e P r o c e d u r e… … … … … … … … … … … … … … … … p . 1 3 6

C. For Arbitration…………………………………………….p.137

D. Remarks……………………………………………………..p.139

Title 2: The Digital Era … … … … … … … … … … … … … p . 1 4 1


Chapter 1: ODR and its characteristics………………..p.151

Section 1: What is Online Dispute Resolution?..................p.151

Section 2: Technology as a fourth party

a n d t h e v ar i o u s IC T t o o l s … … … … … … … … … … … p . 1 6 1

Section 3: ODR forms……………………………………………p.175

A. Online Negotiation………………………………………..p.177

B. Online Mediation…………………………………………..p.183

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C. Online Arbitration…………………………………………p.188

Chapter 2: ODR in action;

E x a mp l e s o f O D R p r o v i d e r s … … … … … … … … … … … … p . 1 9 6

S e c t i o n 1 : T h e Vi r t u a l M a g i s t r a t e P r o j e c t ( V M P ) … … … … … p . 1 9 8

Section 2: The Online Ombuds Office…………………………p.202

S e c t i o n 3 : C yb e r T r i b u n a l … … … … … … … … … … … … … … … . . p . 2 0 5

Section 4: EBay and SqaureTrade………………………………p.207

S e c t i o n 5 : T h e In t e r n e t C o r p o r a t i o n f o r A s s i g n e d N a m e s

An d N u m b e r s ( IC A N N ) … … … … … … … … … … … . . p . 2 1 2

Chapter 3: The Advantages and

the Challenges of ODR..…………………………………….p.216

S e c t i o n 1 : A d v a n t a g e s o f O n l i n e Di s p u t e R e s o l u t i o n … … … p . 2 1 8

A. Time savings………………………………………………..p.219

B. Cost savings………………………………………………..p.221

C. Access to justice…………………………………………...p.223

D. Convenience………………………………………………..p.226

E. Flexibility…………………………………………………..p.230

Section 2: The challenges of ODR……………………………..p.233

A . P r a c t i c a l c h a l l e n g es … … … … … … … … … … … … … … … … p . 2 3 3

i. The literacy of participants………………………………p.234

ii. Lack of face-to-face encounters…………………………p.236

B . A u t h e n t i ci t y , d a t a s e c u r i t y a n d c o n f i d en t i a l i t y … … … … . . p . 2 4 3

C . E n f o r c e m e n t o f O DR d e c i s i o n s

a n d S e l f - e n f o r c e m e n t m e c h a n i s ms … … … … … … … … … … . p . 2 4 8

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i. S e l f - e n f o r c e m e n t me c h a n i s m s b a s e d o n

Technical control…………………………………………p.253

ii. S e l f - e n f o r c e m e n t me c h a n i s m s b a s e d o n

R e p u t a t i o n i n c e n t i ve s … … … … … … … … … … … … … … . . p . 2 5 4

1. Feedback systems…………………………………………..p.255

2. Trustmarks…………………………………………………..p.256

iii. S e l f - e n f o r c e m e n t me c h a n i s m s b a s e d o n

Financial control………………………………………….p.258

Part 2: The ODR System … … … … … … … … … … … … . p . 2 6 2

Title 1: The ODR process … … … … … … … … … … … … p . 2 6 9


C h a p t e r 1 : T h e t h re e s t e p p r o c e s s … … … … … … … … … . p . 2 7 0

S e c t i o n 1 : A m u l t i -s t e p p r o c e s s … … … … … … … … … … … … . . p . 2 7 1

S e c t i o n 2 : O n l i n e Di s p u t e P r e v e n t i o n … … … … … … … … … … p . 2 7 7

S e c t i o n 3 : T h e U NC IT R A L e x a m p l e … … … … … … … … … … . . p . 2 8 1

C h a p t e r 2 : O n l i n e a r b i t r a t i o n a s th e f i n a l s t e p o f th e

process…………………………………………..p.284

Section 1: Why online arbitration?...................................p.288

A . O n l i n e a r b i t r a t i o n ve r s u s l i t i g a t i o n

and traditional arbitration…………………………………..p.291

B . O n l i n e a r b i t r a t i o n ve r s u s o t h e r O D R m et h o d s . … … … … . p . 2 9 2

Section 2: The online arbitration agreement………………….p.296

A. Validity of arbitration agreements

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and the written requirement ………………………………..p.298

B. Expressing consent in electronic arbitration contract …p.303

C. Arbitrability and pre-dispute arbitration agreements…..p.306

Section 3: The online arbitration procedure………………….p.315

A. The place or seat of arbitration…………………………….p.316

B. The applicable law……………………………………………p.320

Chapter 3: The Outcome of the process…………………p.324

Section 1: Non-binding online arbitration…………………….p.326

S e c t i o n 2 : T h e U DR P ex a m p l e … … … … … … … … … … … … … . p . 3 2 9

Section 3: Binding online arbitration………………………….p.333

Title 2: The ODR architecture … … … … … … … … … . p . 3 4 0

C h a p t e r 1 : T h e O DR n e t w o rk … … … … … … … … … … … . p . 3 4 2

S e c t i o n 1 : A n i n t e rn a t i o n a l n e t w o r k … … … … … … … … … … . . p . 3 4 2

Section 2: Clearinghouses……………………………………….p.347

Section 3: An accreditation network…………………………..p.350

C h a p t e r 2 : R e g u l a ti o n a n d g u i d e l i n e s … … … … … … … … p . 3 5 4

Section 1: Regulation of ODR…………………………………..p.354

A. Governmental regulation…………………………………….p.356

B. Self-regulation ………………………………………………..p.360

i. Self-regulation in action………………………………….p.362

ii. Advantages of self-regulation……………………………p.365

iii. Disadvantages and limitations of self-regulation…….p.367

C. Co-regulation………………………………………………….p.369

13
Section 2: ODR guidelines ……………………………………..p.371

S e c t i o n 3 : T h e p ri n c i p l e s o f O D R … … … … … … … … … … … … p . 3 8 1

A. Impartiality and Independence………………………………p.382

B. Transparency ………………………………………………….p.385

C. Accessibility, effectiveness and fairness ………………….p.392

C h a p t e r 3 : t h e O DR p r o v i d e r … … … … … … … … … … … . . p . 3 9 7

S e c t i o n 1 : T h e O DR f u n d i n g … … … … … … … … … … … … … … . p . 3 9 7

A. Bilateral user fees…………………………………………….p.399

B. Unilateral user fees…………………………………………..p.400

C. Safeguards……………………………………………………..p.401

D. Funding by External sources………………………………..p.402

E. Solutions………………………………………………………..p.404

Section 2: Technological architecture…………………………p.405

A. Accessibility …………………………………………………..p.407

B. Ease of application …………………………………………..p.409

C. Security…………………………………………………………p.411

Section 3: Creating Awareness and Trust …………………….p.413

A. Awareness………………………………………………………p.414

B. Trust ……………………………………………………………p.417

C. Solutions………………………………………………………..p.421

Conclusion … … … … … … … … … … … … … … … … … … … . . p . 4 2 4

14
Introduction

D i s p u t e s ex i s t e d a s l o n g a s h u m a n s . D i s p u t e s a r e t h e r e s u l t

of the inevitable conflict between humans, the result of the

struggle between parties with colliding interests or goals.1

Disputes arise in every environment from the family to a

c o m m e r c i a l e n v i r o n m e n t , 2 t o a n y o n l i n e c o m m u n i t y. T h e r e ’ s n o

way to prevent disputes from arising. But as long as there were

d i s p u t es p e o p l e a l w a ys f o u n d w a ys t o r e s o l v e t h e m . A l t h o u g h

t h e r e h a v e a l w a ys b e e n e x t r a - j u d i c i al w a ys o f d i s p u t e r e s o l u t i o n ,

from a very early on point in human coexistence, the primary

way to resolve disputes has been resolution through the courts.

This solution was more than reasonable in the past because

d i s p u t es w e r e f e w e r i n n u m b e r a n d u s e d t o a r i s e m o s t l y i n s i d e

the boundaries of small societies, the members of which were

situated in regional p r o x i m i t y. However, as time passed,

h u m a n i t y e v o l v e d a n d t h e w a y p e o p l e c a m e i n t o c o n t ac t a n d

c o m m u n i c a t e d c h a n g e d r a d i c a l l y; c o n s e q u e n t l y d i s p u t e s ev o l v e d

1
“The basic premise of conflict was always the same: an expressed struggle between at least two
interdependent parties who perceive scarce resources, incompatible goals and interference from
the other party in achieving their goals” See KATSH Ethan, Dispute Resolution in Cyberspace,
Connecticut Law Review, vol. 28, 2006, p. 953.
2
“Disputes are a fact of life in business. In fact, businesspeople often benefit from conflict, as it
can result in energy, motivation, productivity, and creativity. The challenge lies in managing
conflict so that it doesn’t impede progress, or worse, destroy the capacity to achieve business
goals”. See RULE Colin, Online Dispute Resolution For Business: B2B, E-commerce, Consumer,
Employment, Insurance, and other Commercial Conflicts, (John Wiley & Sons) 2002, p. 1.

15
in parallel. People started to travel longer distances, interact

with other people of very different cultures and disputes started

t o i n v o l v e m u c h m o r e c o m p l ex t h a n e v er y d a y i s s u e s .

The inability of traditional courts to resolve these disputes

brought attention to the already existing methods of extra-

judicial dispute resolution as an alternative to the courts. As

humanity evolved even further by minimizing distances and

facilitating global communication, the need for alternative

dispute resolution grew even more. During the last quarter of the

20th century the interest in alternative dispute resolution grew

d r a s t i c a l l y a n d s e v e r a l m e t h o d s o f AD R w e r e i n c r e a s i n g l y u s e d

t o r e s o l v e a l l k i n d o f d i s p u t e s , wi t h m o r e r e p r e s e n t a t i v e a m o n g

them negotiation, mediation and arbitration. Although ADR was

not perfect and problems arose, however, the considerable

a d v a n t a g e s o u t w e i g h e d a n y p o t e n t i a l d i f f i c u l t i e s . A DR m e t h o d s

a l l o w e d f o r c o n s i d e r a b l e t i m e a n d c o s t s a v i n g s , c o n fi d e n t i a l i t y

and flexibility in the process and turned the focus of the

resolution towards a conciliatory function.

With the advent of technology and the appearance of the

i n t e r n e t , t h e w a y o f c o m m u n i c a t i o n a n d w i t h i t t h e n at u r e o f

d i s p u t es e v o l v e d o n c e m o r e . T h e w o r l d e n t e r e d t h e d i g i t a l e r a a s

information started to be stored, transmitted and shared,

communication started to be possible through a computer screen

and a whole virtual world was created in parallel with the real

16
world. The vast technological d e v el o p m e n t and the rapid

d i s s e m i n a t i o n o f i n fo r m a t i o n i n f l u e n c e d t h e n a t u r e o f d i s p u t e s a s

is evident particularly in commercial disputes, where

In f o r m a t i o n and Communication T ec h n o l o g y 3 a l l o w fo r an

o v e r w h e l m i n g f l o w o f i n f o r m a t i o n wh i c h e n a b l e s p a r t i e s t o

p e r f o r m , r a t h e r e a s i l y, l i m i t l e s s t r a n s ac t i o n s a r o u n d t h e w o r l d . 4

The internet has developed into a tool that facilitates global

t r a n s a c t i o n , i n s t a n t l y, w i t h t h e p u s h o f a b u t t o n . Un f o r t u n a t e l y,

i n t h e c yb e r w o r l d , a s e a s i l y a s i n t h e r e a l w o r l d , t h e s e

i n t e r a c t i o n s c a n r e s u l t t o d i s p u t e s , o v er m a t t e r s a s d i v e r s e a s t o

i t e m s o f p ri v a c y, s e r v i c e q u a l i t y, d e f a m a t i o n a n d i n t e l l e c t u a l

properties.

The ability to communicate with someone who might be

situated on the other end of world by pushing a single button,

c r e a t e d n e w k i n d s o f d i s p u t e s b u t al s o c h a n g e d t h e n a t u r e o f t h e

old ones. Traditional disputes became increasingly cross-border,

a n d n e w d i s p u t e s a ro s e , t h i s t i m e b o r d e r l e s s , a s t h e v i rt u a l w o r l d

k n o w s n o b o u n d a r i e s . D i s p u t e s i n c r e as e d i n n u m b e r a s an yo n e

could be much easier involved in a dispute simply by accessing

t h e i n t e r n e t . N e w d i s p u t es o f l e s s e r v a l u e a r o s e , f o r w h i c h n o

available path of resolution ex i s t ed . 5 T r a d i t i o n a l f o rm s of

3
Hereafter will be referred as ICT.
4
DOMENICI Kathy, Mediation: Empowerment in Conflict Management Prospect, (Height:
Waveland Press, Inc.), 2006, p. 18.
5
Disputes arising from e-commerce i.e. transactions over the Internet and m-commerce i.e.
transactions through the use of a mobile device.

17
d i s p u t e r e s o l u t i o n w e r e u n e q u i p p e d a n d i n a d e q u a t e t o ad d r e s s

a n d r e s o l v e t h e s e d i s p u t es . T h e n e e d f o r a s ys t e m c a p a b l e t o

a d a p t t o t h e n e w w a ys o f c o m m u n i ca t i o n f o r t h e r e s o l u t i o n o f

d i s p u t es b e c a m e i n c r e a s i n g l y a p p a r e n t d u r i n g t h e p a s t t w o

decades and seemed to suggest that the most suitable approach

would be found in the means of alternative dispute resolution.6

A s d i s p u t e s e v o l v e d s o d i d d i s p u t e r e s o l u t i o n . Al t e r n a t i v e m e a n s

of dispute resolution were transferred to the digital era, to the

v i r t u a l w o rl d a n d g a v e b i r t h t o O n l i n e D i s p u t e R e s o l u t i o n . 7

O D R a r o s e f r o m t h e c o m b i n a t i o n o f AD R a n d IC T t o o l s .

Technology was added as the fourth party to complement the

traditional three side model of the parties involved in the

d i s p u t e a n d t h e t h i r d n e u t r a l p a r t y. T h e A D R m e t h o d s g a v e b i r t h

to corresponding ODR methods with most representative

a m o n g s t t h e m , o n l i n e n e g o t i a t i o n , o n l i n e m e d i at i o n a n d o n l i n e

a r b i t r a t i o n . M a n y O D R i n i t i a t i v e s we r e b o r n t h e p a s t t w o

d e c a d e s , f r o m t h e V i r t u a l M a g i s t r a t e t o E B a y a n d P a yP a l , w h i c h

a r e c o u n t i n g m i l l i o n s o f r e s o l v e d d i s p u t e s . O D R p r e s e n t ed m a n y

a n d h i g h l y i m p o r t a n t a d v a n t a g e s a l l o wi n g f o r c o n s i d e r a b l e t i m e

and cost savings, providing flexibility in the process and

i n c r e a s e d c o n v e n i e n c e f o r t h e d i s p u t a n t s . U n f o r t u n a t e l y, b e s i d es

t h e i n v a l u a b l e a d v a n t a g e s , O D R p r e s e n t e d s e v e r a l d r a wb a c k s

6
BENYEKHLEF Karim and GELINAS Fabien, Online Dispute Resolution, Lex Electronica, vol.
10, No. 2, 2005, p. 11.
7
Hereafter will be referred as ODR.

18
s u c h a s t h e u n f a m i l i a r i t y o f u s e r s w i t h t h e n e w IC T t o o l s , t h e

lack of human interaction and face to face contact, concerns

r e l a t i n g t o a u t h e n t i c i t y, d a t a s e c u r i t y a n d c o n f i d e n t i a l i t y b u t

most i m p o rt a n t l y drawbacks involving the enforcement of

d e c i s i o n s . H o w e v er , a s i s e v i d e n t b y t h e u s e o f t h e t e r m

“drawbacks”, these problems are not without a possible solution.

The long experience of the ADR movement as well as the

relatively short but still enlightening experience of the ODR

m o v e m e n t p r o v i d e t h e n e c e s s a r y k n o w l e d g e f o r t h e s t r u ct u r i n g

o f a n O D R s ys t e m t h a t t a k e s a d v a n t a g e o f t h e i n v a l u a b l e

benefits of ODR and at the same time overcomes all the potential

d r a w b a c k s . T h i s r e s e a r c h p r o j e c t a i m s t o d o ex a c t l y t h a t .

T h e t h e s i s i s d i v i d ed i n t o t w o m ai n p a r t s a n d e a c h o f t h e s e

is further divided into two halves and each half into its relevant

chapters, sections and paragraphs. The first part of the thesis

p r o v i d e s a n ex t e n s i v e r e s e a r c h t o b o t h A DR a n d OD R . It

d e m o n s t r a t e s t h e e v o l u t i o n o f d i s p u t es a n d t h e a p p e a r a n c e o f

O D R a s a n u n a v o i d a b l e r e s u l t o f t h a t ev o l u t i o n . T h e f i r s t h a l f o f

the first part is dedicated to ADR in, what is called for

p r e s e n t a t i o n p u r p o s e s , t h e a n a l o g e r a . It b r e a k s d o w n A D R f r o m

its definition and its evolution during the ages, to its most

representative techniques that became the stepping stone for

ODR, its invaluable advantages, most of which were “inherited”

by ODR, to finally its most concerning inefficiencies that paved

19
the way for ODR. The second half of the first part is dedicated

to ODR, from the definition and the i d e n t i fi c a t i o n of

t e c h n o l o g y’ s i m p a c t , t o t h e s h o r t h i s t o r y o f O D R a n d t h e m o s t

i n f l u e n t i a l i n i t i a t i v e s , t o f i n al l y t h e i n v a l u a b l e a d v a n t a g e s o f

ODR that assure of its successful future and the unavoidable

d r a w b a c k s t h a t a n y O D R s ys t e m m u s t co m b a t .

The second part of the research is a necessary subsequent

t o t h e f i r s t . It p o r t r a ys h o w t h e O D R s ys t e m m u s t b e s t r u c t u r e d

t o t a k e f u l l a d v a n t ag e o f t h e l e s s o n s l ea r n e d f r o m t h e A D R a n d

t h e O D R ex p e r i e n ce , i n o r d e r t o m ax i m i z e t h e a d v a n t a g e s a n d

m i n i m i z e t h e p o t e n t i a l d r a w b a c k s . T h e O D R s ys t e m p r o p o s e d i n

this thesis tackles one by one all the drawbacks faced by ODR.

The first half of the second part is dedicated to the ODR

process, which must include all of the representative methods of

dispute resolution, mainly online negotiation, online mediation

a n d o n l i n e a r b i t r at i o n i n a m u l t i -s t e p p r o c e s s t h a t a i m s t o

resolve disputes as soon as possible and progresses to each step

after the failure of the previous one. Online arbitration, in

p a r t i c u l a r , m u s t b e t h e f i n a l s t e p o f t h e p r o c e s s , s i n ce o n l y

o n l i n e a r b i t r a t i o n ca n o v e r c o m e o n e o f t h e g r e a t e s t d r a w b a c k s o f

ODR, which is the enforceability of ODR outcomes. However,

online arbitration itself presents drawbacks related to the online

arbitration agreement, the online arbitration procedure and the

20
o n l i n e a r b i t r a t i o n aw a r d . T h e O D R s ys t e m p r o p o s e d i n t h e t h e s i s

demonstrates the appropriate solutions.

The second half of the second part is dedicated to the

s t r u c t u r e o f t h e O DR s ys t e m . In p a r t i c u l a r , i t p o rt r a ys t h e O D R

network as a global and international network of cooperation at

a national level between states and at a supranational level under

the auspices of an international organization wi t h great

legitimacy and global presence. The international organization

coordinates the various ODR i n i t i at i v e s around the globe,

a c c r e d i t s O D R p ro v i d e r s t h r o u g h t h e c l e a r i n g h o u s e s a n d i n

cooperation with state authorities and regulates ODR through

guidelines that p ro p o s e minimum re g u l a t o r y standards and

ensure the safeguarding of basic principles for ODR so that the

O D R s ys t e m p r o v i d e s a n e f f e c t i v e a n d f a i r w a y t o r e s o l v e

d i s p u t es . F u r t h e r m o r e , t h e s e c o n d h a l f e x a m i n e s t h e O D R s ys t e m

at the level of the provider and in particular answers all the

relevant questions regarding the funding of ODR, i.e. how ODR

providers should be funded, as well as questions regarding

t e c h n o l o g i c a l c o n s i d e r a t i o n s , i . e . w h a t IC T t o o l s s h o u l d O D R

providers e m p l o y. F i n a l l y, even though the considerable

advantages of ODR as well as the impressive success of several

O D R i n i t i at i v e s s h o u l d h a v e m a d e t h e u s e o f O D R a co m m o n

p h e n o m e n o n , h o w ev e r , O D R i s s t i l l n o t w i d e l y u s e d . O n e o f t h e

reasons behind this occurrence is the lack of awareness as well

21
as the lack of trust regarding ODR. The last section of the

second part describes all the necessary steps that must be taken

to raise awareness and increase the confidence in ODR, so that

f i n a l l y O D R w i l l r ea c h i t s f u l l e s t p o t e n t i a l .

22
Part 1

From the Analog to the Digital Era

The first part of this research project provides the

t h e o r e t i c a l f o u n d a t i o n f o r O D R . It d e s c r i b e s t h e e v o l u t i o n i n

dispute resolution that created the need for a faster and more

efficient way to resolve disputes. This need led to the

appearance of ADR in the past and the appearance of ODR in

r e c e n t t i m e s . T h e re a d e r w i l l b e t a k e n t h o u g h t a c o m p r e h e n s i v e

a n a l ys i s o f O D R a n d o f t h e e v o l u t i o n i n d i s p u t e r e s o l u t i o n t h a t

gave birth to ODR.

T h e f i r s t h a l f e x am i n e s d i s p u t e r e s o l u t i o n i n w h a t i s

referred here, for explanatory purposes, as the analog era, before

t h e u s e o f IC T t o o l s , w h e n d i s p u t e r e s o l u t i o n w a s p e r f o r m e d f a c e

t o f a c e ( t r a d i t i o n a l A D R ) . T h e f i r s t h al f i s e s s e n t i a l , n o t o n l y t o

present a more comprehensive portrait of ODR, but also because

of the commonalities between ADR and ODR. ADR combined

w i t h t h e t e c h n o l o g i c a l a d v a n c e s o f r e c e n t t i m e s ( In f o r m a t i o n a n d

c o m m u n i c a t i o n t e c h n o l o g y) i s t h e c o r e o f m o s t p l at f o r m s u s e d t o

r e s o l v e d i s p u t e s b y m a n y O n l i n e D i s p u t e R e s o l u t i o n s ys t e m s . 8

8
MUECKE Nial, STRANIERI Andrew and C. MILLER Charlynn, Re-consider: The Integration
of Online Dispute Resolution and Decision Support Systems, in POBLET Marta, Expanding the

23
O D R i n i t i al l y w a s d e v e l o p e d a s s u c h c o m b i n a t i o n a n d e v o l v e d t o

a c o n s t a n t l y d e v e l o p i n g f o r m o f d i s p u t e r e s o l u t i o n t h at u s e s

technology as an integral part of the process.9 Therefore, it is

only natural that in order to understand ODR and draw secure

conclusions the best way is to begin with the tools and

techniques of ADR and from that point examine these techniques

w h e n c o m b i n e d w i t h IC T t o o l s a n d t r a n s f e r r e d t o t h e o n l i n e

e n v i r o n m e n t . 10

T h e s e c o n d h a l f e x a m i n e s d i s p u t e r es o l u t i o n d u r i n g t h e

ongoing today digital era (ODR). The main weight of the first

p a r t w i l l r e s t o n OD R a n d t h e p ri n c i p a l s u r r o u n d i n g q u e s t i o n s .

The second half illustrates that the appearance of ODR was a

result and a necessity of the digital era and the changes it

b r o u g h t t o t h e w a ys o f i n t e r a c t i o n a n d c o m m u n i c a t i o n . F r o m

t h e r e i t p r o c e e d s t o a n i n d e p t h ex a m i n a t i o n o f O DR , i t s

d e f i n i t i o n , s e v e r a l k e y r e a l w o r l d e x am p l e s o f O DR a n d f i n a l l y

the advantages that advocate the importance of ODR and the few

drawbacks that must be overcome.

Horizons of ODR, Proceedings of the 5th International Workshop on Online Dispute Resolution
(ODR Workshop ’08), Firenze: Italy), 2008, p. 1.
9
WAHAB Mohamed S. Abdel, KATSH Ethan & RAINEY Daniel, Online Dispute Resolution:
Theory and Practice - A Treatise on Technology and Dispute Resolution, (Eleven International
Publishing), 2012, p. 23.
10
RULE Colin, op. cit., pp. 35, 36.

24
Title 1

The Analog era (ADR)

The unreasonably high costs, the unsatisfactory amount of

t i m e c o n s u m e d b y t h e c o u r t s , t h e c o m p l ex i t y o f l i t i g a t i o n

procedures and the uncertainty of results (with no “win-win

settlement b e t w e en t h e d i s p u t a n t s ) d i s c o u r a g e d a n d c o n t i n u e

t o , m o r e a n d m o r e e a c h p a s s i n g d a y, t h e a c c e s s t o t r a d i t i o n al

c o u r t s . 11. A c c o r d i n g t o Lo r d W o o l f , “ t h er e i s a c u t e c o n c e r n o v er

the many problems which exist in the resolution of disputes by

t h e c i v i l c o u rt s . T h e p r o b l e m s a r e b a s i c a l l y t h e s a m e . T h e

p r o c e s s i s t o o ex p e n s i v e , t o o s l o w an d t o o c o m p l ex . It p l a c e s

m a n y l i t i g a n t s a t co n s i d e r a b l e d i s a d v a n t a g e s w h e n c o m p a r e d t o

their opponents. The result is inadequate access to justice and an

inefficient and ineffective s ys t e m ” . 12 Alternative Dispute

Resolution, referred to also as “Appropriate Dispute Resolution”

or “Amicable Dispute resolution” (although the latter term does

not usually include arbitration), is a broad term, that is used to

d e s c r i b e t h e u s e o f m e t h o d s o t h e r t h an l i t i g a t i o n t o r e s o l v e t h e

11
HAMID Nor ‘Adha Binti Abdul, The Alternative Dispute Resolution (ADR): Malaysian
Development And Its State-of-Innovative-Art, 2010, p. 2 available at
http://www.aija.org.au/NAJ%202010/Papers/Hamid%20A.pdf
12
Lord Woolf, Access to Justice, Interim Report, June 1995; Access to Justice, Final Report, July
1996 as seen at ZUCKERMAN A. S. Adrian, Lord Woolf’s Access to Justice: Plus Ça Change....,
Modern Law Review, vol. 59, 1996, p. 773.

25
d i s p u t e . T h e v a r i o u s m e t h o d s i n c l u d ed i n A DR c o v e r a b r o a d

s p e c t r u m t h a t ex t en d s f r o m t e c h n i q u es o f m u t u a l r e s o l u t i o n t o

t h i r d - p a r t y- i m p o s e d s o l u t i o n s . 13 S o m e o f t h e m o s t c o m m o n l y

used ADR methods include arbitration, c o u r t - a n n e x ed

arbitration, mediation, negotiation, conciliation, med-Arb, mini-

trial, summary jury trial, early neutral evaluation, and judicial

s e t t l e m e n t c o n f e r e n c e s . 14 O f c o u r s e , i t w o u l d b e i m p r a c t i ca l t o

expect an in depth examination of all these forms of ADR or

their online equivalents for that matter; therefore the thesis will

be confined to the most popular and most representative

techniques of n eg o t i a t i o n , mediation and arbitration. The

a n a l ys i s o f t h e s e m e t h o d s t a k e s p l a c e i n t h e s e c o n d c h a p t e r o f

t h i s p a r t . T h e fi r s t c h a p t e r i d e n t i f i es A D R a s a c o n c e p t , i t s

c h a r a c t e r i s t i c s , i t s a p p e a r a n c e a n d i t s e v o l u t i o n . F i n a l l y, t h e

third chapter evaluates ADR by examining its advantages and

disadvantages.

13
SHAMIR Yona, Alternative Dispute Resolution Approaches and their Application, Report for
the joint UNESCO–Green Cross International project entitled “From Potential Conflict to Co-
operation Potential (PCCP): Water for Peace”, 2003, p. 6.
14
RESNIK Judith, Many Doors? Closing Doors? Alternative Dispute Resolution and
Adjudication, Ohio State Journal on Dispute Resolution, vol. 10, No. 2, 1995, pp. 217, 218.

26
Chapter 1

Alternative Dispute Resolution

T h e f i r s t c h a p t e r i s d e d i c a t e d t o t h e co n c e p t o f A D R ; i n

p a r t i c u l a r t h e fi r s t s e c t i o n s et s t h e f o u n d a t i o n b y d e f i n i n g A D R .

The second section illustrates the evolution of ADR from its

c o n c e p t i o n t o m o re r e c e n t t i m e s . F i n a l l y, t h e t h i r d s e c t i o n

r e l a t e s t o A D R o f t o d a y, d e m o n s t r a t i n g t h e g r o w t h o f AD R i n

t h e p a s t s e v e r a l ye a r s , f r o m t h e A D R m o v e m e n t i n t h e 1 9 7 0 ’ s t o

p r e s e n t d a y.

Section 1: What is ADR?

Alternative dispute resolution allows the parties in a

dispute to resolve their dispute outside the courts; it is an

a l t e r n a t i v e t o l i t i g a t i o n . S yn o n ym s i n c l u d e e x t r a - j u d i c i a l a n d

“out-of-court” dispute r e s o l u t i o n . 15 A D R offers parties the

possibility to resolve their dispute and at the same time avoid

t h e s t ri c t r e g u l a t i o n s o f l i t i g a t i o n . Th e a l t e r n a t i v e n a t u r e o f

15
HÖRNLE Julia, Cross-border Internet Dispute Resolution, (Cambridge University Press), 2009,
p. 48.

27
ADR implies that it functions as a complement to litigation

r a t h e r t h a n a s u b s t i t u t e . It i n c r e a s e s a c c e s s t o j u s t i c e s i n c e i t

i n c r e a s e s t h e l i k e l i h o o d o f d i s p u t e s b ei n g s e t t l e d t h a t w o u l d n o t

b e o t h e r w i s e , b e c a u s e o f t h e c o m p l ex i t i e s , h i g h m o n e t a ry c o s t s

a n d r e q u i r e d t i m e as s o c i a t e d wi t h t h e l e g a l p r o c e s s . A l t e rn a t i v e

dispute resolution was in the recent years explored primarily as

a w a y t o r e s o l v e d i s p u t es o u t s i d e t h e c o u r t s a n d r e d u c e t h e

judicial caseload.

Even though ADR is not a recent phenomenon, however,

t h e r e w a s a l w a ys a t e n d e n c y f o r l a w ye r s a n d a c a d e m i c s t o

c o n s i d e r t h e c o u r t s a s t h e n at u r a l a n d o b v i o u s d i s p u t e r e s o l v e r s

and to some ex t en d “ignore a rich variety of alternative

processes that may result to a more effective dispute

r e s o l u t i o n ” . 16 In t h e p a s t , c o u r t s w e r e c o n s i d e r e d t h e p r i n c i p al

m e a n s o f d i s p u t e re s o l u t i o n . F o r t u n a t e l y, f o r s o m e t i m e n o w i t

h a s b e c o m e m o r e an d m o r e c o m m o n t o d e l e g a t e c e r t a i n d i s p u t e s

t o s p e c i a l i z e d b o d i e s f o r i n i t i a l r e s o l u t i o n . 17 T h e p a s t ye a r s ,

a l t e r n a t i v e w a ys a r e u s e d m o r e a n d m o r e t o r e s o l v e c o m m e r c i a l

d i s p u t es . Over the last few decades, alternative dispute

r e s o l u t i o n h a s g r o w n r a p i d l y, f u e l e d b y a d e s i r e t o c r e a t e a m o r e

efficient way to work out differences. An alternative to the court

s ys t e m h a s b e e n c r e a t e d b y a g r o w i n g p o o l o f p r o f e s s i o n a l

16
SANDER E. A. Frank, Varieties of Dispute Processing in the Pound Conference: Perspectives
on Justice in the Future, 1979, p. 69.
17
Ibid., p. 82.

28
d i s p u t e r e s o l v e r s ; a s ys t e m t h a t e n a b l e s d i s p u t i n g p a r t i e s t o

r e s o l v e t h e i r d i s a g r e e m e n t s m u c h m o r e r a p i d l y a n d e f f e c t i v e l y. 18

T h e p a r t i e s a n d t h e i r l a w ye r s a r e i n c r e a s i n g l y s e a r c h i n g t o

resolve their disputes in a way that allows them to avoid the

f o r m a l a n d c o m p l ex p r o c e d u r e s , t h e d e f i c i e n c i e s a n d c o s t s o f t h e

courts and therefore they resort to what we call today alternative

d i s p u t e r e s o l u t i o n . A s a r e s u l t , a r b i t r a t i o n , m e d i at i o n , a n d o t h e r

alternative dispute resolution mechanisms are commonly utilized

today in such disparate fields as securities regulation,

c o m m e r c i a l l a w , e m p l o ym e n t l a w , d o m e s t i c r e l a t i o n s , l a b o r l a w ,

m e d i c a l m al p r a c t i c e , c o n s t r u c t i o n l a w , i n t e r n a t i o n a l p ri v a t e l a w ,

a n d m a n y o t h e r a r e a s . 19

The term alternative dispute resolution entails a wide

range of dispute resolution procedures the goal of which is to

r e s o l v e d i s p u t e s i n a w a y d i f f e r e n t t h a n l i t i g a t i o n . 20 It i n c l u d es

all the methods and processes, alternative to full-scale court, to

prevent and resolve conflicts and disputes. This is a term with a

very wide definition that covers any form of dispute resolution

and “comprises all mechanisms for resolving legal disputes

18
RULE Colin, op. cit., pp. 2, 3.
19
STONE V. W. Katherine, Alternative Dispute Resolution, University of California, Los Angeles
School of Law Public Law & Legal Theory Research Paper Series, Vol. 04, No. 30, 2004, p. 1.
20
“Strictly speaking the term ‘alternative’ may be something of a misnomer. Most forms of ADR
are used hand in hand with either litigation or arbitration”. See CLIFT Rhys, Introduction to
Alternative Dispute Resolution: A Comparison between Arbitration and Mediation, pp. 4, 5
available at
http://www.hilldickinson.com/pdf/A%20Comparison%20between%20Mediation%20and%20Arbit
ration.pdf

29
w i t h o u t r e s o r t i n g t o l i t i g a t i o n ” . 21 It c o v e r s a b r o a d r a n g e o f

methods for resolution, from negotiation, which is the simplest

and most direct technique of resolution, to arbitration and mini-

t r i a l s , w h i c h a r e m u c h c l o s e r t o l i t i g a t i o n , d u e t o t h e d ec i s i o n -

making authority of a third neutral p a r t y. 22 Mediation,

c o n c i l i a t i o n a s w e l l a s s o m e h yb r i d p r o c e s s e s l i k e M e d - A r b a n d

t h e O m b u d s m a n a re i n c l u d e d i n t h e A D R p r o c e d u r e s . 23 T h e

p a r t i e s t o a d i s p u t e a r e f r e e t o u t i l i z e a n y o f t h o s e m et h o d s ,

combine them, or even create new varieties of ADR forms

d e p e n d i n g o n t h ei r n e e d s a n d t h e n a t u re o f t h e d i s p u t e . H o w e v e r ,

A D R s ys t e m s u s u a l l y f a l l u n d e r o n e o f t h r e e c a t e g o r i e s a n d t h e

procedure is most often negotiation, mediation, or arbitration,

because those forms of ADR are the most representative as well

a s t h e m o s t s u c c e s s f u l . 24

21
HEUVEL V. D. Esther, Online Dispute Resolution as a Solution to Cross-border E-disputes: An
Introduction to ODR, 1997, p. 5 available at http://www.oecd.org/internet/consumer/1878940.pdf
22
SHAMIR Yona, op. cit., p. 4.
23
BROWN J. Henry and MARRIOTT L. Arthur, ADR Principles and Practice, (London: Sweet
& Maxwell), 1993, p. 19.
24
See infra at chapter 2.

30
S e c t i o n 2 : T h e b i r th o f A D R

O n e m u s t k e e p i n m i n d t h at a l t h o u g h a g r a n d h i s t o r i c a l

sweep, combined with the unavoidable economy of space, may

l a c k a n a l yt i c a l f o c u s ; h o w e v e r , n o m a t t e r h o w c o n f i n e d i t

necessarily must be, it provides a useful and more complete

perspective. Therefore it is beneficial to briefly go through the

h i s t o ri c a l developments, in order to establish a deeper

understanding of the reasons c h a p er o n i n g t h e e v o l u t i o n in

d i s p u t e r e s o l u t i o n . A s s t a t e d , “ t h e b a s i c p r e m i s e o f c o n fl i c t w a s

a l w a ys t h e s a m e : a n e x p r e s s e d s t r u g g l e b e t w e e n a t l e a s t t wo

interdependent parties who perceive scarce resources,

incompatible goals and interference from the other party in

a c h i e v i n g t h e i r g o a l s . ” 25 T h e r e f o r e , d i s p u t e s h a v e e x i s t e d s i n ce

t h e e a r l y d a ys o f c i v i l i z a t i o n a n d s o h a s t h e n e e d f o r t h e i r

resolution.

Reading about Alternative Dispute Resolution someone

could very easily come under the impression that ADR was

i n i t i a l l y c r e a t e d i n t h e U n i t e d S t at e s o f A m e r i c a d u r i n g t h e p a s t

c e n t u r y. H o w e v e r , A D R i s n o t a m o d er n p h e n o m e n o n ; i t e x i s t e d

in many cultures of the world, and existed long before

25
KATSH Ethan, op. cit., p. 953.

31
l i t i g a t i o n . 26 W h a t i s m i s t a k e n l y c o n s i d e r e d a s t h e r e c e n t b i r t h o f

ADR actually describes the renewed interest in ADR methods

a n d t h e f o r m a t i o n o f a s t r o n g m o v e m e n t ; i t s m o d e r n r e b i r t h . In

r e a l i t y, “ a l t e r n a t i v e d i s p u t e r e s o l u t i o n m e t h o d s h a v e b e e n i n u s e

s i n c e t h e e a r l y d a ys o f c i v i l i z at i o n ”. 27 A D R o r i g i n a t e s f r o m

several traditional societies that did not base the resolution of

d i s p u t es o n m e a n s o f c o e r c i o n b u t o n t h e c o n t r a r y o n u n a n i m i t y.

S o c i e t i e s i n Eu r o p e , A s i a a n d A f r i c a r e s o r t e d t o ex t r a j u d i c i a l

m e a n s t o r e s o l v e d i s p u t e s l o n g b e f o r e t h e y e v o l v e d i n t o s t a t es

w i t h h o m o g e n o u s p o p u l a t i o n . It s r o o t s d a t e b a c k t o a n t i q u i t y,

where in most traditional societies such as ancient Greece,

China, Japan and Africa, people in order to balance their

conflicts and their peaceful coexistence, endeavored means

essential for peaceful and amicable resolution of their disputes

r e s o r t i n g t o ex t r a j u d i c i a l f o r m s o f d i s p u t e r e s o l u t i o n .

The first traces of ADR can be found in “1800 BC when

t h e M a r i k i n g d o m ( i n c o n t e m p o r a r y S yr i a ) u s e d m e d i a t i o n a n d

a r b i t r a t i o n i n d i s p u t e s w i t h o t h e r k i n g d o m s ” . 28 A f i r s t c l e a r

m e n t i o n o f a r b i t r at i o n c a n b e f o u n d i n P l a t o ’ s “ La w s ” ( 3 5 0

B.C.). Also Plutarch had written a clever story about arbitration

according to which he helps two parties to resolve a dispute by

26
FIADJOE Albert, Alternative Dispute Resolution: A Developing World Perspective (London,
Sydney, Portland, Oregon: Cavendish Publishing Limited), 2004, pp. 2-6.
27
SEVERSON M. Margaret and BANKSTON V. Tara, Social Work and the Pursuit of Justice
Through Mediation, Social Work, vol. 40, no. 5, 2005, pp. 683-689.
28
BOULLE Laurence, "A History of Alternative Dispute Resolution”, ADR Bulletin: Vol. 7, No.
7, Art. 3, 2005, pp. 1, 2.

32
l e a d i n g t h e m t o a re m o t e t e m p l e a n d co n v i n c i n g t h e m t o t a k e a n

oath that they will obey to his arbitral award which was: “Stay

h e r e u n t i l yo u c o n c i l i a t e ” . In a n c i e n t A t h e n s , t h e a r b i t r a t o r s i n

p r i v a t e l a w s u i t s t r i e d t o m a k e s u r e t h a t e v e r yt h i n g w a s s e t t l e d

by compromise between the conflicting parties by reaching an

amicable settlement; and even when they were unable to do so,

t h e y a l w a ys d e c i d e d m o r e i n a s p i ri t o f f a i r n e s s a n d n o t s t r i c t

o b s e r v a n c e o f t h e l a w , a s A r i s t o t l e s ays i n h i s b o o k ” A t h e n i a n

C o n s t i t u t i o n ” . 29 A r a r e a n d w o n d r o u s m o n u m e n t o f A D R i s a n

i l l u s t r a t i o n o f a n a rb i t r a t i o n p r o c e d u r e o n t h e s h i e l d o f A ch i l l e s ,

o n w h i c h H e p h a e s t u s f o r g e d a d i s p u t e r e s o l u t i o n b e t w ee n t w o

m e n , w h o f o r a j u s t s o l u t i o n a d d r es s e d a t h i rd p e r s o n , t h e

‘ Is t o r a ’ , i . e . t h e a r b i t r a t o r , a s g r a p h i c a l l y d e s c r i b e d b y H o m e r i n

t h e Il i a d a t t h e 1 8 t h R h a p s o d y. 30 T h e p r a c t i c e o f s e t t l i n g d i s p u t e s

b y a r b i t r a t i o n o c cu r r e d v e r y f r e q u e n t l y i n a n c i e n t c l a s s i c a l

G r e e c e , w h e r e t h e i n s t i t u t i o n o f Am p h i c t yo n i c w a s d e v e l o p e d ,

which is considered the first organized institution of arbitration

and the ancestor of modern arbitration organizations.

The Code Digesto of the ancient Romans, stated that a

third person, ca l l e d ''arbitri'', ''recepti arbitri'' or

' ' c o m p o m i s s o ri ' ' , w i l l s e t t l e d i s p u t e s a r i s i n g . T h e C o n f u c i a n

school in ancient China, inspired by the moral and political

29
ARISTOTLE, Athenian Constitution, 53 1-4.
30
HOMER, Iliad ΙΗ’ 478-608 : “[Λαοί δ’ ειν αγορή εθρόοι ένθα δε νείκος … ωρώρει, δύο δ’
άνδρες ενείκεον είνεκα ποινής…. ανδρός αποφθιµνέου ο µεν εύχετο παντ’ αποδούναι …]”

33
p h i l o s o p h y o f C o n fu c i u s , h a d f o s t e r e d i n t e n s e a n d a d m i r ab l y i n

the resolution of disputes with moral persuasion and friendly

s e t t l e m e n t . 31 From the Zh o u period, in accordance with

o b e d i e n c e t o c e r e m o n i a l r u l e s , t h e re w a s a n o b l i g a t i o n t o

a t t e m p t r e s o l v i n g d i s p u t e s a m i c a b l y. O t h e r A s i a n s o c i e t i e s , f o r

example Japan, also used to choose mediation for the resolution

o f d i s p u t e s . A D R a l s o ex i s t s i n l e s s d e v e l o p e d s o c i et i e s t h a t

have kept a more primitive way of living, like the Bushmen in

t h e K a l a h a r i D e s e r t . 32

In In d i a a l r e a d y s i n c e 5 0 0 B . C . a r b i t r a t i o n w a s a f e a t u r e o f

In d i a n l i f e . P e o p l e s u b m i t t e d t h e i r d i f fe r e n c e s v o l u n t a r i l y t o t h e

“ P a n c h a ya t s ” w h o r e s o l v e d t h e d i s p u t es a n d t h e i r d e c i s i o n s w e r e

binding. Furthermore, disputes were settled peacefully with the

intervention of the “kulas” (family or tribal assemblies), the

“srenis” (unions of men with the same job) and the “parishads”

(assemblies of educated people who knew the law), before they

w e r e b r o u g h t t o t h e k i n g f o r a r u l i n g . M u c h l at e r , i n 1 8 8 9 t h e

f i r s t In d i a n A r b i t r a t i o n A c t w a s p a s s ed , w h i c h m a d e A D R m o r e

31
WATSON Adam, The Evolution of International Society: A Comparative Historical Analysis,
(Taylor & Francis Book L.t.d.), 2006, p. 163.
32
“The lack of technological refinement belies sophistication in dispute resolution practices which
have evolved without courts and a formal state system and are suited to the needs of a collective
hunter-gatherer society. The Bushmen’s is not an idyllic existence and disputes occur over food,
land and mates. Those in conflict bring other members of the tribe together to hear out both sides.
Where passions rise, senior tribal members hide the disputants’ poisoned hunting arrows to
prevent resort to violence. If resolution is not reached in the small group the larger community is
brought together where everyone is able to talk through methods that have obvious analogies with
mediation, conciliation and peace-making practices in non-traditional societies similar among
Hawaiian islanders, the Yoruba of Nigeria and the Abkhazian of the Caucuses.” See BOULLE
Laurence, op. cit., pp. 1, 2.

34
s ys t e m a t i c a n d o r g a n i z e d , a n d w i d e l y u s e d t o r e s o l v e d i s p u t e s i n

r e c e n t ye a r s .

R e l i g i o n a l w a ys a c c e p t e d A D R a s a w a y t o r e s o l v e a

d i s p u t e . T h e C h r i s t i a n r e l i g i o n a s we l l a s J u d a i s m l o n g a g o

provided guidance on how to resolve disputes and had

e s t a b l i s h e d n e g o t i a t i o n , m e d i a t i o n a n d a r b i t r a t i o n a s m a i n w a ys

of resolution. The dialogue between Abraham and god regarding

criteria for the destruction of Sodom and Gomorrah, taken from

the torah, is one of the first m en t i o n s of a negotiation;

furthermore the Ten Commandments and the 613 laws that can be

found in the torah, which Moses brought from mount Sinai are

o n e o f t h e f i r s t ex am p l e s o f a f r a m e wo r k t h a t g u i d e d p e o p l e o f

t h a t t i m e o n h o w t o r e s o l v e d i s p u t e s . 33 A c c o r d i n g t o t h e B i b l e,

K i n g S o l o m o n i n 9 6 0 B . C . w a s t h e fi rs t a r b i t r a t o r , w h e n h e w a s

asked to resolve a dispute about a baby and his rightful mother.

When the two women wrote to Solomon to resolve their dispute,

h e r e f e r e e d w i t h w i s d o m a n d c o m p a s s i o n a n d r e s o l v ed t h e

d i s p u t e b y a w a r d i n g j u s t i c e . 34 F u r t h e r m o r e , A p o s t l e P a u l ar g u e d

i n f a v o u r o f t h e u s e o f A D R i n s t e a d o f l i t i g a t i o n a s a m ea n s o f

resolving disputes between people of their faith. “I say this to

s h a m e yo u . Is i t p o s s i b l e t h at t h e r e i s n o b o d y a m o n g yo u t o b e

w i s e e n o u g h t o j u d g e a d i s p u t e b e t w ee n b e l i e v e r s ? B u t i n s t e a d ,

33
LODDER R. Arno and ZELEZNIKOW John, Enhanced Dispute Resolution through the use of
Information Technology, Cambridge University Press, 2010, p. 1.
34
The Bible, 1 Kings 3:16-28.

35
o n e b r o t h e r g o e s t o l a w a g a i n s t a n o t h er a n d t h i s i s i n f r o n t o f

u n b e l i e v e r s . T h e v e r y f a c t t h a t yo u h a v e l a w s u i t s a m o n g yo u

means yo u have been completely defeated a l r e a d y” . 35 T h e

concept of arbitration (thakim) was practiced in the Middle East

f r o m t h e e a r l y d a ys o f Is l a m a n d Is l a m i c l a w e a r l y o n r e c o g n i z e d

t h e l e g i t i m a c y o f a r b i t r a t i o n a s a p e ac e f u l m e a n s o f r e s o l v i n g

d i s p u t es b o t h i n c i v i l a n d p u b l i c l a w . 36 “ A m o n g t h e i n t r i g u i n g

h i s t o ri c a l i l l u s t r a t i o n s o f ‘ A D R ’ p h e n o m e n a i s t h e r o l e o f

M o h a m m e d i n a v e r t i n g w a r o v e r t h e r e c o n s t r u c t i o n o f K a a b a ” . 37

P e o p l e f r o m al l r e l i g i o n s , s u c h a s J e w s , C h r i s t i a n s , M u s l i m s a n d

B u d d h i s t s h a v e p r a c t i c e d A D R f o r t h o u s a n d s o f ye a r s . 38

B u t e v e n l a t e r o n t h r o u g h o u t h i s t o r y, a l t e r n a t i v e m e a n s o f

d i s p u t e r e s o l u t i o n a l w a ys h a d a s t r o n g p r e s e n c e . F o r i n s t a n c e ,

d u r i n g t h e m i d d l e ag e s , “ w h e n e v e r a n i n j u r y w a s c a u s e d b y o n e

p e r s o n a g a i n s t a n o t h e r , t h e p a r t i e s we r e e x p e c t e d t o r e a c h a n

agreement that would restore both parties and the community to

a state where all involved healed from i n j u r y” . 39 A n o t h er

example of ADR during the middle ages was in West Francia, the

u s e o f s ym b o l i c c o n t e s t s t o r e s o l v e l a n d d i s p u t e s . In t h e It a l i a n

p e n i n s u l a , s e v e r a l It a l i a n c i t i e s b e c a m e t r a d i n g c e n t e r s o f t h e

t h e n k n o w n ci v i l i z e d w o r l d a n d u t i l i z e d A D R t h r o u g h t h e

35
The Bible, 1 Corinthians 6:6.
36
WATSON Adam, op. cit., p. 57.
37
BOULLE Laurence, op. cit., pp. 1, 2.
38
MOORE W. Christopher, The Mediation Process: Practical Strategies for Resolving Conflict,
(John Wiley & Sons), 2003, p. 14.
39
SEVERSON M. Margaret and BANKSTON V. Tara, op. cit., pp. 683-689.

36
existence of the “fair courts” that were established by

commercial traders in order to resolve the disputes that arose

d u r i n g t h e a n n u a l f ai r s .

In E n g l a n d d u r i n g t h e 1 0 t h c e n t u r y n e i g h b o u r s o v e r c a m e

private differences in accordance with customary law and “there

were a number of early examples of consensual jurisdiction,

m o r e l i k e m o d e r n ar b i t r a t i o n , i n a d d i t i o n t o t h e p r o p e r t y b a s e d

p o w e r o f t h e k i n g a n d t h e l o c a l l o r d ” . 40 B y 1 2 2 4 a r b i t r a t i o n w as

u s e d t o r e s o l v e c o m m e r c i a l d i s p u t e s . 41 D u r i n g t h e f o u r t e e n t h a n d

fifteenth centuries ADR was fairly common and the lobby of the

“Chartered In s t i t u t e o f A r b i t r a t o r s ” i n Lo n d o n h a s s e v e r a l

framed arbitration awards from that time, that are very similar to

t o d a y’ s a w a r d s a n d a c c o r d i n g t o w h i c h , a r b i t r a t o rs r e s o l v e d

d i s p u t es r e l a t i n g t o l a n d d i s p u t e s b e t we e n n e i g h b o r s , a s w e l l a s

f a r m i n g r i g h t s . 42

In F r a n c e , o n e o f t h e h o m e l a n d s o f m o d e r n p r e v e n t i v e

resolution, it is characteristic that the French legislator

introduced in 1790, as mandatory in all cases, the previous

attempt of the parties to c o n c i l i at e . 43 After the French

R e v o l u t i o n , a r b i t r at i o n w a s r e g a r d e d a s n a t u r a l l a w an d t h e

40
MANEVY Isabelle, Online Dispute Resolution: What Future? 2001, p. 4 available at
http://lthoumyre.chez.com/uni/mem/17/odr01.pdf
41
CARTER T. Albert, A History of the English Courts, 7th Ed., (London: Hambledon Press), 1994,
pp. 2, 3.
42
RULE Colin, op. cit., pp. 13, 14.
43
FERRAND Frederique, La mediation judiciaire, EXPERTS, No 41, 1998, p. 8.

37
C o n s t i t u t i o n o f 1 7 9 1 d e c l a r e d t h e c o n s t i t u t i o n al r i g h t o f ci t i z e n s

to resort to arbitration. Already in the second half of the 19th

century there is mediation to resolve disputes concerning

e m p l o ym e n t relationships in England, France, Belgium and

Holland.

E v e n i n t h e U n i t e d S t a t e s , wi t h t h ei r r e l a t i v e l y s h o r t e r

h i s t o r y, A D R h a s b e e n i n e f f e c t f o r c e n t u r i e s . F o r i n s t a n c e ,

“ s t a t u t e s l i k e t h o s e e n a c t e d i n P e n n s yl v a n i a i n 1 7 0 5 a n d 1 8 1 0 ,

provided for arbitration in m a t t e rs pending in c o u r t ” . 44

Furthermore, George Washington’s last testament included an

arbitration cl a u s e providing that any dispute about the

interpretation of its wording should be resolved by a panel of

t h r e e a r b i t r a t o r s . In 1 8 5 4 t h e U n i t ed S t at e s S u p r e m e C o u r t

issued a verdict in accordance to which arbitrators were entitled

to issue binding decisions and contributed in 1925 to the

enactment of the federal arbitration act. At the beginning of the

twentieth c e n t u r y, ADR was promoted even further with

international arbitration “as the foundation of a new world order

and the formulation of many major ADR organizations such as

t h e ‘ In t e r n a t i o n a l C o u r t o f A r b i t r a t i o n ’ a t t h e ‘ In t e r n a t i o n a l

Chamber of Commerce’ (1923) and the ‘American Arbitration

A s s o c i a t i o n ’ ( 1 9 2 6 )” . 45

44
MANEVY Isabelle, op. cit., p. 4.
45
RULE Colin, op. cit., pp. 13, 14.

38
Section 3: The 20th Century Rebirth of ADR

Disputes and dispute resolution have changed over the

c e n t u r i e s a n d c o n t i n u e d t o c h a n g e d u r i n g t h e t w e n t i e t h c e n t u r y.

In t h e U n i t e d S t a t e s , p a r t i c u l a r l y, d u r i n g t h e 1 9 6 0 s m ed i a t i o n

becomes highly developed with the establishment of community

mediation centers in order to resolve environmental disputes,

f a m i l y d i s p u t e s , a n d c o m m e r c i a l m a t t e r s . 46 “ In t h e 1 9 7 0 s , j u r i s t s

b e g a n t o v o i c e c o n c e r n s a b o u t t h e r i s i n g c o s t s a n d i n c r ea s i n g

d e l a ys a s s o c i a t e d w i t h l i t i g a t i o n a n d s o m e e n v i s i o n e d c h e a p e r ,

faster, less formal and more effective dispute resolution in such

a l t e r n a t i v e s a s a rb i t r a t i o n a n d m e d i a t i o n ” . 47 In r e s p o n s e t o

deficiencies in the official court s ys t e m , mainly academic

scholars advocated the increasing use of ADR and

c o n c e p t u a l i z e d A DR , f o r m i n g w h a t l a t e r b e c a m e k n o w n a s t h e

m o d e r n A D R m o v em e n t . 48 W h i l e t h e r e l o n g h a v e b e e n a l t e r n a t i v e

means to resolve disputes other than traditional litigation,

p e r h a p s o n e o f t h e m o s t i m p o rt a n t m i l e s t o n e s f o r A D R wa s t h e

1970’s, when in Europe and North America the increase in civil

c o u r t c a s e s l e d l a wye r s a n d a c a d e m i c s t o s p e a k o f t h e s o c a l l e d

“litigation ex p l o s i o n ” and resulted in the modern ADR

movement.

46
Ibid., p. 15.
47
MANEVY Isabelle, op. cit., p. 4.
48
HÖRNLE Julia, op. cit., p. 48.

39
T h e A D R m o v e m en t w a s t h e c e n t r e o f a t t e n t i o n a t t h e

“ P o u n d C o n f e r e n c e o n T h e C a u s e s o f P o p u l a r D i s s a t i s fa c t i o n

with the Administration of Justice”, which took p l ac e in

M i n n e a p o l i s , M i n n es o t a , f r o m t h e s e v en t h t o t h e n i n t h o f A p r i l

1976 and where “US chief Justice Warren Burger encouraged the

e x p l o r a t i o n a n d u s e o f i n f o r m a l d i s p u t e r e s o l u t i o n p r o c e s s e s ” . 49

At the same conference, Harvard Law Professor Frank E.A.

Sander revolutionized the ADR field by proposing the formation

of the “multi-door courthouse”, according to which “disputes

would be evaluated then directed to the most appropriate process

o r s e q u e n c e o f p r o c e s s e s ” . 50 La w s c h o o l s a n d a c a d e m i c s s t a r t e d

t o d e v e l o p t h e t h e o r e t i c a l b a c k g r o u n d b e h i n d A DR , b as e d o n

c o n c e p t s s u c h a s n e g o t i a t i o n t h e o r y, w h i c h t u r n e d t h e d i s p u t e

resolution movement into a defined discipline and allowed for an

expansion and professionalization of the field during the next

d e c a d e s . 51 N e w A D R p r o v i d e r s s t a r t e d t o i n c r e a s i n g l y a p p e a r a n d

the already existing ones experienced a dramatic raise of their

c a s e l o a d . 52

The increasing difficulty to ascribe justice, in a worldwide

level, due to the large number of cases brought to court, the

49
LODDER R. Arno and ZELEZNIKOW John, op. cit., p. 1.
50
JACOBS L. Becky, Often Wrong, never in Doubt: How Anti-arbitration Expectancy Bias may
Limit Access to Justice, Maine Law Review, vol. 62, 2010, p. 532.
51
RULE Colin, op. cit., p. 16.
52
For instance, “the American Arbitration Association, the largest business-to-business dispute
resolution service provider in the United States, handled more than 150,000 cases in 1999, while
Judicial Arbitration and Mediation Services (JAMS) handled more than 60,000. The Better
Business Bureau (BBB) handled more than 450,000 cases in 2000”. Ibid., p. 17.

40
o r g a n i z a t i o n a l s t ru c t u r e o f t h e j u d i c i a l s ys t e m , t h e c o n t i n u o u s

procedural processes, the long duration of the trial sometimes

leading to a denial of justice, the high economic costs which in

m a n y c a s e s e x c e e d t h e v a l u e o f t h e s u b j e c t m a t t e r , an d t h e

p s yc h o l o g i c a l suffering of the parties, made litigation

ineffective, thereby leading over the past few ye a r s all

developed countries to seek remedies and immerge various forms

o f a l t e r n a t i v e d i s p u t e r e s o l u t i o n . 53

The dissemination in theory and practice of alternative

w a ys t o r e s o l v e d i s p u t e s a n d a v o i d l i t i g a t i o n w a s i n t h e f i r s t

p l a c e a r e s u l t o f t h e p a r t i e s t h e m s el v es w h o w i s h e d t o a v o i d t h e

f o r m a l , c o m p l ex an d o f t e n l e n g t h y j u d i c i a l p r o c e d u r e s , t h e

d e f i c i e n c i e s , c o s t s a n d t h e i n c r e a s e d u n c e r t a i n t y, a n d s e c o n d l y, a

result of the realization that civil justice was and still is in

crisis due to excessive caseloads of private disputes overloading

t h e c i v i l c o u rt s o f a l l d e v e l o p e d c o u n t r i e s . F o r i n s t a n c e , i n

F r a n c e t h e l a s t t h i r t y ye a r s h a v e s e e n a l a r g e i n c r e a s e i n c i v i l ,

commercial and labour cases for judgment. The French judicial

s ys t e m responds quite adequately in the first degree, by

p r o c e s s i n g c a s e s w i t h i n a r e a s o n a b l e p e r i o d o f 6 - 9 m o n t h s . In

second degree, however, there is a considerable problem with

cases in the Court of Appeal taking up to 14 to 16 months with

the prospect of continuous increase in time.


53
HERTZ Ketilbjørn & LOOKOFSKY Joseph, Transnational Litigation and Commercial
Arbitration, (Juris Publishing Inc.), 2nd Ed., 2004, p. 755.

41
It a l y i s f a c i n g a v e r y s e r i o u s p r o b l em i n t h e h a n d l i n g o f

p r i v a t e d i s p u t e s b ec a u s e o f t h e e v e r i n c r e a s i n g c a s e s . T h i s h a s

r e s u l t e d i n t h e a v e r a g e d u r a t i o n o f a t r i a l t o ex c e e d t h r e e ye a r s

i n t h e f i r s t i n s t a n ce a n d f o r a f i n a l d e c i s i o n o f t h e C o u r t o f

A p p e a l t h e p a r t i e s o f t e n w a i t m o r e t h a n 1 0 ye a r s . B e c a u s e o f

t h i s s i t u a t i o n m a n y It a l i a n l a w ye r s a p p e a l t o t h e E u r o p e a n C o u r t

s e e k i n g t h e c o n v i c t i o n o f t h e It a l i a n g o v e r n m e n t f o r b r e a c h o f

Article 6 of the “European Convention on Human Rights”, which

p r o v i d e s , t h e ri g h t o f e v e r y p e r s o n t o b e t r i e d i n t h e c a s e w i t h i n

a r e a s o n a b l e t i m e . In E n g l a n d , t h e t i m e r e q u i r e d t o p r o c e s s a

c a s e i n t h e f i r s t i n s t a n c e i s a r o u n d t h r e e ye a r s f o r t h e c o u r t o f

Lo n d o n a n d a r o u n d f o u r ye a r s f o r c a s e s i n c o u r t s o u t s i d e

Lo n d o n . T h e g r e a t e s t p r o b l em i s , t h e ex t r e m e l y h i g h c o s t s w h i c h

the rich can withstand because of their financial situation and

the poor because of the benefit of free legal aid, but for people

of the middle classes who do not have the financial ability nor

qualify for free legal aid, to appeal to civil justice is almost

prohibitive. F i n a l l y, in the United States d e l a ys in the

processing of civil cases are quite large although the duration of

the trial is different in each state and often in the courts of the

s a m e s t a t e . 54 T h e i n e f f e c t i v e n e s s o f t r a d i t i o n al c o u r t s , d u e t o t h e

excessive caseload combined with numerous advantages of ADR,

s h i n e d t h e s p o t l i g h t o n t h o s e m e t h o d s as a n e f f e c t i v e a l t e r n a t i v e .

54
GENN Hazel, 'Tribunals and. Informal Justice', Modern Law Review, vol. 56, 1993, p. 277.

42
A s s t a t e d , t h e m o d e r n A D R m o v e m en t f o u n d i t s r o o t s

initially in the United States, which resulted to considerable

skepticism from the European side as it was perceived as “a way

t o A m e r i c a n i z e t h e l a w ” . 55 H o w e v e r , o v e r t h e ye a r s a l t e r n a t i v e

resolution has gained strength in contemporary positive law.

Especially lately ADR becomes more and more popular in

Europe to a point where in the United States the percentages are

s i m i l a r t o t h o s e o f c o n t i n e n t a l E u r o p e . In a s u r v e y c o n d u c t e d b y

the Euro-barometer and published in October 2004, the results

showed that 59% of the people were aware of the existence of

alternative dispute resolution, while 56% felt ready to resort to

A D R , i f n e c e s s a r y. N o t o n l y t h a t , b u t f u r t h e r m o r e d u r i n g t h e

p a s t ye a r s i n t h e Eu r o p e a n U n i o n t h e re h a v e b e e n c o n s i d e r a b l e

efforts to regulate the development of ADR “particularly in the

information society context, in order to improve the trust that

c o n s u m e r s a n d s m a l l a n d m e d i u m - s i z e d b u s i n e s s e s p l ac e i n

e l e c t r o n i c c o m m e r ce ” . 56

M e m b e r S t at e s a n d i n s t i t u t i o n s h a v e s h o w n a s t r o n g a n d

substantial interest in ADR. Starting from the action plan of the

Vienna European Council in December 1998, the conclusions of

the Tampere European Council in 1999 and the work on the

55
MARRIOTT, Arthur, Tell it to the judge…but only if you feel you must, Arbitration
International, vol.12, 1995, p.13.
56
COM/2002/0196 final, Green paper on alternative dispute resolution in civil and commercial
law, 2002, p. 6.

43
E u r o p e a n S u m m i t i n Li s b o n i n 2 0 0 0 , 57 t h e C o u n c i l o f M i n i s t e rs

for Justice and Home Affairs in 2000 invited the Commission to

p r e s e n t a “ G r e e n P ap e r o n a l t e r n a t i v e d i s p u t e r e s o l u t i o n i n c i v i l

a n d c o m m e r c i a l l a w” , e x c l u d i n g A r b i t ra t i o n . 58 In 1 9 . 0 4 . 2 0 0 2 , t h e

Commission adopted the “Green Paper on alternative dispute

r e s o l u t i o n i n c i v i l an d c o m m e r c i a l l a w ” , w h i c h r a i s e s a w a r e n e s s

o n A D R , d e t a i l s t h e d e v e l o p m e n t s i n t h e f i e l d o f ex t r a j u d i c i a l

dispute resolution and notes that the development of those

specific methods for resolving disputes should not be seen as a

way of addressing the difficulties that characterize the

f u n c t i o n i n g o f t h e c o u r t s , b u t a s an a l t e r n a t i v e m e a n s t o

consensual social peace, which in many cases might be more

convenient to resort to.

E s p e c i a l l y f o r c o n s u m e r d i s p u t e s w h i ch a r e c o n s i d e r e d t h e

most advanced regarding extrajudicial s e t t l e m e n t , 59 the

C o m m i s s i o n c o n s i d e r e d t h a t A D R t h ro u g h i m p a r t i a l m ed i a t o r s

can lead to constructive solutions and proceeded to issue

recommendations according to which there are two major

categories of alternative methods of dispute resolution. One

includes procedures under which the third party finds a solution

which then submits to the parties and the other includes

57
DONEGAN L. Susan, Alternative dispute resolution for global consumers in E-commerce
transactions. E-commerce: law and jurisdiction (Kluwer Law International), 2003, p. 61.
58
COM/2002/0196 final, op. cit., p. 10.
59
JACOBS Wendela and JOUSTRA Caria, Consumer redress schemes from a comparative
perspective, Consumer Law Journal, vol. 11, 1995, p. 16.

44
procedures in which a third party helps the parties to reach an

agreement, without taking a firm stand on how to resolve the

dispute. The interest of the Community and the great importance

i t a t t a c h e s t o a l t e r n a t i v e w a ys o f d i s p u t e r e s o l u t i o n i s s h o w n b y

t h e c r e a t i o n i n 2 0 0 0 o f t h e E u r o p e a n E x t r a j u d i ci a l - N e t b o o k

“ E E j - N e t ” t o c o o r d i n a t e d i s p u t e r e s o l u t i o n i n M e m b e r S t a t es

a n d p r o v i d e c o m m u n i c a t i o n a n d s u p p o r t t o t h e p a r t i es . T h e

“Directive 2008/52/EC of the European parliament and of the

council of 21 May 2008 on certain aspects of mediation in civil

and commercial matters” encourages the use of mediation and

a m i c a b l e s e t t l e m e n t o f d i s p u t e s a n d i s a p p l i c a b l e ( i n i t i al l y) i n

cross-border disputes in civil and commercial matters, excluding

tax, customs, administrative affairs and the liability of the State

f o r a c t s o m i s s i o n s . 60 O n e c a n c l e a r l y s e e t h e E U e f f o r t s t o

facilitate access to ADR, by promoting amicable settlement and

t h e u s e o f m e d i a t i o n a n d b y b a l a n c i n g t h e r e l a t i o n s h i p b et w e e n

ADR and the judicial route.

O v e r t h e l a s t ye a r s i t h a s b e c o m e s t a n d a r d i n s e v e r a l

European member states for the court to recommend or require

the prior attempt of the resolution of the dispute through ADR

before the parties are allowed to proceed to litigation. For

i n s t a n c e , “ i n P o rt u g a l a n d s e v e r a l G e r m a n ‘ Lä n d e r ’ , c l a i m a n t s

60
2008/52/EC Directive of the European parliament and of the council of 21 May 2008 on certain
aspects of mediation in civil and commercial matters, Official Journal of the European Union L
136/3.

45
m u s t f i r s t r e s o r t t o A D R b e f o r e t h e a c t u a l j u d i c i a l p r o c ee d i n g s

m a y b e g i n , w h e r e a s i n Ir e l a n d a n d S w e d e n , t h e c o u r t w i l l

a t t e m p t t o a c h i e v e a s e t t l em e n t am o n g t h e p a r t i e s , e v e n i f s u c h

i s n o t l e g a l l y r e q u i r e d ” . 61

In F r a n c e t h e p r e v a i l i n g a l t e r n a t i v e w ays o f s e t t l i n g c i v i l

d i s p u t es i n c l u d e c o n c i l i a t i o n a n d m e d i a t i o n . B o t h a r e p r o p o s e d

b y t h e j u d g e a n d e x e r c i s e d b y a t h i r d p a rt y. T h e F r e n c h

p r o c e d u r a l l a w ex p r e s s l y p r o v i d e s t h a t s e t t l e m e n t i s a m o n g t h e

p o w e r s o f t h e c o u r t . M e d i a t i o n i s p r i m a r i l y e x e r c i s e d i n fa m i l y

m a t t e r s , i n h e r i t a n ce , l a b o r , j o i n t o wn e r s h i p a n d c o m m e r c i a l

m a t t e r s a s w e l l a s g e n e r a l m a t t e r s o f b u s i n e s s l a w . T h e co u r t , i f

it considers that a dialogue can take place between the parties

and that an alternative method is more suitable for the resolution

o f t h e d i s p u t e m ay a p p o i n t a n e u t r al t h i r d p a r t y t o c o n d u c t

mediation. The mediation should be completed in three months,

but there is a possibility to extend for another 3 months. A legal

p e r s o n ( a n a g e n c y o r a m e d i a t i o n c o m p a n y) o r a n a t u r a l p e r s o n

m a y b e a p p o i n t e d a s a m e d i a t o r . Th e m e d i a t o r i s i n d e p e n d e n t

and acts freely in mediation without following a strict

p r o c e d u r e , b u t u n d e r t h e s u p e r v i s i o n o f t h e j u d g e . In t h e e n d , i f

the parties come to a settlement, they report it to the court. The

judge, if the parties so request, may declare enforceable the

61
EU study on the Legal analysis of a Single Market for the Information Society. New rules for a
new age? Digital Agenda For Europe; A 2020 initiative, 2010, pp. 10, 11.

46
agreement for resolving the dispute, if it does not violate any

r u l e o f t h e l a w , i s n o t c o n t r a r y t o p u b l i c p o l i c y o r a b u s i v e . 62

In E n g l a n d , i n a d d i t i o n t o t h e o r d i n a r y c i v i l c o u r t s a n d t o

complement them, alternative justice operates successfully and

w i t h t h e p r o s p e c t o f a d v a n c e m e n t . In i t i a t e d b y f a m i l y l a w i n

1980 ADR has been extended to almost all areas of private law,

p r i m a r i l y i n c o m m e r c i a l l a w , w h i c h h a s s h o wn c o n s i d e r a b l e

g r o w t h . S e v e r a l A DR c e n t e r s o p e r a t e , s u c h a s t h e “ Lo n d o n C o u r t

of In t e r n a t i o n a l Arbitration”, as independent organizations

( b o d i e s ) , s t a f f e d b y l a w ye r s a n d o t h e r t r a i n e d p r o f e s s i o n a l s ,

covering the entire spectrum of ADR. The rules of civil

p r o c e d u r e i n E n g l a n d , a f t e r a r a d i c a l r e f o r m b y Lo r d W o o l f,

argue explicitly and unambiguously in favor of the alternative

justice. Explicitly given is the right in court to stay the

proceedings for a month, even if the parties do not wish to

attempt to resolve their dispute through mediation.

Furthermore, besides Europe in other parts of the world

ADR has become a c o m m o n a l i t y. Japan has an ex t e n s i v e

tradition in ADR and the beginnings of alternative methods of

r e s o l v i n g d i s p u t e s a r e r e a c h i n g t h e 1 6 t h c e n t u r y. M e d i a t i o n i s

p r a i s e d b y a l l r e l e v a n t p l a ye r s , a s t h e w a y t o r e s o l v e d i s p u t e s ,

which is the most convenient and the most adapted to the

mentality and culture of the Japanese people. When it comes to

62
FERRAND Frederique, op. cit., p. 10.

47
s m a l l cl a i m s ( u n d e r 3 0 0 , 0 0 0 ye n ) t h e j u d g e r e f e r s t h e c a s e t o a

m e d i a t o r f o r a m i c a b l e s e t t l e m e n t a n d t h e l a w ye r s t h e m s e l v e s

s e e k a n a m i c a b l e s e t t l e m e n t o f c a s e s . In J a p a n , t h e c u r r e n t l e g a l

framework is not limited to mediation and there are many ADR

organizations, depending on the t yp e s of cases (e.g.

e n v i r o n m e n t al pollution, e m p l o ym e n t relationships,

construction, accidents, credit agreements, trade in raw

m a t e r i a l s , d e f e c t i v e p r o d u c t s , i n t e l l e c t u a l p r o p e r t y, e t c . ) .

In In d i a , extrajudicial s et t l e m e n t s are encouraged to

address the growing backlog of cases pending before the courts.

In 1 9 9 6 In d i a a d o p t e d t h e La w o n A r b i t r a t i o n a n d C o n c i l i a t i o n ,

which was based on the “United Nations Commission on

In t e r n a t i o n a l Trade La w ( U N C IT R A L) Model La w on

international Commercial Arbitration”, and since then has

f u r t h e r d e v e l o p e d a n d p r o m o t e d A DR , b y f a c i l i t a t i n g t h e u s e o f

various ADR methods, such as arbitration, m ed i a t i o n ,

c o n c i l i a t i o n , n e g o t i a t i o n , M i n i - T r i al s , c o n s u m e r s f o r u m s , Lo k

Adalats and the Banking Ombudsman. For the ef f e c t i v e

implementation of alternative dispute resolution mechanisms, a

number of important organizations have been established,

making significant contributions to the promotion of ADR in

In d i a , t h a t n e e d s p e c i a l m e n t i o n , s u c h a s t h e “ In d i a n C o u n c i l o f

A r b i t r a t i o n ” ( IC A ) , t h e “ In t e r n a t i o n a l C e n t r e f o r Al t e rn a t i v e

D i s p u t e R e s o l u t i o n ” ( IC A D R ) t h e “ F e d e r a t i o n o f In d i a n C h a m b e r

48
o f C o m m e r c e a n d In d u s t r y” , t h e “ In d i a n C h a m b e r o f C o m m e r c e ”

a n d t h e “ C h a m b e r o f C o m m e r c e a n d In d u s t r y o f B e n g a l ” .

In Canada and particularly in Quebec the amicable

settlement of cases occurs through judicial mediation before the

Court of Appeals. This alternative measure has proven highl y

s u c c e s s f u l a n d h a s m e t t h e p o s i t i v e c o n t r i b u t i o n o f l a w ye r s . 63 In

t h e U . S . A DR i s i n t h e m i n d s o f t h e p a r t i e s t h e m o s t p o p u l a r

institution for fast, economical and efficient resolution of the

d i s p u t e . Th e “ U n i f o r m M e d i a t i o n A c t ” i s t h e s p e c i a l l e g a l

f r a m e w o r k t h a t r e g u l a t e s t h e i s s u e t h ro u g h o u t t h e c o u n t ry a n d

m e d i a t i o n i s a p p l i ed i n m a n y b r a n c h e s o f l a w ( f a m i l y, l a b o r ,

criminal and administrative litigation). Furthermore, Alternative

D i s p u t e R e s o l u t i o n i s a n a l yz e d a t a h i g h s c i e n t i fi c l e v e l i n m a n y

A m e r i c a n u n i v e r s i t i e s . T h e s c i e n t i f i c d e v e l o p m e n t o f a l t e rn a t i v e

justice was launched by Harvard University and soon expanded

to almost all the United States, in many universities, where

many European mediators go for special education. Most of the

research and education relates to various techniques of

a l t e r n a t i v e d i s p u t e r e s o l u t i o n a n d n o v el t e c h n i q u e s a n d m e t h o d s

a r e c r e a t e d , w h i c h o f t e n c o m b i n e el e m e n t s o f c o n c i l i a t i o n ,

mediation and arbitration (e.g. med-arb, rent- a-judge, mini-trial

etc.).

63
OTIS Louise, Pour une nouvelle justice civile, Magistrats Européens pour la Démocratie et les
Libertés, 2011, p. 27.

49
T o d a y A D R , a f t e r t h o u s a n d s o f ye a r s o f e v o l u t i o n a n d

a f t e r i t s m o d e r n re b i r t h d u e t o t h e A D R m o v e m e n t o f t h e

t w e n t i e t h c e n t u r y, h a s b u i l t a n i n d i s p u t a b l e f o u n d a t i o n a n d h o l d s

a secure foothold in the resolution of disputes. Negotiation,

mediation and arbitration have become popular and highl y

utilized surrogates for litigation, to the extent that ADR is

c o n s i d e r e d t h e u s u a l w a y t o r e s o l v e d i s p u t e s i n a wi d e v a r i e t y o f

areas, such as workplace disputes, insurance claims,

c o n s t r u c t i o n d e f e c t s , i n t e l l e c t u a l p r o p e r t y, a n d p u b l i c p o l i c y

d i s p u t es .

50
Chapter 2

Forms of ADR

Traditional ADR includes a wi d e variety of dispute

resolution m et h o d s from p a r t y- t o - p a r t y engagement in

negotiations, mediation and arbitration to variations such as

e x p e r t e v a l u at i o n an d m i n i - t r i a l s , t o h yb r i d f o r m s t h a t c o m b i n e

methods such as med-arb. The various techniques of traditional

A D R c a n b e e n v i s i o n e d a l o n g a s p e c t r u m . A t o n e e n d t h er e a r e

A D R t e c h n i q u e s wi t h w h i c h t h e p a r t i es h a v e c o n t r o l o v e r b o t h

t h e p r o c e d u r e a n d t h e o u t c o m e . A t t h e o t h e r e n d a r e t e c h n i q u es

with which control is transferred totally to a third neutral

decision maker who resembles a judge. All other techniques can

be found somewhere in b e t w e e n . 64 H o w e v e r , these various

m e t h o d s a n d t e c h n i q u e s w i l l n o t b e ex a m i n e d i n d e t ai l h er e , a s

the goal of this thesis is not to enumerate or describe all the

different variations, but instead provide a better understanding

of the techniques that came to influence ODR and the techniques

that describe the different steps of dispute resolution, operating

as building blocks for all else; negotiation as a voluntary

procedure between the parties, mediation because it includes an

assisting neutral third party and arbitration because it includes a

64
RULE Colin, op. cit., p. 37.

51
n e u t r a l t h i r d p a r t y w i t h d e c i s i o n au t h o r i t y. T h e d i s t i n c t i o n

between methods assisted by third neutrals and the ones that are

not as well as the distinction between adjudicative and not will

be of great importance later on in the examination of ODR.

However, the last section presents not only arbitration but also

s o m e o f t h e h yb r i d f o r m s o f A D R , b e c a u s e a b r i e f p r e s e n t a t i o n i s

e s s e n t i a l i n b e t t e r u n d e r s t a n d i n g A D R a n d i t s w h o l e s p ec t r u m .

The other methods that are included in the brief presentation are

conciliation, mini-trials, med-arb and the Ombudsman.

S e c t i o n 1 : N e g o ti a ti o n

“Let us never negotiate out of fear


b u t l e t u s n e v e r f e a r t o n e g o t i a t e ” . 65
J . F. K e n n e d y

N e g o t i a t i o n i s o n e o f t h e m o s t b a s i c fo r m s o f i n t e r a c t i o n 66

a n d p e o p l e a r e c o n s t a n t l y n e g o t i a t i n g i n e v e r yd a y l i f e a n d i n

b u s i n e s s e v e n i f t h e y d o n ’ t r e a l i z e i t . 67 N e g o t i a t i o n i s s o

65
KENNEDY F. John, President of the United States of America inaugural address, January 20,
1961.
66
MOFFITT Michael & BORDONE Robert, The handbook of Dispute Resolution, (San Francisco:
Jossey Bass), 2005, p. 279.
67
BETANCOURT C. Julia and ZLATANSKA Elina, Online Dispute Resolution (ODR): What Is
It, and Is It the Way Forward?, International Journal of Arbitration, vol. 79, Is. 3, 2013, p. 4

52
c o m m o n t h a t i t i s p r a c t i c a l l y i n v o l v e d i n a l l i n t e r p er s o n a l

c o m m u n i c a t i o n a n d c a n b e i d e n t i f i e d i n m o s t o f t h e e v er yd a y

i n t e r a c t i o n s . 68 A f t e r a l l , i t i s e s s e n t i a l t o u n d e r s t a n d t h a t i t i s a

communication process that takes place whenever we want

s o m e t h i n g f r o m s o m e o n e o r s o m e o n e w an t s s o m e t h i n g f r o m u s . 69

Negotiation is the most common and simplest method of

alternative dispute resolution and is placed at the core of

practically any ADR process, especially non-binding dispute

r e s o l u t i o n p r o c e d u re s s u c h a s m e d i a t i o n . 70 N e g o t i a t i o n t h e o r y

has been the theoretical background for dispute resolution

t h e o r y. N e g o t i a t i o n i s t h e m e a n s b y w h i c h c o n f l i c t i n g p a r t i e s

settle their differences, with their mutual effort to reach an

agreement through processes based on communication,

p e r s u a s i o n a n d t h e c o n s o l i d at i o n o f c o n f i d e n c e . 71 C o m m u n i c a t i o n

and consultation with the other side to achieve a resolution of

t h e d i s p u t e c o n s t i t u t e t h e p r o c e s s o f n e g o t i a t i o n . “ In i t s s i m p l e s t

68
“You negotiate with your kids about their bedtime, you negotiate with your boss about your
raise, you negotiate with the car dealer about the purchase price for your new minivan [...] as the
saying goes, in work as in life, you don’t get what you deserve, you get what you negotiate”.
RULE Colin, op. cit., p. 38.
69
SHELL G. Richard, Bargaining for advantage: Negotiation Strategies for Reasonable People,
(Viking), 1996, p. 6.
70
MOEVES S. Amy and MOEVES C. Scott, Two Roads Diverged: A Tale of Technology and
Alternative Dispute Resolution, William & Mary Bill of Rights Journal, vol. 12, Is. 3, 2004, pp. 2-
5.
71
LUECKE Richard, Harvard business essentials: negotiation, Harvard Business School Press,
2003, p. 2.

53
f o r m , n e g o t i a t i o n i n v o l v e s a n ex c h a n g e o f v i e w s a n d p r o p o s a l s

b y p a r t i e s w h o w i s h t o s e t t l e o u t o f c o u r t ” . 72

To reach an agreement, the parties are combining

collaborative and competitive methods. So, depending on the

circumstances, the negotiation is distinguished either for its

aggressive or its competitive approach, or for the attempt to

work together, or finally for the desire to solve the problem by

creating a range of alternatives. Negotiation is based on social

norms of reciprocity but very important success factor in any

n e g o t i a t i o n i s t h e n e g o t i a t i n g s t yl e .

In t h e f i e l d o f A D R , n e g o t i a t i o n i s c h ar a c t e r i z e d p r i m a r i l y

by three t yp e s of approaches; the competitive bargaining

a p p r o a c h , t h e c o l l ab o r a t i v e o r o p e r a t i v e b a r g a i n i n g a p p r o a c h a n d

the ethical or principled n e g o t i at i o n . The c o m p et i t i v e

n e g o t i a t i o n o r w i n -l o s e n e g o t i a t i o n a t t a c h e s t o t h e n e g o t i a t i o n

t h e n a t u r e o f a c o n f r o n t a t i o n w i t h w i n n e r s a n d l o s e r s . It i s

characterized by hard negotiators, who aim to capture, retain and

e x p a n d t h e i r p o s i t i o n s ( p o s i t i o n al b a r g a i n i n g ) a n d i t i s u s e d

when there is a negative correlation between their interests. This

s t r a t e g y h a s l i t t l e c r e a t i v e a n d d i s t r i b u t i v e n at u r e . T h e s t r o n g

interest of each side is only essential to achieving its own goals,

i . e . t o c l o s e t h e d ea l , t o w i n i n t h e n eg o t i a t i o n wi t h l i t t l e o r n o

72
BENYEKHLEF Karim and GELINAS Fabien, Online Dispute Resolution, Lex Electronica,
Vol. 10, No. 2, 2005, p. 44.

54
regard for the consequences to the subsequent relationship or

transactions wi t h the other side. The main goal of the

n e g o t i a t o r s i s v i ct o r y. T h e y u s u a l l y s t a r t wi t h a n ex t r e m e

position and insist upon it until the end of the negotiations.

They use lies, threats and often harm their relationship with the

o t h e r s i d e , b e c a u s e t h e h a r d b a r g a i n i n g t a c t i c s r a i s e eq u a l l y

harsh reactions.

C o l l a b o r at i v e n e g o t i a t i o n o r w i n - w i n n e g o t i a t i o n i s

c h a r a c t e r i z e d b y m i l d n e g o t i a t o r s a n d w i n / w i n o u t c o m e s . It

a i m s t o s o l v e t h e p r o b l e m , t o c o v e r t h e i n t e r e s t s a n d m e et t h e

needs of both parties (interest - based bargaining), consistently

focusing on interests and not on either side’s supporting

p o s i t i o n s . It i s u s e d w h e n t h e g o a l s a n d o b j e c t i v e s o f b o t h

parties have a positive correlation. This approach considers the

“ o p p o n e n t s ” a s p ar t n e r s in finding a common solution by

r e d i r e c t i n g t h e c o n f l i c t . In t h i s s t r a t eg y i t i s a l s o i m p o rt a n t t o

achieve the substantive goals and at the same time keep the

r e l a t i o n s h i p i n t a c t . T h e p a r t i e s a r e t yp i c a l l y e x p e c t e d t o h a v e a

reciprocal relationship where both make concessions. The main

i d e a b e h i n d t h e n e g o t i a t i o n i s t h at t h e o b j e c t i v e s o f t h e t w o

sides are compatible and not mutually exclusive; if one side

achieve their goals, this does not prevent the other to achieve its

o w n . T h e g a i n o f o n e s i d e i s n o t a c h i e v e d a t t h e ex p e n s e o f t h e

other. The more skilled negotiators seek to avoid having

55
personal conflicts; they tend to make many concessions to reach

an agreement and create an environment which will allow

negotiations to t ak e place based on cooperation, h o n e s t y,

equality and generally good relations between them. The parties

c o n v e r t t h e i n i t i a l d i l e m m a o f o n e p ar t y v e r s u s t h e o t h e r , t o a

b o t h p a r t y c o l l a b o r a t i o n w i t h a w i n - w i n r e s u l t . In t h e e n d b o t h

p a r t i e s f e e l v i n d i ca t e d , b e c a u s e e v e n i f t h e s o l u t i o n i s n o t

o p t i m al , i t i s t h e i r co m m o n e f f o r t . 73

F i n a l l y, p r i n c i p l e d n e g o t i a t i o n o r i e n t s t h e p a r t i e s i n t o t w o

m a i n d i r e c t i o n s ; t o a l w a ys s e e k m u t u a l b e n e f i t s a n d w h en t h e i r

interests collide, to look together for fair standards. The biggest

advantage of this method is that it allows parties to be fair while

protecting them from the other side when they try to exploit this

fact. The negotiation must follow some criteria; it should lead to

a wise agreement that meets the legitimate interests of each side.

It s h o u l d b e e f f i c i e n t i . e . s a v e t i m e a n d c o s t a s w e l l a s m e e t t h e

deeper needs and concerns of the parties, based on the exchange

o f i n f o r m a t i o n b e t w e e n t h e p a r t i e s . A n d f i n a l l y, i t s h o u l d

i m p r o v e t h e r e l a t i o n s h i p b e t w e e n t h e p a r t i e s . In p r i n c i p l e d

negotiation the main concern of the negotiator are the interests

and needs of both parties. The negotiators take into account the

73
DONALDSON C. Michael, Negotiating for dummies, (Wiley Publishing Inc.: Indiana) 2nd
Ed., 2007, p. 317.

56
existing conditions and look for a way to resolve the dispute

o b j e c t i v e l y a n d i m p a r t i a l l y. 74

One of the key parts of negotiation and the main difference

from other ADR methods is the autonomy and independence of

the parties who have no need of an arbitrator, mediator or judge.

In n e g o t i a t i o n t h e r e i s n o i n t e r v e n t i o n b y a t h i r d p a r t y. 75 B e c a u s e

no third party acts as facilitator or umpire in the

communications between the parties as they attempt to resolve

their dispute, it is the most cost-effective and efficient method

o f r e s o l v i n g d i s p u t e s b e t w e e n p a r t i es . 76 “ F i n d i n g a m u t u a l l y

a c c e p t a b l e s o l u t i o n t o t h e d i s p u t e d e p en d s o n t h e p a r t i e s a n d t h e

n e g o t i a t i o n p r o c e s s i s c o n f i d e n t i a l a n d c o m p l e t e l y v o l u n t a r y;

g e n e r a l l y, t h e p a r t i e s c a n w i t h d r a w a t a n y p o i n t ” . 77 .

Although each negotiation is an independent and

a u t o n o m o u s p r o c e s s t h a t u s u a l l y d i s p l a ys c e r t a i n s p e c i f i c t o e a c h

case characteristics, there are however some stages that are

c o m m o n t o a l l n e g o t i a t i o n s . T h e f i rs t s t a g e i n c l u d e s t h e “ d e s i g n

a n d a n a l ys i s ” . T h i s s t e p i s e s s e n t i al l y t h e b e g i n n i n g o f t h e

negotiating process and is particularly important b ec a u s e

p r e p a r a t i o n i s t h e k e y p a r t o f a n y n e g o t i a t i o n . G o o d p r e p ar a t i o n

74
FISHER Roger, URY L. William and PATTON Bruce, Getting to Yes: Negotiating Agreement
Without Giving In, (Penguin), 2011, pp. 13- 49.
75
MENKEL-MEADOW J. Carrie, Lawyer Negotiations: Theories and Realities- what we learn
from Mediation, Modern Law Review, vol. 56, 1993, p. 361.
76
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 2, 3.
77
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 44.

57
creates a solid foundation for the negotiation and gives the

necessary confidence for the negotiators to reach success. The

preparation process is continued throughout the negotiation. At

t h i s s t a g e t h e n e g o t i a t o r s c o l l e c t a l l t h e r e l e v a n t i n f o rm a t i o n

related to the subject of the negotiation. The collection of the

maximum amount of information on the subject gives to each of

the negotiators bargaining power. During the design stage the

negotiators recognize the goal of negotiation, which should be

clear-cut in order to formulate the plan to be followed. Each

n e g o t i a t o r a n a l yz e s t h e n e e d s , i d e n t i f i es t h e i n t e r e s t s , s e l ec t s t h e

s t r a t e g y, t h e t e c h n i q u e a n d g e t s f a m i l i a r w i t h h i s o p p o n e n t . T h e

planning process includes the definition of the range of issues

and the anticipation of potential questions that might embarrass

the negotiator. Finally the stage includes the timing of the

p r o c e s s , w h i c h d ep e n d i n g o n t h e ci r c u m s t a n c e s , s h o u l d b e

n e i t h e r t o o l o n g n o r t o o s h o r t . 78

The second stage is the main negotiation where the

exchange of information takes place. At this stage the

n e g o t i a t i o n s b e g i n . B y s h a r i n g i n f o r m a t i o n t h e p a r t i e s a t t em p t t o

d i s c o v e r w h a t e l em e n t s e a c h s i d e p r e f e r s t o a c q u i r e. E a c h

negotiator has reviewed the proposals of the other side, has

c o m p l e t e d h i s r e s e a r c h , k n o w s w h a t h e w a n t s a n d i s r ea d y t o

pass his positions on the opposite side. Particularly important is

78
DONALDSON C. Michael, op. cit., p. 317.

58
t h e w a y a n d t h e o r d e r i n w h i c h t h e y a n a l yz e t h e i n i t i a l p o s i t i o n s .

Each negotiator’s objective should be to challenge his opponent

t o f i r s t s t at e t h e i r v i e w s a n d i d e a s . T h i s s t a g e i n c l u d e s t h e

s h a r i n g o f e a c h n e g o t i a t o r ’ s v i e w s a n d t h e i r c a r e f u l ex a m i n a t i o n ,

s o m e t h i n g a b s o l u t e l y e s s e n t i a l i n a l l n eg o t i a t i n g r e l a t i o n s h i p s .

The third stage is the post-negotiation stage which

i n c l u d e s t h e c o m p ro m i s e s . At t h i s s t a g e a l l t h e d e t a i l s t h at e a c h

n e g o t i a t o r m i g h t r ev e a l t o t h e o t h e r ar e a l r e a d y p r e s e n t e d , a n d

t h e p a r t i e s c l a r i f y t h e i r d i s p u t e t h r o u gh t h e f i n a l p r e s e n t at i o n o f

t h e i r c l a i m s . Th e p a r t i e s i m p l e m e n t t ac t i c s t h at w i l l r e s u l t i n a

b e t t e r a p p r o x i m a t i o n o f t h e a n t i c i p at e d r e s u l t , t h e s at i s f a c t i o n o f

their requirements with the minimal possible deviation, by

making compromises and mutual concessions and creating a

friendly atmosphere which helps to resolve the dispute.

The last stage is the agreement. At this stage, proposals,

counterproposals and compromises are evaluated and conclusions

are drawn defining the end of the negotiation. At this point the

a g r e e m e n t b e t w e e n t h e c o n f l i c t i n g p a rt i e s o c c u r s a s a r e s u l t o f

the previous stages. The agreement can occur either because the

full acceptance of the positions of one side or the other or due to

t h e d i s c o v e r y o f m i d d l e g r o u n d , i . e. a m u t u a l l y a c c e p t a b l e

s o l u t i o n . 79

79
FISHER Roger, URY L. William and PATTON Bruce, op. cit., pp. 41, 42.

59
T h e n e g o t i a t i o n i s c o n s i d e r e d s u c c e s s fu l i f t h e b e n e f i t s t o

one side have been achieved while the other side feels the same

w a y. 80 If n o p o i n t o f a g r e e m e n t i s f o u n d a n d t h e p r o c e s s d o e s n o t

reach an arrangement, then the process must be repeated from

t h e b e g i n n i n g o r t h e p r o c e s s m u s t e n d . If t h e p a r t i e s s t i l l c a n n o t

r e a c h a n a g r e e m e n t , o t h e r f o r m s o f a l t er n a t i v e d i s p u t e r e s o l u t i o n

must be adopted. Positional bargaining and biases such as the

tendency to be overly optimistic about their positions and the

tendency to devalue proposals made by adversaries may result in

the failure of a negotiation, leaving parties with the options, of

going to court, opting for another alternative dispute resolution

procedure or not resolving the dispute at a l l . 81 H o w e v e r ,

negotiation is an important building block for many other ADR

procedures, and is a prerequisite for the successful

implementation of several methods of ADR, such as mediation,

w h i c h i s ex a m i n e d n e x t , a s w e l l a s s e v e r a l o f t h e h yb r i d f o r m s .

80
EL-HAKIM Jacques, Les modes alternatifs de règlement des conflits dans le droit de contrats,
Revue Internationale de Droit Compare, vol. 2, 1997, p. 349.
81
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 2, 3

60
Section 2: Mediation

A . Wh a t i s m e d i a t i o n ?

When a dispute arises the parties will normally attempt to

resolve it initially by negotiating with each other. However,

since the parties in most cases are not professional negotiators,

often the negotiations do not prove fruitful. On the contrary

m e d i a t i o n a l l o ws t h e p a r t i e s t o r e t a i n t h e i r c o n t r o l a n d t h e i r

d e c i s i o n m a k i n g a u t h o r i t y, b u t a l s o i n v o l v e s a t h i r d n e u t r al p a r t y

to assist the parties during the process; making mediation a kind

of assisted n e g o t i a t i o n . 82 Mediation is one of the most

r e p r e s e n t a t i v e t yp e s o f a l t e r n a t i v e d i s p u t e r e s o l u t i o n a s w e l l a s

o n e o f t h e m o s t wi d e l y u s e d A D R m e t h o d s . 83 M e d i a t i o n i s a

method of alternative dispute resolution, in which parties

r e s o l v e t h e d i s p u t e w i t h t h e a s s i s t a n ce o f a n e u t r a l t h i r d p a r t y,

t h e m e d i a t o r , w h o e m p l o ys v a r i o u s t e c h n i q u e s i n o r d e r t o h e l p

t h e p a r t i e s fi n d a co m m o n g r o u n d a n d s e t t l e t h e d i s p u t e . It i s t h e

process in which the parties of a dispute, guided by a third

p a r t y, s ys t e m a t i c a l l y i s o l a t e t h e p o i n t s o f t h e d i s a g r e e m e n t , w i t h

the aim to reach a consensual resolution of the dispute, which

82
RULE Colin, op. cit., p. 39.
83
BOULLE Laurence and NESIC Miryana, Mediation: Principles, Process, and Practice,
(Butterworths), 2001, p. 4.

61
serves both their interests. Mediation is essentially a dialogue or

a n e g o t i a t i o n wi t h t h e i n v o l v e m e n t o f a t h i r d p a r t y. 84 T h e

mediator does not decide on the dispute, but helps the disputing

parties to come to an agreement by finding a commonly

acceptable solution. “Managing the mediation process can also

b e c o l l e g i a l , i n o t h e r w o r d s , p e r f o r m e d b y m o r e t h an o n e

i n d i v i d u a l ” . 85 T h e n e e d f o r i n v o l v e m e n t o f a t h i r d p e r s o n i s

j u s t i f i e d i n t h e o r y b a s e d o n t h e p r em i s e t h a t m a n y t i m e s t h e

p a r t i e s a r e s i m p l y n o t a b l e t o i d e n t i f y t h e m s e l v e s , i n a c l ea r a n d

m e a n i n g f u l w a y, t h e c o n f l i c t i n g e l e m e n t s o f t h e i r d i s p u t e a n d

negotiate in order to achieve a compromise. This may be due to

mutual prejudice, fear of notification of certain details, the risk

of misinterpretation of a compromise, due to ignorance and the

possible devaluation of the position of the opponent and due to

p o t e n t i al m u t u a l h o s t i l i t y.

T h e i m p o rt a n c e o f m e d i a t i o n i s e v i d e n c e d b y i t s m u l t i p l e

functions. Mediation defines the dispute; the impartial mediation

process helps to identify and refine the problems within the

s c o p e o f t h e d i s p u t e . M e d i a t i o n r e s o l v e s d i s p u t e s b et w e e n r i v a l

parties concerning a particular claim for matters related to

interests, principles or procedures. Even if the mediation process

d o e s n o t p ro d u c e t h e d e s i r e d e f f e c t i t p r o m o t e s t h e u s e o f

another procedure, such as arbitration. Mediation helps in the


84
MOORE W. Christopher, op. cit., p. 14.
85
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 45.

62
management of lengthy conflicts that are expected to continue.

Even if the opposing parties do not desire to reduce or resolve

the dispute, the mediation process can control the conflict by

establishing appropriate rules, structures and modes of

c o m m u n i c a t i o n . T h i s a l l o ws f o r f u t u r e i n v o l v e m e n t i n s e t t l e m e n t

procedures. Mediation assists in n eg o t i a t i n g c o n t r a c t s . The

c o n f l i c t i n g p a r t i e s , w i t h t h e a s s i s t an c e o f a m e d i a t o r , c a n

manage processes in order to e s t ab l i s h a p o s i t i v e c l i m a t e

between the parties, to identify the interests and priorities, to

i m p r o v e c o m m u n i c a t i o n , t o a c h i e v e h an d l i n g n e g a t i v e e m o t i o n s ,

to make suggestions and to register agreements. Mediation

c r e a t e s a n e n v i r o n m e n t t h a t al l o w s fo r l a t e r a l t h i n k i n g w h i c h

i n v o l v e s r e s t r u c t u ri n g , e s c a p e , a n d t h e p r o v o c a t i o n o f n e w

p a t t e r n s a n d l e a d s t o b r a i n s t o rm i n g a n d s u b s e q u e n t l y t o t h e r i s e

o f m a n y d i f f e r e n t i d e a s i n o r d e r t o r e s o l v e t h e d i s p u t e . 86

M e d i a t i o n h a s i t s ro o t s i n a n c i e n t p r ac t i c e s a n d i s o n e o f

the oldest methods originated mainly in Africa and Asia. The

m e d i a t o r i n c o m m er c i a l r e l a t i o n s o f t h e A r a b s , t h e el d e r s a s

mediators in China, the judge with the task to promote a

compromise in the Swiss, German and Japanese practice,

exemplify the need for a third party as a neutral who will reduce

tensions and o v e rc o m e potential impasses. But the most

i m p o r t a n t d e v e l o p m e n t i n r e c e n t d e c a d e s h a s b e e n t h e n e ce s s i t y
86
DE BONO Edward, Lateral Thinking: A Textbook for Creativity, (Australia: Penguin Books
Ltd), 2009, p. 11.

63
o f p a r t i c u l a r A n g l o - S ax o n j u r i s d i c t i o n s t o a v o i d t h e c o s t a n d

d e l a y o f l i t i g a t i o n s ys t e m , d e v e l o p i n g m e d i a t i o n i n c i v i l a n d

commercial matters. Mediation in its modern version is an

i n s t i t u t i o n o f A m e ri c a n i n s p i r a t i o n . E v e n t h o u g h m e d i a t i o n w a s

s u b j e c t t o t h e o r e t i ca l a n d p r a c t i c a l p r o c e s s i n g s i n c e t h e 7 0 ' s a n d

8 0 ' s , e s p e c i a l l y i n r e c e n t ye a r s i t h a s s p r e a d r a p i d l y i n m a n y

s t a t e s . F o r i n s t a n ce , In G r e a t B r i t a i n , w h e r e m e d i a t i o n e x i s t s

since 1989, 85% of the cases of disputes addressed through

mediation were successfully resolved, and i n t e r n a t i o n al

m e d i a t i o n d e v e l o p ed t o s u c h a n ex t en t i n t h e l e g a l w o r l d i n

England that since 1999 has been part of the English civil

justice. These developments, of course, were not only a privilege

o f t h e A n g l o -S a x o n c o u n t ri e s . At t h e e n d o f t h e 2 0 t h ce n t u r y

s u c h d yn a m i c t r e n d s d i d e m e r g e i n F r a n c e , C a n a d a , H o n g K o n g

a n d s e v e r a l E u r o p e a n c o u n t r i e s . F o r e x a m p l e , i n G e r m an y, i n

2 0 0 2 s p e c i a l r u l e s fo r m e d i a t i o n w e r e e s t a b l i s h e d a n d m o r e s o i n

two levels because of the federal form of the state, i.e. both in

the German Civil Procedure ( Zi v i l p r o z e s s o r d n u n g ) and in

s p e c i f i c l e g i s l a t i o n o f t h e Lä n d e r o f t h e F e d e r a l R e p u b l i c o f

G e r m a n y.

Mediation differs from j u d i c i al resolution in several

aspects. Mediation, as mentioned above, is characterized by

having a neutral third party who works with the parties to

i d e n t i f y i s s u e s , ex p l o r e t h e i r i n t e r e s t s a n d p o s s i b l e s o l u t i o n s ,

64
whereas in litigation the judge is not affiliated with the parties,

i n s t e a d s i m p l y a s s e s s e s t h e e v i d e n c e a n d d e c i d e s . In m e d i a t i o n

the parties retain control of the process and determine the

p o t e n t i al c o m p r o m i s e w h i l e i n l i t i g a t i o n t h e p a r t i e s s h i f t c o n t r o l

to the judge and there are few prospects for compromise because

the process is determined by the evidence presented. Mediation

i s c h a r a c t e r i z e d f o r f a c i l i t at i n g n e g o t i at i o n s , s o m e t h i n g w h i c h i s

completely absent in litigation. Mediation is confidential and

may lead to agreements on how much publicity will be given to

t h e d i s p u t e . In s t e a d c o u r t p r o c e e d i n g s a r e p u b l i c a n d a t t r i b u t e

e r r o r t o o n e o f t h e p a r t i e s h u rt i n g i n t h i s w a y i t s r e p u t a t i o n . In

s o m e c u l t u r e s , s u ch a s A s i a n o r M i d d l e E a s t c u l t u r e s , i t i s

important for each party in a dispute to emerge from it without

harm to its honour and reputation. This is ensured in mediation

because the mediator does not impose liability to any party but

f a c i l i t a t e s a g r e e m e n t s t h a t d o n o t o f f en d a n y o f t h e p a r t i e s . T h e

main difference of mediation is the focus on the interests of the

parties, on the objectives and the relationships between them,

contrary to litigation where great importance is given to the

s u b s t a n t i v e a n d p r o c e d u r a l l a w s , a s w e l l a s t o r i g h t s i n s t ea d o f

interests.

It is characteristic that in mediation the parties a re

encouraged to communicate between themselves and the

meetings are informal, while litigation undermines the effective

65
communication of the parties, by focusing on the defence of

t h e i r a r g u m e n t s , e s s e n t i a l l y l i m i t i n g t h e c o m m u n i c a t i o n b et w e e n

l a w ye r s a n d c o u r t s , a n d r e p l a c i n g i n f o r m a l m e e t i n g s w i t h fo r m a l

c o u r t s e s s i o n s i n a c e r t a i n p l a c e a n d t i m e . 87 M o r e o v e r , t h e

agreement in mediation is consistent with the needs of the

parties and a mutually satisfactory settlement is made between

the parties, offering the opportunity for both parties to come out

of the process as winners without damaging the relationship

b e t w e e n t h e m . In s t e a d i n l i t i g a t i o n d ec i s i o n s a r e m a d e b a s e d o n

the evidence and the law and record one of the parties as the

winner and its opponent as the defeated. Finally mediation offers

f l e x i b l e t e r m s b e t we e n t h e p a r t i e s , a c c e l e r a t e d p r o c e s s a n d l o w

c o s t . O n t h e c o n t r a r y i n l i t i g a t i o n t h e r e i s l a c k o f f l ex i b i l i t y, t h e

process is quite time consuming and expensive. Based on these

d i f f e r e n c e s b e t w e e n m e d i a t i o n a n d l i t i g a t i o n i t i s u n d er s t o o d

t h a t m e d i at i o n i s f ra m e d w i t h s e v e r a l ad v a n t a g e s t h a t m a k e i t a n

a t t r a c t i v e a n d p r e f er r e d o p t i o n .

Mediation is regarded as a voluntary procedure by which

p a r t i e s i n d i s p u t e c o m m u n i c a t e wi t h t h e a s s i s t a n c e o f a t h i r d

n e u t r a l p a r t y w i t h n o d e c i s i o n p o w e r ( c a l l e d m e d i a t o r ), w h o

improves the communication between them by using techniques,

such as restating their arguments, and tries to bring them to an

87
BREIDENBACH Stephan, Mediation: Struktur, Chancen und Risiken von Vermittlung im
Konflikt, (Schmidt Dr. Otto KG), 1995, p. 69.

66
a m i c a b l e a g r e e m e n t . 88 T h e r e a r e s e v e r a l k i n d s o f m e d i a t i o n . T h e

first kind is known as settlement mediation and does not

necessarily require any special knowledge, experience or special

preparation. The mediator seeks solutions through interventions

and the objective is to encourage the development of an

appropriate agreement between the two parties based on a

“central point”. The second kind is known as facilitative

mediation where the mediator acts as a facilitator who mediates

t h e d i s p u t e i n t e r m s o f t h e u n d e r l yi n g n e e d s a n d i n t e r e s t s o f t h e

p a r t i e s r a t h e r t h a n s t r i c t l e g a l r e q u i r e m e n t s . It c o n t r i b u t e s

significantly to the establishment of a code of ethics (a Code of

Conduct and Rules which may apply in the exercise of its

p o w e r s , g o v e r n s t h e d i s p u t e , t h e e x t en t a n d l i m i t s o f l i a b i l i t y

a n d t h e s o l u t i o n ) an d f a c i l i t a t e s t h e n e g o t i a t i o n , e n s u r i n g a s a f e

environment and seeking a constructive dialogue between the

parties by encouraging the direct involvement of the parties in

the process through the absence of other agents and by

r e c o g n i z i n g t h e i n f l u e n c e o f e a c h p a r t y . In f a c i l i t a t i v e m e d i a t i o n

the third neutral party assists the parties in reaching an

agreement but does not make recommendations about the

s e t t l e m e n t . Th e t h i rd k i n d i s t h e r a p e u t i c m e d i a t i o n , wh i c h d e a l s

88
“Mediation shall mean any process, however named or referred to, where two or more parties to
a dispute are assisted by a third party to reach an agreement on the settlement of the dispute,
regardless of whether the process is initiated by the parties, suggested or ordered by a court, or
prescribed by the national law of a Member State”. See Report on the proposal for a directive of
the European Parliament and of the Council on certain aspects of mediation in civil and
commercial matters, 2007, Article 2 (a).

67
with the causes of the conflict in the relations between the rival

p a r t i e s . T h e m e d i a t o r i s r e q u i r e d t o h av e e x p e r t i s e i n c o u n s e l i n g ,

p s yc h o t h e r a p y a n d g e n e r a l u n d e r s t a n d i n g o f t h e p s yc h o l o g i c a l

f a c t o r s . T h e m e d i at o r f o l l o w s t h e p at h o f e m p o w e r m e n t a n d

mutual recognition between the parties in order to achieve a

resolution of the dispute and not simply settle the matter.

F i n a l l y, t h e f o u r t h k i n d o f m e d i a t i o n i s k n o w n a s e v a l u a t i v e

mediation, which is advisory and managerial and the mediator

can acts as an evaluator. The mediator gives an assessment of

t h e c a s e , w h i c h i n v o l v e s a n a l ys i s o f t h e d i s p u t e i n a c c o r d a n c e

with the legal rights of the parties. The parties are encouraged to

consider and formulate proposals for resolution of the dispute

based on the evaluation. The responsibility of the mediator in

this approach is great, and the result approximates the concept

of a decision. The interventionism of the mediator is greater in

this approach; the parties do not acquire skills for the future

handling of their disputes and the boundaries with arbitration are

c l o s e . In e v a l u a t i v e m e d i a t i o n t h e t h i r d p a r t y e v a l u a t e s t h e

parties’ positions and makes r e co m m e n d a t i o n s about the

s e t t l e m e n t b a s e d o n i t s v i e w . 89

89
HÖRNLE Julia, op. cit., p. 51.

68
B. Choosing Mediation

Mediation takes place most often on a voluntary basis

since “parties cannot be forced to participate in a mediation

p r o c e d u r e a n d m a y a l s o a b a n d o n t h e m e d i a t i o n at a n y s t a g e p r i o r

t o t h e s i g n i n g o f a s e t t l e m e n t a g r e e m e n t ” . 90 H o w e v e r , m e d i a t i o n

c a n a l s o b e d i s c r e t i o n a r y, i n t h e s e n s e t h a t i t m a y b e u n d e r t a k e n

at the discretion of a particular person and mediation may be

mandatory as for instance it is in Belgium, several states in the

U n i t e d S t at e s , a n d m a n y A u s t r a l i a n j u r i s d i c t i o n s . 91 M e d i a t i o n

can be applied to any disagreement with the condition that the

p a r t i c i p a n t s a r e w i l l i n g t o t r y. S u b m i t t i n g a d i s p u t e t o m ed i a t i o n

can be agreed by the parties either before or after the dispute

arises. A mediation agreement can be binding if the parties’

o b l i g a t i o n s a r e s u ff i c i e n t l y c l e a r , a s i l l u s t r a t e d b y C a b l e &

Wi r e l e s s P l c v . I B M. 92

Of course, some cases are more suitable than others, and

often the question arises how to make the choice of whether the

d i s p u t e s h o u l d b e r e s o l v e d t h r o u g h m ed i a t i o n . In t h i s c a s e t h e

participants from each side should first consider whether the

90
HEUVEL V. D. Esther, op. cit., p. 7.
91
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 3, 4.
92
“In Cable & Wireless Plc v. IBM, a mediation clause was held to be enforceable since it referred
to an institution and specified procedure, and the court held that the parties’ obligation was to
participate in the process of initiating the mediation, selecting a mediator and presenting the
mediator with the case and relevant documents”. See HÖRNLE Julia, op. cit., p. 51

69
d i s p u t e c o u l d t h e o re t i c a l l y b e r e s o l v e d t h r o u g h n e g o t i a t i o n s a n d

w h e t h e r t h e r e i s p r o g r e s s i n t h e o n - g o i n g n e g o t i a t i o n s b et w e e n

t h e p a r t i e s . 93 M e d i a t i o n i s i n f o r m al a n d h a s a m o r e f l ex i b l e f o r m ,

which makes it compatible with a variety of cases and therefore

c a n b e i n v o k e d a t a n y s t a g e , b e f o r e o r d u r i n g t h e t r i a l . 94

Mediation often is part of a multi-method ADR process, in which

case mediation is usually preceded by negotiation and followed

b y a r b i t r a t i o n . It m u s t b e n o t e d t h a t t h e a p p l i c a t i o n o f m e d i a t i o n

b e c o m e s d i f f i c u l t i n c a s e s o f f o r g e r y, p l a g i a r i s m o r a n y o t h e r

case where the bad faith of at least one party can infringe the

t r u s t a n d c o m m u n i ca t i o n b e t w e e n t h e p a r t i e s . 95

However, even though the parties cannot be forced in truly

participating in the mediation process, it is still a fairly common

practice for contracts to include mediation clauses. These

clauses operate as a conditions that must be fulfilled before the

p a r t i e s c a n g o t o c o u r t o r u s e a r b i t r a t i o n t o r e s o l v e t h ei r d i s p u t e ,

and they usually require for a certain amount to pass, time that

should ideally be utilized for conducting the mediation

procedure. “This type of mechanism is common in instruments

providing for private dispute resolution among states and

investors, such as those of the In t e r n a t i o n a l Centre for

93
BEVAN H. Alexander, Alternative dispute resolution: a lawyer's guide to mediation and other
forms of dispute resolution, (Thomson, Sweet & Maxwell Editions), 1992, pp. 39- 44.
94
FIADJOE Albert, op. cit., pp. 22-23.
95
VARADY Tibor, BARCELLO J. John and VON MEHREN T. Arthur, International
Commercial Arbitration, A Transnational Perspective, (Thomson West), 2003, p. 10.

70
S e t t l em e n t o f In v e s t m e n t D i s p u t e s ( IC S ID ) , i n l e g a l i n s t r u m e n t s

required by the World Bank in some of the infrastructure

contracts that it finances, as well as in a growing number of

c o m m e r c i a l c o n t r a c t s ” . 96 F u r t h e r m o r e , t h i s w a y m e d i a t i o n c an b e

s u g g e s t e d b y o n e o f t h e p a r t i e s wi t h o u t h i n t s o f i n c r i m i n a t i o n

and without giving the impression to the other party that the

suggestion of conducting the mediation is based on the fear of a

p o t e n t i al u n f a v o r a b l e o u t c o m e t h r o u g h t h e j u d i c i a l r o u t e . In

order for the parties to take part in mediation, they must be

willing and capable; willingness implies that the parties are

prepared to make a good faith attempt to negotiate an outcome to

their dispute, while capacity implies that the parties have an

ability to express and negotiate for their own needs and

i n t e r e s t s . 97

The process of mediation can be used to resolve all private

d i s p u t es , s u c h a s c i v i l , c o m m e r c i a l , fa m i l y, l e a s i n g , t r a d e , r e a l

e s t a t e , c o n s t r u c t i o n , p r o p e r t y, a n d b a n k i n g d i s p u t e s , r e g a r d l e s s

o f t yp e , w h i c h c a n b e r e s o l v e d b y a g r e e m e n t a n d a r e w i t h i n t h e

contractual freedom of the parties, except those subject to

mandatory provisions (like the dissolution of marriage). One can

solve a dispute with a partner, associate, supplier, tenant or

landlord and with members of family (especially as regards the

l a t t e r c a t e g o r y o n e m a y s o l v e i s s u e s o f m a i n t e n a n c e o r p ro p e r t y
96
BENYEKHLEF Karim and GELINAS Fabien, op. cit., pp. 45, 46.
97
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 3, 4.

71
but not the divorce, which by order of the law is the

responsibility of the c o u r t s ). Ap a r t from the particular

a p p l i c a t i o n i n c a s es o f f a m i l y a n d c o m m e r c i a l l a w , m e d i a t i o n

g e n e r a l l y a p p l i e s i n c a s e s w h e r e t h e em o t i o n i s d o m i n a n t a t t h e

expense of reason as well as in cases of low economic interest.

M e d i a t i o n i s s u i t ed f o r s i t u at i o n s wh e r e t h e p a r t i e s a r e m o r e

i n t e r e s t e d i n a c o m p r o m i s e , r a t h e r t h an p a r t i c i p a t i n g i n a f o r m a l

juridical process.

T h e r e a s o n s f o r c h o o s i n g m e d i at i o n c a n b e i l l u s t r a t e d b y

four basic elements which define mediation and are Consensus,

C o n t i n u i t y, C o n t r o l a n d C o n fi d e n t i al i t y, o f t e n r e f e r r e d a s t h e “ 4

C’s”. The Consensus (consent) guaranties that the process and

outcome of mediation depends entirely on the will of the parties;

t h e C o n t i n u i t y, a l l o w s f o r t h e d e v e l o p m e n t o f a p r o f e s s i o n a l a n d

on-going relationship between the parties contrary to litigation

which only escalades the disputation; wi t h Control, the

development of the case depends on the ability of the parties to

find the most appropriate solution for them.

F i n a l l y, t h e p r i n c i p l e o f C o n f i d e n t i al i t y a p p l i e s t o a l l

d i s c u s s i o n s a n d a ct i o n s o f s t a k e h o l d e r s a n d p a r t i e s i n v o l v e d .

C o r n e r s t o n e f o r t h e r e c o g n i t i o n a n d a cc e p t a n c e o f m e d i a t i o n a s

an effective method of alternative dispute resolution is to ensure

c o n f i d e n t i a l i t y, s i n c e t h e m u t u a l t r u s t o f t h e p a r t i e s i s a

72
p r e r e q u i s i t e o f a s u c c e s s f u l m e d i at i o n . 98 T h e c o n f i d e n t i a l i t y

e n h a n c e s t h e s i n ce r i t y a n d h o n e s t y a n d c o n f i r m s t h a t a n y

s u g g e s t i o n s , i d e a s a n d s t a t e m e n t s ex p re s s e d b y a p a r t y i n o r d e r

to resolve the dispute are not going to affect the outcome of the

result and will not be used later against that party during

arbitration or litigation. There is no prejudice in mediation and

negotiations are conducted without bias since parties do not fear

t h a t t h ei r d i s c u s s i o n s m i g h t b e r e v e a l ed i n c o u r t .

C o n f i d e n t i a l i t y, d e s p i t e t h e p a r t i ci p a t i o n o f t h e t h i r d p a r t y

i s n o t e n d a n g e r e d i n a n y w a y, c e r t a i n l y n o t t o t h e ex t e n t t h at

this happens in litigation, where the principle of publicity

a p p l i e s , o r i n a r b i t ra t i o n w h e r e t h e s e cr e t p r o c e s s o f t e n i n v o l v e s

m a n y t h i r d p e r s o n s ( r e f e r e e s , a r b i t r a t o r s , l a w ye r s , p a r t i e s e t c . )

a n d i n c r e a s e s t h e r i s k o f i n f o rm a t i o n l e a k i n g . 99 T h e m e d i at i o n

agreement prohibits the mediator to disclose material or

i n f o r m a t i o n i n c o u r t o r i n a r b i t r a t i o n . In f o r m a t i o n d i s c l o s e d

m u s t b e r e t u r n e d o r o t h e r w i s e d e s t r o ye d , i f t h e p a r t y c h o o s e s s o .

In c o n c l u s i o n , t h e i n f o r m a t i o n o b t a i n e d d u r i n g t h e m e d i a t i o n

s h a l l b e c o n f i d e n t i al a n d t h e r e s p o n s i b i l i t y f a l l s b o t h t h e o n t h e

m e d i a t o r a n d t h e p ar t i e s . 100

98
BREIDENBACH Stephan, op. cit., pp. 288-289.
99
FOLBERG Jay and TAYLOR Alison, Mediation; A Comprehensive Guide to Resolving
Conflicts without Litigation, (San Francisco: Jossey Bass Publishers), 1984, pp. 8-9.
100
VARADY Tibor, BARCELLO J. John and VON MEHREN T. Arthur, op. cit., p. 9.

73
As already mentioned, one of the strongest selling points

for mediation is the increased probability of reaching a mutually

acceptable solution that meets the interests of both parties (win-

w i n - s o l u t i o n ) . T h e r e s o l u t i o n i s f o r m ed t o t h e m e a s u r e s o f t h e

parties that satisfy their real interests, without being bound by

l e g a l a r g u m e n t s . In p a r t i c u l a r , t h e n o m i n a t i o n a n d c o n s i d er a t i o n

by the parties, with the assistance of the mediator, even of non-

legal factors that serve their interests and the possibility of

detachment from legal arguments is a key advantage of

mediation, since the solution is more oriented towards interests

a n d n o t t h e r i g h t s o f t h e p a r t i e s . 101

A key advantage of mediation is that it is fast and cost

e f f i c i e n t . T h e p r o ce s s i s q u i c k , w i t h o u t d e l a ys , b u r e a u c r a c y, o r

t h e p e r p e t u a t i n g t h e d i s p u t e . Th e e c o n o m i c b e n e f i t i s m o s t

apparent when the mediation process takes place in the early

s t a g e o f t h e d i s p u t e , w h e n t h e c o s t o f t h e w h o l e p r o c e s s ca n b e

c a l c u l a t e d i n a d v a n c e . It o f f e r s e a s y a c c e s s t o p e o p l e a n d

provides time saving, allowing the opposing parties to solve

t h e i r c o m m o n p ro b l e m i n v e r y s h o r t t i m e , wh i c h i s e s p e c i a l l y

u s e f u l i n c o m m e r c i al m a t t e r s , w h e r e t i m e c o u n t s s i g n i f i c a n t l y.

A big advantage of mediation is the f l ex i b i l i t y a n d

elasticity of the process. The process is specified freely by the

101
DUVE Christian, EIDENMULLER Horst and HACKE Andreas, Mediation in der Wirtschaft:
Wege zum professionellen Konfliktmanagement, (Schmidt), 2011, p. 162.

74
m e d i a t o r i n c o o p e r at i o n wi t h t h e p a r t i es . T h e p a r t i e s , r a t h er t h a n

facing the stringent requirements of the juridical process may

benefit from procedures that are tailor made to their own needs.

Furthermore, the voluntary nature of the process means that

although the parties agreed to resolve any or all of the

d i f f e r e n c e s t h r o u g h t h e m e d i a t i o n p ro c e s s , t h e y s h a l l n o t b e

r e q u i r e d t o c o n t i n u e t h a t p r o c e s s a f t e r t h e f i r s t s e s s i o n , an d c a n

leave whenever they wish. Thus the parties constantly keep

c o n t r o l o f t h e r e s o l u t i o n o f t h ei r d i s p u t e . M o r e o v e r , t h e n o n -

binding nature of the process means that a decision cannot be

i m p o s e d o n t h e p ar t i e s , u n l e s s t h e p a r t i e s t h e m s e l v e s w i s h t o

adopt it. Therefore, if adopted, the outcome of the dispute

satisfies both parties, the gain is mutual and there are no

winners and losers. The contracting parties who have made an

agreement between themselves to resolve their dispute through

m e d i a t i o n a r e m o re l i k e l y t o f o l l o w a n d c o m p l y w i t h t h e

conditions set by them than if they were imposed by the

mediator. Voluntary compliance can lead to the restoration of

d i s t u r b e d r e l at i o n s b e t w e e n t h e p a r t i e s a n d c o n t r i b u t e t o a m o r e

s u s t a i n a b l e e c o n o m i c a n d s o c i a l c l i m a t e.

Another advantage is that there is no infringement of

f u n d a m e n t a l r i g h t s o f t h e p a r t i e s , b ec a u s e o f t h e e q u a l i t y a n d

fairness that characterize mediation as well as, because the

p a r t i e s r e t a i n t h e i r r i g h t t o r e c o u r s e t o l i t i g a t i o n . F i n a l l y,

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m e d i a t i o n i s a p p r o p r i a t e f o r m u l t i l a t er a l d i s p u t e s b e c a u s e m o r e

persons involved in a situation can participate in the process,

persons who in case of judicial proceedings could not become

parties. In conclusion it can definitely be said that the

advantages of mediation outweigh any disadvantages or

imperfections and give an answer to the question of why to

c h o o s e m e d i a t i o n . M e d i a t i o n i s a u s e fu l t o o l t o r e s o l v e ex i s t i n g

c o n f l i c t s a n d p r e v e n t f u t u r e o n e s , c o n t r i b u t i n g t h e p r e s e rv a t i o n

of social peace.

C . T h e M e d i a t i o n p r o ce s s

T h e m e d i a t i o n p r o c e s s c o n s i s t s o f s ev e r a l s t a g e s ; i n t h e

preliminary stage, the parties are informed of the process, the

usefulness and feasibility and agree to the responsibility of a

p a r t n e r s h i p . D u ri n g t h i s s t a g e t h e p a r t i e s a n n o u n c e t h e i s s u e s o f

t h e d i s p u t e a s w e l l a s t h e i r i n i t i a l p o s i t i o n t o t h e m e d i a t o r, w h o

d r a w s u p a s u m m a ry. T h e n e x t p h a s e u s u a l l y i n c l u d e s d o cu m e n t

a n d i n f o r m a t i o n e x ch a n g e w i t h t h e p r e s e n c e o f r e p r e s e n t a t i v e s o f

t h e p a r t i e s a n d o f co u r s e t h e m e d i a t o r . It i s t h e fi r s t s u b s t a n t i v e

m e e t i n g b e t w e e n t h e p a r t i e s , w h e r e e v er yo n e h a s t h e o p p o rt u n i t y

t o s t at e t h e i r v i ew s o n t h e l e g a l , f i n a n c i a l a n d e m o t i o n a l

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implications of the dispute and to propose preferable solutions.

T h e m a i n p r o c e d u r e s t a r t s wi t h t h e ac c e p t a n c e o f t h e ru l e s o f

c o n d u c t i n v o l v i n g m a i n l y t h e t i m e t a b l e a n d w i t h t h e i n au g u r a l

post of the mediator. At this stage of the process, especially in

c o m m e r c i a l d i s p u t es , t h e m e d i a t o r a f t e r a s e r i e s o f m e e t i n g s ,

either simultaneously with both sides or separately with each

s i d e , e n c o u r a g e s b o t h p a r t i es t o c o n s i d e r t h e p o s i t i o n s o f t h e

o t h e r s i d e a n d p ro p o s e s o p t i o n s t h at w i l l h e l p t h e m i n t h e

negotiations on the terms of the agreement. The mediator uses

“ a s s i s t e d s t o r yt e l l i n g ” t o h e l p t h e p a r t i e s r e f r a m e t h e i r p o s i t i o n s

a n d a r g u m e n t s w i t h m o r e c l a r i t y, r e v e a l t h e u n d e r l yi n g i s s u e s

and work more effectively towards a mutually acceptable

s e t t l e m e n t . 102 F o r t h e e f f e c t i v e n e s s o f t h i s p h a s e , t h e m e d i a t o r

s h o u l d wo r k w i t h a s m a l l g r o u p f r o m e a c h s i d e a n d m a i n l y w i t h

people who make the d e c i s i o n s . 103 In most i n t e r n a t i o n al

c o m m e r c i a l m e d i a t i o n s , p e o p l e i n v o l v ed i n t h e s e c o n d p h a s e a r e

u p t o s i x t o t e n , wh i l e i n t h e t h i r d p h a s e t h e r e a r e u p t o t w o o r

t h r e e p a r t i c i p a n t s f r o m e a c h s i d e . 104 F i n a l l y, u s u a l l y n e a r t h e e n d

of the mediation procedure or at an impasse, and after taking

into account all the accumulated information, such as the

arguments of the parties, their common ground and their

differences, the mediator may issue a recommendation in order

102
RULE Colin, op. cit., p. 41.
103
FISHER Roger, URY L. William and PATTON Bruce, op. cit., p. 14.
104
CARROLL Eileen and MACKIE Karl, International Mediation - The Art of Business
Diplomacy, (Kluwer Law International), 2000, pp. 101-102.

77
to further assist the parties to reach a resolution, but in no way

can the mediator issue a decision.

D. The Mediator

The mediator does not render a decision; instead the

mediator improves the communication between the parties in the

attempt to assist them to find by themselves a commonly

a c c e p t a b l e w a y t o r e s o l v e t h e d i s p u t e . In s h o r t , “ t h e m ed i a t o r

does not make a decision, but helps the disputing parties to find

t h e s o l u t i o n t h a t i s a c c e p t a b l e t o a l l p ar t i e s i n v o l v e d ” . 105 M o d e rn

mediation, in which the facilitator operates as an “intermediate”

in the dispute, is influenced by the modern theory of negotiation

b y w h i c h t h e g o a l i s t o h e l p t h e p ar t i e s f i n d t h e m s e l v e s a n

a p p r o p r i a t e s o l u t i o n b a s e d o n t h e i r n e e d s a n d i n t e r e s t s . 106 T h e

mediator only assists the parties in reaching resolution on their

o w n w i t h o u t a d v o ca t i n g i n f a v o r o f o n e o r t h e o t h e r p a r t y;

instead the mediator will scrupulously avoid appearing biased

toward one side or the other, because it’s not the opinion of the

105
HEUVEL V. D. Esther, op. cit., p. 7.
106
BÜHRING-UHLE Christian, op. cit., pp. 274, 280, 282.

78
mediator but the opinion of the parties that will lead to the

s e t t l e m e n t . 107

T h e m e d i a t o r w i t h a b s o l u t e i m p a r t i a l i t y a n d c r e d i b i l i t y,

h a v i n g e x p e r i e n c e i n t h e p r o c e s s a n d n e g o t i a t i n g s k i l l s , wi t h o u t

h a v i n g d e c i s i v e a u t h o r i t y, i s l i m i t e d t o b r i n g i n g t h e p a r t i e s

together, facilitate cooperation, relationships and communication

a n d e n c o u r a g e s t h e m t o u n d e r s t a n d t h ei r n e e d s a n d i n t e r e s t s a n d

those of their opponents by creating the right conditions that

will result in the satisfaction of the interests of both sides.

However, although a mediator usually “has no determinative role

i n r e g a r d t o t h e co n t e n t o f t h e d i s p u t e o r t h e o u t c o m e o f i t s

r e s o l u t i o n ” , 108 t h e m e d i a t o r m a y a d v i s e o n o r d e t e r m i n e t h e

mediation process and may even evaluate the content of the

dispute.

U s u a l l y, t h e m e d i a t o r i s a l l o w e d t o h e a r t h e p a r t i es

t o g e t h e r a n d s e p a r a t e l y. O n e o f t h e m o s t i m p o r t a n t f e a t u r e s o f

mediation and the means to a successful settlement is known as

“caucusing”. During the mediation, the mediator is likely to take

t h e i n i t i a t i v e f o r a b r e a k , t h e “ c a u c u s ” i n o r d e r t o m ee t t h e

parties separately and after a discussion, evaluate their

p r o p o s a l s f o r r e s o l v i n g t h e d i s p u t e . Th e “ A m e r i c a n A r b i t r a t i o n

Association” (AAA) states that the caucusing allows the

107
RULE Colin, op. cit., p. 41.
108
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 3, 4.

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mediator the selective use of information obtained by each party

t o r e d u c e h o s t i l i t y b e t w e e n t h e p a r t i e s a n d h e l p t h e m t o en g a g e

in a meaningful dialogue on key issues to uncover additional

facts and the real interests of the parties, to construct a setting

t o r e s o l v e c u r r e n t p r o b l e m s a n d f u t u re n e e d s o f t h e p a r t i e s . 109

A l s o i t m a k e s t h e re a c h i n g o f a s e t t l e m e n t m o r e l i k e l y b e c a u s e

o f t e n t h e p a r t i e s a re m o r e w i l l i n g t o s h a r e s e n s i t i v e i n f o rm a t i o n

t h a t t h e y w o u l d n o t r e v e a l t o t h e o t h e r p a r t y, i n f o r m a t i o n w h i c h

could lead to possible middle ground that the parties might not

h a v e s u s p e c t e d w a s t h e r e w i t h o u t t h e h el p o f t h e m e d i a t o r . 110

T h e m e d i a t o r m u s t b e a b l e t o l i s t e n c a r e f u l l y, t o a p p r e c i a t e

and understand the parties, to be able to suggest compromises by

m o d i f yi n g v i e w s , r e l a t i o n s h i p s a n d p ri n c i p l e s a n d u l t i m a t e l y t o

i n t e r p r e t i n a p r o p e r w a y t h e p o s i t i o n o f t h e p a r t i e s . 111 T h e

m e d i a t o r m u s t b e s k i l f u l i n p u b l i c r e l at i o n s , t o c o n d u c t wh a t w e

c a l l d i p l o m a c y m e d i a t i o n ( a l s o k n o w n a s s h u t t l e d i p l o m ac y) i n

the sense that he should be active during the negotiations and

109
CONNERTY Anthony, A Manual of International Dispute Resolution, (Commonwealth
Secretariat Library), 2006, p. 269. For more information see American Arbitration Association
available at www.adr.org
110
“However, caucus meetings are very sensitive undertakings and require some reserve on the
part of the mediator because the basis for agreement has to be woven out of confidential
information. In cases where the dispute resolution system allows the mediator to become an
arbitrator if mediation fails, it is very inadvisable for the mediator to meet with the parties
separately. Under the law of many countries, such a process would contravene the principles of
fair hearing, and could nullify any arbitration award on the grounds that it violates public order.
The principle of fair hearing is entrenched worldwide, and prevents an individual invested with
judicial functions from hearing one party without allowing the other party to respond to the
representations”. See BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 47.
111
MACKIE J. Karl, A Handbook of Dispute Resolution; ADR in Action, (London and New York:
Routledge and Sweet & Maxwell), 1991, pp. 89-90.

80
discussions with the parties and able to transfer critical

m e s s a g e s a b o u t t h e o u t c o m e o f t h e r e s u l t . 112 T h e m e d i a t o r s w o rk

is often hard and described as equal parts art and science since it

can be very difficult to facilitate an agreement in an

e n v i r o n m e n t o f c o n fl i c t a n d d i s t r u s t . 113

The role of the mediator is to settle any personal

differences between the parties, putting aside any unreasonable

requirements, mitigating initial rigid positions and seeking to

p r e v e n t t h e e s c a l a t i o n o f t e n s i o n a n d co m p e t i t i o n b et w e e n t h e m .

T h e m e d i a t o r h e l p s t h e p a r t i e s t o w o rk t o g e t h e r t o u n d e r s t a n d

the common features in their interests and for each party to

understand the respective interests and opinions of others. The

mediator helps stabilize and control the parties’ emotions and at

the same time helps to understand that in a dispute the challenge

is to find a solution and not the victory of one part y over the

other. The mediator encourages the parties to engage in a

dialogue with perspective and motivates them not only to

participate in the process but also be more imaginative in their

112
HIBBERD Peter and NEWMAN Paul, ADR and Adjudication in Construction Disputes,
(Blackwell Science), 1999, pp. 63-64.
113
“Some mediators have an innate ability to help people understand each other, and their
involvement can be the catalyst that enables resolutions to emerge when there seems no possibility
an agreement could ever be achieved. There is no ideal mediation style. Some mediators are very
aggressive and challenging, like trial lawyers, focusing on the details in the dispute and pushing
disputants on inconsistencies. Other mediators are much more reflective, like therapists or
counselors, letting the parties go through their own exploration of the issues, and focusing on the
relationship between the parties. Different styles fit different types of disputes and different types
of disputants”. See RULE Colin, op. cit., p. 41

81
q u e s t t o f i n d t h e m s e l v e s a l t e r n a t i v e wa ys t o r e s o l v e t h e d i s p u t e

and to reach a mutually acceptable solution.

The mediator must m ai n t a i n the momentum of the

n e g o t i a t i o n s a n d en c o u r a g e t h e p a r t i e s t o c o n t i n u e e v e n u n d e r

e x t r e m e c o n d i t i o n s o f i n t e n s e p e r s o n a l r i v a l r y, m a i n t a i n i n g o p e n

c o m m u n i c a t i o n wi t h e a c h o f t h e m a n d c o o p e r a t i n g e q u a l l y w i t h

both parties. Furthermore the mediator is responsible for

c r e a t i n g a n e n v i r o n m e n t t h at e n s u r e s c o n f i d e n t i a l i t y, f o r h i m ,

f o r t h e p r o c e d u r e i t s e l f , b u t al s o b e t w ee n t h e r i v a l p a r t i e s . W h e n

there is trust, the parties are less defensive and appear more

w i l l i n g t o s h a r e i n f o r m a t i o n a m o n g t h e m s e l v e s a n d wi t h t h e

mediator during private meetings. The mediator in order to win

the confidence of the parties must be impartial and keep an equal

distance from the opposing sides, facing the opposing parties

with respect and d i g n i t y, showing understanding of their

problem and genuine interest in resolving the dispute, as well as

making clear that he has no personal interest that could prevent

the achievement of an agreement between them. The mediator

must not criticize the parties, impose own views or ask

threatening questions. The mediator must ensure that any

c o n f i d e n t i a l i n f o rm a t i o n s h a l l n o t b e co m m u n i c a t e d t o t h e o t h e r

p a r t y. T h e m e d i a t i o n m u s t b e c o n d u c t e d i n a m a n n e r t h a t d o e s

n o t v i o l at e p r i v a c y, u n l e s s t h e p a r t i e s a g r e e o t h e r w i s e . F i n a l l y,

the mediator must present a range of mechanisms to solve the

82
problem in question and promote a plan of settlement which

w o u l d a c t u a l l y c o n t a i n t h e a g r e e d p o s i t i o n o f t h e p a r t i e s . 114

It i s i m p o r t a n t t h a t t h e e f f e c t i v e m e d i a t o r m u s t h a v e s o m e

theoretical knowledge as well as the necessary practical skills,

such as being able to carefully listen to the parties but also pick

u p o n a n y s i l e n t cu e s o f c o m m u n i c a t i o n a n d a s s i s t p a r t i e s t o

listen carefully to each other. The mediator must be able to

carefully word any questions, to summarize the parties’

positions and to pay attention to the arguments, opinions and

feelings of the parties. The mediator must be able to facilitate

the emergence of shared concerns and interests of the parties, to

effectively use language and to give focus on the ordinary rather

extreme nature of the dispute. The mediator must be able to

manage the process but also the expression of emotions, to

d e v e l o p a n d p r o m o t e a d d i t i o n a l p e r s p ec t i v e s , i d e a s a n d o p t i o n s ,

to strengthen the three sided model by avoiding alliances, to

keep equal distance from each of the parties, to be silent when

necessary and to obey to moral commitments (Code of Ethics and

Rules of procedure). The mediator must have emotional

s e n s i t i v i t y, w h i c h i s a n a b i l i t y t h a t a l l o w s t h e m e d i a t o r t o

r e s p o n d t o t h e ex p r e s s i o n o f e m o t i o n s o f t h e p a r t i e s a n d t o

a p p r o a c h s e n s i t i v el y a n y m a n i f e s t a t i o n s o f c o n f r o n t a t i o n o r

reconciliation of the parties. The identification and handling of

114
MACKIE J. Karl, op. cit. pp. 89, 90.

83
emotions is a necessary element of mediation and there are

various stages of handling emotions such as the clarification of

e m o t i o n s , t h e m a n ag e m e n t o f t h e r e s p o n s e o f e a c h p a r t y t o t h e

e m o t i o n al ex t r e m i t i e s o f t h e o t h e r s i d e a n d t h e r e c o g n i t i o n o f

t h e r i g h t a s w e l l a s t h e t i m e n e e d e d f o r e a c h s i d e t o ex t e r n a l i z e

t h e a c c u m u l a t e d p r es s u r e . 115

Im p o r t a n t a r e t h e s k i l l s o f g o o d j u d g m e n t , t h e a b i l i t y t o

understand the particularities of each specific case, practical

knowledge, c r e a t i v i t y, f l e x i b i l i t y, perception, intuition,

r e l i a b i l i t y a n d t h e c o m p e t e n c e t o e x e rc i s e t h e r e l e v a n t d u t i e s i n

a n e f f e c t i v e , c o n s t ru c t i v e a n d s e l f - r e l i a n t m a n n e r . F u r t h e rm o r e ,

t h e m e d i a t o r m u s t h a v e t h e n e c e s s a r y c o m m u n i c a t i o n s k i l l s t h at

a r e r e q u i r e d i n t h e p r o c e s s o f c o n f l i c t r e s o l u t i o n , t h e a b s en c e o f

which may cause substantial problems, such as the lack of

understanding of each side’s position, and the creation of

misunderstandings because of the inability to successfully

convey the message or due to differences in culture, education,

e t c . In o r d e r t o i m p r o v e t h e m e d i a t o r’ s c o m m u n i c a t i o n s k i l l s ,

active attention is required for the understanding of the

positions and feelings of each side as well as the context in

which communication takes place. The mediator must use a way

of speaking that aims at understanding and not impressing the

parties, reporting only what is appropriate and potentially

115
HIBBERD Peter and NEWMAN Paul, op. cit., pp. 63, 64

84
productive and adjusting to personality and cultural differences.

F i n a l l y, t h e m e d i a t o r m u s t b e a b l e t o s c h e d u l e m e e t i n g s .

In c o n c l u s i o n , t h e ca t a l yt i c a s s i s t a n c e a n d g u i d a n c e o f t h e

mediator through all the above mentioned capabilities allows the

p a r t i e s t o f i n d a t ai l o r m a d e s o l u t i o n b a s e d o n t h e i r n e ed s a n d

interests, a solution that would n ev e r b e r e a c h e d through

l i t i g a t i o n . T h e s e a r c h f o r t h e c a u s e s o f t h e c o n f l i c t , t h e a n a l ys i s

of the conflict cycle, the diagnosis and the application of

s p e c i f i c p a t t e r n s fo r b e h a v i o r a n a l ys i s i s t h e t h e o r e t i c a l b a s i s

based on which the mediator brings the parties to a successful

outcome of their attempt to resolve their dispute. According to

the above it is clear that the skills of a mediator vary and extend

b e yo n d l e g a l s c i e n c e , p s yc h o l o g y a n d n e g o t i a t i o n s . It c o m e s

d o w n t o t h e a b i l i t y o f " e m p a t h y" , i . e . t h e a b i l i t y t o u n d e r s t a n d

the parties, to be confidential, actively listen and effectively use

s i l e n c e , s u b m i t t h e a p p r o p r i a t e q u e s t i o n s , a b s o r b t h e n eg a t i v e

e m o t i o n s o f t h e p a rt i e s t o u n b l o c k t h e p r o c e s s , a n a l yz e i n t e r e s t s

and find possible points of identification. The role of the

mediator and the limits of that role must be presented in a calm

and possibly informal tone before the start of the mediation

process.

85
E. The settlement

O n e o f t h e m a i n f ea t u r e s o f m e d i a t i o n i s i t s n o n - b i n d i n g

c h a r a c t e r a s o p p o s e d t o o t h e r f o r m s o f A D R l i k e a r b i t r a t i o n . 116

In i t i a l l y, t h e p a r t i e s c a n l e a v e t h e m e d i a t i o n a t a n y p o i n t a n d a r e

not obligated to sign the settlement. Even mediation under a

b i n d i n g m e d i a t i o n ag r e e m e n t a s C a b l e & Wi r e l e s s P l c v . IB M i s

v o l u n t a r y, s i n c e t h e p a r t i e s a r e o n l y o b l i g a t e d t o i n i t i a t e a n d

a t t e m p t t h e p r o c e s s . 117 T h e m e d i a t i o n p ro c e s s c a n b e a f a i l u re

a n d l e a v e t h e p a r t i es b a s i c a l l y w h e r e t h e y s t a r t e d , t h o u g h b e t t e r

i n f o r m e d . B u t , i t ca n b e a s u c c e s s , i n w h i c h c a s e a s e t t l e m e n t

agreement is drafted and signed by the parties. In some

c o u n t r i e s , f o r i n s t a n c e i n t h e U n i t ed S t at e s , “ p a r t i e s d e c i d e

whether or not they wish to make their agreement legall y

enforceable or not, in which case a non-enforceable agreement is

based on the idea that parties have reached a mutually

a c c e p t a b l e s o l u t i o n t h a t w i l l b e h o n o r ed b y b o t h o f t h e m w i t h o u t

h a v i n g t o r e s o r t t o l e g a l l y b i n d i n g w r i t t e n a g r e e m e n t s ” . 118

However, in most countries, as far as the legal nature of

the agreement goes, the settlement agreement is accepted as a

b i n d i n g c o n t r a c t , wh i c h i n c a s e o f n o n -p e r f o r m a n c e , w h e n o n e o f

116
See infra at section 3.
117
HÖRNLE Julia, op. cit., p. 51.
118
HEUVEL V. D. Esther, op. cit., p. 7.

86
t h e p a r t i e s d o e s n o t h o n o r t h e a g r e e m e n t , a l l o ws f o r a l e g a l

cause of action. Even though, settlement agreements have a

special status in some countries making them easier to enforce,

internationally there is not an accepted framework to facilitate

the enforceability of international settlement agreements.

U n f o r t u n a t e l y t h i s p r o b l e m w a s n o t o v e r c o m e b y U N C IT R A L’ s

M o d e l La w ; a l t h o u g h s e v e r a l s o l u t i o n s w e r e s u g g e s t e d t o m a k e

m e d i a t i o n a g r e e m e n t s b i n d i n g a n d e n f o r c e a b l e i n t e r n a t i o n a l l y,

such as “submitting the agreement, in cases that lend themselves

to such an approach, to an arbitral tribunal required to render an

a r b i t r a t i o n a w a r d t h a t w a s d e s c r i b e d as c o n t a i n i n g a g r e e d t e r m s

or consider the agreement itself as an arbitral award for the

p u r p o s e o f r e c o g n i z i n g i t s e n f o r c e a b i l i t y” , 119 t h e M o d e l La w

c o u l d n o t p r o v i d e t h e n e c e s s a r y i n t e r n a t i o n a l r e m e d i es t h a t

might have made settlement agreements easier to enforce and

mediation a much more desirable choice for the resolution of

international disputes.

Unlike mediation, arbitration is more easily enforced and

t h e r e f o r e t h e p r e f e r r e d A D R m e t h o d a t l e a s t f o r i n t e r n at i o n a l

d i s p u t es . T h e f a c t t h a t t h e m e d i at i o n p r o c e d u r e i s v o l u n t a r y a n d

the fact that mediation is not suitable for all disputes, make

clear the need for a binding and adjudicative dispute resolution

method such as arbitration, which must be available and

119
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 48.

87
accessible for disputes and especially those not lending

t h e m s e l v e s t o c o m p r o m i s e . A ft e r a l l , a l t h o u g h m e d i a t i o n a i m s t o

find out the parties’ respective interests and align the resulting

p r e f e r e n c e s i n s u ch a w a y, t h a t t h e s o l u t i o n s a t i s f i e s e a c h

p a r t y’ s i n t e r e s t s ; h o w e v e r , o n e m u s t n o t f o r g e t t h at n o t a l l

d i s p u t es c a n b e s o l v e d i n t h i s w a y. In s o m e c a s e s , t h e u n d e r l yi n g

interests of the parties simply cannot be aligned, and it is

t h e r e f o r e n e c e s s a r y t o r e s o r t t o a d j u d i ca t i o n . 120

S e c t i o n 3 : A rb i t r a ti o n a n d t h e h y b r i d f o r ms

This section includes the presentation of arbitration and

the examination of its main characteristics, but also includes the

presentation of several other forms of ADR referred to as the

“ h yb r i d ” f o r m s . T h e e x a m i n a t i o n o f t h e s e m e t h o d s i s i n cl u d e d i n

t h e s e c t i o n a b o u t a rb i t r a t i o n b e c a u s e i t w a s d e e m e d t h a t i t w o u l d

be better for presentation purposes not to dedicate a whole new

s e c t i o n a b o u t t h e s e h yb r i d f o r m s , b u t i n s t e a d t h a t i t w o u l d b e

preferable to present them briefly after arbitration as to

demonstrate a more complete picture of the whole spectrum of

A D R a n d c o n s e q u e n t l y p r o v i d e a b e t t e r u n d e r s t a n d i n g o f AD R .
120
HÖRNLE Julia, op. cit., pp. 55- 58.

88
A . Wh a t i s A r b i t r a t i o n

Arbitration is an institution recognized by the law, which

appears as an alternative to resolving a dispute, a proposition

different from litigation. Arbitration is the oldest and most

c o n f r o n t a t i o n al f o rm o f a l t e r n a t i v e d i s p u t e r e s o l u t i o n ; i t i s a

s ys t e m o f j u s t i c e , c r e a t e d b y m e r c h a n t s t h o u s a n d s o f ye a r s

a g o . 121 T h e v a s t g r o w t h o f a r b i t r at i o n i n re c e n t d e c a d e s i s d u e t o

the fact that arbitration is a crucial component in the

development of ec o n o m i c life, particularly in international

t r a d e . 122 T h e b i g i n c r e a s e i n i n t e r n a t i o n al t r a d e t h a t o c c u r r e d i n

m o d e r n t i m e s c a u s e d m a j o r p r o b l e m s a l w a ys a s s o c i a t e d w i t h

international business such as the geographical, linguistic

ethnic, economic diversity of the environment of the parties. But

the needs created by international trade consistently proved

stronger than the obstacles. Thus the practice of international

trade applied a variety of means and methods for facilitating its

c o n d u c t , w i t h e m p h a s i s o n t h e ex c h a n g e o f b e n e f i t s . O n e t h e

more successful and popular methods amongst t h em was

a r b i t r a t i o n . Th e m a i n r e a s o n s f o r l e a d i n g t h e p a r t i e s t o a

dispute, to arbitration remain about the same today as in the

121
ROEBUCK Derek, Cleopatra Compromised: Arbitration in Egypt in the First Century BC,
Journal of the Chartered Institute of Arbitrators, 2008, p. 263.
122
CARABIBER Charles, L’evolution de l’arbitrage commercial international, Recueil des Cours
de l'Académie de Droit international, vol. 99, 1960, pp. 125- 130.

89
p a s t . 123 H o w e v e r , i n m o d e r n t i m e s , a r b i t r a t i o n i s p r e f e r r e d f o r

a d d i t i o n a l r e a s o n s , s u c h a s t h e p r o t e c t i o n o f p ri v a c y, t h e c o n t r o l

o f t h e p a r t i e s a n d t h e e a s e i n t h e i n t er n a t i o n a l r e c o g n i t i o n a n d

enforcement of arbitral awards against judicial decisions.

F r o m v e r y e a r l y, h u m a n s o c i e t i e s h a d m a n i f e s t e d a s p i r i t

o f r e s o l u t i o n o f d i s p u t e s a n d e s s e n t i al a t t e m p t s h a d b e e n m a d e

f o r t h e p e a c e f u l a n d a m i c a b l e s e t t l e m en t o f d i s p u t e s t h r o u g h t h e

process of arbitration. Whether or not arbitration proceeded the

justice of state institutions is not easy to determine and is not

the subject of this thesis. However it is argued that the roots go

back to ancient Greek law, the “heroic” period and the epics of

H o m e r , w h e r e a s c e n e o f t h e q u a r r e l b et w e e n O d ys s e u s a n d A i a s

T e l a m o n i o s i s d e s c ri b e d , t h e r e s o l u t i o n o f w h i c h w a s p e r f o r m e d

by arbitrators. Ancient Greek arbitration was divided into

p r i v a t e a n d p u b l i c a n d i n c l u d e d a s a f i r s t s t a g e t h e a t t em p t t o

r e c o n c i l e t h e t w o d e f e n d a n t s . T o c o n d u c t t h e a r b i t r at i o n a

c o n t r a c t u a l a g r e e m e n t w a s r e q u i r e d , w h i c h h a d t o b e i n w ri t i n g ,

s i g n e d b y t h e p a r t i e s , i n c l u d i n g t h e n u m b e r o f a r b i t r a t o rs a n d

determining the number of votes required for the validity of the

d e c i s i o n . A r b i t r a t o rs i n e a c h c a s e h a d t o d e c i d e i n a s p i r i t o f

f a i r n e s s a n d n o t m er e l y s t r i c t o b s e r v a n c e o f t h e l a w . T h e r o l e o f

a r b i t r a t o r s i n a n c i en t G r e e k l a w s t r o n g l y r e m i n i s c e n t t h e b a s i c

c h a r a c t e r i s t i c s o f t h e m u n i c i p al c o u r t s ( j u g e d e p a i x ) o f F r e n c h
123
CARBONNEAU E. Thomas, Etude historique et compare de l’arbitrage, Revue Internationale
de droit comparé, 1984, pp. 727- 730.

90
l a w a f t e r t h e F r e n c h R e v o l u t i o n . A r b i t r a t i o n w a s f a v o u re d i n

m o s t a n ci e n t l e g a l s ys t e m s a n d h i s t o r i c a l l y f u n c t i o n e d a s a n

independent adjudicative dispute settlement mechanism. For

instance, commercial arbitration agreements were very common

a m o n g t h e a n c i e n t G r e e k s a n d P h o e n i ci a n s t r a d e r s . 124

In a n c i e n t S u m e r i a, o n e o f t h e m o s t i n n o v a t i v e a n c i e n t

cultures, cities were trading centres with a high number of

commercial relations and the corresponding inevitable disputes.

Disputes were resolved by the king who was considered God's

representative on earth and his legal responsibility was to

arbitrate disputes between cities and citizens, give rulings and

w h e n n e c e s s a r y e n f o r c e d e c i s i o n s . Fu r t h e r m o r e , t h e C o d e o f

H a m m u r a b i i n B a b y l o n i n c l u d e s c o n f i rm e d m e n t i o n s o f a d u t y t o

a d m i n i s t e r j u s t i c e t h r o u g h a r b i t r a t i o n . 125

In In d i a a r b i t r a t i o n h a s a l o n g h i s t o r y a n d t h e a r b i t r a t i o n

s ys t e m w h i c h w a s a f e a t u r e o f In d i a n l i f e , w a s v e r y s i m i l a r t o

t h e s ys t e m o f a n c i e n t G r e e c e . P e o p l e v o l u n t a r i l y p r e s e n t e d t h e i r

d i s p u t es t o a p e r s o n o r a g r o u p o f w i s e m e n o f t h e c o m m u n i t y,

called “ P a n c h a ya t h ” , who resolved the disputes and their

d e c i s i o n s w e r e b i n d i n g . La t e r t h e “ R e g u l a t i o n o f B e n g a l ” i n

1 7 7 2 p r o v i d e d f o r ca s e s i n v o l v i n g p r i v a t e d i s p u t e s t o b e re f e r r e d

124
BONNER J. Robert, The Jurisdiction of Athenian Arbitrators, Classical Philology, vol.2, 1907,
pp. 132 -135.
125
WATSON Adam, op. cit., p. 57.

91
t o a r b i t r a t i o n . T h e f i r s t In d i a n A r b i t r a t i o n A c t w a s p a s s e d i n

1 8 8 9 a n d i t s e l em e n t s w e r e s i m i l a r t o m o d e r n a r b i t r a t i o n .

In E g yp t a n o r i g i n a l p a p yr u s f r o m t h e 3 r d c e n t u r y p r o v e s

the ex i s t e n c e of private arbitration surprisingly similar to

m o d e r n a r b i t r a t i o n a n d i n t h e M i d d l e E a s t t h e c o n ce p t o f

a r b i t r a t i o n ( t h a k i m ) w a s p r a c t i c e d s i n c e t h e e a r l y d a ys o f Is l a m

a s a p e a c e f u l m e a n s o f s e t t l i n g d i s p u t e s . T h e a r b i t r a t i o n s ys t e m

i n E g yp t f o l l o w e d t h e p r o v i s i o n s o f t h e Is l a m i c S h ar i a i n

accordance with the tenet Hanafi. The Koran includes arbitration

as a recommended means of settling disputes and the Sharia

decides whether an arbitration award is binding on the parties.

In C h i n a , t h e i n s t i t u t i o n o f a r b i t r a t i o n d a t e s f r o m 1 6 0 0

B.C. The Chinese believed that if a dispute cannot be avoided,

then it is imperative that the parties (alone or with the help of an

arbitrator) take the necessary measures early on to understand

t h e m o r a l s i g n i f i c an c e o f t h e r e l a t i o n s h i p c a u s i n g t h e d i s p u t e

and explore the possibilities offered to overcome the root of the

problem and achieve a morally just solution. From the period of

Zh o u t h e r e w e r e l o c a l j u d g e s t h e “ T i a o P e n ” , w h o s e m a i n

function was to assist in resolving disputes. Since then

arbitration was used extensively in ancient Chinese feudal

s o c i e t y, b e c a m e t h e m a i n m e t h o d f o r r e s o l v i n g d i s p u t e s a n d w a s

a n i n t e g r a l p a r t o f t h e l e g a l s ys t e m a n d n o t j u s t a n a l t e r n a t i v e .

Conceptual basis for the prevalence of arbitration was the moral

92
and social teachings of Confucius. The Chinese believed that the

l a w s a r e n o t t h e a p p r o p r i a t e w a y t o r e g u l a t e d i s p u t e s i n e v e r yd a y

relationships and should be limited to a secondary role, as

reflected by the Chinese proverb: “in death avoid hell, in life

a v o i d t h e l a w c o u r t s ” . 126

In R o m a n t i m e s a r b i t r a t i o n w a s v e r y p o p u l a r . T h e R o m a n s

called referees ''arbitri'', ''recepti arbitri'' or ''compomissorii''.

The Justinian Digest states that disputes arising should be

r e s o l v e d b y a t h i r d p a r t y, t h e a r b i t r a t o r . T h e a r b i t r a t o r w a s

usually an elder with significant wisdom, prestige, respected in

t h e c o m m u n i t y a n d h a d n o r e l a t i o n t o s t a t e a u t h o r i t y. In t h e

arbitration proceedings, under Roman law, the parties had the

opportunity to introduce to their agreement a double condition

which would provide that if a party fails to honour the

arbitration agreement or the award, would have to pay the other

p a r t y a k i n d o f p e n a l t y. H o w e v e r , i n g e n e r a l a r b i t r a t i o n w a s

o p t i o n al a n d t h e d e c i s i o n w a s n o t r e s j u d i c a t a . C i c e r o t e s t i f i e s t o

the administration of justice in private disputes through

a r b i t r a t i o n a n d i n d i c a t e s w h a t c r i t er i a t h e R o m a n s u s e d t o

c h o o s e b e t w e e n t h e c o u r t s o r a r b i t r at i o n .

An important chapter in the development of arbitration

dates back to the middle Ages. Originally arbitrator tasks were

126
PAN Junwu, Chinese Philosophy and International Law, Asian Journal of International Law,
vol. 233, 2010, p. 6.

93
performed by the pope, by emperors or kings, parliaments and

even law faculties. However, arbitration was further developed

b y t h e m e r c h a n t s . A t t h e e n d o f t h e 1 1 t h c e n t u r y t h e It a l i a n

c i t i e s h a d b e c o m e i n d e p e n d e n t a n d m e r c h a n t s o r g a n i z ed t h e i r

governance in their own way and according to their interests,

a n d h a d t h ei r o w n l e a d e r s h i p s u c h a s t h e “ C o n s u l e s M e r c a t o r u m ”

in Genoa and Milan. They had political powers and judicial

f u n c t i o n s a n d l e d t h e v a r i o u s u n i o n s a n d g u i l d s o f m e r c h a n t s . In

m a n y It a l i a n c i t i e s t h e u n i o n s a n d g u i l d s ex e r c i s e d p o w e r b y

a d o p t i n g r e g u l a t i o n s t o r e s o l v e t h e i r d i f f e r e n c e s . In i t i a l l y t h e s e

unions were voluntary associations, but were finally combined

into a federation known as the “Mercanzia”. Traders from

various cities came together in markets to do business. Very

often one party in a transaction would challenge another. The

i n e f f i c i e n c y o f t r a d i t i o n al c o u r t s t o r e s o l v e t h e s e d i s p u t e s l e d t o

the development of specific procedures for dealing with trade

i s s u e s a n d a s p e c i f i c s u b s t a n t i v e l a w o f m e r c h a n t s , t h e “ Le x

Mercatoria”. The Council of Federation of the “ O ff i c i u m

Mercanziae” referred most cases to arbitration, which was

ultimately recognized as an institution and ordinary courts were

f o r b i d d e n t o i n t e r f e r e w i t h t h e j u r i s d i c t i o n o f t h e a r b i t ra t o r s .

The rules, regulations and decisions of this institution were

mandatory for merchants and citizens, even for foreigners.

94
D u r i n g t h e e a r l y 1 0 t h c e n t u r y, i n En g l a n d , i n d i v i d u a l s

w i s h i n g t o s e t t l e a d i s p u t e r e s o rt e d t o j u r i e s w h i c h c o n s i s t e d o f

small groups of “neighbours”, expressing their grievances and

d i s p u t es a n d o p e r a t i n g t h e m s e l v e s a s l a w ye r s . 127 D u r i n g t h e 1 6 t h

c e n t u r y, c a s e s a r e r e f e r r e d t o a r b i t r a t o r s , n o t o n l y w i t h t h e

agreement of the parties but also by reference from the judicial

authority specifically for commercial differences between

B r i t i s h a n d f o r e i g n e r s . T h e f i r s t r e c o r d e d j u d i c i al d ec i s i o n

relating to arbitration in England was in 1610, noted by the

English legal scholar Sir Edward Coke. The acceptance of

a r b i t r a t i o n w a s s u b s t a n t i a l s o m et h i n g t h a t b o t h e r e d t h e j u d g e s

w h o c o n s i d e r e d a r b i t r a t i o n c o m p e t i t i v e a n d w e r e t r yi n g t o

impede its development. But the institution survived with the

Arbitration Act passed in 1698, which encouraged traders and

b u s i n e s s m e n t o s u b m i t t h e i r d i s p u t es t o b e r e s o l v e d b y t h e

a r b i t r a t o r s a n d n o t t h e c o u r t s . In S c o t l a n d t h e e a r l i e s t k n o w n

treatise which refers to arbitration is the “Regiam Majestatem”,

w h i c h d a t e s t o t h e e a r l y 1 4 t h c e n t u r y. It e x a m i n e s i s s u e s , s u c h

a s w h o c o u l d r e f e r t h e d i s p u t e t o ar b i t r a t i o n , w h e n i t w a s

arbitrable, what could happen if there were two arbitrators who

disagreed and how a decision should be issued.

A s s t a t e d , F r a n c e i s o n e o f t h e h o m e l a n d s o f m o d e rn

alternative resolution. The origin of the concept of arbitration in

127
CARTER T. Albert, op. cit., pp. 2, 3.

95
France dates back to the ancient courts “Pie poudre”, established

to resolve disputes between traders during market d a ys .

Arbitration in France first appeared in the 13th century during

trade fairs. Before 1789, the institution of arbitration in France

w a s n o t u s e d o f t e n , a l t h o u g h i t w a s a l l o w e d f o r m o s t c a s es a n d

was mandatory for the resolution of various family disputes

u n d e r v a r i o u s d e c r e e s a d o p t e d i n t h e 1 6 t h c e n t u r y. A f t e r t h e

French Revolution arbitration was reconceptualised, regarded as

“natural droit” and the Constitution of 1791 declared the

c o n s t i t u t i o n a l r i g h t o f c i t i z e n s t o r e s o r t t o a r b i t r a t i o n . In e a c h

canton there were founded “tribunaux de la paix”, manned by

“juges de la paix” acting more like regular people than like

j u d g e s a n d t h ei r m a i n c o n c e r n w a s t o r e c o n c i l e t h e p a r t i e s a n d

r e s o l v e t h e d i s p u t e i n q u e s t i o n b a s e d o n t h e p r i n c i p l e o f e q u i t y.

F a m i l y c o u r t s w e r e e s t a b l i s h e d t o a d j u d i c a t e d i s p u t e s b et w e e n

spouses and b e t we e n relatives as well as “t r i b u n a u x de

c o m m e r c e ” f o r c o m m e r c i a l d i s p u t e s . Th e “ N a p o l e o n i c C o d e ” a n d

t h e “ C o d e d e P r o c e d u r e C i v i l e ” a d o p t ed i n 1 8 0 6 a s w e l l a s t h e

Commercial Code contain regulatory provisions for arbitration

c a s e s s u c h a s f o r d i s p u t es r e l a t i n g t o m a r i t i m e i n s u r a n c e a n d

d i s p u t es b e t w e e n t h e s h a r e h o l d e r s o f a c o m m e r c i a l c o m p an y. I n

o t h e r a r e a s , t h e l a w a u t h o r i z e d t h e s u b m i s s i o n o f ex i s t i n g

d i s p u t es t o a r b i t r a t i o n , b u t a r b i t r a t i o n cl a u s e s f o r f u t u r e d i s p u t e s

were not allowed. After the signing by the France of the

96
“ G e n e v a P r o t o c o l o n A r b i t r a t i o n ” C l a u s e s o f 1 9 2 3 , w i t h t h e La w

of 31 December 1925 such clauses were allowed in disputes

a r i s i n g f r o m c o m m e r c i a l r e l a t i o n s . S u b s e q u e n t l a w s en a c t e d

from 1926 to 1975 dealt mainly with the scope of arbitration in

s p e c i f i c s e c t o r s w i t h o u t a n y c h a n g e s o n t h e p r o c e d u r a l r u l e s . 128

In the United States, Native American tribes used

arbitration not only to resolve disputes that arose within the

t r i b e , b u t al s o f o r t h e r e s o l u t i o n o f d i s p u t e s t h a t a r o s e b e t w e e n

the different tribes. From the European colonization of the U.S.,

a r b i t r a t i o n o p e r a t ed i n a c c o r d a n c e w i t h t h e B r i t i s h c u s t o m a r y

law. Already in 1632 the colony of Massachusetts introduced

legislation in support of arbitration as a means of dispute

r e s o l u t i o n , f o l l o w e d b y P e n n s yl v a n i a i n 1 7 9 5 . B u t w h i l e t h e r e

was arbitration in the colonial era, however, it was not popular

a n d n o t wi d e l y a c c e p t e d . A r b i t r a t i o n w a s m e t w i t h h o s t i l i t y a n d

scepticism. The distrust in arbitration was due to the fear of

displacement of justice and public policy and the belief that the

state should keep its monopoly in conflict resolution. But even

with these reservations, arbitration in the USA was an

e s t a b l i s h e d f o r m o f d i s p u t e r e s o l u t i o n b e f o r e t h e Am e r i c a n

R e v o l u t i o n . In 1 7 6 8 t h e “ N e w Y o r k C h a m b e r o f C o m m e r c e ” w a s

created, which was the first permanent board of arbitration and

i t s m a i n a c t i v i t y w a s i n i t i al l y t o r e s o l v e d i s p u t e s b et w e e n

128
CARBONNEAU E Thomas, op. cit., pp. 9- 11.

97
merchants and in 1794 the arbitral tribunal in New Haven was

e s t a b l i s h e d . In 1 7 9 9 G e o r g e W a s h i n g t o n i n h i s w i l l , w h i c h

i n c l u d e d a n a r b i t r a t i o n c l a u s e , s t a t e d t h e e x p l i ci t i n t e n t i o n t h a t

a l l d i f f e r e n c e s ( i f a n y a r i s e u n f o r t u n a t e l y) m u s t b e s o l v e d b y

three impartial and intelligent men, known for their honesty and

their good understanding. Two would be chosen by each of the

disputants, the third chosen by these two, and the decision would

be binding similar to a Supreme Court of the United States

d e c i s i o n . In 1 8 9 1 i n P h i l a d e l p h i a t h e C h a m b e r o f C o m m e r c e w a s

e s t a b l i s h e d . A r b i t r a t i o n r e c e i v e d t h e f u l l s u p p o rt i n g o f t h e

S u p r e m e C o u r t i n 1 8 5 4 w h e n t h e co u r t u p h el d t h e r i g h t o f

arbitrators to issue binding decisions. Arbitration was formally

i n s t i t u t i o n a l i z e d i n t h e US A i n 1 8 2 2 w h e n b u s i n e s s l e a d e r s

created an educational organization called “The Arbitration

Society of America” and in 1854 the Supreme Court recognized

the importance of arbitration by giving arbitrators broad

d i s c r e t i o n a r y p o w e r . In 1 9 1 9 a s m a l l g r o u p o f i n d u s t r i a l i s t s ,

traders and businessmen decided to create an organization that

w o u l d r e p r e s e n t b u s i n e s s e s e v e r yw h e r e a n d t h a t w o u l d b r i n g

h o p e t o a w o r l d d e s t r o ye d b y t h e r e c e n t w a r . T h e y m a n a g e d t o

r e p l a c e f e a r a n d s u s p i c i o n wi t h a n e w s p i r i t o f f r i e n d s h i p a n d

international cooperation. They founded the “ In t e r n a t i o n a l

C h a m b e r o f C o m m e r c e ” ( IC C ) a n d c a l l e d t h e m s e l v e s t h e " T h e

m e r c h a n t s o f p e a c e " . In a n a t t e m p t t o o v e r c o m e t h e d i s t r u s t a n d

98
animosity in dealing with arbitration, the Chamber of Commerce

and the “Bar Association of New York” contributed to establish

arbitration as a viable form of dispute resolution. Thus in 1920

New York C i t y' s first Modern La w on Arbitration was

established. The statute served as a model for other state laws.

In 1925 the “Arbitration Foundation” was founded. The

“Arbitration Foundation” as well as the “Arbitration Society of

A m e r i c a ” c e a s e d t o e x i s t i n 1 9 2 6 an d w e r e r e p l a c e d b y t h e

“ A m e r i c a n A r b i t r a t i o n A s s o c i a t i o n ” ( A A A ) . In 1 9 2 5 C o n g r e s s

p a s s e d t h e A c t k n o w n a s t h e “ F e d e r a l A r b i t r a t i o n A c t ” (F A A )

which allowed companies to agree on a private contractual

settlement of commercial disputes, and awards in cases of

i n t e r s t a t e o r i n t e r n at i o n a l c o m m e r c e b e c a m e e n f o r c e a b l e .

T h e r e c e n t ye a r s t o i m p r o v e t h e h a n d l i n g o f i n t e r n a t i o n a l

commercial disputes several permanent arbitration bodies have

b e e n e s t a b l i s h e d . T h e m o s t f am o u s c e n t r e s o f i n t e r n a t i o n a l

a r b i t r a t i o n a r e t h e “ C h a m b r e d e C o m m e r c e In t e r n a t i o n a l e ” , t h e

“ In t e r n a t i o n a l Court of Arbitration” of the “ In t e r n a t i o n al

C h a m b e r o f C o m m e r c e ” b a s e d i n P a r i s , t h e “ Lo n d o n C o u r t o f

A r b i t r a t i o n ” , t h e “ A m e r i c a n A r b i t r a t i o n A s s o c i a t i o n ” ( A A A) , t h e

“ In t e r - A m e r i c a n C o m m i s s i o n o f C o m m e r c i a l A r b i t r a t i o n ” , a n d

t h e “ In t e r n a t i o n a l C e n t r e f o r t h e S e t t l em e n t o f In v e s t m e n t

d i s p u t es ” ( IC S ID ) . From the overview of the history of

a r b i t r a t i o n i t b e c o m e s o b v i o u s t h at a r b i t r a t i o n i s a n i m p o r t a n t

99
t o o l fo r t h e p r o p e r f u n c t i o n i n g o f i n t e r n a t i o n a l t r a d e . T h e

continued presence and evolution from antiquity to modern times

c o n f i r m s i t s s i g n i f i c a n t v a l u e . To d a y i t i s c l e a r t h at a r b i t r a t i o n

p r e s e n t s a n u n p r e c e d e n t e d g r o w t h a n d h a s b e c o m e t h e p r ef e r r e d

method for the resolution of international commercial disputes.

The evolutionary process requires, however, theorists and

practitioners of law to look into the future of arbitration, to

understand the current and future needs the i n t e r n at i o n a l

commercial p r a c t i ce and ensure a smooth and trouble-free

operation of arbitration in the international arena and in

C yb e r s p a c e .

Arbitration can be defined as an institution founded on the

will of divergent parties who respecting the law, outsource the

resolution of certain legal dispute to third, n e u t r al and

i n d e p e n d e n t p e r s o n s w h o d e r i v e t h ei r a u t h o r i t y f r o m t h e p a r t i e s

t h e m s e l v e s a n d n o t b y t h e s t a t e , a n d r es o l v e t h e d i f f e r e n c e b a s e d

on that agreement after a fair hearing, issuing a final decision,

l e g a l l y b i n d i n g f o r t h e p a r t i e s . In a r b i t r a t i o n t h e p a r t i e s t ra n s f e r

the control over the outcome to the neutral party who has

d e c i s i o n m a k i n g a u t h o r i t y, m a k i n g a r b i t r a t i o n a k i n d o f p r i v a t e

j u d g i n g . 129 T h e p a r t i e s i n v o l v e d i n a d i s p u t e a g r e e t o s u b m i t

t h e i r d i s p u t e a n d p r e s e n t t h e i r e v i d e n c e t o a n e u t r a l p a rt y, t h e

arbitrator, or an independent, private tribunal that renders a

129
RULE Colin, op. cit., p. 42.

100
d e c i s i o n . Th e a r b i t ra t o r h a s t h e p o w e r o f d e c i s i o n i n t h e d i s p u t e .

O n c e t h e d i s p u t e i s s u b m i t t e d t o b e r e s o l v e d t h r o u g h a r b i t ra t i o n ,

“ a p a r t y c a n n o t u n i l a t e r a l l y w i t h d r a w f r o m t h e a r b i t r a t i o n ” . 130

U n l i k e m e d i a t i o n , ar b i t r a t i o n i s n o t v o l u n t a r y b u t m a n d a t o ry a n d

i f t h e r e s p o n d e n t re f u s e s t o p a r t i c i p a t e i n t h e a r b i t r a t i o n , t h e

a r b i t r a t o r m a y i s s u e a d e f a u l t a w a r d . 131

O n e t h i n g t h a t m a k e s a r b i t r a t i o n s u c h a f a s c i n a t i n g s u b j e ct

i s i t s d u a l n at u r e . A r b i t r a t i o n i s a t t h e s a m e t i m e a n e x e r c i s e o f

private ordering, formed by private agreement, shaped as a result

o f c o n s c i o u s p r i v a t e c h o i c e a n d a l s o i t i s a n e x e r ci s e i n

adjudication which results in an award that the force of the state

makes obligatory on the litigants in much the same way as the

j u d g m e n t o f a p u b l i c t r i b u n a l . 132 A r b i t r a t i o n i s a p r o c e d u r e h e l d

in a confrontational manner and is the closest form to

l i t i g a t i o n . 133 H o w e v e r , i t i s a p r i v a t e , m o r e f l e x i b l e a n d l es s

f o r m a l p r o c e s s t h a n l i t i g a t i o n i n co u r t t h at p r o d u c e s f i n a l

d e c i s i o n s , t h e a r b i t ra l a w a r d s , w h i c h a r e e q u a l l y b i n d i n g , a s w e l l

a s e a s i e r t o e n f o r c e i n t e r n a t i o n a l l y. F u r t h e r m o r e , l i k e m e d i a t i o n ,

130
HEUVEL V. D. Esther, op. cit., p. 5.
131
HÖRNLE Julia, op. cit., p. 59.
132
RAU Alan Scott, The Culture of American Arbitration and the Lessons of ADR, Texas
International Law Journal, vol. 40, 2005, p. 1.
133
GENN Hazel, Mediation in Action, Resolving Court Disputes Without Trial, (London:
Galouste Gulbenkian Foundation), 1999, p. 14.

101
“arbitration is for parties that are in conflict but nonetheless

w i s h t o p u r s u e t h e i r c o n t r a c t u a l r e l a t i o n s h i p ” . 134

T h e r e a r e d i f f e r e n t k i n d s o f a r b i t r at i o n ; f o r i n s t a n c e ,

d e p e n d i n g o n t h e n a t u r e o f t h e o u t c o m e, a r b i t r a t i o n c a n b e e i t h e r

binding or non-binding. However, normally when one speaks of

traditional arbitration, more o ft e n than not means binding

a r b i t r a t i o n . Th e r e a r e m a n y t yp e s o f a r b i t r a t i o n s ys t e m s b e c a u s e

p a r t i e s c a n d e s i g n t h e m h o w e v e r t h e y c h o o s e . S o m e p r o ce d u r e s

a r e i n f o r m a l a l l o wi n g p a r t i e s t h e o p p o r t u n i t y t o p r e s e n t a n y

evidence they wish. Others apply rules of evidence, permit

motion practice, and include other judicial procedures. Some

p e r m i t d i s c o v e r y a n d s o m e d o n o t . “ A rb i t r a t i o n h e a r i n g s c a n b e

f o r m a l b u t t h e r u l es o f e v i d e n c e u s e d i n c o u r t s d o n o t u s u a l l y

a p p l y” . 135 A r b i t r a t i o n s c a n b e h e l d w i t h a s i n g l e d e c i s i o n - m a k er

a n d o t h e r s c a n b e h e l d w i t h a p a n el o f t h r e e o r e v e n f i v e .

A r b i t r a t i o n s c a n b e d o c u m e n t s o n l y, i . e . w i t h o u t t h e n e e d f o r

p a r t i e s t o p r e s e n t t h e i r p o s i t i o n s i n f a c e - t o - f a c e h e a r i n gs . 136

A n o t h e r i m p o rt a n t d i s t i n c t i o n i s b e t w e e n a d h o c a n d i n s t i t u t i o n a l

a r b i t r a t i o n . In a d h o c a r b i t r a t i o n , o n e a r b i t r a t o r o r s e v e r a l

arbitrators resolve the dispute outside of any institutional

framework. The main problem with ad hoc arbitration is that in

case of disagreements concerning mostly the arbitral tribunal,

134
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 49.
135
SHAMIR Yona, op. cit., p. 38.
136
RULE Colin, op. cit., p. 42.

102
t h e p a r t i e s h a v e t o r e c o u r s e t o n at i o n a l c o u r t s , s o m et h i n g t h a t

n o r m a l l y p a r t i e s w a n t t o a v o i d . H o w e v e r , t h e s a m e p r o b l em d o e s

n o t ex i s t w i t h i n s t i t u t i o n a l a r b i t r a t i o n , i n w h i c h t h e i n s t i t u t i o n

provides a framework for the procedure, solves any

disagreements or problems that arise, appoints the arbitrators,

sets parameters for the award and generally provides a more

s t a b l e f o u n d at i o n f o r t h e b a s i s o f t h e a rb i t r a t i o n . 137

B. Choosing Arbitration

Li k e i n m e d i a t i o n , p a r t i e s c a n a g r e e t o u s e a r b i t r a t i o n t o

r e s o l v e t h e i r d i s p u t e s w h e n t h e y s i g n t h e i r i n i t i a l c o n t ra c t b y

i n c l u d i n g a n a r b i t r a t i o n c l a u s e , a c c o r d i n g t o w h i c h a l l d i s p u t es

that may arise from that relationship will be resolved through

arbitration, respecting the conditions set out in the agreement as

well as the law (pre-dispute a r b i t ra t i o n ) . Another way to

recourse to arbitration is after a dispute has arisen (post-dispute

a r b i t r a t i o n ) , b u t u s u a l l y c r e a t e s m o r e d i f f i c u l t i e s s i n ce t h e

parties may disagree on several points, even the preferred ADR

m e t h o d o r d et a i l s c o n c e r n i n g i t . H o w ev e r , o n c e t h e p a r t i es h a v e

137
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 50.

103
chosen arbitration to resolve their dispute they renounce the

right to regular recourse before the courts.

Fundamental attributes of arbitration are the autonomy of

the parties across the whole spectrum of the procedure, and the

binding nature of the decision adopted. The free will of the

parties to choose the resolution of the dispute away from the

state courts and the power to shape the terms and conditions for

the arbitration p ro c e d u r e distinguish it from l i t i g a t i o n . 138

A r b i t r a t i o n i s a wi d e l y u t i l i z e d A DR m e t h o d p a r t i c u l a rl y f o r

commercial disputes and presents considerable a d v an t a g e s

compared to litigation, with most important amongst them, the

resolution of the dispute in a much faster and a less expensive

way than litigation. Contrary to litigation in court, where there

i s p u b l i ci t y, a r b i t r a t i o n t a k e s p l a c e b e h i n d c l o s e d d o o rs i n a

private and confidential manner. Furthermore, arbitration

p r o v i d e s f l ex i b i l i t y a s t h e p a r t i e s a r e f r e e t o a g r e e o n a n d s h a p e

several aspects of the arbitration, such as the tie and place of the

arbitration procedure as well as the degree of f o r m a l i t y.

“ C o n v e n t i o n a l wi s d o m s u g g e s t s t h a t b u s i n e s s e s c h o o s e b i n d i n g

arbitration mainly because it is perceived to be different from

l i t i g a t i o n i n s e v e r a l i m p o r t a n t t o t h e m a s p e c t s ” . 139 C o s t a n d t i m e

savings, less f o r m a l i t y, expert third neutral p ar t i e s ,


138
STURGES A. Wesley, Arbitration- What is it? New York University Law Review, vol. 35,
1960, p. 1047.
139
STIPANOWICH J. Thomas, Arbitration: The "New Litigation”, University of Illinois law
Review, 2010, p. 4.

104
c o n f i d e n t i a l i t y, a n d t h e f i n a l i t y g u a r a n t e e d b y t h e r e n d e r i n g o f

binding decisions, made arbitration a wide-ranging surrogate for

c i v i l t r i a l , wi t h a rb i t r a t i o n p r o v i s i o n s u t i l i z e d i n al l k i n d s o f

contracts.

C. The Arbitrator

T h e a r b i t r a t o r c o m m u n i c a t e s wi t h t h e d i s p u t i n g p a r t i e s

and, after taking into account their arguments as well as the

evidence, renders a decision. This method of alternative dispute

resolution is chosen mainly in the business sector where

differences that arise must be adjusted individually by a

s p e c i a l i s t w h o s e ex p e r t i s e w i l l c o r r e s p o n d t o t h e n a t u r e o f t h e

d i s p u t e . T h e p a r t i es c a n c h o o s e t h e a r b i t r a t o r , w h o wi l l r e s o l v e

their dispute. An arbitrator can be part of a court-annexed

s c h e m e , o r a n a r b i t ra t o r w h o i s n o t n e ce s s a r i l y l e g a l l y q u a l i f i e d ;

h o w e v e r , i n s o m e j u r i s d i c t i o n s , s u ch a s F r a n c e a n d In d i a ,

a r b i t r a t o r s n e e d t o h a v e a l e g a l b a c k g r o u n d . 140 P a r t i e s a r e f r e e t o

choose an arbitrator who has “extensive legal and practical

e x p e r i e n c e i n t h e s p e c i f i c f a c t u a l a n d l e g a l i s s u e s i n d i s p u t e ”. 141

140
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 4, 5.
141
HEUVEL V. D. Esther, op. cit., p. 5.

105
The arbitrator can be an expert on the field relating to the

d i s p u t e i n c a s e s u c h a s a n a c c o u n t a n t o r a n e n g i n e e r . 142

However, since the arbitration process has a lot of

s i m i l a r i t i e s t o t h e p r o c e s s i n c o u r t r o o m s , a r b i t r at o r s o f t en r e l y

to a very great degree on the applicable law, relevant legal

documents and contracts, and other precedent-setting decisions.

Therefore, arbitrators are usually lawyers with legal expertise in

t h e m a t t e r s o n wh i c h t h e y a r e c a l l e d i n t o d e c i d e . 143 T h e

arbitrator hears the parties, assesses the relevant facts and

arguments presented by each side, and after considering all

evidence and respecting laws and procedures, the arbitrator

i s s u e s a d e c i s i o n , wh i c h i s c a l l e d a r b i t ra l a w a r d . T h i s p r o ce s s i s

v e r y o f t e n l e s s f o r m a l a s w e l l a s m u c h f a s t e r t h a n t h e j u d i c i al

process.

D. The Arbitral award

After the c o n s i d er a t i o n of all r e l ev a n t evidence, the

a r b i t r a t o r i s s u e s a d e c i s i o n , t h e a r b i t ra l a w a r d , w h i c h i s l e g a l l y

binding, similarly to a court judgment, as well as final and not

142
SHAMIR Yona, op. cit., p. 38.
143
RULE Colin, op. cit., p. 42.

106
appealable, except in very limited instances. An arbitration

award is final in the sense that awards have “res judicata” effect

a n d o n c e a n a w a r d h a s b e e n i s s u e d , u n l e s s t h e a w ar d i s

s u c c e s s f u l l y c h a l l e n g e d , t h e s a m e m a t t e r c a n n o t b e b ro u g h t

b e f o r e a c o u r t o r a r b i t r a t i o n t r i b u n a l a g a i n . 144 D e c i s i o n s o f an

arbitrator can only be appealed to a court on narrow grounds,

s u c h a s f r a u d o r m i s c o n d u c t b y t h e a r b i t r a t o r . E r r o r s o f f ac t o r

law by an arbitrator cannot be a p p e a l e d . 145 In t e r n a t i o n al

Arbitration is greatly facilitated by multilateral treaties, mainly

the “New York Convention”, which regulates the recognition and

enforcement of foreign arbitral awards. The arbitral award can

be enforced in all countries that have signed the “Convention on

the Recognition and Enforcement of Foreign Arbitral Awards

( N e w Y o r k , 1 9 5 8 ) ” . O n e o f t h e m a i n re a s o n s f o r t h e s u c ce s s o f

arbitration and its suitability for resolving commercial disputes

is the ease for enforcing arbitral awards due to this multilateral

t r e a t y, which manages to ensure the recognition and

enforceability of arbitral awards, in a way that is much easier

than the recognition and enforcement of foreign court

j u d g m e n t s . 146 T h e f a ct t h a t a w a r d s c a n b e e a s i l y e n f o r c e d i n a n y

144
HÖRNLE Julia, op. cit., p. 59.
145
STONE V.W. Katherine, Alternative dispute Resolution, Public Law & Legal Theory Research
Paper Series, 2004, p.1.
146
“The Convention requires the courts of the some 125 signatory states to acknowledge written
arbitration agreements, declare themselves incompetent to hear disputes that are subject to
arbitration clauses, and enforce awards in accordance with criteria set out in its provisions. The
New York Convention commits the states in question to recognizing and enforcing foreign arbitral
awards in accordance with a regime that essentially restricts their legal authority to the protection

107
of the signatory states is one of the main reasons why arbitration

is popular for US companies, since the United States do not have

any treaties on the execution of foreign verdicts, but have signed

the “New York C o n v e n t i o n ” . 147 Besides the “New Y o rk

Convention”, arbitration is also greatly facilitated by the

harmonization of national legislation as a result of the

“ U N C IT R A L Model La w on In t e r n a t i o n a l Commercial

A r b i t r a t i o n ” ( 1 9 8 5 ). T h e f i n a l i t y a n d b i n d i n g n a t u r e o f a r b i t r a l

a w a r d s m a k e a r b i t r a t i o n a u n i q u e an d i d e a l m e t h o d fo r t h e

resolution of any kind of dispute and the only true alternative to

l i t i g a t i o n a s a b i n d i n g a n d e n f o r c e a b l e a v e n u e f o r r e d r e s s . 148

E . T h e h y b r i d f o r ms

i. Conciliation

Conciliation is the process of peaceful settlement of

d i s p u t es and the term conciliation means any activity for

of public order, in other words, protection of the core values that would justify state intervention in
the most liberalized system”. See BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 51.
147
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 4, 5.
148
HÖRNLE Julia, op. cit., p. 59.

108
h a r m o n i z a t i o n o r r ea c h i n g a s e t t l e m e n t b e t w e e n t w o c o n fl i c t i n g

p a r t i e s . T h i s p r o c e s s i s i n t e n d e d t o f a c i l i t a t e c o n t a c t b e t w ee n t h e

p a r t i e s t h r o u g h t h e i n t e r v e n t i o n o f a t h i r d p a r t y, t h e c o n c i l i a t o r ,

to achieve s et t l em e n t of their dispute. C o n ci l i at i o n is

characterized by the involvement of three parties, namely two

parties between which there is a dispute and a third which aims

to harmonize and improve relations between the parties. On 24

June 2002, the “ U N C IT R A L Model La w on In t e r n a t i o n al

C o m m e r c i a l C o n ci l i a t i o n ” w a s a d o p t ed . A c c o r d i n g t o P a r t 1 ,

Article 1 (3), “the process of conciliation is defined as a process

w h e t h e r r e f e r r e d t o b y t h e e x p r e s s i o n co n c i l i a t i o n , m e d i a t i o n , o r

an expression of similar import, whereby parties request a third

person or persons ('the conciliator') to assist them in their

attempt to reach an amicable settlement of their dispute arising

o u t o f o r r e l a t e d t o a c o n t r a c t u a l o r o t h e r l e g a l r e l a t i o n s h i p ” . 149

In c o n c i l i a t i o n t h e t h i r d p a r t y u n d e r t a k e s t o a s s i s t t h e

parties to resolve their dispute, but cannot impose upon them a

particular solution. Conciliation is different from negotiation

b e c a u s e o f t h e i n v o l v e m e n t o f a t h i r d n e u t r a l p a r t y. C o n c i l i a t i o n

d i f f e r s f r o m a r b i t r at i o n i n t h at t h e o u t c o m e o f t h e c o n c i l i a t i o n

depends on the willingness of the parties and the parties decide

whether they will come to an agreement. The objective in

conciliation is an amicable settlement rather than the


149
UNCITRAL Model Law on International Commercial Conciliation, 2002, available at
http://www.uncitral.org/pdf/english/texts/arbitration/ml-conc/03-90953_Ebook.pdf

109
formulation of ad j u d i c a t i v e crisis. The distinction from

m e d i a t i o n i s n o t a l w a ys e a s y. F r e n c h t h e o r y c o n s i d e r s t h e

b o u n d a r i e s b et w e e n t h e t w o c o n c e p t s b l u r r y a n d t h e d i f f e r e n c e s

o n l y i n e x t e r n a l f e at u r e s s u c h a s p a ym e n t , r e f e r r a l t i m e , e t c . , b u t

e s s e n t i a l l y n o t h i n g c h a n g e s . In b o t h f o r m s t h e p a r t i e s t r u s t t h e

a b i l i t i e s o f a t h i r d p a r t y w h o f u l f i l l s ce r t a i n c o n d i t i o n s . P e r h a p s

a difference could be related to the submittal of a proposal by

t h e t h i r d p a r t y. W h e n t h i s p r o p o s a l o r s u g g e s t i o n i s s u b m i t t e d t o

the parties, then the process is called conciliation and when

there is no such proposal it is called m e d i a t i o n . 150 T h e

d i f f e r e n c e s a r e s m a l l a n d h a r d l y a n yo n e c o u l d a r g u e t h a t t h e r e i s

r e a l c o n s i s t e n c y i n t h e c o n t r o v e r s y b e t w e e n m e d i at i o n a n d

c o n c i l i a t i o n , s i n c e t h e y a r e u s e d i n t e r c h a n g e a b l y, t h e y p r o v i d e

similar services and have a common objective. The distinction is

r a t h e r t h e o r e t i c a l b u t c o n c i l i a t i o n i s i d e n t i fi e d a s a d i s t i n c t

m e t h o d o f A DR .

The commencement date and the conciliation procedure are

designated by the parties and in case they have failed to do so,

the conciliator may conduct the conciliation proceedings in such

a manner the conciliator considers appropriate. Confidentialit y

and impartiality are two fundamental principles of conciliation.

The c o n c i l i at o r must respect the information the parties

entrusted and additionally should not serve as an arbitrator in

150
HIBBERD Peter and NEWMAN Paul, op. cit., p. 59.

110
the process of conciliation, unless otherwise agreed by the

p a r t i e s . T h e ro l e o f t h e c o n c i l i a t o r i s t o a p p r o x i m a t e t h e v i e w s

o f t h e p a r t i e s a n d m o t i v at e t h em t o en t e r i n t o n e g o t i a t i o n s w i t h

each other in order to find a solution to the dispute. The

c o n c i l i a t o r i s n o t p r i m a r i l y i n v o l v ed i n t h e e s s e n c e o f t h e

d i s p u t e , b u t i s l i m i t e d t o a c h i e v i n g t h e a p p r o p r i a t e c l i m at e f o r

r e s o l u t i o n . T h e c o n t i n u a t i o n o f d i s c u s s i o n s , t h e r e a s s u r an c e o f

tension, proposing measures to create favorable conditions for

d i s c u s s i o n s , c l a r i f yi n g t h e p r o p o s al s an d c o u n t e r p r o p o s a l s o f t h e

p a r t i e s , f i n d i n g ex t r e m e n e g o t i a t i n g b o u n d a r i e s , a n d m a k i n g

m u t u a l l y a c c e p t a b l e c o m p r o m i s e s f o r ac h i e v i n g a g r e e m e n t s , a r e

the most important tasks of the conciliator.

The conciliator is limited to one person only unless

otherwise agreed by the parties. The conciliator’s role is to

assist the parties in an independent and impartial manner in their

a t t e m p t t o r e a c h an a m i c a b l e s e t t l e m e n t o f t h e i r d i s p u t e . T h e

process begins with the submission to the conciliator of a

w r i t t e n r e p o r t f r o m i n t e r e s t e d p a r t i e s t o g e t h e r o r s e p a r a t e l y.

When the report is communicated s e p a r a t e l y, it must be

disclosed by any means to the other party with the care of the

c o n c i l i a t o r w i t h i n t h r e e d a ys . T h e r e p o r t d e s c r i b e s t h e c a s e a n d

clarifies the position of the parties. Conciliation, like other

m e t h o d s o f A D R , h a s a s i t s m a i n c h a r a c t e r i s t i c s f l ex i b i l i t y a n d

c o n f i d e n t i a l i t y. The confidentiality principle excludes

111
information whose disclosure is necessary to allow the

p r e s e n t a t i o n o f a p p r o p r i a t e ex p l a n a t i o n s f r o m t h e o t h e r p a r t y.

Conciliation can be contrasted to the judicial route because of

its non-binding nature and the right for the parties to participate

actively in the process. Nevertheless, conciliation shares many

common e l em e n t s and principles with mediation, their

d i s t i n c t i o n b e c o m es t r u l y d i f f i c u l t a n d a r e b o t h c o n s i d er e d a s

two of the most widely used alternative methods of resolving

d i s p u t es . 151

ii. Mini- trials

T h e t e r m m i n i - t ri a l i s a n A m e r i c a n i n v e n t i o n , w h i ch

a c c o r d i n g t o t h e E n g l i s h t e r m i n o l o g y, i s e n c o u n t e r e d a s e i t h e r

m i n i -t r i a l s o r ex e c u t i v e t r i b u n a l a n d d e s c r i b e s a n a l t e r n a t i v e

m e t h o d o f d i s p u t e re s o l u t i o n i d e a l f o r c o r p o r a t e a n d c o m m e r c i a l

d i s p u t es . U s u a l l y i t i s u s e d t o s o l v e m a j o r d i s p u t e s i n v o l v i n g

c o m p l ex m a t t e r s c o m b i n i n g l e g a l a n d f a c t u a l e l e m e n t s , s u c h a s

product liability and antitrust cases, but where the parties wish

t o m a i n t a i n a f ri e n d l y r e l a t i o n s h i p . It i s v o l u n t a r y a n d t h e

parties can only freely agree to resolve their dispute by using


151
HUNTER Martin, PAULSSON Jan, RAWDING Nigel, REDFERN Alan, op. cit., p. 65.

112
t h e p r o c e s s o f m i n i -t r i a l . T h e p r o c e s s i s i n f o r m a l , a s t h e r e a r e n o

established procedures or rules of evidence governing the

process. However, the parties agree on a set of rules governing

the facts of the case and the evidence and these rules are defined

i n t h e a g r e e m e n t f o r t h e m i n i - t r i a l . T h e p r o c e s s i s v o l u n t ar y a n d

n o n - b i n d i n g b e c a u s e g e n e r a l l y t h e r e i s n o o b l i g a t i o n fo r t h e

parties to take part in the mini-trial and the opinion of the

neutral third party is not binding; instead, decisions are only

r e a c h e d b y t h e a g r e e m e n t o f t h e p a r t i es . T h e g r e a t e s t a d v a n t a g e

o f m i n i -t r i a l s i s t h e i r i n f o r m a t i v e n a t u r e , s i n c e , e v e n i f t h e

procedure does not lead to resolution, it leaves the parties better

i n f o r m e d a b o u t t h e c a s e a n d t h e s t r en g t h o f t h e i r a r g u m e n t s .

T h i s i s e s p e c i a l l y h e l p f u l f o r t h e re s o l u t i o n o f t h e d i s p u t e

t h r o u g h t r a d i t i o n al l i t i g a t i o n , w h i c h m o s t o f t e n f o l l o ws a m i n i -

trial. Li k e other methods, m i n i - t ri a l is characterized by

flexibility and this practically means that through the agreement

o f b o t h s i d e s , a m i n i - t r i a l c a n b e a d a p t e d s o t h a t i t m e et s t h e

needs of each particular case.

M i n i - t ri a l utilizes and combines elements from the

traditional techniques of negotiation, mediation and arbitration.

The dispute is resolved by a three-member panel which consists

o f t h e n e u t r a l t h i r d p a r t y a n d a r e p r e s e n t a t i v e o f e a c h p a r t y. T h e

n e u t r a l t h i r d p a r t y c a n b e f o r i n s t a n c e a l a w ye r , a r e t i r e d j u d g e

o r a n e x p e r t r e l a t ed t o t h e s u b j e c t m a t t e r o f t h e d i s p u t e , o r

113
s o m e o n e w h o h a s e x t e n s i v e ex p e r i e n c e i n r e s o l v i n g d i s p u t e s .

T h e t h i r d n e u t r a l p ar t y i s a k e y p e r s o n i n t h e p r o c e s s a n d i t s r o l e

is mainly a coordinating role aiming to facilitate the procedure

exactly as the neutral party in mediation. The representatives of

the parties usually have the power to bind each side, so usually

the people who are chosen have prestige and influence in the

business or on the individual they are representing. The

p r o c e d u r e t o b e f o l l o w e d i n a m i n i - t r i al i s n o t a l w a ys g i v e n a n d

differs depending on the specific circumstances of each case.

In i t i a l l y, t h e p a r t i e s a g r e e t o s e t t l e t h e i r d i s p u t e t h r o u g h m i n i -

trial and the agreement contains the obligations, the right to

w i t h d r a w f r o m t h e a g r e e m e n t o r t o t e r m i n a t e t h e p r o c es s , t h e

p r i n c i p l e o f c o n f i d en t i a l i t y e t c . In i t s m o d e r n f o r m , t h i s p r o c e s s

takes place in the presence of real audience in a virtual court,

composed especially for this occasion, which issues a decision

t h a t h a s n o b i n d i n g f o r c e b u t a l l o w s s t a k e h o l d e r s t o b e i n fo r m e d

about the arguments and positions of their opponents and also to

l i s t e n t o a n o b j e c t i v e o p i n i o n b y a t h i r d n e u t r a l p a r t y. 152

A l t h o u g h d e s i g n e d a s a q u i c k t r i al , i t i s a c t u a l l y a m e a n s

t o h e a r t h e p a r t i e s a n d t h e v i e w o f t h e o t h e r s i d e a n d a t t em p t a

settlement through negotiation. Prior to the hearing the parties

exchange documents, evidence, s h o rt recommendations and

s u m m a r i e s o f w i t n e s s s t a t em e n t s , a g r e e o n p r o c e d u r e an d o n
152
NAMMOUR Fady, Théorie et Pratique de l’arbitrage interne et international, (Editions
Juridiques Sader), 2000, p. 15.

114
schedules, decide on the venue, the allocation of time, i.e. the

time each party will have at its disposal, the witnesses of each

side, the cost of process and all other details about the course of

t h e p r o c e d u r e . D u ri n g t h e h e a r i n g , e a c h s i d e s u m m a r i z e s t h e

arguments of its case, as in a trial, with the difference that the

cases are presented by the parties themselves and the

presentations are shorter. The neutral third person normally

presides over the process, making key questions, helping the

p a r t i e s t o u n d e r s t a n d t h e i s s u e s , a n d i f n e c e s s a r y, e x p r e s s a n

opinion. The representatives of the parties enter into

negotiations, which are facilitated by the neutral third person

who may be invited to present views in writing on the strengths

a n d w e a k n e s s e s o f e a c h o p p o s i n g p a r t y ’ s o p i n i o n . In t h e p r o c e s s

of mini-trial, representatives may be more practical and creative

in their negotiations, unlike wi t h the t r a d i t i o n al way of

resolving disputes in the courts. The neutral third party has the

r o l e o f a j u d g e o r a r b i t r a t o r wi t h o u t b e i n g a b l e t o i s s u e a

b i n d i n g d e c i s i o n . In t h e p r o c e s s , a l t h o u g h t h e r e i s e v i d e n c e ,

d e p o s i t s a n d a “ j u d g e ” p r e s i d i n g , i n f a c t t h e r e i s n o t r i al . T h e

process is more similar than the other alternatives to the

traditional court process, hence the name mini-trial, since the

t h r e e - m e m b e r c o m m i t t e e r e m i n d s t h e s yn t h e s i s of a three-

m e m b e r t r i b u n a l . Th i s h yb r i d t e c h n i q u e m a y p r e s e n t d i f f e r i n g

levels of assistance of a third neutral, but a neutral third party

115
often facilitates the procedures for the presentation of evidence,

the debate among decision makers, and serves as a mediator to

r e a c h a s o l u t i o n . M i n i - t ri a l s c a n b e m o r e e x p e n s i v e t h a n m o s t

other ADR techniques because the cost of presenting evidence,

but costs are considerably less than in litigation.

A mini-trial is similar to mediation because the parties in

dispute are able to communicate their side of the story and are

usually not bound by the outcome of the process, which, without

t h e c o n s e n t o f t h e p a r t i e s , c a n n o t l e ad t o r e s o l u t i o n . H o w e v e r ,

there is a significant difference between mediation and a mini-

t r i a l . In m i n i - t r i al s t h e r e a r e r e p r e s e n t a t i v e s f o r e a c h o f t h e

p a r t i e s . T h e p a r t i es p r e s e n t t h e i r a r g u m e n t s , b u t d o n o t t a k e

a c t i v e r o l e i n t h e n e g o t i a t i o n s . T h e r e a r e t w o r e a s o n s wh y t h e

parties do not negotiate by themselves in a mini-trial. First, the

parties involved in a dispute u s u al l y and understandabl y

a p p r o a c h t h e i s s u es r e l a t i n g t o t h e d i s p u t e i n a s u b j ec t i v e

m a n n e r i n s t e a d o f r e m a i n i n g d i s t a n t an d o b j e c t i v e . T h e p a r t i e s

a l s o m a y b e b i a s e d o r a c t b a s e d o n e m o t i o n . T h e r e f o re , t h e

r e p r e s e n t a t i v e s , w h o a r e m o r e l i k e l y a b l e t o r e m a i n d i s t an t a n d

detached, speak on behalf of their respective parties and usually

handle the resolution of the dispute in a more objective manner.

S e c o n d l y, the representatives in a m i n i -t r i a l tend to be

knowledgeable and experienced in such matters and can better

c a t e g o r i z e t h e o p p o s i n g e v i d e n c e a n d a r g u m e n t s . F i n a l l y, a m i n i -

116
trial differs from other forms of ADR, as it usually takes place

after a formal action has been already brought. The parties to a

lawsuit are waiting for litigation while the m i n i -t r i a l is

conducted. Thus, the mini-trial i t s el f is not so much an

alternative route for resolving the dispute, as for instance is the

case with arbitration, but rather a temporary secondary attempt

to come to an agreement before the commencement of the

litigation proceedings. The outcome of the m i n i - t ri a l is

confidential and if it does not manage to resolve the dispute, the

p a r t i e s c a n g o t o c o u r t w i t h o u t i t b ei n g r e v e a l e d . A s t h e b i g g e s t

d i s a d v a n t a g e s o f m i n i - t r i al s , t h e r e s h o u l d b e m e n t i o n e d t h e f a c t

t h a t m i n i -t r i a l s a r e n o t a p p r o p ri a t e f o r a l l c a s e s a n d t h e f a c t t h a t

m i n i -t r i a l s , w h e n t h e p a r t i e s w i l l e v e n t u a l l y s e e k l e g a l r e m e d y,

i n c r e a s e t h e c o s t s an d m a y d e l a y t h e r e s o l u t i o n o f t h e d i s p u t e. 153

Many specialized organizations p ro v i d e settlement services

t h r o u g h m i n i - t r i al s a n d a l s o p r o v i d e t h i r d n e u t r a l p a r t i e s . S u c h

o r g a n i z a t i o n s a r e t h e “ C e n t r e f o r E f f e c t i v e D i s p u t e R es o l u t i o n ”

(CERD) based in Lo n d o n and the “Chartered In s t i t u t e of

A r b i t r a t o r s ” . In t h e U S A , s i m i l a r s e r v i c e s a r e p r o v i d e d b y t h e

“ A m e r i c a n A r b i t r a t i o n A s s o c i a t i o n ” ( AA A ) .

153
Alberta Law Reform Institute, Dispute Resolution: A Directory of Methods, Projects and
Resources, (Edmonton, Alberta), 1990, pp. 26, 27.

117
iii. Med-Arb

A n o t h e r h yb r i d p r o c e s s i s t h e o n e k n o w n a s M e d - A r b ,

w h i c h a s t h e n am e s u g g e s t s i s t h e r e s u l t o f c o m b i n i n g m ed i a t i o n

and arbitration. Parties prefer mediation because of the

f l e x i b i l i t y a n d i n i t i a t i v e t h a t o f f e r s t h e m . In c o n t r a s t , t h e y

p r e f e r a r b i t r a t i o n b e c a u s e o f i t s b i n d i n g d e c i s i o n . In p r a c t i c e ,

these two methods can often be viewed as complementary. Many

times there is an effort to combine the key advantages of each

m e t h o d i n o r d e r t o a c h i e v e m ax i m u m e f f e c t i v e n e s s . Th i s i s

achieved by a temporary or permanent conversion of arbitration

to mediation and vice versa, depending on the nature, the course

a n d t h e n e e d s o f t h e d i s p u t e . T h i s a p p ro a c h i s c a l l e d m u l t i - t r a c k

o r m u l t i - s t e p d i s p u t e r e s o l u t i o n a p p r o ac h a n d i s u s e d m o r e o f t e n

in demanding construction projects and in the f i el d of

t e c h n o l o g y. F o r i n s t a n c e , s u c h a n a p p r o a c h w a s u t i l i z e d i n t h e

construction contract of the new airport in Hong Kong, which

p r o v i d e d f o r m e d i at i o n a n d i n c a s e o f f a i l u r e f o r a r b i t r a t i o n . 154

Since both mediation and arbitration are based on the principle

o f p a r t y a u t o n o m y w h i c h i s a b a s i c p r i n c i p l e o f c o n t r ac t l a w

i n t e r n a t i o n a l l y, p e o p l e c a n s e t t l e t h e i r d i s p u t es i n a n y w a y t h e y

w i s h a n d t h e p a r t i e s t o a d i s p u t e c an c o m b i n e m e d i a t i o n a n d

a r b i t r a t i o n wi t h o u t t h e n e e d t o h a v e r u l e s i s s u e d i n t h i s m a t t e r

154
CARROLL Eileen and MACKIE Karl, op. cit., p. 100.

118
by a national legislature or by an international organization.

Party autonomy justifies the combination of mediation and

a r b i t r a t i o n . H o w e v er , i n o r d e r t o a n s w e r t h e q u e s t i o n o f wh e t h e r

o r n o t t h e s e t w o m e t h o d s s h o u l d b e co m b i n e d , i t i s e s s en t i a l t o

e x a m i n e t h e d i f f e re n t t e c h n i q u e s o f c o m b i n i n g m e d i a t i o n a n d

arbitration.

The first technique is the combination of mediation and

arbitration, where mediation is used as the first method for

resolving the dispute and if the parties do not reach an

agreement, then the process is converted to arbitration and the

a r b i t r a t o r f i n a l l y d e c i d e s o n t h e d i s p u t e. 155 T h e p r o b l em w i t h t h i s

method is the fact that the mediator and arbitrator is the same

person, therefore the success of this combination depends on the

experience and skills of a person who conducts the proceedings.

A n o t h e r p r o b l em i s t h e c o n f i d e n t i a l i t y o f i n f o r m at i o n a n d t h e

risk of abusing information during arbitration. Furthermore, if

t h e r e i s t h e r i s k o f t h e m e d i a t o r an d l a t e r a r b i t r a t o r t o u s e

i n f o r m a t i o n i n t h e a r b i t r a t i o n p r o c ee d i n g s , t h e p a r t i e s m a y

behave strategically during mediation rather t h an be

concentrated in achieving a friendly settlement. Although it is

c l e a r t h a t t h e m e d i at o r m a y n o t d i s c l o s e c o n f i d e n t i a l i n f o rm a t i o n

a n d t h e a r b i t r a t o r m u s t t a k e a n i m p a r t i a l d e c i s i o n , h o w ev e r , t h e

155
TELFORD M. Elisabeth, Med-Arb: A Viable Dispute Resolution Alternative, IRC Press, 2000,
p. 1.

119
t w o d i f f e r e n t r o l e s c o n t r a s t e a c h o t h e r . 156 A n o b v i o u s a d v a n t a g e

o f t h i s m et h o d i s t h a t i t r e d u c e s t h e c o s t s a n d i n c r e a s e s t h e

effectiveness of procedures and the time savings.

The second possibility of combined mediation and

a r b i t r a t i o n i s t h a t o f t h e a r b i t r a t o r a l s o a c t i n g a s a m ed i a t o r .

Arbitration proceedings are interrupted and m e d i at i o n is

a t t e m p t e d . If t h e p a r t i e s c a n n o t r e s o l v e t h e d i s p u t e t h r o u g h

mediation, the neutral party returns to arbitration and takes a

b i n d i n g a r b i t r a t i o n d e c i s i o n . Th i s l e a d s t o t h e s a m e p r o b l em s a s

t h o s e o f t h e c o m b i n a t i o n o f t h e f i rs t m e t h o d , t h e d i f f e r e n c e l i e s

i n t h e o r d e r o f t h es e p r o c e d u r e s . A g a i n h e r e t h e a l t e r n a t i o n o f

r o l e s i s t h e w e a k p o i n t ; s i n c e t h e e f f o r t o f t h e s am e p e r s o n i n

two different roles in the same procedure for resolving a dispute

m a y p r o v e d a m a g i n g i f t h i s p e r s o n c o u l d b e b i a s e d b e c au s e o f

the previous role. Only a fairl y experienced person with great

s e l f - c o n t r o l c o u l d ac t i n s u c h a p r o c e d u r e .

Another technique of combination of mediation an d

arbitration is the succession of the two forms of alternative

dispute resolution but in separate procedures. The parties agree

to mediation and if it is not successful, an i n d ep e n d e n t

arbitration procedure follows. Both procedures are carried out by

two independent third parties. So none of the problems

156
OGHIGIAN Haig, The Mediation/Arbitration Hybrid, Journal of International Arbitration, vol.
20, 2003, pp. 75, 76.

120
m e n t i o n e d i n t wo f o r m e r c o m b i n a t i o n s a r i s e h e r e , s i n c e t h e r e a r e

t w o d i f f e r e n t p e r s o n s , t h e r e i s n o i n f o rm a t i o n ex c h a n g e a n d e a c h

p r o c e d u r e i s g o v e r n e d b y i t s o w n p r i n c i p l e s . F i n a l l y, t h e r e i s t h e

c o m b i n a t i o n i n w h i c h a r b i t r a t i o n p r o ce e d i n g s a r e s u s p e n d e d t o

commence mediation, but in two separate and independent

processes. The right to request the suspension of the arbitration

belongs to both the parties, and the third neutral. This

combination also does not have the problem of alternation of

r o l e s o r t h e ri s k o f t h e m i s u s e o f i n f o r m a t i o n .

S u m m a r i z i n g , i t ca n b e s a i d t h a t t h e c o m b i n a t i o n o f

mediation and arbitration provides considerable advantages, but

a t t h e s a m e t i m e i s q u i t e a r i s k y v e n t u r e . It i s d i f f i cu l t i n

practice for a third neutral p a r t y, even one extremely

e x p e r i e n c e d , t o b e a b l e t o a c t a s b o t h m e d i a t o r a n d a r b i t ra t o r o r

v i c e v e r s a . T h i s f a ct m a y c r e a t e p r o b l e m s r e l a t i n g t o t h e v a l i d i t y

of the award and may have as a result that the parties to the

dispute wi l l not gain the benefits of either mediation or

arbitration. The mere succession of mediation and arbitration

does not constitute a real improvement compared to the

“ c o n v e n t i o n a l f o r m s ” o f a r b i t r a t i o n a n d m e d i a t i o n . In c o n t r a s t ,

the suspension of arbitration proceedings for mediation

combines the advantages of mediation and arbitration in the best

m a n n e r a n d c o m b i n e s t h e f l ex i b i l i t y o f m e d i a t i o n a n d t h e f i n a l

121
a n d b i n d i n g n a t u r e o f a r b i t r a t i o n . 157 M e d - A r b i s a h yb r i d p r o c e s s

and is considered as a separate ADR method, although has many

c o m m o n f e a t u r e s wi t h o t h e r p r o c e d u r es a n d s p e c i f i c a l l y b i n d i n g

a r b i t r a t i o n . It s m a i n d e f e c t i s t h a t i t l a c k s s t r u c t u r e , w h i c h

makes it practically a weak process that the parties to a dispute

often ignore preferring a better defined ADR process.

iv. Ombudsman

A distinctive form of ADR is what is known as the

O m b u d s m a n , w h e r e a n i n d e p e n d e n t t h i r d p a r t y w i t h ex p e r i e n c e

and authority attempts a friendly resolution of the dispute. The

O m b u d s m a n ’ s a u t h o r i t y e x t e n d s f r o m t h e s i m p l e ex a m i n at i o n o f

c o m p l a i n t s t o t h e r e s o l u t i o n o f d i s p u t e s . 158 T h e i n s t i t u t i o n o f

Ombudsman was established originally in Sweden in 1713, when

t h e S w e d i s h e m p er o r b e i n g e x i l e d t o T u r k e y, i n s t i t u t e d t h e

office of “Hogste Ombudsmannen”, which would h av e an

overview of the compliance of laws and the performance of

duties by officials. The Ombudsman in Scandinavian means

d e l e g a t e . S u b s e q u en t l y, i t w a s a d o p t e d b y o t h e r N o r d i c c o u n t r i e s
157
CARROLL Eileen and MACKIE Karl, op. cit., pp. 101, 102.
158
GREGORY Roy, The Ombudsman: An Excellent Form of Alternative Dispute Resolution, The
International Ombudsman Yearbook, Vol. 5, 2001, p. 98.

122
(Finland in 1920, Denmark in 1953 and Norway in 1962), with

several variations in particular as regards the scope and nature

( e . g . t h e S w e d i s h Om b u d s m a n h a s ex p a n d e d i t s p o w e r s t o r e a c h

that of the public prosecutor), however in all those countries,

the Ombudsman is a c o n s t i t u t i o n al l y protected institution.

T o d a y, t h e O m b u d s m a n i s f o u n d i n s e v e r a l E u r o p e a n , A n g l o -

S a x o n , A s i a n a n d A f r i c a n c o u n t r i e s . In E u r o p e i t h a s b e e n

adopted by almost all countries, for instance by Great Britain

where the institution has a history since 1967, w h en the

“Parliamentary Commissioner for Administration” was

established, by France since 1973, where the “Mediateur de la

Republique” is appointed by decree of the President of the

French Republic and by Germany and Belgium since 1992.

In t e r n a t i o n a l l y common features of the institution are the

i n s t i t u t i o n a l i n d e p e n d e n c e a n d t h e i m m e d i a c y o f t h e e x e rc i s e o f

i t s j u ri s d i ct i o n . T h e i n s t i t u t i o n d e p e n d i n g o n e a c h c o u n t r y i s

called “Defensor de Pueblo”, “Human Rights Defender”, “State

C o n t r o l l e r ” , “ M e d i at e u r d e l a R e p u b l i q u e ” , a n d i s t a i l o r e d t o t h e

needs, the political, social and ideological traditions.

Since the 1980s the Ombudsman was adopted by private

operators and particularly in the financial and banking sectors,

i n t h e c o n t ex t o f s e l f - r e g u l a t i o n , a n d i n a n a t t e m p t t o i m p r o v e

the image of each sector in the market. Such bodies are

a c c e s s i b l e t o c o n s u m e r s w i t h o u t p a yi n g a f e e f o r t h e i r s e r v i c e s ,

123
they deal with matters already addressed by the company as part

of an internal procedure, they decide, or propose solutions, they

are binding for the institutions that set them up and they do not

p r e v e n t t h e r e c o u r s e t o l i t i g a t i o n o r o t h e r p r o c e d u r e s . 159 T h e

Ombudsman is a neutral third person, whose role is to resolve a

dispute set in the form of a report or a complaint. The

O m b u d s m a n l i s t e n s t o t h e p a r t i e s , ex a m i n e s t h e i r c o m p l a i n t s a n d

i s s u e s a d e c i s i o n o r a r e c o m m e n d a t i o n . T h e O m b u d s m a n s ee k s t o

a d d r e s s c o m p l a i n t s b y m a k i n g s u g g e s t i o n s a n d t r yi n g t o p e r s u a d e

those responsible to modify their positions or just submit

p r o p o s a l s t o p r e v en t r e c u r r e n c e o f e r r o r s b a s e d o n t h e s a m e

cause. Each of the parties shall discuss with the Ombudsman

voluntarily and f r e e l y, expressing their complaints in

c o n f i d e n t i a l i t y, d i s c u s s p r i o r i t i e s a n d i n t e r e s t s i n o r d e r t o d e f i n e

t h e s c o p e f o r c o m p r o m i s e a n d o r i e n t p a r t i e s ’ c h o i ce s t o a

commonly accepted solution abandoning the logic of profit and

l o s s t h a t c h a r a c t e r i z e s t h e j u d i c i a l c o n t ro v e r s y. T h e t r a n s p a r e n c y

in the functioning and effectiveness of the work of the

Ombudsman is ensured through compliance with operating rules,

t h e e q u a l p a r t i c i p at i o n o f t h e p a r t i e s i n t h e p r o c e e d i n g s , t h e

e x p l a n at i o n o f t h e g r o u n d s f o r t h e r e j e ct i o n o f t h e r e q u e s t o f t h e

complainant and the publication of a report evaluating the

process.

159
STEYN H. Jan, Alternative Dispute Resolution: The Role of the Private Sector Ombudsman,
The International Ombudsman Yearbook, Vol. 5, 2001, p. 134.

124
In o r d e r t o g u a r a n t e e t h e g o o d o p e r a t i o n a n d r e s p o n s i b l e

management of the complaints filed, several organizations have

b e e n e s t a b l i s h e d s u c h a s t h e “ B r i t i s h a n d Ir i s h O m b u d s m a n

Association” ( B IO A ) , 160 the “American Center for Public

Resources”, the “British Center for Dispute Resolution” and the

“ N e d e r l a n d ’ s M e d i a t i o n In s t i t u t e ” . 161 O r g a n i z a t i o n s l i k e t h e s e

can have a supervisory role and can help promote uniform and

smooth operation of private Ombudsmen, cultivating ethical

g u i d e l i n e s a n d c o d e s o f c o n d u c t , t ra i n i n g o f p e r s o n n e l a n d

m a k i n g s u r e t h a t t h e p u b l i c i s p r o p er l y i n f o r m e d a b o u t t h e i r

o p e r a t i o n . A l t h o u g h t h e r e a r e c o n c e r n s a b o u t c l a s s i f yi n g t h e

Ombudsman as an ADR method, however, it is generall y

accepted that the mediating role of the Ombudsman is what

m a k e s i t a n A D R m e t h o d . 162

160
JAMES Rhoda, Private Ombudsmen and Public Law, (Aldershot: Dartmouth), 1997, p. 223.
161
DE ROO Annie and JAGTENBERG Rob, Mediation in the Netherlands: Past –Present-Future,
Electronic Journal of Comparative Law, vol. 6, 2002, p. 4.
162
BROWN J. Henry and MARRIOTT L. Arthur, op. cit., p. 279.

125
Chapter 3

Advantages and Drawbacks of ADR

The third chapter of this part of the thesis is dedicated to

t h e a n a l ys i s o f t h e a d v a n t a g e s a s w e l l a s t h e d i s a d v a n t a g e s o f

A D R . T h e d e m o n s t ra t i o n i s n e c e s s a r y i n o r d e r t o p r o v i d e a f u l l

e v a l u a t i o n o f A D R m e t h o d s a n d t o i l l u s t r a t e t h e i r i m p o r t an c e f o r

t h e r e s o l u t i o n o f d i s p u t e s . F u r t h e r m o r e, a s A D R a n d O D R s h a r e

m a n y c o m m o n a l i t i es m o s t o f t h e a d v an t a g e s a n d d i s a d v an t a g e s

of ADR will also apply to ODR. However, although this is

definitely the case with regard to the advantages, as far as the

disadvantages go, ODR manages to overcome some of them, as

w i l l b e e v i d e n c e d i n t h e n ex t p a r t o f t h e t h e s i s .

S e c t i o n 1 : Ad v a n t a g e s o f t h e t r a d i t i o n a l A D R me t h o d s

T h e d e v e l o p m e n t , wi d e s p r e a d a c c e p t a n c e a n d p r e f e r e n c e o f

a l t e r n a t i v e d i s p u t e r e s o l u t i o n p r e s u p p o s e c e r t a i n c h a r a c t e r i s t i cs

that differentiate ADR methods guaranteeing them a special

p o s i t i o n i n r e l a t i o n t o l i t i g a t i o n . T h e ad v a n t a g e s r e s u l t f r o m t h e

126
nature of the ADR methods which allow for a more informal

p r o c e d u r e , f a s t e r a n d l e s s c o s t l y, w h i c h i n t u r n a f f e c t s t h e

relations between the parties, contrary to litigation which is

i n f l ex i b l e , t i m e c o n s u m i n g a n d c o s t l y. D e s p i t e t h e p o t e n t i a l

f l a w s o f A D R , i t s h o u l d b e n o t e d t h at t h e m u c h l a r g e r l i s t o f

advantages, especially the speed of processing and the financial

b e n e f i t s , s h o w t h e g r e a t w o r t h o f A D R m e t h o d s . 163

A. Confidentiality

A key positive feature of ADR explaining the popularity of

these methods, especially in commercial disputes, is the

guarantee of confidentiality in the process as opposed to

l i t i g a t i o n . U n l i k e co u r t - b a s e d s u i t s , w h e r e h e a r i n g a l a w s u i t m a y

result in disclosure of business or personal data with predictable

or unpredictable consequences, ADR offers the best guarantees

of privacy because confidentiality is a precondition of an ADR

p r o c e s s . T h e p u r e l y e x t r a j u d i ci a l n at u re o f A D R a s s e r t s t h a t t h e

procedure is a private matter between the parties and allows the

p a r t i e s t o m a i n t ai n t h e e x i s t e n c e o f r i v a l r y a n d e f f o r t t o r e s o l v e

163
ROBERTS Simon, Alternative Dispute Resolution and Civil Justice; An Unresolved
Relationship, Modern Law Review, vol. 56, 1993, p. 452.

127
the dispute away from public view, as opposed to judicial

dispute resolution which requires publicity and so many times

results to the co m p r o m i s i n g of important i n f o rm a t i o n . 164

C o n s e q u e n t l y, t h e c o n f i d e n t i a l i t y o f A D R p r o t e c t s t h e p a r t i e s

from the unwanted disclosure of sensitive personal information

that would potentially damage their reputation or interests.

B. Time and cost savings

ADR is more efficient than litigation in court, because it

allows significant time and cost savings. Disputes s e t t l ed

through negotiation, m e d i at i o n or arbitration, are usually

r e s o l v e d m u c h f a s t e r t h a n w i t h t r a d i t i o n a l l i t i g a t i o n s i n ce t h e y

are freed from the strict legal formalism of litigation. ADR

t yp i c a l l y r e s o l v e s t h e d i s p u t e i n a m a t t e r o f s e v e r a l d a ys , w e e k s

or months as opposed to litigation where it can take up to

s e v e r a l ye a r s .

In addition, A D R m e t h o d s a l l o w fo r s i g n i f i c a n t cost

savings compared to litigation, where the costs are usually

considerably increased due to the great necessity for written

164
HUNTER Martin, PAULSSON Jan, RAWDING Nigel, REDFERN Alan, op. cit., pp. 71-73.

128
e v i d e n c e a n d e x p e r t w i t n e s s t e s t i m o n i es . T h e s i g n i f i c a n t s a v i n g s

t h a t o n l y A D R c a n p r o v i d e , b e c o m e e a s i l y e v i d e n t i n d i s p u t es

i n v o l v i n g p a t e n t i n fr i n g e m e n t , w h e r e “ t h e A m e r i c a n In t e l l e c t u a l

P r o p e r t y La w A s s o c i a t i o n r e p o r t e d t h a t t h e t o t a l c o s t o f a p a t e n t

infringement suit through trial in the United States, in 1995, was

between $500, 000 and $1.9 million, whereas the total cost

t h r o u g h b i n d i n g a r b i t r a t i o n o f a p a t en t i n f r i n g e m e n t c l a i m w a s

b e t w e e n a b o u t $ 9 9 , 0 0 0 a n d $ 5 0 0 , 0 0 0 ” . 165 T h e f a c t t h at

alternative dispute resolution methods are more cost-efficient

h a s a s i g n i f i c a n t i m p a c t o n t h e p a r t i e s . T h e c o s t a d v an t a g e s

provided by ADR are further advanced by the faster resolution

o f t h e d i s p u t e . C o n s e q u e n t l y, t h e c o s t o f A D R c a n n o t b e

compared with the high cost of a prolonged judicial process.

C. Conciliatory function

A n o t h e r i m p o rt a n t a d v a n t a g e o f A D R i s i t s c o n c i l i a t o r y

f u n c t i o n . T h e s e a l t er n a t i v e f o r m s o f d i s p u t e r e s o l u t i o n w h i c h a r e

voluntarily chosen by the parties involve c o o p er a t i o n ,

constructive communication, and the ability to rescue their

165
CONA Frank, Focus on Cyber law: Application of Online Systems in ADR, Buffalo Law
Review, vol. 45, 1997, p. 984.

129
prestige (save face), since the resolution of the dispute lies in

approaching a common ground without winners or losers. ADR

aims to cooperation, to the fair and acceptable reconciliation of

opposing views and reaching a mutually acceptable agreement

that meets the needs and interests of both parties resulting to a

win-win-solution, i.e. a situation in which there are gains for

b o t h s i d e s . 166 A D R “ f o c u s e s o n t h e o p p o r t u n i t i e s f o r j o i n t , r at h er

than individual gain, oriented toward a positive sum solution

r a t h e r t h a n a z e r o - s u m ” . 167

Il l u s t r a t i n g t h i s i s t h e f a m o u s ex am p l e o f a d i s p u t e

regarding the ownership of an orange. According to it, there are

t w o p a r t i e s a n d b o t h a r e c l a i m i n g t h a t t h e o r a n g e i s t h e i r o w n . If

this dispute were to be resolved through the traditional judicial

route there would be a decision which would recognize that the

orange belongs to one of the parties or possibly split the orange

b e t w e e n t h e m b a s e d o n t h e l e g i t i m a cy o f e a c h p a r t y’ s c l a i m .

However, if the same dispute was to be resolved through ADR,

f o r i n s t a n c e m e d i at i o n , t h e n e u t r a l w o u l d c o m m u n i c a t e m o r e

effectively with the parties and would reveal and focus on their

a c t u a l p u r p o s e s an d i n t e r e s t s , s u c h a s t h e i r i n t e n d f o r t h e

o r a n g e . In t h e e x a m p l e e a c h p a r t y h a s a d i f f e r e n t u s e f o r t h e

orange; one wants to use the rind for perfume and the other

wants the pulp for orange juice. The ADR process manages to
166
FIADJOE Albert, op. cit., p. 1.
167
MANEVY Isabelle, op. cit., p. 9.

130
find a fair and commonly acceptable solution that gives both

parties what they want.

F u r t h e r m o r e , A D R a d v a n c e s s o c i a l h a r m o n y, s i n c e ( m o r e

so in those ADR methods that aim for settlements) “the parties

do not engage in confrontation but rather in a process of

r a p p r o c h e m e n t ” . 168 A D R e m p o w e r s t h e p a r t i e s t o p e r c e i v e t h e

dispute as a common struggle that they will resolve, with and

n o t a g a i n s t e a c h o t h e r . T h e a g r e e m e n t t h a t w i l l r e s u l t f ro m t h e

r e s o l u t i o n o f t h e d i s p u t e s h o u l d r e f l e c t a s h a r e d v i s i o n fo r t h e

f u t u r e . It i s a p r o m i s e n o t o n l y t o r e s o l v e t h e c u r r e n t c o n f l i c t ,

b u t a l s o a b a s el i n e f o r d i f f e r e n c e s t h a t m i g h t e m e r g e i n t h e

future. The settlement which is based on a friendly compromise

o f t h e p a r t i e s ’ i n t e re s t s , a l l o w s t h em t o c o n t i n u e t h e b u s i n e s s o r

other cooperation for the benefit of themselves and their wider

p r o f e s s i o n a l o r s o c i a l c yc l e s , a s i n t h e c a s e o f c u s t o d y o f

children after a divorce and commercial matters where the

c o n t i n u a t i o n o f t h e r e l a t i o n s h i p i s c r u c i a l . In s t e a d , i n l i t i g a t i o n

the relations between parties are rarely restored, while

sometimes controversy and collateral disputes are generated.

Often both parties in litigation are dissatisfied with the outcome

of the trial, because rarely court decisions fulfill their

aspirations; so the possibility of reconciliation achieved through

168
COM/2002/0196 final, op. cit., p. 9.

131
ADR is considered one of the most important advantages of

A D R . 169

D. Flexibility

ADR methods a re usually less confrontational t h an

l i t i g a t i o n d u e t o t h e l e s s e r d e g r e e o f f o r m a l i t y. T h e i n f o r m a l

s e t t i n g p r o v i d e s t h e p a r t i e s w i t h f l ex i b i l i t y g i v i n g t h e m g r e a t e r

latitude than in litigation. The procedure is controlled by the

parties, who can agree on how formal or informal the resolution

will be, “by choosing the forum, the procedure that will be

followed and whether or not to take part in the proceedings in

p e r s o n o r t o b e r e p r e s e n t e d ” . 170 M o r e o v e r , t h e p a r t i e s c a n ad o p t

more than one ADR options, so as to increase the probability to

reach a mutually acceptable agreement. The choice of ADR

a l l o w s p a r t i e s t o f o r m t h e m s el v e s t h e a g r e e m e n t , w h i c h c a n

provide for any solution that settles the dispute even the

p r e d i c t i o n o f f u t u re c o o p e r a t i o n b e t we e n t h e p a r t i e s , w h i c h n o

169
LANGELAAR V. Anton, Dispute Boards as an ADR Mechanism on Construction Projects in
Southern Africa, Arbitration International, vol. 70, 2004, p. 100.
170
COM/2002/0196 final, op. cit., p. 9.

132
judgment can order, since judgments consider the past, while

A D R a g r e e m e n t s m a y a l s o h a n d l e t h e f u t u r e . 171

T h e f l ex i b i l i t y e x t e n d s t o t h e n e u t r a l p a r t y a s w e l l a s t h e

outcome of the procedure. The parties can decide which

organisation or person will be in charge of the proceedings and

p e r h a p s “ s e l e c t a n e u t r a l m o r e ex p e r t i n t h e i r d i s p u t e a r e a t h a n a

j u d g e ” . 172 F u r t h e r m o r e , t h e n e u t r a l p a r t y i t s el f e n j o ys f l e x i b i l i t y

r e l a t i n g t o t h e r e s o l u t i o n o f t h e d i s p u t e, s i n c e i t i s n o t b o u n d b y

principles like the stare decisis of the common law judges, and

their bargaining abilities entail creative solutions that no judge

c o u l d p o s s i b l y a c h i e v e . 173 U n l i k e a j u d g e w h o f o c u s e s o n t h e

parties’ rights, the neutral party in an ADR procedure focuses on

the parties’ interests and how these will be affected by the

o u t c o m e o f t h e r e s o l u t i o n , a l l o wi n g f o r c r e a t i v e s o l u t i o n s t h a t

c a n n o t b e r e a c h e d t h r o u g h t h e t r a d i t i o n a l j u d i ci a l r o u t e . 174

171
ALISON R. John, Five Ways to keep Disputes Out of Court, Harvard Business Review on
Negotiation and Conflict Resolution, 1997, pp. 163-187 .
172
MANEVY Isabelle, op. cit., p. 9.
173
BÜHRING-UHLE Christian, op. cit., p. 337.
174
For instance, “a judge has to grant reimbursement of the price paid for a defective product if the
plaintiff has a right to it. A mediator, who takes the parties’ rights into account but is not confined
to examining rights alone, is free to explore a more advantageous alternative solution for the
parties, for example, replacement of the defective product by one of greater value to the plaintiff
but less costly to the respondent than reimbursement”. See BENYEKHLEF Karim and GELINAS
Fabien, op. cit., p. 46.

133
S e c t i o n 2 : D r a w b a c k s o f t h e t r a d i t i o n a l A D R me t h o d s

F i r s t o f a l l i t m u s t b e n o t e d t h a t A DR m e t h o d s a r e b e s t

suited to resolve disputes in which the parties do not seek to

avenge legal rights because they are oriented to finding a

s o l u t i o n b a s e d o n co m p r o m i s e s . T h e i r b e s t q u a l i t i e s a r e t i m e a n d

c o s t e f f i c i e n c y a s w e l l a s f l ex i b i l i t y. H o w e v e r , a l t e r n a t i v e f o r m s

of dispute resolution despite their numerous advantages

described above, also present several drawbacks which have led

t o c r i t i ci s m e s p e c i a l l y b e c a u s e o f t h e f a c t t h a t t h e s e m e t h o d s

replace the traditional way of resolving disputes in the courts.

Most criticisms concern the legality of the final solution

achieved and the ability to enforce it, while others focus on the

a l l e g a t i o n t h a t A DR p r o v i d e s a s e c o n d c l a s s j u s t i c e .

A. For The parties

T h e f i r s t s e t o f d ra w b a c k s r e l a t e s t o t h e p a r t i e s a n d t h e

d i f f i c u l t i e s t h a t m a y a r i s e i n t h e i r r e l a t i o n s h i p . It s h o u l d b e

n o t e d t h at o f t e n p a r t i e s w h o p r e f e r t h e u s e o f A D R m et h o d s ,

b e l i e v e t h a t t h i s m ay b e p e r c e i v e d a s a w e a k n e s s . H o w e v e r , t h i s

134
can be avoided if in the original contract a clause is

incorporated, which provides for the use of ADR in case a

d i s p u t e a r i s e s . 175 V o l u n t a r y A D R m e t h o d s c a n n o t b e e f f e c t i v e i f

one of the parties is unable to negotiate due to strong emotional

i n v o l v em e n t i n t h e d i s p u t e , i f o n e o f t h e p a r t i e s h a s a d o p t e d

very negative positions and views on the other, or if there is a

b i g p o w e r i m b a l a n c e b e t w e e n t h e p a r t i e s m a k i n g i t h a rd e r t o

compromise and reach a mutually acceptable solution.

Another drawback of ADR closely connected to the parties

but also to the settlement of the dispute, is the full dependence

o n t h e c o o p e r a t i o n o f t h e p a r t i e s b e c a u s e f o r m o s t A DR m e t h o d s

there is a lack of legal rules to facilitate the execution and

f i n a l i t y o f a g r e e m e n t s . 176 T h e r e f o r e , t h e r e s o l u t i o n d e p e n d s o n

the good faith of the parties, whereas without it “some parties

may be using the process as a fishing expedition or simply to

s t a l l t h e l i t i g a t i o n p r o c e s s ” . 177 P a r t i c u l ar l y, v o l u n t a r y a n d n o n -

binding ADR methods are solely based on the voluntary

c o o p e r a t i o n a n d co m p l i a n c e wi t h t h e o u t c o m e t h e p ro c e s s ,

contrary to litigation where the court has the power to enforce

its decisions.

175
HUNTER Martin, PAULSSON Jan, RAWDING Nigel, REDFERN Alan, op. cit., pp. 71-74.
176
TWEEDDALE Andrew and TWEEDDALE Keren, Arbitration of Commercial Disputes,
International and English Law and Practice, (Oxford: Oxford University Press), 2005, pp. 5-6.
177
NOHAN-HALEY Jacqueline, Alternative Dispute Resolution in a nutshell, (West Academic
Publishing), Ed. 4, 2013, p.60.

135
B. For The procedure

As far as the procedure goes, most ADR methods lack the

“ p r o c e d u r a l a n d c o n s t i t u t i o n a l p ro t e c t i o n s o f a d v e r s a r i al j u s t i c e ,

s u c h a s t h e ri g h t t o a j u r y t r i a l a n d t h e r i g h t t o c o u n s e l ” . 178 T h e

absence of these safeguards creates doubts about the fairness of

the final agreement. Furthermore, the lack of strict rules of

evidence can lead to the presentation of irrelevant and

s u p e r f l u o u s m at e r i a l t h u s i n c r e a s i n g t i m e a n d m o n e y. 179 O t h e rs

criticize ADR because it promotes compromise, which is a good

way to resolve some disputes, but in others it is not appropriate;

i n c o n f l i c t s o v e r j u r i s d i c t i o n al o r m o r a l i s s u e s , i t w i l l b e

d i f f i c u l t t o b ri n g a b o u t a c o m p r o m i s e b e t w e e n t h e d i s p u t a n t s .

A n o t h e r d i s a d v a n t ag e i s t h e f a c t t h a t t h e r e s o l u t i o n o f

issues through ADR is private and thus it may lead to the public

n o t f i n d i n g o u t cr u c i a l i n f o rm a t i o n t h a t c o u l d a f f e c t t h e m

d i r e c t l y o r i n d i r e c t l y. F o r i n s t a n c e , i f a c o m p a n y s o l d d e f e c t i v e

p r o d u c t s a n d h a r m fu l t o t h e h e a l t h o f c o n s u m e r s , b y r e s o l v i n g

t h e d i s p u t e t h r o u g h A D R , t h e c o m p a n y w o u l d n o t h a v e t o ex p o s e

t h e p r o b l e m p u b l i cl y, s o m e t h i n g t h a t w o u l d h a p p e n i f t h e l e g a l

route had been followed. So an important issue that directly

a f f e c t s t h e h e a l t h o f c o n s u m e r s c o u l d re m a i n h i d d e n wi t h o u t t h e

178
Ibid., p. 59.
179
BÜHRING-UHLE Christian, op. cit., p. 339.

136
company being forced to take some drastic measures such as the

w i t h d r a w a l o f t h e d e f e c t i v e p r o d u c t fr o m t h e m a r k e t . F i n a l l y,

third party neutrals are not bound by previous cases, which

create a lack of precedent that does not help resolve latter cases.

For most ADR methods the agreement is “binding between the

parties as a regular contract and even in arbitration, the award

h a s o n l y r e s j u d i c a t a a s t o e a c h p a r t i c u l a r d i s p u t e ” . 180

C. For Arbitration

Perhaps the greatest problem for most ADR methods is the

inability to enforce the agreement when one of the parties

r e f u s e s t o c o m p l y. H o w e v e r , t h i s n o t t h e c a s e w i t h a r b i t ra t i o n ,

where the “New York Convention” greatly f a c i l i t a t es the

enforcement of arbitral awards making arbitration the preferable

m e t h o d e s p e c i al l y f o r c o m m e r c i a l d i s p u t e s . A r b i t r a t i o n h as b e e n

p o r t r a ye d , o v e r t h e p a s t s e v e r a l d e c a d e s , “ a s a m o r e e f f i c i e n t ,

l e s s c o s t l y, a n d m o r e f i n a l m et h o d f o r r e s o l v i n g d i s p u t e s w i t h

180
MANEVY Isabelle, op. cit., p. 10.

137
l i t t l e o r n o d i s c o v er y, m o t i o n p r a c t i c e , j u d i c i a l r e v i e w , o r o t h e r

t r a p p i n g s o f l i t i g a t i o n ” . 181

However, arbitration has also been repudiated over the

ye a r s . T h e a r g u m e n t s a g a i n s t a r b i t r a t i o n r e l a t e t o t h e c o n c e r n

that the scheduling inefficiency of arbitrators may void the time

and cost savings normally provided by arbitration. Another

c o n c e r n r e l a t e s t o t h e f a c t t h a t i n a rb i t r a t i o n , t h e a t t e m p t o f

a r b i t r a t o r s t o i n c r ea s e e f f i c i e n c y, m a y l e a d t o i n j u s t i c e , w h i c h

will be harder to correct because of the difficulty of appealing

arbitral awards.

F i n a l l y, over the past several ye a r s arbitration has

witnessed a dramatic increase in the degree of formality to the

e x t e n t t h at a r b i t r a t i o n p r o c e d u r e s m a y c o m e t o b e v e r y s i m i l a r t o

litigation. Especially lately the situation has become even worse;

n o w a d a ys a r b i t r a t i o n h a s b e c o m e f o r m al , c o s t l y, t i m e c o n s u m i n g

a n d s u b j e c t t o h a r d b a l l a d v o c a c y, “ t o t h e p o i n t t h a t i n t h e U . S .

business arbitration is referred to in terms similar to civil

l i t i g a t i o n ” . 182 H o w e v e r , m a n y o f t h e s e p r o b l e m s d i s a p p e a r w h en

arbitration is transferred to the online environment, an issue

e x a m i n e d ex t e n s i v el y i n t h e f o l l o w i n g p a r t s o f t h i s t h e s i s .

181
STIPANOWICH J. Thomas, op. cit., p. 8.
182
Ibid., p. 9.

138
D. Remarks

In e a c h c a s e , h o w e v e r , w e s h o u l d n o t e t h a t i t i s e n t i r e l y a t

the discretion of the parties to consider alternative methods

beneficial or not for their dispute, to assess whether ADR

techniques promote their interests and to decide whether to

a d o p t o r r e j e c t t h em . O n l y t h e p a r t i e s c a n d e c i d e w h e t h e r t h e

judicial route of resolution or ADR is the most effective solution

to save time and money and therefore are responsible for the way

in which they resolve their dispute.

Judge Dorothy Nelson of the United States Federal Court

o f A p p e a l s i n S a n F r a n c i s c o w h o t r a v e l e d t o Is r a e l t o m o n i t o r

t h e a p p l i c a t i o n o f t h e l a w o f d i v o rc e i n d i f f e r e n t r e l i g i o u s

groups, while monitoring the achievement of justice in a case

r e s o l v e d b y t h r e e O r t h o d o x p r i e s t s , w h e r e t h e c o m p ro m i s e

proposed in the end satisfied both spouses who left the room

hand in hand, made her wonder about the resolution of the same

d i s p u t e t h r o u g h t h e t r a d i t i o n a l j u d i ci a l m e t h o d , w i t h o r d er s f o r

appearance in court, lengthy meetings and the high cost of

l a w ye r s . 183 It s h o u l d al s o b e n o t e d t h a t t h e u n d e n i a b l e f a c t o f t h e

endless list of advantages of these methods, especially the speed

and handling of cases and the economic benefits, deserve special

183
ALISON R. John, op. cit., p. 167.

139
attention and create the conditions for the extension of the use

o f A D R i n a w i d e ra n g e o f c a s e s a n d p a r t i c u l a r l y i n t h e f i e l d o f

f a m i l y, l a b o r a n d c o m m e r c i a l r e l a t i o n s h i p s .

140
Title 2

The Digital Era

A s m e n t i o n e d , A DR m e t h o d s ex i s t s i n c e t h e e a r l y d a ys o f

civilization. H o we v e r , the w a ys of communication and

interaction have co n s i d e r a b l y c h a n g e d over the ye a r s . For

instance, “during the Middle Ages talking or writing about

someone in one village or country would not affect others

thousands of miles away and h i s t o r i c a l l y, conflicts are

perpetuated by physical interactions, by people who know each

o t h e r o r w h o h a v e a t l e a s t s e e n e a c h o t h e r ” . 184 T h e e x p l o s i v e

growth of technological advances, particularly the development

of the information society and the rapid spread of digital

technology has created new standards worldwide, has affected

significantly and adjusted many practices of social and economic

life, heavily influencing the daily life of people and making

evident the urgent need for gradual change of the legal

framework governing these practices.

184
WAHAB S. A. Mohamed, The Global Information Society and Online Dispute Resolution: A
New Dawn for Dispute Resolution, Journal of International Arbitration, vol. 21, 2004, p. 143.

141
T h e a r r i v a l o f In t e r n e t t e c h n o l o g y 185 a l l o w e d p e o p l e t o

i n t e r a c t w i t h e a c h o t h e r i n a n i n s t a n ce f r o m a n yw h e r e o n t h e

p l a n e t . T o d a y t h e I n t e r n e t 186 i s t h e l a r g e s t c o m p u t e r s ys t e m i n

the world; the most modern means of communication and

probably the biggest communications r e v o l u t i o n , 187 s i n c e i t

b r i n g s i n t o d i r e c t co n t a c t p e o p l e f r o m a l l c o r n e r s o f t h e w o r l d . It

i s a l s o c a l l e d N e t o r In f o r m a t i o n H i g h w a y o r C yb e r s p a c e . 188 T h e

u n i v e r s a l i t y a n d g l o b a l n a t u r e o f t h e In t e r n e t , 189 w h i c h e x i s t s

e v e r yw h e r e a n d n o w h e r e a t t h e s a m e t i m e , m a k i n g b o r d e r s

u n n e c e s s a r y, 190 a l l o ws d a i l y t r a n s a c t i o n s t o p e o p l e al l o v e r t h e

w o r l d . In t h e C yb e r - w o r l d d i s p u t e s m a y a r i s e “ o v e r s o m e t h i n g

t h a t d o e s n o t e v e n p h ys i c a l l y e x i s t o r t h a t c a n b e c h a n g e d w i t h a

185
“The Internet began in 1969 as experimental network called ARPANET and funded by the US
Department of Defense to insure that its computer system would remain functional in the event of
an enemy attack. In the 1980s, the National Science Foundation (NSF), the scientific and technical
agency of the United States Federal government expanded ARPANET. In 1989, the name “World
Wide Web” was invented by the European Center of nuclear research in Geneva. Then, the rise of
popularity of the Internet in the United States coincided with the outsourcing in 1995 of the
internet management from NSF to the private sector”. See MANEVY Isabelle, op. cit., p. 5.
186
The term Internet derives from the words International / Interconnected / Network. For a
definition, see MILLET J. Marcus, Same Game in a New Domain- Some Trademark Issues on the
Internet, New Jersey Lawyer, vol. 198, 1999, p. 32. “Professor Chris Reed defines the internet as
‘an open network which permits communication between parties without the need for both to
subscribe to the same closed network’”. See WANG Fangfei Faye, Online Dispute Resolution -
Technology, management and legal practice from an international perspective, (Chandos
Publishing: Oxford · England), 2009, p. 2.
187
Data Protection Working Group, Privacy in the Internet, 2000, p.64
188
Cyberspace: the term first appeared in 1984 in the science fiction novels of William Gibson
''Neuromancer''. Officially the term was first introduced in 1996 by the Federal Court of
Pennsylvania, as means of communication and decentralized world, connecting people,
organizations, companies, governments around the world.
189
KRISTULA Dave, The History of the Internet, 2001, available at
http://www.davesite.com/webstation/net-history.shtml
190
GINSBURG C. Jane, Putting cars on the “Information superhighway“: authors, exploiters, and
copyright in Cyberspace, Columbia Law Review, vol. 95, 1995, p. 1467.

142
p u s h o f a b u t t o n ” . 191 A s a n a t u r a l c o n s e q u e n c e , t h e i n c r e a s ed

exercise of the rights of free movement of people, goods and

s e r v i c e s 192 i n e v i t a b l y l e a d s t o t h e c r e a t i o n o f o n l i n e l e g a l

r e l a t i o n s h i p s i n v o l v i n g m o r e j u r i s d i c t i o n s . 193 In i t i a l l y, b e f o r e t h e

great expansion of the internet, the online legal relationships

between users were limited mostly to online chat rooms without

any economic relevance and the disputes that arose were limited

to disagreements and use of foul language. Before the

commercial use of the internet, online conflicts were mostly

d i s p u t es b e t w e e n u s e r s w h o w o u l d g e t c a u g h t i n “ f l a m e w a r s ” ,

w i t h h i g h t e m p e r e d d i s c u s s i o n s a n d i n s u l t s ex c h a n g e d a n d w h e r e

t h e a t t e m p t f o r r e s o l u t i o n ex t e n d e d t o t h e i n t e r v e n t i o n b y f o r u m

moderators in order to calm down emotions. Until 1995 the

i n t e r n e t w a s m a i n l y u s e d b y t h e m i l i t a r y, g o v e r n m e n t a l a n d

a c a d e m i c s e c t o r s . Ho w e v e r , t h e s i t u a t i o n d r a s t i c a l l y c h a n g e d

once the internet began to be used for commercial purposes and

l e d t o w h a t i s t o d ay k n o w n a s e - c o m m e r c e . 194 It i s o n l y w i t h i n

191
ARSIC Jasna, International commercial arbitration on the Internet – Has the future come too
early?, Journal of International Arbitration, vol. 14, 1997, p. 209.
192
LESSIG Lawrence, SLAUGHTER Anne-Marie and ZITTRAIN Jonathan, Developments in the
Law of Cyberspace, Harvard Law Review, vol. 112, 1999, pp. 1578, 1579.
193
O’ ROURKE A. Maureen, Fencing Cyberspace: Drawing borders in virtual world,
Massachusetts law Review, vol. 82, 1998, p. 615.
194
The term electronic commerce or e-commerce describes the sale and purchase of goods or
services by electronic means, over computer mediated networks and particularly over the Internet.
It includes transactions between businesses, households, individuals, governments, and other
public or private organizations”. See DUCA D. Louis, RULE Colin, LOEBL Zbynek, Facilitating
Expansion of Cross-Border E-Commerce - Developing a Global Online Dispute Resolution
System (Lessons Derived from Existing ODR Systems – Work of the United Nations Commission
on International Trade Law), Penn State Journal of Law & International Affairs, vol.1, No. 1,
2012, pp. 58, 59.

143
t h e l a s t t e n ye a r s t h a t c o m m e r c e h a s i n c r e a s i n g l y b e e n c o n d u c t e d

over the internet, selling goods and providing services

e l e c t r o n i c a l l y. 195

T h e p o p u l a r i t y a n d e x t e n d e d u s e o f el e c t r o n i c c o m m e r c e

had as a result the increase of “conflicts over contracts which

h a v e b e e n e n t e r e d i n t o o n l i n e , r e g a r d i n g p r i c e , l a t e d e l i v e r y,

d e f e c t s a n d s p e c i f i c a t i o n s ” . 196 B e f o r e t h e In t e r n e t , c r o s s b o r d er

c o m m e r c e w a s l i m i t e d t o l a r g e i n t e r n a t i o n a l c o m p a n i e s , wh e r e a s

c o n s u m e r s c o n d u c t e d m o s t o f t h e i r s h o p p i n g l o c a l l y. H o w e v e r ,

t o d a y c r o s s b o r d e r o n l i n e s h o p p i n g i s a v a i l a b l e t o a n yo n e w i t h a

computer and an internet connection making problems like the

n o n - d e l i v e r y o f g o o d s a n d t h e d i f fi c u l t y o b t a i n i n g r e f u n d s a

daily occurrence. The internet, e-commerce and online disputes

are inextricably connected to each other. The w i d es p r e a d

acceptance and rise in the use of the internet leads to the

i n c r e a s e o f e - c o m m e r c e 197 w h i c h i n t u r n l e a d s t o t h e i n c r e a s e o f

195
WANG Fangfei Faye, op. cit., p. 2.
196
EU study on the Legal analysis of a Single Market for the Information Society, op. cit., p. `13.
197
“In the late 1990s roughly between two and five percent of the world’s population used the
Internet. By 2010, however, that percentage had increased to nearly thirty percent, with users
dispersed over every geographic region around the globe. The acceptance of the Internet as a
commercial trading platform also increased and continues to increase as the number of commercial
transactions that consumers complete online continues its meteoric rise, so too does the amount
these consumers are spending. From 1999 to 2009, for example, the value of e-commerce in the
United States alone expanded nearly 400% from $33 billion in 1999, at best, to $182 billion in
2009. At the same time, internet usage in the United States expanded from 36.6% of the
population to an enormous 78.1%. For the period 2009-2015, e-commerce sales in the United
States are projected to rise 10% a year to a total of $279 billion by 2015. For the period of 2010-
2015 worldwide, e-commerce sales are projected to rise at the rate of 19% per year from a total
$572.5 billion to $1.4 trillion in 2015”. Ibid., pp. 59, 60

144
o n l i n e d i s p u t e s a s ra p i d l y a s e - c o m m e r c e i t s e l f . 198 In t h e p a s t t wo

decades the world has entered what can only be described as the

digital era and the ever emerging new technologies such as the

i n t e r n e t ( w h i c h b ec o m e s m o r e a n d m o r e a c c e s s i b l e e v e r y d a y

e v e n w i r e l e s s l y) , t h e n e w g e n e r a t i o n m o b i l e p h o n e s , s a t e l l i t e s

and optic fibers allow for almost any activity or transaction to

be performed online. The world has become a “drive through”

( o r “ d r i v e - t h r u ” ) s o c i e t y; “ a s i n t h e p a s t d r i v e t h r o u g h w i n d o w s

allowed customers to get their meals without stopping or leaving

t h e i r c a r s , t o d a y, t h e s e c o n v e n i e n c e w i n d o w s a r e p r o v i d e d f o r

t h i n g s s u c h a s m a r ri a g e a n d p o l i t i c a l co n s t i t u e n c y s e r v i c e s a n d

continually more means are created a l l o wi n g for b an k i n g ,

b u yi n g , t r a n s a c t i n g , a n d c o m m u n i c a t i n g q u i c k l y, c o n v e n i e n t l y,

a n d w i t h o u t p e o p l e l e a v i n g t h e i r c a r s , c o u c h e s o r c o m p u t e r s ” . 199

T h e r e f o r e , t h e q u e s t i o n t h a t n at u r a l l y a r i s e s i s w h et h e r t o

a d o p t t r a d i t i o n al d i s p u t e r e s o l u t i o n m et h o d s f o r t h e r e s o l u t i o n o f

online disputes or find a new resolution method which is better

s u i t e d t o t h e n e w r ea l i t y o f a n i n c r e a s i n g l y v i r t u a l w o r l d . In t h e

online world without borders, where complete strangers interact

w i t h e a c h o t h e r f r o m a n yw h e r e i n t h e w o r l d , t h e r e i s a g r e a t e r

possibility that the relationship may go awry because of

198
“Between 1 and 3 % of all Internet transactions end up in some kind of disputes. Unofficial
estimates put the number of online disputes into the hundreds of millions of cases per year, maybe
even into the billions.” See RULE Colin, op. cit., p. 37
199
SCHMITZ J. Amy, ‘Drive-thru’ Arbitration in the Digital Age: Empowering Consumers
through Binding ODR, Baylor Law Review, vol. 62, 2010, pp. 179- 182.

145
misunderstandings, mistakes or simply fraud. For disputes

a r i s i n g o u t o f t h e s e k i n d s o f r e l a t i o n s , t h e t r a d i t i o n a l m ea n s o f

dispute resolution i.e. the courts, prove to be inconvenient, time-

c o n s u m i n g a n d ex p e n s i v e m a i n l y b e c a u s e o f t h e l o w v a l u e , t h e

h i g h v o l u m e o f t h e t r a n s a c t i o n s a n d t h e p h ys i c a l d i s t a n c e

between the parties. Furthermore, courts are unable to keep up

with the constantly evolving developments regarding online

d i s p u t es . 200 In t h i s o n l i n e e n v i r o n m e n t , d i s p u t e s e t t l e m e n t f a c es

new problems i n cl u d i n g the distance between p a r t i es , the

d i f f i c u l t y o f d e t e r m i n i n g t h e a p p l i c ab l e l a w a n d t h e c o m p e t e n t

jurisdiction and the enforcement of judgments. These problems

c r e a t e l a c k o f e f f e c t i v e r e d r e s s a n d n ec e s s i t a t e a c c e s s t o j u s t i c e

in the online environment.

Particularly one of the greatest problems of traditional

c o u r t j u s t i c e i s t h e i n a d e q u a c y o f c u r r e n t p r i v a t e i n t e r n a t i o n al

law when applied to delocalized online disputes, c re a t i n g

p r o b l e m s r e l a t i n g t o j u r i s d i c t i o n a n d ch o i c e o f l a w . A c c o rd i n g t o

p r i v a t e i n t e r n a t i o n al l a w t h e d et e r m i n a t i o n o f j u r i s d i c t i o n a n d

choice of law is based on the localization of the dispute

a c c o r d i n g t o c e r t a i n c o n f l i c t r u l e s . Ho w e v e r , t h i s l o c a l i z a t i o n

c a n b e c o n s i d e r a b l y h a r d e r i n t h e d e l o c a l i z e d o n l i n e w o r l d . In

the virtual world it can be very complicated and unpredictable to

d e t e r m i n e , f o r i n s t an c e , t h e d e f e n d a n t ’s d o m i ci l e o r t h e p l a c e o f
200
CORTES Pablo, Online Dispute Resolution for Consumers in the European Union (Routledge:
London and New York), 2011, p. 2.

146
t h e s p e c i f i c p e r f o r m a n c e o r t h e p l a ce i n w h i c h t h e b ra n c h ,

agency or other establishment is situated. Regarding choice of

l a w , a g a i n , i t m i g h t b e d i f f i c u l t t o d et e r m i n e , f o r i n s t a n c e , t h e

d o m i c i l e o f t h e p a rt i e s , s i n c e t h e y c a n a c c e s s t h e In t e r n e t f r o m

a n yw h e r e i n t h e wo r l d . T h e d e t e r m i n a t i o n t h e j u r i s d i c t i o n a n d

t h e l a w a p p l i c a b l e i n d i s p u t e s , w h i ch a r e e s s e n t i a l f o r l e g a l

c e r t a i n t y, a r e v e r y d i f f i c u l t i n o n l i n e t r a n s a c t i o n s . “C yb e r s p a c e

t r a n s a c t i o n s a r e i n t e n s i o n wi t h t h e p r i v a t e i n t e r n a t i o n a l l a w

r u l e s , w h i c h a r e t e rr i t o r i a l a n d n a t i o n a l i n n a t u r e ” . 201

T h e r a p i d g r o w t h o f In t e r n e t t e c h n o l o g y p o i n t e d o n c e m o r e

t o a l t e r n a t i v e d i s p u t e r e s o l u t i o n . V e r y s o o n i t b e c a m e c l e ar t h a t

t h e u n i q u e n a t u r e o f t h e c yb e r s p a c e a n d o n l i n e d i s p u t e s c o u l d

n o t b e r e s o l v e d e f f e c t i v e l y b y t h e t r a d i t i o n al c o u r t s . In t h e c a s e

o f e - c o m m e r c e d i s p u t e s , r e c o u r s e t h ro u g h t r a d i t i o n a l j u d i c i a l

m e c h a n i s m s p r e s e n t s s e v e r a l d i f f i c u l t i e s w i t h m o s t i m p o r t an t t h e

determination of the competent jurisdiction in a virtual world

w i t h o u t b o u n d a r i e s , t h e c h o i c e o f t h e a p p l i c a b l e l a w an d t h e

enforcement of foreign judgments. These issues create

c o m p l ex i t i e s t h a t at t h e v e r y l e a s t m a k e r e c o u r s e a v e r y t i m e

c o n s u m i n g a n d u n af f o r d a b l e p r o c e s s . T h e r e f o r e , “ a s e c o n o m i c

stakeholders search for law and justice equitable and adapted to

t h e i r a c t i v i t i e s , t h ey h a v e n o c h o i c e b u t t o t u r n t o m e c h a n i s m s

201
HERBOCZKOVÁ Jana, op. cit., pp. 2, 3

147
t h a t u t i l i z e a n d c h al l e n g e t h e f r e e d o m t o c o n t r a c t ” . 202 T h e n e e d

f o r s p e e d y, a f f o r d a b l e a n d r e l i a b l e j u s t i c e b r o u g h t f o r t h o n c e

again the concept of Alternative Dispute Resolution.

But, even traditional ADR was evident not to be the most

a p p r o p r i a t e m e a n s . T h e c h a r a c t e r i s t i c s o f t h e In t e r n e t m a k e

traditional alternative dispute resolution unsatisfactory for many

c o n t r o v e r s i e s t h a t ar i s e i n t h e o n l i n e wo r l d . T h e i n t e r n e t i n v i t e s

small entities and individuals that do not have the ability to

p a r t i c i p a t e i n t r a d i t i o n al A D R p r o c ed u r e s e s p e c i a l l y i f o n e

a c c o u n t s f o r t h e g r e a t t r a v e l ex p e n s e s t h a t a c c o m p a n y t h e g l o b a l

n a t u r e a n d t h e l o w v a l u e o f o n l i n e d i s p u t e s . F u r t h er m o r e ,

traditional ADR was better suited for resolving disputes between

parties with pre-existing relationships, whereas the internet

c u l t i v a t e s m o r e s t ra n g e r t o s t r a n g e r r e l a t i o n s h i p s . 203 F o r t h e s e

k i n d s o f d i s p u t e s l i t i g a t i o n a s w e l l as t r a d i t i o n a l A D R s i m p l y

proves inefficient; in order to provide effective resolution the

methods for the resolution of disputes had to be adapted to the

e l e c t r o n i c e n v i r o n m e n t . A n e w d i s p u t e r e s o l u t i o n s ys t e m w a s

n e e d e d t h a t w o u l d p r o v i d e e f f e c t i v e s o l u t i o n s i n a s h o r t er t i m e

f r a m e , w i t h t h e p o s s i b i l i t y o f u s i n g e x p e r t s a n d a l l t h a t wi t h t h e

c o s t b e i n g p r o p o r t i o n a l l y a p p r o p r i a t e t o t h e s p e c i f i c n at u r e o f

online disputes.

202
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 35.
203
PERRITT Henry, Dispute Resolution in Cyberspace: Demand for New Forms of ADR, Ohio
State Journal of Dispute Resolution, vol. 15, 2000, p. 675.

148
Since such disputes n o r m al l y generate from online

a c t i v i t i e s i n t h e C yb e r - w o r l d , i t w o u l d b e r e a s o n a b l e t o a s s u m e

that there is where they should also be resolved. ADR appeared

to be a particularly promising avenue when used in the virtual

w o r l d . T h e p r o p o s ed s o l u t i o n t o h a n d l e s u c h d i s p u t e s w a s t o u s e ,

rather than traditional court litigation or traditional ADR, online

d i s p u t e r e s o l u t i o n (O D R ) m e c h a n i s m s . T h e i n t e r n e t w a s a l r e a d y

used by ADR practitioners, but in the beginning onl y as an

information booth or clearinghouse of information for people

w h o w e r e f i r s t l e a r n i n g a b o u t A D R . 204 H o w e v e r , “ f r o m 1 9 9 5 t o

1998, informal online dispute resolution mechanisms were

recognized as distinct from ADR and since 1998 they became an

i n d u s t r y, especially in the United S t a t e s ” . 205 E x p e r i m e n t al

projects such as the Virtual Magistrate at the Villanova

University and the Online Ombuds Office at the University of

Massachusetts had started by the mid-nineties and by 2001,

c o m m e r c i a l s i t e s o ff e r i n g O D R s e r v i c e s , s u c h a s “ S q u a r e T r a d e ” ,

“ C yb e r s e t t l e ” , “SmartSettle” in the US and E C O D IR and

“Médiateur du Net” in Europe had reached their peak. Not only

that, but ODR has become a priority for all stakeholders in e-

commerce from governments to businesses and consumer groups,

as they realized the potential for an effective way to resolve

204
VICTORIO M. Richard, Internet Dispute Resolution (iDR): Bringing ADR into the 21st
Century, Pepperdine Dispute Resolution Law .Journal, vol. 1, 2001, pp. 3-5.
205
POBLET Marta, Mobile Technologies for Conflict Management: Online Dispute Resolution,
Governance, Participation, (Springer), 2001, p. 8.

149
d i s p u t es . For instance, t r a d i t i o n al offline arbitration and

mediation institutions have been focusing on the possibilities

r a i s e d b y o n l i n e t e ch n o l o g y. F u r t h e r m o r e , s o m e s t a t u t o r y d i s p u t e

resolution schemes that use ODR have been established but more

i m p o r t a n t l y, r e c e n t ye a r s h a v e a l s o s e e n a n a m o u n t o f p r i v a t e

e n t r e p r e n e u r i a l a c t i v i t y i n t h e O D R f i e l d . 206 R e s o l v i n g d i s p u t es

o v e r t h e In t e r n e t w i l l p l a y a n e v e n m o r e i m p o r t a n t r o l e i n t h e

f u t u r e o f e l e c t r o n i c c o m m e r c e . 207

T h e f o l l o w i n g p a r t o f t h e t h e s i s a n a l ys e s i n d e p t h O DR a n d

a l l i t s s u r r o u n d i n g i s s u e s . It d e f i n e s O D R , t h e t e c h n o l o g y u s e d ,

the different forms of ODR and provides a comprehensive

journey of ODR by examining real world ODR initiatives, from

t h e f i r s t t h at a p p e a r e d t o o n e s o p e r a t i n g s u c c e s s f u l l y u n t i l t h i s

d a y. It d e m o n s t r a t e s t h e n u m e r o u s a d v a n t a g e s o f O D R a n d t h e

f e w u n w e l c o m e d r a w b a c k s . T h i s e x am i n a t i o n i l l u s t r a t e s t h a t

ODR is not only a necessity dictated by the evolution in the way

p e o p l e i n t e r a c t c r e a t e d b y t h e i n n o v a t i o n s o f t h e d i g i t a l er a b u t

also a viable and preferable solution for resolving disputes

online.

206
HÖRNLE Julia, op. cit., p. 76.
207
SCHULTZ Thomas, BONNET Vincent, BOUDAOUD Karima, KAUFMANN-KOHLER
Gabrielle, HARMS Jürgen and LANGER Dirk, “Electronic Communication Issues Related To
Online Dispute Resolution Systems”, Proc. WWW2002 – The Eleventh International World Wide
Web Conference – Alternate Track CFP: Web Engineering, Honolulu, Hawaii, conference on 7-11
May, 2002, p. 2, available at http://www2002.org/globaltrack.html

150
Chapter 1

ODR and its characteristics

T h i s c h a p t e r i s an i n d e p t h ex a m i n a t i o n o f O DR . It

examines and defines the concept of ODR, illustrates the way

O D R w a s b o r n , i d en t i f i e s t h e c o n t r i b u t i o n o f t h e t e c h n o l o g y a s

t h e “ f o u r t h ” p a r t y a n d a n a l yz e s t h e f u n d a m e n t a l O D R m e t h o d s .

Section 1: What is Online Dispute Resolution?

It i s d i f f i c u l t t o a t t r i b u t e a n a u t o n o m o u s d e f i n i t i o n t o O DR

because of the fast pace of development in the field of

information technology and because of the peculiar balance of

t h e s yn e r g y b e t w e e n t r a d i t i o n a l A D R a n d IC T . T h e v a r i e t y o f

t e r m s u s e d t o d e s c ri b e t h e f i e l d o f O DR m i g h t s o u n d c o n f u s i n g

even to the most familiar with the field; some include:

“ T e c h n o l o g y m e d i a t e d d i s p u t e r e s o l u t i o n ” ( T M D R ) , “ E l e c t ro n i c -

A D R ” ( e - A D R ) , “ On l i n e A DR ” ( o - A DR ) a n d “ In t e r n e t D i s p u t e

R e s o l u t i o n ” ( ID R ) . R e l a t e d t e r m s a r e " v i r t u a l A D R " , " c yb e r

mediation" and "cyber arbitration". ODR was created from the

151
c o m b i n a t i o n o f A DR a n d IC T , a s a m e t h o d o f r e s o l v i n g d i s p u t e s

t h a t w e r e a r i s i n g o n l i n e , “ a n d f o r w h i c h t r a d i t i o n a l m ea n s o f

dispute resolution were unavailable or i n e f f i c i e n t ” . 208 The

primary methods of alternative dispute resolution were

c o m p l e m e n t e d w i t h IC T a n d O D R s t a rt e d o u t a s t h e c o n d u c t i n g

o f A D R p r o c e s s e s o n l i n e . 209

O D R h a s b e e n a b ro a d t e r m t h a t h a s c o v e r e d m a n y f o r m s

o f d i s p u t e r e s o l u t i o n i n c o r p o r a t i n g t h e u s e o f t h e In t e r n e t a n d

other information technology as part of the dispute resolution

process. Scholars initially defined ODR exclusively as ADR

c o m p l e m e n t e d wi t h IC T t o o l s ; “ h o w ev e r , p a r t o f t h e d o c t r i n e

i n c o r p o r a t e s a b r o ad e r a p p r o a c h i n c l u d i n g o n l i n e l i t i g a t i o n a n d

other sui generis forms of dispute resolution that are assisted by

IC T ” . 210 T h e l e t t e r d e f i n i t i o n f o r O D R i n c o r p o r a t e s a l l f l ex i b l e

m e t h o d s u s e d t o re s o l v e d i s p u t e s t h a t a r e c o n d u c t e d m a i n l y

t h r o u g h t h e u s e o f IC T . 211 In t h i s c o n t ex t , t h e t e r m “ o n l i n e ADR ”

is used to refer to those methods involving primarily ADR

m e t h o d s a s s i s t e d l ar g e l y b y IC T . H o w e v e r , i n a s t r i c t e r s e n s e ,

the term “Online Dispute Resolution” (ODR) is used

208
KATCH Ethan & RIFKIN Janet, Online Dispute Resolution: Resolving Conflicts in Cyberspace
(San Francisco: Jossey Bass), 2001, p. 9.
209
RULE Colin, op. cit., p. 44.
210
KAUFMANN-KOHLER Gabrielle and SCHULTZ Thomas, Online Dispute Resolution:
Challenges for Contemporary Justice (Kluwer Law International, The Hague), 2004, p. 5.
211
For instance,”the ABA Task Force on E-Commerce and ADR provides a generic definition of
ODR: ODR is a broad term that encompasses many forms of ADR and court proceedings that
incorporate the use of the internet, websites, e-mail communications, streaming media and other
information technology as part of the dispute resolution process”. See WANG Fangfei Faye, op.
cit., p. 25.

152
internationally to describe different forms of on-line

extrajudicial dispute resolution. The main difference between

t r a d i t i o n a l A DR a n d O D R i s t h a t i n s t e a d o f m e e t i n g f a c e t o f a c e ,

t h e p a r t i e s i n t e r a c t o n l i n e . 212 O n l i n e D i s p u t e R e s o l u t i o n i s a n ew

and evolved form of ADR adapted to the specific conditions of

t h e C yb e r - w o r l d ; a b r a n c h o f d i s p u t e r e s o l u t i o n w h i c h d i f f e r s

f r o m o t h e r n o n - j u d i c i a l w a ys , b e c a u s e o f i t s i n n o v a t i v e a n d

advantageous use of application development and computer

n e t w o r k s f o r t h e r e s o l u t i o n o f d i s p u t e s . 213 T h e r e f o r e , i n t h i s

t h e s i s , O DR i s c o n s i d e r e d a s d i s p u t e r e s o l u t i o n o u t s i d e t h e

c o u r t s c a r r i e d o u t b y u s i n g IC T a n d , i n p a r t i c u l a r , In t e r n e t

a p p l i c a t i o n s . 214 A D R a i m s t o r e s o l v e d i s p u t e s o u t o f c o u rt a n d

O D R i s t h e a p p l i c a t i o n o f t e c h n o l o g y t o a c h i e v e t h e s a m e g o a l . 215

ODR methods are “ADR provided online, meaning that

they are alternatives to litigation and to state justice, but not all

m e t h o d s a r e o n l i n e A D R ” . 216 Li k e O D R , A D R i s a d e b a t a b l e

c o n c e p t . In E n g l a n d a n d W a l e s , A DR i s c o n s i d e r e d a l l m e t h o d s

for resolving disputes other than litigation. By contrast, in the

United States ADR is generally referred to as “non-adjudicative”

212
HANG Q. Lan, Online Dispute Resolution Systems: The Future of Cyberspace Law, Santa
Clara Law Review, vol. 41, 2001, p. 846.
213
CALLIESS Gralf-Peter, Online Dispute Resolution: Consumer Redress in a Global Market
Place, German Law Journal, vol. 7, 2006, p. 647.
214
HÖRNLE Julia, op. cit., p. 75.
215
RULE Colin, op. cit., p. 43.
216
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, United
Nations Economic Commission for Europe Forum on Online Dispute Resolution Geneva, 6-7 June
2002, p. 2

153
d i s p u t e r e s o l u t i o n , e x c l u d i n g a r b i t r a t i o n a n d o t h e r a d v er s a r i a l

p r o c e e d i n g s . S i m i l ar l y t o A D R , i n O DR t h e r e i s a w i d e r an g e o f

ODR mechanisms, however, ODR methods can be categorized in

t h e s a m e w a y a s A D R m e t h o d s . 217 C o n s e q u e n t l y, a l t h o u g h i n a

broad sense of the term there is a numerous selection of ODR

mechanisms, amongst them negotiation, mediation and

arbitration are the most commonly practiced as well as the basis

f o r m o s t p l at f o r m s . 218 In t h i s t h e s i s , t h e ex a m i n a t i o n o f O D R w i l l

be focused on the major ADR methods of negotiation, mediation

a n d a r b i t r a t i o n , i n t h e i r v i r t u a l r e p r e s en t a t i o n . T h e s e t r a d i t i o n a l

ADR methods are transplanted into the online environment and

a d a p t e d a c c o r d i n g l y. T h i s v i e w i s a d o p t e d a s m o r e a c c u r a t e l y

corresponding to the future of ODR. After all, it is considered

p r e f e r a b l e a n d m o r e r e a l i s t i c t o ex am i n e a n d a t t e m p t t o i m p r o v e

o n l i n e A D R m e t h o d s t h a t w i l l b e n e f i t fr o m t h e e x p e r i e n c e o f t h e

e n t i r e A D R m o v e m e n t t h a n t r yi n g t o “ c o m e u p ” w i t h n ew O D R

methods.

H o w e v e r , a l t h o u g h O D R i s b a s e d o n AD R , t h e c o m b i n a t i o n

of ADR methods with technology is not a mere transplant but a

t r a n s f o r m a t i o n o f t h e u n d e r l yi n g A D R p r o c e s s e s m a k i n g O D R

u n i q u e a n d w i t h e n d l e s s p o s s i b i l i t i e s . 219 T h e u s e o f t h e In t e r n et

217
SCHULTZ Thomas, BONNET Vincent, BOUDAOUD Karima, KAUFMANN-KOHLER
Gabrielle, HARMS Jürgen and LANGER Dirk, op. cit., p. 2.
218
BETANCOURT C. Julia and ZLATANSKA Elina, op. cit., p. 258.
219
“To say that ODR is merely online ADR would similarly underestimate the transformative
power of the technology […] in the same way as the argument that, for all forms of motorized

154
a n d t h e IC T t o o l s i n d i s p u t e r e s o l u t i o n m a n i f e s t l y i n f l u e n c e s t h e

traditional ADR processes (negotiation, mediation and

a r b i t r a t i o n ) a n d c h a n g e s t h e f o r m o f c o m m u n i c a t i o n , cr e a t i n g

new possibilities and advantages, but also creating new

concerns, such as those relating to the security of online

c o m m u n i c a t i o n s a n d d a t a . 220 T h e f o l l o w i n g c h a p t e r s o f t h i s p a rt

e x a m i n e i n d e p t h al l t h e n e w c a p a b i l i t i e s o f O D R , i n o rd e r t o

t a k e a d v a n t a g e o f t h e m , a s w e l l a s t h e d r a w b a c k s t h a t n e ed t o b e

avoided.

O D R e v o l v e s e x i s t i n g A D R m e t h o d s b y t h e u s e o f IC T

t o o l s “ b a s e d o n t h e a s s u m p t i o n t h at c e r t a i n d i s p u t e s ( a n d

foremost e-disputes) can also be resolved quickly and adequately

v i a t h e In t e r n e t ” . 221 A D R m e t h o d s a r e a s s i s t e d b y t h e s p e e d a n d

c o n v e n i e n c e o f IC T a n d t h e i n t e r n e t , w h i c h m a k e s t h em b e t t e r

s u i t e d t o t h e n e e d s o f c yb e r s p a c e a n d e s p e c i a l l y e - c o m m e r c e .

However, ODR is suitable to resolve not only disputes that arise

online or small claims arising from e-commerce disputes but

ODR has also proven successful in resolving offline and large

v a l u e d i s p u t e s a s s h o w n b y t h e e x a m p l e o f “ C yb e r S e t t l e ” .

Technically ODR can be used to resolve any kind of disputes

transport, the horse that drew the cart has merely been replaced by an engine, but that the
transportation itself has not changed”. See HÖRNLE Julia, op. cit., p. 76.
220
“As ODR services began to roll out, some new wrinkles to the technology emerged. Some of
the mainstays of face-to-face dispute resolution practice did not translate well into the online
environment, and some capabilities of online dispute resolution were entirely new”. See RULE
Colin, op. cit., p. 44.
221
HEUVEL V. D. Esther, op. cit., p. 8.

155
r e g a r d l e s s o f t h e i r o r i g i n ( f r o m t h e o f fl i n e o r t h e v i r t u a l w o r l d )

and their nature.

H o w e v e r , t h e r e a r e t yp e s o f c a s e s t h a t a r e b e t t e r s u i t e d f o r

resolution through ODR. There are specific examples of these

b e t t e r s u i t e d c a s e s , s u c h a s d i s p u t e s o r i g i n a t i n g i n C yb e r s p a c e

where the use of ODR can avoid c o m p l ex j u ri s d i ct i o n a l

q u e s t i o n s , d i s p u t e s r e l a t i n g t o d o m a i n n a m e s , 222 o r i n t e l l ec t u al

property disputes, for the resolution of which the use of

a r b i t r a t i o n i s c o n s i d e r e d h i g h l y s u i t a b l e . 223 T h e p r o t e c t i o n o f

i n t e l l e c t u a l p r o p e r t y i n c yb e r s p a c e c a n n o t s o l e l y r e l y o n c i v i l o r

c r i m i n a l s a n c t i o n s b u t i n s t e a d i t w o u l d b e m o r e e f f i c i en t f o r

p a r t i e s t o c h o o s e n e u t r a l s w h o a r e ex p e r t s a n d k n o w t h e s u b j e c t

and customs of the matter at hand rather than expend resources

t e a c h i n g a j u d g e o r j u r y a b o u t c o m p l ex t e c h n o l o g i c a l i s s u e s a n d

h o p i n g t h e y w i l l g r a s p t h e i s s u e s . 224 T o d a y, O D R i s m a i n l y u s ed

t o r e s o l v e e m p l o ym e n t d i s p u t e s , f a m i l y d i s p u t e s a n d c o m m e r c i a l

d i s p u t es , including those with cross-border e l e m e n t s . 225

H o w e v e r , g e n e r a l l y O D R i s l e s s a p p ro p r i a t e f o r f i e l d s “w h e r e

legal constraints are higher, such as family law and taxation law,

222
See infra at “ODR in action”.
223
“The development of digital communication has spawned a number of issues for intellectual
property owners. With the use of new technologies, particularly the Internet, it has become much
easier for intellectual property pirates to infringe upon intellectual property rights. For instance,
copyrights in songs and movies are constantly infringed with their dissemination on file-swapping
platforms such as Kazaa. Similarly, unauthorized hyperlinking, framing, and meta-tagging on the
Internet could also violate copyright and trademark rights”. See SHAH Aashit, Using ADR to
Solve Online Disputes, Richmond Journal of Law & Technology, Vol. 10, Is. 3, 2004, pp. 4, 5.
224
VICTORIO M. Richard, op. cit., pp. 21- 23
225
CORTES Pablo, op. cit., p. 2

156
because states are more sensitive to interventions in their

s o v e r e i g n t y i n t h e s e f i e l d s ” . 226 F u r t h e r m o r e , O D R m e t h o d s a r e

b e t t e r s u i t e d f o r m o n e t a r y d i s p u t e s s u c h a s c r e d i t ca r d a n d

insurance claims rather than disputes that relate to recognition

o f r i g h t s , b e c a u s e o f t h e n a t u r e o f t h e c yb e r s p a c e w h i c h i n v o l v e s

numerous economic transactions and usually between strangers

w i t h n o p r i o r r e l a t i o n s h i p . In m o n e t a r y d i s p u t e s O DR c a n

p r o v i d e a f a s t a n d ea s y r e s o l u t i o n a s i s e v i d e n t b y t h e s u c c e s s f u l

operation of s e v er a l providers s u ch as “ c l i c k N s e t t l e” and

“ C yb e r s e t t l e ” . F o r d i s p u t es t h a t a r e p u r e l y e c o n o m i c s u c h a s i n

i n s u r a n c e c l a i m s , co n s t r u c t i o n d e f e c t d i s p u t es , a n d e - c o m m e r c e ,

O D R c a n h e l p t h e b a r g a i n i n g p r o c e s s m o v e s w i ft l y a n d q u i c k l y,

and may even preserve the contractual relationship. Where ODR

is best suited to resolve disputes is in e-commerce where the use

o f IC T t o o l s a n d m e t h o d s c a n b e u t i l i z e d b y b u s i n e s s e s a n d

consumers to resolve disputes that arise out of economic

transactions. E-commerce transaction and the corresponding

d i s p u t es a r e u s u a l l y o f l o w v a l u e a n d O D R a l l o w s f o r t h e i r

resolution but at the same time manages to keep the costs

p r o p o r t i o n al l y l o w . F u r t h e r m o r e , i n t h e s e c a s e s t h e f a c t t h a t t h e

dispute arose over the internet suggests that the parties are

a l r e a d y f a m i l i a r w i t h t h e p e c u l i a r i t i es o f t h e c yb e r s p a c e a n d

h a v e a l l t h e n e c e s s a r y t o o l s t o r e s o l v e t h e d i s p u t e o v er t h e

226
EU study on the Legal analysis of a Single Market for the Information Society, op. cit., p. 13.

157
internet. ODR makes it possible to resolve lesser-value and

cross-border disputes which simply could not be resolved

o t h e r w i s e , p r o v i d i n g a c c e s s t o j u s t i c e t o p a r t i e s t h at w o u l d n o t

be able to find recourse otherwise. For e-commerce disputes,

ODR is not just an alternative but often the only viable way to

r e s o l v e d i s p u t e s . E- c o m m e r c e d i s p u t e s a r i s e o u t o f c o m m e r c i a l

transaction that occur online and include three d i f fe r e n t

categories based on the parties that take part in the transaction.

The dispute may arise from a transaction between two businesses

( B 2 B ) , o r b e t w e e n p r i v a t e i n d i v i d u al s i . e . c o n s u m e r s (C 2 C ) , o r

f i n a l l y b e t w e e n a b u s i n e s s a n d a c o n s u m e r ( B 2 C ) . 227

The perspective adopted in this thesis regarding the nature

of specific disputes will be a broad one so that the observations

and conclusions reached can apply to the resolution of all kinds

o f d i s p u t e s . H o w e v e r , w h e n i t i s d e em e d n e c e s s a r y t h e t h e s i s

makes distinctions based on the nature of the dispute in order to

address specific issues not common to all disputes. Such an

example are B2C disputes where the power imbalance between

227
“An example of an individual versus individual online dispute is when the buyer bids the
highest price for an item auctioned by the seller through an online auction venue such as eBay. An
online business may also find itself in a dispute with another online business. In one case, eBay
sued another online auction site for trespass because the rival web site sent an automated query
program, or ‘robot’, to search eBay's web site for bidding prices. This burdened eBay's computer
network since the excess traffic to its web site by the robots took up valuable capacity”. See
CORTES Pablo, (2010) Online Dispute Resolution for Consumers, in WAHAB Mohamed S.
Abdel, KATSH Ethan & RAINEY Daniel, Online Dispute Resolution: Theory and Practice - A
Treatise on Technology and Dispute Resolution, (Eleven International Publishing), 2012, p. 151.
Finally, “a B2C dispute may arise when an individual conducts business with an online merchant,
for example when a buyer purchases a license to use software from a merchant through merchant's
web site”. HANG Q. Lan, op. cit., pp. 4- 6.

158
the parties creates the need for protection of the consumer who

is the weaker party and where ODR has a dual role of resolving

d i s p u t es and i n c re a s i n g consumer trust, essential in the

development of sustainable e-commerce.

F i n a l l y, i n o r d e r t o c o m p l e t e t h e d ef i n i t i o n o f O D R , a

m o r e a c u t e d e s c r i p t i o n o f i t s o n l i n e n a t u r e m u s t b e p r o v i d e d . 228

T o d a y, O D R i s n o t j u s t a f o r m o n a w e b s i t e o r s i m p l y t h e u s e o f

e - m a i l . O D R i s u n d e r s t o o d a s t h e u s e o f s o p h i s t i c a t e d s o ft w a r e

capable of handling online administrative processes previously

conducted offline; a significant part of the dispute process must

be conducted online. ODR services must be able to perform

o n l i n e t h e m a j o r p ar t o f t h e d i s p u t e r es o l u t i o n p ro c e d u r e , f r o m

the initial filing of the dispute, to the appointment of the third

n e u t r a l p a r t y, t h e p r e s e n t a t i o n a n d e v a l u a t i o n o f e v i d e n ce , t h e

conducting of oral hearings when applicable, the communication

between the parties, and even the rendering of binding

settlements. ODR is a distinct way to resolve disputes that takes

p l a c e m o s t l y i n t h e o n l i n e e n v i r o n m en t w i t h t h e a s s i s t an c e o f

IC T , b u t a t t h e s a m e t i m e r e s p e c t s d u e p r o c e s s .

228
“ODR can involve automated negotiation processes administered by a computer, or it can
provide world-class experts to administer binding arbitration procedures. ODR systems can be
legalistic and precedent-based, like the courts, or flexible exception-handling mechanisms to act as
an extension to customer service efforts. ODR can be a multimillion dollar customer relationship
management system or a $75 website set up to aid a mediator with the administration of a small
case”. See RULE Colin, op. cit., p. 44.

159
It would be difficult to establish a clear borderline

b e t w e e n A D R a n d O D R . 229 A D R p r o c e s s e s d o n o t e x c l u d e t h e u s e

o f In t e r n e t c o m m u n i c a t i o n s s u c h a s e m a i l s ; i n t h e s a m e m a n n e r

ODR processes may be complemented by face to face

m e e t i n g s . 230 H o w e v e r , it is commonly accepted that ODR

i n c l u d e s m a i n l y t h o s e m e t h o d s i n w h i c h t h e u s e o f IC T h a s a

principal role in the procedure. A range of communication

methods can be used, including: “Email (a virtually

instantaneous transfer of mainly text messages), In s t a n t

M e s s a g i n g ( a v a r i a n t o n e m a i l t h a t a l l o w s s yn c h r o n o u s o n l i n e

c h a t ) , O n l i n e C h at ( a s yn c h r o n o u s , t ex t - b a s e d ex c h an g e o f

information), T h r ea d e d Discussion (also known as bulletin

boards, an a s yn c h r o n o u s , t ex t u a l exchange of i n f o rm a t i o n

organized into specific topics), Video/Audio Streams

( a s yn c h r o n o u s transfer of recorded messages) and

Videoconferencing (a s yn c h r o n o u s transfer of video

i n f o r m a t i o n ) ” . 231

229
HÖRNLE Julia, Online Dispute Resolution: the Emperor's New Clothes, International Review
of Law, Computers & Technology, vol. 17, 2003, p. 27.
230
KAUFMANN-KOHLER Gabrielle and SCHULTZ Thomas, op. cit., p. 5.
231
RAINES S. Susan and TYLER C. Melissa, From e-bay to Eternity: Advances in Online
Dispute Resolution, University of. Melbourne Legal Studies Research Paper, 2006, p. 4.

160
Section 2: Technology as a fourth party and the various ICT

tools

In O D R t h e r e s o l u t i o n o f t h e d i s p u t e i s p e r f o r m e d n o t o n l y

b y p h ys i c a l p e r s o n s , b u t a l s o “ b y c o m p u t e r s a n d s o f t w a r e , w h i c h

provide an independent contribution to the management of the

d i s p u t e ” . 232 In t h e o f f l i n e w o r l d , d i s p u t e r e s o l u t i o n i s f a c e- t o -

f a c e ; a l l c o m m u n i ca t i o n h a p p e n s b y v o i c e , e i t h e r i n t h e s a m e

r o o m o r o v e r t h e t e l e p h o n e a n d t h e f e a t u r e s o f t h e p l ac e o f

m e e t i n g a r e o f l e s s e r i m p o rt a n c e . 233 O n t h e c o n t r a r y, i n t h e

v i r t u a l w o rl d t h e t o o l s u s e d t o c o m m u n i c a t e s u b s t a n t i a l l y s h a p e

the way information is transmitted and the way messages are

u n d e r s t o o d b y t h e p a r t i e s . 234 T h e i n f l u e n c e o f t e c h n o l o g y c a n b e

s e e n b y t h e f a c t t h a t IC T a s s i s t a n c e h a s b e e n c h a r a c t e r i z e d a s

the fourth party by the academia, which comes to be added to the

t r a d i t i o n a l t h r e e s i d e m o d e l , c o m p r i s ed b y t h e t w o p a r t i e s w h o

a r e i n v o l v e d i n a d i s p u t e , a n d t h e t h i r d n e u t r a l p a r t y. 235

232
KATCH Ethan & RIFKIN Janet, op. cit., p. 93.
233
“Occasionally one side or the other will submit a brief, such as in arbitration, but the vast
majority of communications are voice-based. […] the neutral can do little more than arrange the
room and table as everyone liked and ask questions to help the parties make progress”. See RULE
Colin, op. cit., pp. 45, 46.
234
CORTES Pablo, op. cit., p. 85.
235
WAHAB S. A. Mohamed, Globalization and ODR: Dynamics of change in e-commerce
dispute settlement, International Journal of Law and Information Technology, vol. 12, 2004, p.
123.

161
The fourth party participates in the resolution procedure in

d i f f e r e n t w a ys ; a t t i m e s i t c a n s u b s t i t u t e t h e t h i r d p a r t y, o r i t i s

f r e q u e n t l y u s e d b y t h e t h i r d p a r t y i n o r d e r t o f a c i l i t at e t h e

communication between the disputants and the resolution

p r o c e s s i n g e n e r a l . 236 S o m e o f t h e f o r m s o f a s s i s t a n c e t h a t t h e

fourth party may provide include simple tasks like organizing

information, shape writing communications between the parties

and making them more polite and constructive, sending

a u t o m a t i c r e s p o n s es t o k e e p p a r t i e s i n f o r m e d , s t o p p i n g b a d

l a n g u a g e a n d s c h e d u l i n g m e e t i n g s . Ot h e r s m o r e c o m p l ex m a y

include evaluating and storing information, helping the parties

t o p r i o r i t i s e , a n d f o s t e r i n g b r a i n - s t o rm i n g . 237 F o r i n s t a n c e , i n

online arbitration, the fourth party can play a significant role to

structure the positions of the p ar t i e s and a structured

p r e s e n t a t i o n o f i s s u e s a n d s t a t e m e n t s a l l o w s t h e a r b i t r at o r t o

d e t e r m i n e , a l m o s t i m m e d i a t e l y, t h e e x t e n t o f t h e d i s a g r e e m e n t

b e t w e e n t h e p a r t i e s . 238

T h e r o l e o f t h e f o r t h p a r t y i s n o t a l w a ys l i m i t e d t o a m e re

a s s i s t a n t , s i n c e t ec h n o l o g y a l s o s t r o n g l y i n f l u e n c e s t h e w a y

c o m m u n i c a t i o n s t ak e p l a c e a n d e v e n f u r t h e r i n s o m e f o r m s o f

O D R t h e f o u r t h p ar t y c a n d i s p l a c e t h e t h i r d o n e t o s i g n i f i c a n t

236
GAITENBY Alan, The Fourth Party Rises: Evolving Environments of Online Dispute
Resolution, The University of Toledo Law Review, vol. 38, 2006, p. 372.
237
KATCH Ethan & RIFKIN Janet, op. cit., p. 129
238
LODDER R. Arno and ZELEZNIKOW John, op. cit., p. 79

162
e x t e n d . 239 T h e t r a n s f o r m a t i v e p o w e r o f t h e f o u r t h p a r t y c a n a l s o

s h a p e t h e u n d e r l yi n g A D R p r o c e s s a n d c r e a t e n e w d i s p u t e

resolution mechanisms, such as blind bidding negotiation, which

h a s n o e q u i v a l e n t i n t h e o f f l i n e w o r l d . 240 T h e f o u r t h p a r t y a d d s

value and can alter the t h i rd - p a r t y roles of mediator or

arbitrator, since the third party will gradually rel y more and

more on the capabilities provided by ICT, the fourth party will

increasingly become indispensable in dispute resolution with the

e x p e r i e n c e a n d t h e r e a l i z a t i o n t h a t ce r t a i n p a r t s o f h o w t h i r d

parties handle disputes need to be reevaluated given the new

t o o l s t h at a l l o w t o c h a n g e h o w a n d w h e r e i n t e r a c t i o n s w i t h

p a r t i e s m i g h t t a k e p l a c e . 241

S i m i l a r l y t o A D R , w h e r e l a w ye r s i n i t i a l l y q u e s t i o n e d t h e

n e e d f o r a t h i r d n e u t r a l p a r t y t o a s s i s t t h e d i s p u t a n t s wi t h t h e

resolution; today many ADR practitioners are opposed to the

i n v o l v em e n t of the fourth p a r t y. Some dispute resolution

professionals have criticized the concept of ODR and

s p e c i f i c a l l y t h e u s e o f IC T t o o l s w i t h o n e o f t h e i r m a i n c o n c e r n s

being ODR’s lack of face to face interaction between the parties,

w h i c h w o u l d n o t a l l o w t h e d e v e l o p m e n t o f O D R . 242 H o w e v e r , t h e

realisation that when dealing with online disputes that usually


239
KATCH Ethan & RIFKIN Janet, op. cit., pp. 32, 94
240
“Technologies used are not merely subordinate tools in the same way that pen and paper pads
are for recording an award or mediation settlement”. See HÖRNLE Julia, op. cit., pp. 86, 87.
241
MOFFITT Michael & BORDONE Robert, op. cit., pp. 432 433.
242
EISEN Joel, Are we ready for mediation in cyberspace, Brigham Young University Law
Review, vol. 4, 1998, pp. 1305, 1354.

163
are also cross border and low value disputes, ODR may be the

only cost-effective manner of resolving them, “has convinced

many d i s p u t e r e s o l u t i o n p r a c t i t i o n e rs t o n o w r e c o g n i z e t h e

v a l u e o f t h e In t e r n e t a n d u s e i t o n a d a y- t o - d a y b a s i s , e s p e c i a l l y

to provide, access, and ex c h a n g e of i n f o r m a t i o n ”. 243

Furthermore, the argument about the lack of face to face contact

b e c o m e s l e s s a n d l e s s a c c u r a t e , s i n c e t h e d e v e l o p m e n t o f IC T

especially with the use of broadband connections and the ability

t o p e r f o r m v i d e o - ca l l s f r o m a l l n e w g e n e r a t i o n c e l l u l a r p h o n e s

has made it possible for parties to present al l kinds of

i n f o r m a t i o n , e v e n t h e i r f e e l i n g s a n d e m o t i o n s . 244 T h e e l e c t r o n i c

i n s t r u m e n t s f a c i l i t at e t h e t r a n s m i s s i o n o f i n f o rm a t i o n a n d t h u s

p r o m o t e t h e c o m m u n i c a t i o n b et w e e n t h e t w o p a r t i e s . R e l i ab i l i t y

a n d s p e e d a d d t o t h e i r v a l u e . 245 T h e u s e o f m o d e r n t e c h n o l o g i c a l

m e d i a p l a ys a r o l e o f p r i m a r y s i g n i f i c a n c e i n t h e O D R p r o c e s s

and can prove very beneficial to the parties as well as to the

ODR practitioner. In accordance with the p ri n c i p l e of

c o n t r a c t u a l f r e e d o m a n d t h e f u n d am e n t a l p r i n c i p l e o f p a r t y

a u t o n o m y, t h e p a r t i e s h a v e t h e a b i l i t y a n d t h e f r e e d o m t o d e c i d e

which electronic media will be used during the proceedings, or

243
SYME David, Keeping Pace: On-line Technology and ADR Services, Conflict Resolution
Quarterly, vol. 23, 2006, p. 345.
244
CORTES Pablo, op. cit., pp. 83, 84.
245
GIBBONS Llewellyn Joseph, Creating a Market for Justice: A Market Incentive Solution to
Regulating the Playing Field : Judicial Deference, Judicial Review, Due Process, and Fair Play
in Online Consumer Arbitration, North-western Journal of International Law & Business, vol.
23, 2002, pp. 1 , 4.

164
w h i c h w i l l b e e x c l u d e d . 246 A n O D R p l a t f o r m m a y e m p l o y v a r i o u s

communication tools, each with different strengths and

weaknesses, suitable more or less depending on the nature of

e a c h p a r t i c u l a r d i s p u t e a n d O D R m e t h o d . 247 S o m e o f t h e s e t o o l s

i n c l u d e t h e e - m a i l , c h a t a n d v i d e o c o n f er e n c e .

O n e o f t h e m o s t c o m m o n l y u s e d IC T t o o l s i n O DR i s t h e

u s e o f e - m a i l f o r c o m m u n i c a t i o n . 248 It i s a n e l e c t r o n i c m ai l

s ys t e m t h r o u g h w h i c h p a r t i e s c a n ex c h a n g e a l l k i n d s o f d at a . T h e

only requirement is for users to have an electronic mailbox

which is free and can be easily acquired online in a matter of

minutes. Besides the classical messages via e-mail, parties can

exchange data including documents, images, audio messages,

spread sheets, programs and even voicemails (voice e-mail)

where users record voice messages using a microphone (standard

issued with any personal computer and mobile phone).

Electronic mail is one of the most popular services of the

In t e r n e t , t h e m o s t c o m m o n a n d c l e a r l y e a s i e s t f o r m o f e l e c t r o n i c

c o m m u n i c a t i o n ; i t s a v e s m o n e y, s i n c e t h e c o s t o f s e n d i n g

messages is practically zero, and the internet now with one

simple subscription is unlimited. Also it saves time since it

p r o v i d e s f a s t c o m m u n i c a t i o n , c o m p ar e d t o t r a d i t i o n a l l e t t e r s ,

246
DUMORTIER Jos and VAN EECKE Patrick, The European Draft Directive on a common
Framework For Electronic Signatures , The Computer Law & Security Report, vol. 15, 1999, p.
2.
247
RULE Colin, op. cit., p. 46
248
CHAFFEY Dave, Total E-mail Marketing, (Taylor & Francis), 2003, pp. 86-123.

165
because messages reach millions of people around the world in

seconds, i.e. in real time virtually zero. E-mail is the most basic

IC T t o o l , e a s y t o u s e , p e r s o n a l i z e d , i t h a s a f a s t d o w n l o a d

p r o c e s s a n d i t d o e s n o t r e q u i r e b a n d wi d t h s i n c e m o s t m es s a g e s

are text based.

When integrated in ODR services email has the advantages

o f b e i n g a n a s yn c h r o n o u s c o m m u n i ca t i o n w h i c h e v e r yo n e i s

f a m i l i a r w i t h , i t i s v e r y f l e x i b l e f o r e v e r y t yp e o f d i s p u t e a n d

e n a b l e s t h e ex c h a n g e o f c o m p l ex w r i t t e n i n f o rm a t i o n . W h e r e a s

in face-to-face dispute resolution processes, the communication

i s m o s t l y i n - p e r s o n o r o v e r - t h e - t e l ep h o n e s yn c h r o n o u s v o i c e

communication, e-mail has changed the dispute resolution

process regarding the participant’s notion of time by providing

t h e o p t i o n o f a s yn c h r o n o u s c o m m u n i c at i o n . 249

S yn c h r o n o u s communication is direct communication,

when minimal time is required for a message to reach the other

p a r t y a n d f o r t h e l a t t e r t o r e p l y. S yn c h r o n o u s c o m m u n i c a t i o n i n

the offline w o rl d is face to face communication or

communication by telephone and in the online world

c o m m u n i c a t i o n t h r o u g h a u d i o o r v i d e o c o n f e r e n c e . A s yn c h r o n o u s

249
“Synchronous is when you and the other party are communicating in “real-time,” and you are
expected to respond to the other side as soon as they finish making their comments. Phone and
face-to-face interactions are both synchronous communications. Asynchronous communication is
when you and the other party are not communicating at the same time. When you get a message
from the other side you are not expected to respond immediately. Sending letters back and forth
through the mail is asynchronous, and posting messages on an online bulletin board or discussion
forum is also asynchronous”. See RULE Colin, op. cit., pp. 47, 48.

166
communication is when the parties do not communicate at the

s a m e t i m e , o n e p a r t y’ s m e s s a g e d o e s n o t r e a c h t h e o t h e r

i m m e d i at e l y nor does the latter r e p l y. A s yn c h r o n o u s

communication is the communication via e-mail or text

m e s s a g e s . A s yn c h r o n o u s c o m m u n i c a t i o n p r o v i d e s p a r t i es w i t h

m o r e t i m e a n d s p a c e t o r e a d a m e s s a g e , t o u n d e r s t an d i t s

meaning and more calmly consider the relevant issues of the

dispute. Furthermore, because messages are saved, an email

a c c o u n t a l s o s e r v e s a s a s t o r a g e f a c i l i t y. H o w e v e r , i t m a y s l o w

d o w n t h e r h yt h m o f t h e c o m m u n i c a t i o n a n d m a k e i t m o r e

d i f f i c u l t t o d i s c o v e r t h e r o o t o f t h e p r o b l e m . Al t h o u g h t h e r e a r e

b e n e f i t s o f s yn c h r o n o u s a s w el l a s a s yn c h r o n o u s c o m m u n i c a t i o n

and which communication form should be preferred depends on

t h e n a t u r e o f t h e d i s p u t e a n d t h e p a r t i es i n v o l v e d , h o w e v e r, b o t h

f o r m s o f c o m m u n i c a t i o n c a n b e c o m b i n e d ; a n ex a m p l e o f a

p r o v i d e r s u p p o r t i n g b o t h i s t h e It a l i a n p r o v i d e r “ R i s o l v i o n l i n e ” ,

w h i c h o f f e r s b o t h e - m a i l a n d c h a t . 250

C u r r e n t l y, e-mail is an essential f a c i l i t at o r which

c o m p l e m e n t s O D R a s w e l l a s A D R f o r p r o v i d i n g i n f o rm a t i o n ,

s c h e d u l i n g , b r i e f c o n t a c t s , e t c . It s m a i n d i s a d v a n t a g e i s t h a t e -

m a i l s i n m o s t c a s e s a r e n o t e n c r yp t e d , w h i c h w o u l d a l l o w t h i r d

parties to read them and recipients to forward them to others.

These issues concerning the security and privacy of the

250
LODDER R. Arno and ZELEZNIKOW John, op. cit., pp. 73, 74.

167
c o m m u n i c a t i o n c a n b e t a c k l e d t h r o u g h t h e u s e o f e n c r yp t i o n

t e c h n o l o g y (c r yp t o g r a p h y) . 251 U n f o r t u n a t e l y, t h e a s s e s s m e n t o f

s u c h c o m p l ex i s s u es r e q u i r e s s p e c i f i c t e c h n i c a l k n o w l e d g e a n d

u s u a l l y n o t e a s i l y a c c e s s i b l e t o t h e a v e r a g e u s e r . 252 H o w e v e r , a s

seen in the next part of this thesis, ODR providers can use

appropriate technological tools and ensure the security and

confidentiality of the communication.

C h a t a n d In s t a n t M e s s a g i n g ( IM ) a r e w a ys t o d i r e c t l y

contact a number of people, who are concentrated in a particular

W e b s i t e c a l l e d “ ch a t r o o m ” b y t yp i n g t e x t m e s s a g e s t o e a c h

o t h e r t h r o u g h a s o ft w a r e a p p l i c a t i o n i n r e a l - t i m e . C h at an d IM

d i f f e r f r o m e - m a i l i n t h a t t h e t ex t ex ch a n g e i s f a s t e r . A l t h o u g h

C h a t a n d In s t a n t M e s s a g i n g a r e v e r y s i m i l a r m e t h o d s t h ei r m a i n

d i f f e r e n c e i s t h a t c h a t e x c h a n g e s a r e m o r e s yn c h r o n o u s t h a n IM

251
“The word cryptography is composite word. The first component is ‘crypto’ and the second
component is ‘writing’. So then, cryptography means hide what I write. Cryptography is the
science or art of concealment of writing from unwanted readers. Cryptography was originally the
art form the secrets of which knew only a select few. The history of cryptography begins around
4000 B.C. in ancient Egypt and in ancient Greece according to references by the historian
Polybius. The first encrypted text dates in 1500 B.C. Babylon associated with the preparation
instructions for the manufacture of enamel-painted clay pots. The earliest known encryption
device is the ‘baton’ which was used by the Spartans”. As seen at Encyclopaedia Papyrus Larousse
Britannica, vol. 36.
“The most striking development in the history of cryptography came in 1976 when Diffie and
Hellman published ‘New directions in cryptography’. In 1978 Rivest, Shamir and Adleman
discovered the first practical application of the proposed scheme. It was called the RSA scheme
and was based on a hard mathematical problem, namely the difficulty of factoring large integers
which ensures confidentiality in digital communications so the message can be read only by the
addressee, as in the intermediate stages, the message appears with unintelligible characters, i.e.
unreadable”. See KUMAR Anil, Network Security and Cryptography, International Journal for
Scientific Research & Development, vol. 2, 2014, p. 845.
252
AALBERTS Babette and VAN DER HOF Simone, Digital Signature Blindness: Analysis of
Legislative Approaches toward Electronic Authentication, (Kluwer), 2000, p. 16.

168
exchanges because they appear in a single “window” contrary to

IM w h e r e t h e r e a r e s e p a r a t e “ w i n d o w s ” t h a t u s u a l l y p o p - o u t

when the message is finished and sent to the recipient.

The previous IC T tools are based on written

c o m m u n i c a t i o n s . On e t h e o n e h a n d , t h i s p r o v i d e s p a r t i es w i t h

the ability to separate emotions from the issues in disputes and

to choose words more carefully when they appear in writing. The

m a i n d i s a d v a n t a g e o f C h a t a n d In s t a n t M e s s a g i n g i s t h a t i t i s a

v e r y t e x t u a l m e t h o d t o r e s o l v e d i s p u t e s a n d “ l a c k s n o n -v e r b a l

c o m m u n i c a t i o n s u ch a s p o s t u r e s , f a c i a l e x p r e s s i o n s , g e s t u re s a n d

t o n e o f v o i c e ” , 253 a f a c t w h i c h m a k e s i t m o r e d i f f i c u l t f o r t h e

ODR practitioner to establish trust between the parties and

confidence in the process. Furthermore, some users are more

a b l e t o e x p r e s s e f f i c i e n t l y b y w r i t i n g a n d o t h e r s w h o t yp e s l o w e r

w i l l q u i c k l y g e t f r u s t r a t e d . 254 A n o t h e r p ro b l e m w i t h c h a t a n d IM

is that parties tend to write fast and short messages, which may

encourage escalations of insults and misunderstandings; these

miscommunications happen more often because of the loss of

b o d y l a n g u a g e , v o i c e i n f l e c t i o n , f a c i a l ex p r e s s i o n s , e t c . M o s t

exchanges are mainly text format, though popular services, such

253
KATCH Ethan & RIFKIN Janet, op. cit., p. 141.
254
For instance, “If one side types thirty words per minute and the other types ninety words per
minute the latter party can get in three words for every one of the other side. There will
undoubtedly be delays as one side or the other makes their points, but the thirty-words-per-minute
party will probably get frustrated as he struggles to keep up with all the points coming from the
other side. This frustration will likely degrade the quality of the discussion as well, as the parties
become more focused on getting their points in than thinking through what they really want to
say”. See RULE Colin, op. cit., p. 52

169
a s , “ M S N M e s s e n g e r ” , “ Y a h o o ! ” , “ S k yp e ” a n d “ A p p l e ' s i C h a t ” ,

now allow voice messaging, file sharing and even video based

c o m m u n i c a t i o n s . 255

Today the advancements of technology as well as the high

internet speed re a c h e d allow for much more c o m p l ex

communication tools such as audio and videoconference, which

are technological breakthroughs in ODR. Audio conference is a

c o m p l e t e l y s yn c h r o n o u s m e a n s o f c o m m u n i c a t i o n t h at a l l o w s a

v o i c e b a s e d d i a l o g u e b e t w e e n m u l t i p l e p a r t i e s . V i d e o c o n f er e n c e

i s a l i v e c o n n e c t i o n b e t w e e n p e o p l e u s u a l l y i n v o l v i n g a u d i o , t ex t

and video communications. In its simplest form the

communication can be the exchange of text or images between

two parties, whereas more sophisticated forms include the

transmission of high-quality audio and video. Today most

software platforms allow for both audio and video conference as

w e l l a s d o c u m e n t -p r e s e n t a t i o n a n d ap p l i c a t i o n - s h a r i n g f e a t u r e ;

that is the immediate presentation and exchange of electronic

documents. However, the most important and revolutionary

aspect is the video-communication from a distance, which can be

used to replace the traditional face to face meetings and hearings

o f w i t n e s s e s . 256 T h e m a i n a d v a n t a g e i s t h a t t h e p a r t i e s , t h e ODR

255
HILL Richard, Online arbitration: issues and solutions, Arbitration International, vol. 15, 1999,
p. 199.
256
“Video has been considered the ultimate ODR technology. Once parties can see each other and
the neutral, some observers have reasoned, little incentive remains to ever bother getting together
face to-face”. See RULE Colin, op. cit., p. 54.

170
practitioners or the witnesses do not have to travel, thus saving

t i m e a n d m o n e y. 257 T h e o n l y n e c e s s a r y r e q u i r e m e n t s t o p e r f o r m a

videoconference include the acquisition of the appropriate

software which can easily be downloaded even for free by many

p r o v i d e r s s u c h a s S k yp e . c o m 258 a n d t h e u s e o f a w e b c a m , wh i ch

n o w a d a ys i s p r o v i d e d a l m o s t a s a s t a n d a r d a c c e s s o r y w i t h a n y

personal computer. Videoconference allows for face to face

(F2F) communication which consequently adds to the ODR

procedure the formally missing non-verbal cues. Even though

t h e r e a r e s o m e c o n c e r n s a b o u t t h e q u al i t y o f t h e v i d e o l i n k a n d

the tribunals ability to evaluate testimonies through such a

m e a n s ; 259 t h e s e i s s u e s b e c o m e l e s s a n d l e s s c o n c e r n i n g e a c h d a y

due to the fast pace of technological development.

V i d e o c o n f e r e n c e p r o v i d e s s e v e r a l a d v an t a g e s s u c h a s t h e a b i l i t y

to record the proceedings which helps to memorialize the points

of agreement, prevents fraud and allows parties to go back and

review parts of it. Furthermore, the virtual nature of

videoconference creates a safe distance between parties

p r e v e n t i n g o n e o f t h e m t o d o m i n a t e t h e o t h e r . 260 C o n d u c t i n g

videoconference calls can be necessary for high value disputes

257
HOFFMANN A. David, The Future of ADR, Professionalization, Spirituality and the Internet,
Dispute Resolution Magazine, vol.14, 2008, p. 6.
258
The last 5 years Skype has become one of the most commonly used computer applications in
the world, to an extend which led to coined phrases such as “I will Skype you” or “Skype you
later”.
259
HÖRNLE Julia, JISC Legal Briefing Paper: Online Dispute Resolution, 2004, p. 10 available
at www.jisclegal.ac.uk
260
MOEVES S. Amy and MOEVES C. Scott, op. cit., pp. 19-21.

171
o r m o r e c o m p l ex o n e s s u c h a s t h o s e r e l a t e d t o f a m i l y l a w , r a t h e r

t h a n l o w v a l u e c o n s u m e r o r f i n a n ci a l d i s p u t e s , w h e re l e s s

c o m p l ex t o o l s s u ch a s t h e e m a i l m ay b e e n o u g h . 261 H o w e v e r,

p r e s e n t l y i t s e e m s t h a t O D R d e v el o p m e n t t e n d s t o i n c o r p o r a t e

a u d i o a n d v i d e o c o n fe r e n c i n g w i t h t ex t u a l c o m m u n i c a t i o n s .

M i n o r c o n c e r n s h a v e b e e n e x p r e s s e d a b o u t w h e t h e r v i rt u a l

face-to-face is actually face-to-face communication. The fact

that the parties are not really in the same room may result in

lack of well-organized cooperation and may disrupt the

c o n s t r u c t i v e r e l a t i o n s h i p b e t w e e n t h em . F o r e x a m p l e , d u r i n g a

l o n g t e l e c o n f e r e n c e p r o b l e m s m a y a r i s e s u c h a s t h e d i f f i cu l t y t o

assemble and the parties may find it exhaustive to stare at a

screen constantly for a large amount of time. However, the main

concern lies around the fact that the use of such a tool would be

i n a p p r o p r i a t e a n d ev e n u n f a i r t o p a r t i e s w h o l a c k t h e n e ce s s a r y

e x p e r i e n c e i n t h i s t yp e o f t e c h n o l o g y. A s a t i s f a c t o r y a n s w e r t o

this concern would be the proposition of a trial run before the

a c t u a l p r o c e e d i n g s t o f a m i l i a r i s e t h e p ar t i e s w i t h t h e p ro c e d u r e .

P r e s e n t l y, the extensive use of broadband and the

e x p o n e n t i a l a d v a n ce o f IC T , w h i c h i s a p p a r e n t f r o m t h e a d v a n c e

o f c o m p u t e r s a n d In t e r n e t c o n n e c t i o n s i n t h e l a s t d e c a d e , a r e

creating opportunities fo r new multimedia and higher

261
SCHULTZ Thomas, Information Technology and Arbitration: A Practitioner’s Guide, (The
Netherlands: Kluwer Law International), 2006, pp. 168-169.

172
t e c h n o l o g y. 262 N e w IC T t o o l s m a y b e a v a i l a b l e f o r O D R i n t h e

forthcoming future, “such as virtual meeting rooms, holographic

i m a g e s a n d A I a n d IC T w i l l b e c o m e s m a r t e r , s m a l l e r , s a f e r ,

f a s t e r , a l w a ys c o n n e c t e d a n d e a s i e r t o u s e , w i t h c o n t e n t m o v i n g

t o t h r e e d i m e n s i o n al m u l t i m e d i a f o r m at s ” . 263 A l r e a d y, w h a t w as

s e e n a s s c i e n c e f i c t i o n b e f o r e t e n ye a r s s e a m s t o d a y a n e v e r yd a y

r e a l i t y, a s u s e r s c a n m a k e v i d e o - c a l l s a n d a l m o s t e v e ryt h i n g ,

w h i c h c o u l d f o rm e r l y b e d o n e o n l y w i t h t h e u s e o f p er s o n a l

c o m p u t e r s , f r o m t h e i r h a n d h e l d d e v i c es a n d t h e n e w g e n e r a t i o n

m o b i l e p h o n e s . 264

A l t h o u g h t h e u s e o f e l e c t r o n i c m e d i a i s r e a l l y a n o v e l t y,

t h e i r a p p l i c a t i o n i n p r a c t i c e m a y c r e a t e s o m e d i f f i c u l t i e s . 265 T h e

technological developments in electronic communication are

accompanied by risks such as the challenging of electronic

documents and the collection of personal data in an unlawful

m a n n e r , a c t i o n s t h at c o u l d j e o p a r d i z e t h e O D R p r o c e s s a n d m a k e

i t d e p e n d a n t o n t h e q u a l i t y o f t h e s o f t w a r e . 266 T h i s i m p l i e s t h at

u s i n g t h e a d v a n t ag e s o f e l e c t r o n i c c o m m e r c e a n d e l e c t r o n i c

262
KATSH Ethan and WING Leah, Ten Years of Online Dispute Resolution (ODR): Looking at
the Past and Constructing the Future, University of Toledo Law Review, vol. 38, 2006, p. 27.
263
COM (2005) 229 final, Communication from the Commission to the Council, European
Parliament, the European Economic and Social Committee and the Committee of the Regions,
i2010 – A European Information Society for Growth and Employment, 3.
264
“If wireless access becomes the norm, people may have the ability to engage in dispute
resolution procedures on their handheld devices or cellular phones”. RULE Colin, op. cit., p. 300.
265
STYLIANOU Paul, Online Dispute Resolution: The Case for a Treaty Between the United
States and the European Union in Resolving Gross- Border E-Commerce Disputes, Syracuse
Journal
of International Law and Commerce, vol. 36, 2008, pp. 117, 124.
266
KATSH Ethan and WING Leah, op. cit., p. 30.

173
c o m m u n i c a t i o n t o t h e m ax i m u m ex t en t c a n b e c h a l l e n g i n g . 267

This is why it has been argued that the v i rt u a l ro o m s ,

videoconference, e-mails and many other electronic media can

c o n t r i b u t e t o t h e ev o l u t i o n o f A D R , b u t p r o v i d e d t h a t t h e m a i n

r o l e i s t o f a c i l i t a t e. 268 B u t , i t s e e m s m o r e l o g i c a l t o a r g u e t h at

t h e u s e o f e l e c t r o n i c m e a n s i n t h e p ro c e s s o f O D R c a n p r o v e

very beneficial and even replace the traditional means of dispute

resolution as long as they satisfy all the necessary safety

r e q u i r e m e n t s , u p h o l d t h e i n t e g r i t y o f c o m m u n i c a t i o n s , re s p e c t

the principles of good faith and the consumer p ro t e c t i o n

p r o v i s i o n s 269 and define the ex a c t way the electronic

c o m m u n i c a t i o n o f re l e v a n t p a r t i e s , w i l l b e h el d ; i n s h o r t , IC T

tools are valuable when used in the right way and in appropriate

c a s e s , 270 s i n c e their efficiency depends on the a p p r o p r i at e

combination of IC T t o o l s and traditional methods for the

s p e c i f i c s o f t h e d i s p u t e . 271 T h e r e f o r e , O D R p r o v i d e r s a n d t h i rd

p a r t y n e u t r a l s m u s t b e a w a r e o f t h e v a r i o u s IC T t o o l s , t h e

advantages and disadvantages that the use of each of them

267
For instance, “a difficulty in the growth of ODR is to devise technology which would be
compatible between different users and providers. This is important when ODR users may need to
store and exchange evidence and other documents. To such end there are ongoing efforts to
develop ODR-XML (Exchange Markup Language), which is a variant of XML that enables
information exchange among ODR systems, providing a standardized system”. CORTES Pablo,
op. cit., pp. 83, 84.
268
HILL Richard, op. cit., p. 199.
269
LOPEZ-TARRUELLA Aurelio, A European community regulatory framework for electronic
commerce, Common Market Law Review, vol. 38, 2001, pp. 1337, 1339.
270
WAHAB S. A. Mohamed, Does technology emasculate trust? Confidentiality and security
concerns in online arbitration, International Court of Arbitration Bulletin Special Supplement on
Using Technology to Resolve Business Disputes, 2004, p. 43.
271
SYME David, op. cit., p. 346.

174
entails, in order to apply the tools most appropriate for each

dispute.

S e c t i o n 3 : O D R f o rms

As stated, ODR in a broad sense may include numerous

m e c h a n i s m s , b a s i c al l y a n y m e t h o d t h a t r e s o l v e s d i s p u t e s t h r o u g h

t h e u s e o f IC T t o o l s a n d p a r t i c u l a r l y t h e i n t e r n e t . In t h i s s e n s e

ODR can be considered as not a predetermined concept but as a

continually evolving concept that includes any dispute resolution

p r o c e s s t h a t u s e s IC T a n d t h a t m a y b e b o r n o u t o f p u b l i c o f

p r i v a t e i n i t i a t i v e s . 272 T h e r e f o r e , O D R c a n b e d i v i d e d t o s u i

generis ODR (ODR in the broad sense), which includes all

methods of dispute resolution that are based on the innovative

technologies such as the internet and ODR in a strict sense,

which includes mainly online ADR. This thesis adopts the latter

o f t h e t w o d i s t i n ct i o n s . A s i n t r a d i t i o n a l A D R , O D R s e r v i c e s

p r o v i d e a g a m u t o f A D R p o s s i b i l i t i e s , fr o m d i r e c t n e g o t i a t i o n t o

b i n d i n g a r b i t r a t i o n . 273 H o w e v e r , t h e s t a n d a r d t yp o l o g y o f ODR

s ys t e m s mainly includes automated negotiation, computer

272
CORTES Pablo, op. cit., p. 54.
273
RULE Colin, op. cit., p. 44.

175
a s s i s t e d n e g o t i a t i o n , o n l i n e m e d i at i o n a n d o n l i n e a r b i t r a t i o n . 274

T h i s i s b e c a u s e t h es e m e t h o d s a r e t h e m o s t c o m m o n l y u s e d a n d

p r e f e r r e d b y O D R p r o v i d e r s . B u t , a l s o b e c a u s e a n O DR s ys t e m

based on traditional ADR techniques takes advantage of the

invaluable ex p e r i en c e of the ADR m o v e m e n t . 275 A n o t h er

distinction that will play an important role in tis thesis, is

b e t w e e n c o n s e n s u a l a n d b i n d i n g f o r m s o f O D R . Th i s d i s t i n c t i o n

is based on whether or not the result of the dispute resolution

process is binding for the parties and enforceable or it requires

the voluntary adoption of the settlement by both parties.

According to this distinction, non-binding ODR forms include

o n l i n e n e g o t i a t i o n , o n l i n e m e d i at i o n a n d n o n - b i n d i n g a r b i t r a t i o n

whereas the only binding form is binding online arbitration.

Depending on the nature of the dispute one or the other method

m a y b e m o r e o r l e s s s u i t a b l e f o r i t s r e s o l u t i o n ; f o r ex a m p l e f o r

purely monetary disputes negotiation can be adequate, but the

s a m e c a n n o t b e s a i d f o r m o r e c o m p l e x d i s p u t es , s u c h a s d i s p u t e s

r e l a t i n g t o p a r t i a l o r t o t a l l i a b i l i t y, o r w h e n t h e d i s p u t e d fa c t i s

274
SCHULTZ Thomas, The Roles of Dispute Settlement and ODR, in A. Ingen-Housz, ADR in
Business: Practice and Issues across Countries and Cultures, Vol. II (Kluwer Law International
BV: The Netherlands), 2011, p. 138.
275
“ODR as online ADR will be more effective than new specific forms of dispute resolution once
it can benefit from the legal instruments developed for ADR, which may only be a question of
time. And ODR may evolve in the direction of ADR, because just as lawyers have conquered the
ADR movement, injecting formalities drawn from their judicial experience, they are likely to
conquer ODR, injecting formalities drawn from their ADR experience”. See SCHULTZ Thomas,
Online Dispute Resolution: an Overview and Selected Issues, op. cit., pp. 3, 4

176
t h e p a ym e n t o f g o o d s o r s e r v i c e s . 276 T h i s s e c t i o n ex a m i n e s t h e

b a s i c c h a r a c t e r i s t i cs o f e a c h o f t h e s e m e t h o d s .

A. Online Negotiation

In t h e a g e o f t h e i n t e r n e t a n d e - c o m m e r c e , n e g o t i a t i o n h a s

evolved and the use of new communication tools and software

facilitate the goal of reaching an agreement. Negotiation has

moved off the court corridors and law firms on to the Web,

which resulted in the advancement of the idea of electronically

based n e g o t i a t i o n s . 277 In s t e a d of being confined to a f ew

meetings, the online environment assists the communication

between parties making negotiations easier. For instance, it is

more possible for the parties to come to an agreement, if there is

the ability to resolve issues and details about the agreement

without having to travel each time for the meeting. Many

i n t e g r a t e d O D R p r o g r a m s 278 n o w a d d a n e g o t i a t i o n s t a g e b e f o re

t h e m e d i a t i o n o r a rb i t r a t i o n p r o c e s s b eg i n s . 279

276
CORTES Pablo, op. cit., pp. 163, 164
277
BETANCOURT C. Julia and ZLATANSKA Elina, op. cit., p. 259.
278
For instance Online Resolution offers blind bidding as a standard feature in its ‘Resolution
Room’ process”. See www.onlineResolution.com
279
BENYEKHLEF Karim and GELINAS Fabien, op. cit., pp. 44, 45.

177
In O D R , n e g o t i a t i o n c a n b e a t r a d i t i o n a l p r o c e s s t h a t u s e s

t e c h n o l o g y a s t h e c o m m u n i c a t i o n m ed i u m , b u t a l s o t h e u s e o f

technology can have a transformative effect on the process and

negotiation can become an automated procedure, which uses

algorithms to d ri v e the negotiation p r o c e s s . 280 Therefore,

negotiation in its online manifestation comes in two different

f o r m s ; t h a t o f a u t o m a t e d n e g o t i a t i o n (a l s o c a l l e d b l i n d - b i d d i n g

o r S i n g l e V a r i a b l e B l i n d - B i d d i n g P r o ce s s 281) a n d t h at o f a s s i s t ed

n e g o t i a t i o n ( a l s o ca l l e d f a c i l i t a t e d n e g o t i a t i o n ) . T h e c o m m o n

p o i n t i n b o t h f o r m s o f n e g o t i a t i o n i s t h a t n o p h ys i c a l t h i r d - p a r t y

person normally intervenes in the process. Other than that there

are significant differences.

A u t o m a t e d n e g o t i a t i o n d o e s n o t h i g h l y r e s e m b l e i t s A DR

e q u i v a l e n t . T h e n eg o t i a t i o n p r o c e s s i n v o l v e s t h e s u b m i s s i o n o f

o f f e r s ( b i d d i n g ) b y b o t h p a r t i e s f o r t h e p o t e n t i a l s et t l em e n t o f

t h e d i s p u t e . T h e s e o f f e r s a r e n o t d i s c l o s e d t o t h e o t h e r p a r t y;

h e n c e ‘ b l i n d ’ b i d d i n g . 282 T h e s e t t l e m e n t p r o p o s al s a r e i n t h e

form of monetary figures and the parties can usually submit up

to three offers. A computer compares the settlement offers, and

c a l c u l a t e s t h e s p r ea d b e t w e e n t h e m , e i t h e r i n t h e f o r m o f a

p e r c e n t a g e o r o f a n a m o u n t o f m o n e y. If t h e o f f e r s a r e w i t h i n
280
RULE Colin, op. cit., p. 56.
281
SCHMITZ J. Amy, ‘Drive-thru’ Arbitration in the Digital Age: Empowering Consumers
through Binding ODR, Baylor Law Review, vol. 62, 2010, pp. 13, 14.
282
“Offers and demands remain confidential, so as to not prejudice future negotiations”. See
PONTE M. Lucille and CAVENAGH D. Thomas, CyberJustice: online dispute resolution (ODR)
for E-commerce, (Pearson/Prentice Hall), 2005, p. 44.

178
c e r t a i n l i m i t s ( u s u al l y f r o m 3 0 t o 5 p e r c e n t ) , t h e s o f t w a r e s e t s

t h e s e t t l em e n t a t m e a n v a l u e ; i f t h ey a r e n o t t h e p a r t i e s a r e

asked to enter a new settlement proposal until the number of

rounds or the time-limit has expired. The simplicity of the

p r o c e s s c a n b e i l l u s t r a t e d wi t h a s i m p l e h yp o t h e t i c a l . F o r

instance, if the settlement range is 20% and one party offers

eighty and the other a hundred, the dispute will be automaticall y

s e t t l e d f o r n i n e t y. 283 T h e f a c t t h a t t h e p r o c e s s i s d r i v e n b y

software and no human third party is directly involved, makes

the process p ar t i c u l a r l y cost-effective and r em o v e s

considerations of bias.

It is a p a r t i c u l ar l y successful process designed to

determine the economic settlement for claims in which the facts

a r e n o t c h a l l e n g e d , s u c h a s wi t h i n s u r a n c e c o m p e n s a t i o n s a n d

commercial activities, since it splits the difference when the

a m o u n t s a r e c l o s e . It c a n a l s o e f f e c t i v e l y b e u s e d i n t h o s e c a s e s

“where initially a number of issues are at stage, but after the use

o f m e d i a t i o n f o r ex a m p l e , t h e o n l y r e m a i n i n g i s s u e i n d i s p u t e i s

t h e a g r e e m e n t r e l a t i n g t o a n a m o u n t o f m o n e y” . 284 T h e r e a r e

minor concerns ab o u t the a d v a n t ag e s that repeat users,

f a m i l i a r i z e d wi t h t h e p r o c e s s m a y h a v e c o m p a r e d t o o n e - t i m e

283
SCHULTZ Thomas, The Roles of Dispute Settlement and ODR, op. cit., p. 138.
284
KATCH Ethan & RIFKIN Janet, op. cit., p. 62.

179
u s e r s a n d a b o u t t h e f a i l u r e t o p r o v i d e t r a d e - o f f s 285 w h i c h o f t en

m a y r e s u l t t o s u b o p t i m a l s e t t l e m e n t s . 286

However, currently automated negotiation is quite

successful and is offered by several providers such as

“ C yb e r S e t t l e ” . 287 “ C yb e r S e t t l e ” h a s b e e n o n e t h e fi r s t p r o v i d e rs

using automated negotiation for the resolution of financial

d i s p u t es , w i t h m o s t c o m m o n a m o n g s t t h e m i n s u r a n c e d i s p u t e s .

The claimant accesses the provider and initiates the dispute

r e s o l u t i o n p r o c e s s fr o m a p r i v a t e a n d s e c u r e a c c o u n t b y e n t e r i n g

three different amounts (bids) as proposals for the resolution of

t h e d i s p u t e . T h e OD R p r o v i d e r t h e n c o n t a c t s t h e o t h e r p ar t y w h o

i s a s k e d t o a l s o t o e n t e r t h r e e b i d s . Th e s o f t w a r e c o m p a re s t h e

p r o p o s e d a m o u n t s a n d c a l c u l a t e s t h e d i s t a n c e b e t w e e n t h e m . If

the difference between any of the amounts proposed by the

disputants does not exceed a percentage of 30% or the amount of

5 , 0 0 0 $ , t h e c l a i m i s s e t t l e d f o r t h e m e a n a m o u n t , an d t h e

provider notifies the parties. However, if the difference is

g r e a t e r a n d t h e r e i s n o s e t t l e m e n t , e a c h p a r t y’ s b i d s r e m a i n

c o n f i d e n t i a l . “ If a c a s e f a i l s t o s e t t l e , t h e r e i s n o f e e c h a r g e d t o

e i t h e r p a r t y. If a c a s e s e t t l es f o r $ 5 , 0 0 0 o r l e s s , t h e f e e i s $ 1 0 0

f o r e a c h p a r t y. If a c a s e s e t t l e s f o r b e t w e e n $ 5 , 0 0 0 a n d $ 1 0 ,

285
WEISS Russell, Some Economic Musings on Cybersettle, University of Toledo Law Review,
vol.38, 2006, p. 89.
286
DEFFAINS Bruno & GABUTHY Yannick, Efficiency of Online Dispute Resolution: A Case
of Study, Communications &Strategies, No. 60, 4th Q., 2005, p. 205.
287
For more information visit www.cybersettle.com

180
0 0 0 , t h e f e e i s $ 1 5 0 f o r e a c h p a r t y. I f a c a s e s e t t l e s f o r m o r e

t h a n $ 1 0 , 0 0 0 , t h e f e e i s $ 2 0 0 f o r e a c h p a r t y” . 288 A n o t h er

e x a m p l e i s EC O D IR ’ s n e g o t i a t i o n s o ft w a r e o f f e r i n g a d yn a m i c

t a b l e o f “ b i d s a n d co u n t e r b i d s d e s i g n e d t o l e a d t o a g r e e m e n t s a s

q u i c k l y a s p o s s i b l e ” . 289 F u r t h e r m o r e , o t h e r O D R p r o v i d e r s w i t h

s i m i l a r s e r v i c e s a r e t h e “ M e d i a t i o n R o o m ” a n d “S m a r t S e t t l e

O n e ” . 290 T h e m a i n a d v a n t a g e o f a u t o m a t e d n e g o t i a t i o n i s t h a t i t

h a s t h e p o t e n t i a l o f s a v i n g m o n e y a n d ye a r s o f l i t i g a t i o n t o b o t h

parties. The main disadvantage is that it is technically restricted

t o p u r e l y m o n e t a r y d i s p u t e s ex c l u d i n g n o n - m o n e t a r y i s s u e s .

“The fees for automated negotiation are usually determined on

the basis of the settlement amount and split between the two

p a r t i e s ; f o r a s e t t l em e n t a m o u n t b el o w 2 0 . 0 0 0 U S D , t h e fe e i s

t yp i c a l l y a r o u n d 1 0 0 t o 2 0 0 U S D ” . 291

Blind bidding negotiation besides resolving purely

monetary issues, might also be used before beginning a lengthier

process as well as a valuable tool that can be added at any phase

o f a d i s p u t e r e s o l u t i o n p r o c e s s . H o w ev e r , m o s t o f a l l i t r a i s e s

t h e q u e s t i o n o f w h a t e l s e a n e t w o r k - co n n e c t e d c o m p u t e r c a n d o

t o f a c i l i t a t e t h e r es o l u t i o n o f a d i s p u t e , s i n c e c o m p u t e r s , “ a r e

288
MANEVY Isabelle, op. cit., p. 12.
289
BENYEKHLEF Karim and GELINAS Fabien, op, cit., p. 45.
290
CORTES Pablo, op. cit., p. 65.
291
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 5.

181
m u c h m o r e t h a n c a l c u l a t o r s , a n d s ys t e m s c a n b e b u i l t t o p r o c e s s

a n d e v a l u a t e q u a l i t at i v e i n f o rm a t i o n ” . 292

A s s i s t e d n e g o t i a t i o n i s t h e f o r m o n e m i g h t f i n d m o re

familiar since basically it is the corresponding ADR method

assisted by online facilities. The parties negotiate to resolve

their dispute and in the process they use one or more of ODR’s

IC T t o o l s , s u c h a s t h e i n t e r n e t i n g e n e r a l a n d m o r e s p e c i f i c a l l y

e - m a i l , c h a t o r a u d i o a n d v i d e o c o n fe r e n c e . T h e p r o c e d u r e i s

designed to i m p ro v e parties’ communications through the

a s s i s t a n c e o f s o f t wa r e e n h a n c i n g t h e a d v a n t a g e s o f t h e p r o c e s s

s u c h a s i n f o r m a l i t y, s i m p l i c i t y a n d u s e r f r i e n d l i n e s s . 293 The

provider assisting the parties may provide some additional

s e r v i c e s s u c h a s i d e n t i f yi n g a n d a s s e s s i n g s t a n d a r d s o l u t i o n s ,

w r i t i n g a g r e e m e n t s o r s t o ri n g i n f o r m at i o n . A s s i s t e d n e g o t i a t i o n

i s a h i g h l y s u c c e s s f u l O D R m e t h o d wi t h h i g h l y u s e d p r o v i d e r s

s u c h a s “ S q u a r e T r a d e ” a n d “ S m a r t S e t t l e ” . 294 “ T h e f e e r a n g e i s

n o r m a l l y b e t w e e n 5 0 a n d 3 0 0 US D p e r p a r t y a n d p e r h o u r ” . 295

292
MOFFITT Michael & BORDONE Robert, op. cit., p. 431.
293
CORTES Pablo, op. cit., p. 66.
294
“SmartSettle, originally called OneAccord, is much more sophisticated negotiation software
than the 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, composed of quantitative or
qualitative issues, of short or long duration, and involving interdependent factors and issues”.
WANG Fangfei Faye, op. cit., p. 57. For more information see www.smartsettle.com
295
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 4.

182
B. Online Mediation

O n l i n e m e d i a t i o n i s t h e o n l i n e e q u i v a l e n t o f t r a d i t i o n al

mediation with the only difference in the fact that the parties

communicate online, often over sophisticated communication

platforms. On l i n e mediation is a non-binding e x t r a j u d i c i al

dispute resolution method in which the parties agree to use the

o p p o r t u n i t i e s p r o v i d e d b y t h e In t e r n e t a n d c o n d u c t t h e p r o c e d u r e

o n l i n e b y r e p l a c i n g t h e p h ys i c a l m e e t i n g s o f t h e p a r t i es w i t h

c o m m u n i c a t i o n b a s e d o n e l e c t r o n i c t r an s m i s s i o n s . 296 U s i n g t h e i r

p e r s o n a l c o m p u t e r s , p a r t i e s c a n c o m m u n i c a t e w i t h e a ch o t h e r

f r o m t h e f a r c o r n e r s o f t h e e a r t h . T e c h n o l o g y p l a ys a n i m p o r t a n t

r o l e b e c a u s e c o m m u n i c a t i o n i s c e n t r a l t o m e d i a t i o n i n o rd e r t o

reduce tensions and reach a voluntary settlement agreement.

B e c a u s e m e d i a t i o n i s l e s s f o rm a l , i t i s h i g h l y s u i t a b l e t o

t h e o n l i n e e n v i r o n m e n t a n d t h e i n t e r n e t o f f e r s p a r t i c i p an t s an

enhanced role in resolving disputes. T h e o n l i n e m ed i a t i o n

process is usually initiated by one of the parties, who visits the

website of the online mediator or mediation organization and

f i l e s a d i s p u t e . T h e p r o v i d e r t h e n c o n t ac t s t h e o t h e r p a r t y t o f i n d

out whether they are willing to participate in an online

296
United Nations Conference on Trade and Development, Dispute Settlement , International
Commercial Arbitration, Electronic Arbitration, (New York and Geneva: United Nations, 2003)
p. 4.

183
m e d i a t i o n p r o c e d u r e . If s o , a m e d i a t o r i s c h o s e n o r a s s i g n e d a n d

the process begins. For instance, “Online Resolution.com” is an

American company that was formed by the combination of the

“Mediation In f o r m a t i o n and Resource Center” and

“ M e d i a t e . c o m ” a n d u s e s o n l i n e m e d i at i o n a n d a r b i t r a t i o n f o r t h e

resolution of “business-to-business” (B2B) and “business-to-

c o n s u m e r ” ( B 2 C ) c o m m e r c i a l d i s p u t e s . In o r d e r t o i n i t i at e , f o r

i n s t a n c e , t h e m e d i at i o n p r o c e d u r e o n e o f t h e p a r t i e s m u s t co n t a c t

the ODR provider and register the dispute. The ODR provider

t h e n c o n t a c t s t h e o t h e r p a r t y, t h e a g r e e m e n t o f w h o i n i t i a t e s t h e

m e d i a t i o n p r o c e d u re . T h e m e d i a t o r s re s o l v i n g t h e d i s p u t e a r e

e x p e r i e n c e d p r a c t i t i o n e r s w i t h o n l i n e t ra i n i n g a n d t h e y a s s i s t t h e

parties to communicate more effectively and come to an

a g r e e m e n t . “ T h e f e e s r a n g e f r o m $ 5 0 p e r h o u r p e r p ar t y f o r

d i s p u t es u n d e r $ 1 0 , 0 0 0 t o $ 1 0 0 p e r h o u r p e r p a r t y f o r d i s p u t e s

o v e r $ 5 0 , 0 0 0 ” . 297

Although the form of communication is adapted to each

individual case and s i t u at i o n ; most c o m m o n l y, the

communication takes place via e-mail, instant messaging, or

audio and video conferencing managed through intermediaries,

f o r m i n g a p l a c e o f d i g i t a l c o m m u n i c at i o n , 298 a v i r t u a l r o o m i n

t h e c yb e r w o r l d . O n l y t h e p a r t i c i p a n t s i n t h e m e d i a t i o n p r o c e s s

297
MANEVY Isabelle, op. cit., p. 14.
298
ROSENTHAL David, Internet. Schöne, neue Welt? Der Report über die unsichtbaren Risiken,
(Orell Füssli, 2nd Ed.), 1999, p. 21.

184
m a y b e p r e s e n t i n s u c h a v i r t u a l r o o m , a n d t h e i r ex c l u s i v e a c c e s s

c a n b e e n s u r e d b y t h e u s e o f s p e c i a l c o d e s o r p a s s w o r d s . 299 T h e

m e d i a t o r c a n i n t er a c t e x c l u s i v e l y w i t h o n e o f t h e p a r t i e s ,

without disrupting the course of the mediation process, in a

separate virtual conference room, whose access is protected by

password, while the other parties are waiting in another virtual

r o o m . T h i s w a y i t i s e v e n p o s s i b l e fo r t h e m e d i a t o r t o b e i n

d i f f e r e n t “ r o o m s ” s i m u l t a n e o u s l y, s o m e t h i n g w h i c h w o u l d b e

i m p o s s i b l e i n r e a l -w o r l d , o f f l i n e m e d i a t i o n . 300

There are concerns that mediation as a voluntary and

i n f o r m a l p r o c e s s p re s e n t s g r e a t e r r i s k s o f a b u s e o n t h e i n t e r n e t

b e c a u s e t h e p a r t i e s a r e n o t i n p h ys i c a l p r o x i m i t y. C e r t a i n l y t h e

i m p e r s o n a l p r o c e s s a n d t h e l a c k o f p h ys i c a l p r e s e n c e o f t h e

parties to the dispute and the mediator can work against the

development of t ru s t in online communication because of

p o s s i b l e g a p s i n c o m m u n i c a t i o n a n d i n c r e a s e d u n c e r t a i n t y, 301

“giving the impression that the online environment does not

299
BIUKOVIC Ljiljana, International commercial arbitration in cyberspace: recent developments,
North-western Journal of International Law & Business, vol. 22, 2002, pp. 319, 332.
300
“It is possible to segment the online platform into spaces, such that Space A is only accessible
to one party and the mediator, Space B is only accessible to the other party and the mediator, and
Space C is accessible to both parties and the mediator. Spaces A and B could be used for virtual
private caucuses, and Space C for public discussions. In this way, the platform can be used to
replicate the traditional three room procedure by the use of virtual meetings on an online platform.
The mediator and the parties in an online mediation can be simultaneously in Spaces C and A/B,
thus being in a joint meeting and caucus at the same time”. See. HÖRNLE Julia, op. cit., pp. 79,
80.
301
D' ZURILLA T. William, Alternative Dispute Resolution: ADR Hits the Internet, Louisiana
Bar Journal, vol. 45, 1995, p. 352.

185
s e e m c o n d u c i v e t o s u c c e s s f u l m e d i a t i o n ” . 302 A l s o t h e r e a r e

concerns about the appropriateness of o n l i n e m e d i at i o n in

r e s o l v i n g c e r t a i n k i n d s o f d i s p u t e s . Le g a l l y, m e d i a t i o n ca n b e

u s e d t o r e s o l v e an y d i s p u t e t h a t f al l s u n d e r t h e c o n t r a c t u a l

freedom of the parties. However, “as electronic communication

b r i n g s a l o n g d e p e r s o n a l i z a t i o n , i t p r e s en t s a p a r t i c u l a r c h a l l e n g e

to emotionally charged disputes, such as family law issues or

w h e n p h ys i c a l h a r m h a s o c c u r r e d ” . 303 T h i s i s n o t t h e c a s e f o r

commercial disputes, the resolution of which has spurred

n u m e r o u s o n l i n e m e d i a t i o n i n i t i a t i v e s i n t o ex i s t e n c e .

Online mediation has numerous advantages with foremost

t h e a b i l i t y t o s u b s t i t u t e p h ys i c a l m e e t i n g s w i t h v i r t u a l m ee t i n g s

which obviates the need to travel and the ability to conduct the

m e d i a t i o n p r o c e d u r e a s yn c h r o n o u s l y w h i c h a d s t o c o n v e n i e n c e

a n d i n c r e a s e s t h e c h a n c e s o f s u c c e s s . 304 A n o t h e r m a i n a d v an t a g e

o f o n l i n e m e d i at i o n i s t h e u s e o f f l ex i b l e p r o c e d u r e s w h i c h a l l o w

for a greater control of the outcome and encourage participation.

It a i m s n o t o n l y t o r e s o l v e t h e d i s p u t e , b u t t h e d yn a m i c p r o c e s s

c r e a t e s n e w v a l u e s a n d p e r s p e c t i v e s s er v i n g a s a f o r u m o f i d e a s

b y e n h a n c i n g t h e i n f o r m a t i o n ex c h a n g e a n d t h e c o o p e r a t i o n

between the p a r t i e s . 305 O n l i n e mediation can achieve w h at

302
EISEN Joel, op. cit., p. 1305.
303
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 5.
304
HÖRNLE Julia, op. cit., p. 80.
305
E-mediation, available at
http://www.judgelink.org/a2j/system.design/Resolution/emediation.cfm

186
l i t i g a t i o n o r f o r t h at m a t t e r t r a d i t i o n al A D R c a n n o t g u a r a n t e e t o

t h e s a m e e x t e n d ; 306 t h e v o l u n t a r y c h a r a c t e r a n d t h e i n f o r m al

n a t u r e o f t h e p r o c e s s p r o v i d e g r e a t f l e x i b i l i t y, f a s t e r d e c i s i o n s ,

s i m p l i c i t y, u s e r - f r i e n d l i n e s s a n d c o n s e q u e n t l y t h e m e d i a t o r ’ s

a b i l i t y t o a d a p t p a r t s o f t h e p r o c e s s a n d a d d r e s s s p e c i a l n e e d s . 307

P a r t i c i p a n t s i n e - m e d i a t i o n n e e d n o t re s p o n d i m m e d i a t e l y a s i n

face-to-face conversations, so they can look more closely at the

proposals and the data, developing options, saving time and

reducing operating costs. The cost of an online mediation

process may depend on the provider, the nature of the dispute,

t h e c o m p l ex i t y o f t h e m a t t e r i n h a n d a n d t h e t i m e r e q u i r e d f o r

the resolution. However, in general the cost of an online

m e d i a t i o n w i l l c e r t a i n l y b e l e s s t h an t h a t o f a t r a d i t i o n a l

mediation. The substitution of the physical meetings by virtual

m e e t i n g s s p a r e s t h e p a r t i e s o f c o s t s r e l a t i n g t o t r a v e l ex p e n s e s

a n d s e c u r i n g v e n u e s t o h o l d t h e s e m e e t i n g s . 308 “ F e e s f o r o n l i n e

m e d i a t i o n a r e u s u al l y c o m p u t e d o n an h o u r l y b a s i s , a n d r a n g e

f r o m 5 0 t o 2 5 0 US D p e r p a r t y a n d p e r h o u r ” . 309

However, in terms of acceptance by citizens and the legal

community there is still reluctance and potentially a long wa y

306
BATES M. Donna, A consumer’s dream or Pandora’s Box: Is arbitration a viable option for
cross-border consumer disputes?, Fordham International Law Journal, vol. 27, 2004, pp. 823,
824.
307
LIDE E. Casey, ADR and Cyberspace: The Role of Alternative Dispute Resolution in Online
Commerce, Intellectual Property and Defamation, Ohio State Journal on Dispute Resolution, vol.
12, 1996, p. 208.
308
MOEVES S. Amy and MOEVES C. Scott, op. cit., pp. 862- 864.
309
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 5.

187
ahead. The number of ODR providers offering online mediation

d u r i n g t h e p a s t ye a r s i s r e l at i v e l y h i g h i n c l u d i n g p r o v i d e rs s u c h

as “BBBOnline”, the “C a m e r a Arbitrale di Milano”,

“SmartSettle”, “SquareTrade”, “Web Trader”, “WebAssured”,

“ W e b M e d i a t e ” a n d “ In t e r n e t N e u t r a l ” . 310

C. Online Arbitration

Online arbitration is the online equivalent to traditional

arbitration, where a third neutral party chosen by the parties to a

dispute, or nominated by the ODR provider chosen by the

parties, resolves the dispute by issuing a decision, after taking

into account the parties’ arguments and the relevant evidence.

A g a i n , t h e m a i n d i f f e r e n c e l a ys o n t h e w a y o f c o m m u n i c a t i o n .

ODR introduces the t e c h n o l o g y, which transforms the

communication between the parties influencing the entire

p r o c e s s o f a r b i t r a t i o n . F o r t h e i r c o m m u n i c a t i o n t h e p a r t i es u s e

v a r i o u s IC T t o o l s , s u c h a s e - m a i l s , a u d i o a n d v i d e o c o n f e r e n c e s .

310
For Instance “Internet Neutral allows parties to choose from several online mediation
alternatives, including e-mail, instant messaging, chat conference rooms and video conferencing.
Internet Neutral uses conferencing software that enables the mediator to communicate with the
parties in designated channels or ‘rooms’ accessed securely with passwords. During the mediation,
the software enables the parties to communicate through two channels: one for a private dialogue
between one party and the mediator, the other for open dialogue with all participants, including the
mediator”. See WANG Fangfei Faye, op. cit., p. 57.

188
O D R c o m b i n e s t h e e f f e c t i v e n e s s o f t ra d i t i o n al a r b i t r a t i o n w i t h

t h e i n n o v a t i v e p o w e r o f t h e In t e r n e t ; “ k n o w n t e r m s i n c l u d e

c yb e r - a r b i t r a t i o n , c yb i t r a t i o n , c yb e r s p a c e arbitration, virtual

arbitration, electronic arbitration, arbitration using online

t e c h n i q u e s ” . 311

Online arbitration is usually been distinguished to

arbitration for the resolution of disputes that arise on the web,

a n d a r b i t r a t i o n t o re s o l v e o f f l i n e d i s p u t e s . T h i s d i s t i n c t i o n t e n d s

to limit the scope of online arbitration to disputes arising on the

i n t e r n e t . B u t o n l i n e a r b i t r a t i o n d o e s n o t d e p e n d o n t h e o ri g i n o f

t h e d i s p u t e ; o f f l i n e d i s p u t es a r i s i n g f r o m r e a l w o r l d t r a n s ac t i o n s

m a y w e l l b e s u b j ec t e d t o o n l i n e a r b i t r a t i o n a n d r e s o l v e d i n

a c c o r d a n c e w i t h t h e f r e e w i l l o f t h e p a rt i e s u s i n g t h e d i v e rs e a n d

i n n o v a t i v e t e c h n o l o g i e s t h a t t h e i n t e rn e t h a s t o o f f e r . 312 T h u s ,

o n l i n e a r b i t r at i o n i s p e r c e i v e d i n t h e b r o a d e r s e n s e , a s a n y

arbitration proceedings “conducted partly or wholly by

e l e c t r o n i c m e a n s a s s o c i a t e d w i t h t h e d e v e l o p m e n t o f i n t e rn e t ”. 313

It is most suitable for disputes ar i s i n g out of electronic

t r a n s a c t i o n s , b e c a u s e t h e p a r t i e s w h o u s e t h e i n t e r n et a r e

familiar with it and its implementation will have fewer

311
HERRMANN Gerold, Some legal e-flections on online arbitration (‘cybitration’), in Law of
international business and dispute settlement in the 21st century, (Bredow eds. Cologne), 2001, p.
267.
312
MOREK Rafal, op. cit., p. 45.
313
CALLIESS Gralf-Peter, op. cit., p. 450.

189
d i s a d v a n t a g e s a n d m o r e a d v a n t a g e s . 314 F o r i n s t a n c e , i t c a n b e

used to resolve disputes concerning the exchange of material

goods and to resolve disputes arising from online transactions

f o r i n t a n g i b l e e l e c t ro n i c g o o d s . 315

O n l i n e a r b i t r a t i o n i s a n a u t o n o m o u s e x t r a j u d i c i al d i s p u t e

resolution mechanism, which has as its essential feature the

p u r s u i t o f a p r i v a t e s o l u t i o n b y a t h i r d p a r t y, h a s i t s f o u n d a t i o n

on the autonomous will of the parties, is governed by a-national

rules and standard international trade practices, uses innovative

e l e c t r o n i c m e d i a a n d h a s i t s o w n a r e a t r a n s n a t i o n al a n d v i r t u a l .

W h a t o n e r e a l i z es e a s i l y i n a n o n l i n e a r b i t r a t i o n p r o c e d u r e i s t h e

a b s e n c e o f a m a t er i a l v e n u e f o r t h e p r o c e e d i n g s . T r a d i t i o n al

f a c e - t o - f a c e h e a r i n g s a r e r e p l a c e d b y m e a n s o f v i s u al d i s t a n c e

communication, such as Web communication and video

conferencing, and witnesses, parties and arbitrators do not need

t o t r a v e l , t h u s r ed u c i n g t i m e w a s t e d a n d c o s t . 316 In o n l i n e

arbitration, all the key phases, like the arbitration agreement,

t h e a p p o i n t m e n t o f a r b i t r a t o r s , t h e a rb i t r a l p r o c e e d i n g s a n d t h e

award, make use of the internet. The traditional documents and

the evidence in general can easily be replaced by electronic files

transferred online, and the distance that usually separates the

parties possibly located at both ends of the planet, disappears


314
HEISKANEN Veijo, Dispute Resolution in International Electronic Commerce, Journal
of International Arbitration, vol. 16, 1999, p. 29.
315
KALOW M. Gwenn, From the Internet to court, Fordham Law Review, vol. 65, 1997, p. 2214.
316
HÖRNLE Julia, op. cit., p. 84.

190
i n s t a n t a n e o u s l y i n c yb e r s p a c e ; t h e p h ys i c a l s e p a r a t i o n b e c o m e s

insignificant in online arbitration.

A r b i t r a t i o n i s m o s t s u i t a b l e f o r t h e o n l i n e e n v i r o n m e n t . 317

Arbitration is more suitable to be performed online than

mediation “because third neutral parties do not have to engage

w i t h t h e p a r t i es i n s u c h a n i n t e n s e m a n n e r a n d c o m m u n i c a t i o n

p r o c e s s e s a r e l e s s c o m p l ex t h a n i n o n l i n e m e d i a t i o n ” . 318 O n l i n e

arbitration is much simpler and documents only arbitration can

take place without the benefit of a single face-to-face

c o n v e r s a t i o n b e t w ee n t h e n e u t r a l a n d t h e p a r t i e s . 319 B a s e d o n t h e

o u t c o m e o f t h e p ro c e s s , o n l i n e a r b i t r a t i o n i s d i s t i n g u i s h e d t o

b i n d i n g a n d n o n - b i n d i n g o n l i n e a r b i t ra t i o n . A s f a r a s t h e l a t t e r

goes, the are no additional issues since any non-binding ODR

p r o c e d u r e i s s a n c t i o n e d b y t h e p r i n c i p l e o f p a r t y a u t o n o m y. O n

the other hand, in the case of binding online arbitration there are

some issues regarding the validity of online arbitration

a g r e e m e n t s a n d o n l i n e a r b i t r a l a w a r d s , e s p e c i a l l y, w i t h i n t h e

m e a n i n g o f t h e “ N e w Y o r k C o n v e n t i o n ” ( N Y C ) . 320

317
LODDER R. Arno and VREESWIJK Gerard, Online arbitration services at a turning point,
ICC International Court of Arbitration Bulletin, 2004, pp. 21-28.
318
BERNSTEIN Ronald, J. TACKABERRY John, and MARRIOTT L. Arthur, Handbook of
Arbitration Practice (Sweet & Maxwell 3rd Ed.), 1998, p. 5.
319
RULE Colin, op. cit., p. 44.
320
“The NYC was adopted at a time when the drafters could not foresee that arbitration
agreements and arbitral awards could take other than a physical form”. See BETANCOURT C.
Julia and ZLATANSKA Elina, op. cit., pp. 262, 263.

191
A l t h o u g h c u r r e n t l y t r e a t e d w i t h s o m e c a u t i o n , i t s h o ws

s i g n i f i c a n t g r o w t h p o t e n t i al a n d c o m p a r a t i v e a d v a n t a g e s v e r s u s

c o n v e n t i o n a l a r b i t ra t i o n . T o d a y o n l i n e a r b i t r a t i o n i s b ec o m i n g

more popular, fully private, can be binding or non-binding,

creates a climate of cooperation, confidentiality and

c o m m u n i c a t i o n b e t w e e n t h e p a r t i e s an d i s a n i d e a l m e ch a n i s m

f o r r e s o l v i n g d i s p u t e s . O n l i n e a r b i t ra t i o n i s b e c o m i n g m o r e

d e s i r a b l e b e c a u s e i t r e p r e s e n t s s o m e a d d i t i o n a l b e n e f i t s fo r t h e

parties to the dispute, such as speed, a c c e s s i b i l i t y, cost

e f f e c t i v e n e s s , f l ex i b i l i t y a n d r e l o c a t i o n . 321 H o w e v e r , d e s p i t e t h e

obvious advantages of online arbitration and the existence of

s e v e r a l o n l i n e p r o v i d e r s , a r b i t r a t i o n i s n o t ye t a v e r y p o p u l a r

O D R m e t h o d , e s p ec i a l l y a t a n i n t e r n a t i o n a l l e v e l . S u c c e s s f u l

O D R i n i t i a t i v e s a re r a r e a n d t h e n u m b e r o f a r b i t r a t i o n c a s e s

o n l i n e i s q u i t e s m a l l , ex c e p t i n s o m e A s i a n c o u n t r i e s s u c h a s

J a p a n a n d m o r e r e c e n t l y i n N o r t h A m e r i c a . In B 2 C d i s p u t e s ,

consumer groups have traditionally disfavoured the use of

arbitration for fear that arbitration would impede consumers

from enforcing their full procedural and substantive rights.

Presently consumer groups are taking a more supportive

a p p r o a c h g i v e n t h e e x i s t i n g d i f f i c u l t i e s i n a p p l yi n g d o m e s t i c

laws to cross-border disputes, and the increase of consumer

arbitration services managed by public authorities.

321
KAUFMANN-KOHLER Gabrielle and SCHULTZ Thomas, op. cit., p. 68.

192
Online arbitration is ex p a n d i n g d a i l y, particularly in

consumer disputes related to cross border trade and this is not

j u s t e v i d e n c e o f i t s s u c c e s s a n d ri s i n g p o p u l a r i t y, b u t a l s o

indicates the change in attitudes towards the existing legal

r e a l i t y. 322 O n l i n e a r b i t r a t i o n h a s b e e n l i s t e d a s a l e g a l c o n c e p t

and procedure in Article 17 of “Directive 2000/31/EC”,

a c c o r d i n g t o w h i c h “ M e m b e r S t a t e s s h al l e n s u r e t h a t i n c as e s o f

disagreement between a provider and a recipient of the service

i n f o r m a t i o n s o c i e t y, t h e i r l e g i s l a t i o n d o e s n o t h a m p e r t h e u s e o f

means existing under national law, for the extra-judicial dispute

s e t t l e m e n t , i n c l u d i n g a p p r o p r i a t e e l e c t r o n i c m e a n s ” . 323

C u r r e n t l y, s e v e r a l t r a d i t i o n a l o f f l i n e i n s t i t u t i o n s , s u c h a s

t h e “ C h a r t e r e d In s t i t u t e o f A r b i t r a t i o n ” a n d t h e “ In t e r n a t i o n a l

Court of Arbitration” in the EU, the “American Arbitration

Association” and the “Better Business Bureau” in the US, have

i n t r o d u c e d O DR t ec h n o l o g y. 324 O n l i n e a r b i t r a t i o n a t t r a c t s t h e

attention of the legal community more and more especially the

l a s t t w o d e c a d e s . 325 T h e f i r s t e x p e r i e n c e o f a f o r m a l d i s p u t e

resolution online was on 8 May 1996 when a composition of the

322
DONAHEY Scott, Dispute resolution in cyberspace, Journal of International Arbitration, vol.
15, 1998, p. 127.
323
Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain
legal aspects of information society services, in particular electronic commerce, in the Internal
Market (Directive on electronic commerce), Article 17.
324
DAVIS G. Benjamin, Symposium Enhancing Worldwide Understanding through Online
Dispute Resolution: Walking Along in the Mission, University of Toledo Law review, vol. 38,
2006, p. 2.
325
ARSIC Jasna, op. cit., p. 209.

193
“ V i r t u a l M a g i s t r a t e” 326 i s s u e d a d e c i s i o n i n a d i s p u t e , a f t e r t h e

c o m m u n i c a t i o n w as d o n e ex c l u s i v e l y b y e l e c t r o n i c m e a n s . 327

Currently there are several ODR providers which offer online

arbitration; e x am p l e s include “W e b - d i s p u t e ” 328 and “e-

R e s o l u t i o n ” . 329 “ F e e s f o r o n l i n e a r b i t r a t i o n a r e u s u a l l y t h e s a m e

as for mediation: they are in most cases charged on an hourly

b a s i s , a n d r a n g e f r o m 5 0 t o 2 5 0 US D p e r p a r t y a n d p e r h o u r ” . 330

The time r e q u i r ed for conducting the online arbitration

procedure may vary depending on the case, but usually it takes

b e t w e e n 4 h o u r s a n d 6 0 d a ys .

Any problems related to the way online arbitration

o p e r a t e s , s u c h a s c o n f i d e n t i a l i t y, t r a n s p a r e n c y a n d e f f i c i e n c y a r e

followed by technological development and enhanced data

s e c u r i t y; this thesis argues that the continuous and rapid

326
See infra at ‘ODR in action’.
327
KAUFMANN-KOHLER Gabrielle and SCHULTZ Thomas, op. cit., p. 27
328
“Webdispute.com is an example of an online arbitration service provider. It is a US based
company that arbitrates online commercial disputes for business-to-business (B2B) and business-
to-consumers disputes (B2C). The consent of both parties is required, who need to mutually agree
on an arbitration forum and sign an “oath of participation”. Webdispute.com offers
“document/email” hearing as an option. Parties submit documents to the arbitrator and the other
party and comment on the evidence submitted by both sides via email to the arbitrator. The
arbitrator notifies the parties of his decision within twenty business days. Webdispute.com costs
from $ 100 to $ 600 for online arbitration”. See MANEVY Isabelle, op. cit., p. 15
329
“E-Resolution is a virtual tribunal to settle domain name disputes. The ICANN (Internet
Corporation for Assignment Names and Numbers) has accredited e-Resolution to settle domain
name disputes online in accordance with the ICANN Uniform Domain-Name- Dispute-Resolution
Policy. A domain name complaint can be submitted online by means of a secure web based
complaints form or by e-mail. The arbitrator deals with the parties’ claims in conformity with
ICANN’s Policy and ICANN‘s Rules and e-Resolution’s own supplemental rules. After both
parties have had the opportunity to make their case, the arbitrator will issue a legally binding
decision. Anyone registering a domain name is bound by the ICANN Rules”. See HEUVEL V. D.
Esther, op. cit., pp. 9, 10.
330
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 6

194
d e v e l o p m e n t o f t e ch n o l o g y 331 w i l l n o t o n l y c o v e r a n y d e f e c t s

arising in online arbitration proceedings, but will more than that

equip it with endless possibilities of means and very soon turn

online arbitration to the primary and dominant form of dispute

resolution; a truly alternative arbitration compared to

t r a d i t i o n a l a r b i t r a t i o n . 332 A r b i t r a t i o n h a s u n i q u e a d v a n t a g e s t h at

m a k e i t i n v a l u a b l e a n d n e c e s s a r y f o r a n y O D R s ys t e m . O n l i n e

a r b i t r a t i o n , t h e k ey s t a g e s o f t h e o n l i n e a r b i t r a t i o n p r o c e d u r e

a n d t h e c o r r e s p o n d i n g i s s u e s a s w el l a s t h e o u t c o m e o f t h e

procedure are examined in the second part of the thesis where

online arbitration is presented as an invaluable part of any

e f f e c t i v e a n d f a i r O D R s ys t e m . 333

331
HÖRNLE Julia, Online Dispute Resolution: the Emperor's New Clothes, op. cit., pp. 29-59.
332
YU Hong-lin and NASIR Motassem, Can online arbitration exist within the traditional
arbitration framework? Journal of International Arbitration, vol. 20, 2003, p. 455.
333
Se infra at ‘Arbitration as the final step of the ODR process’.

195
Chapter 2

ODR in action; Examples of ODR providers

The previous chapter examined dispute resolution and its

evolution into ODR as well as ODR as a concept in general. This

section supports the theory behind ODR wi t h real world

examples, from the first to current initiatives, offering a brief

a c c o u n t o f t h e a l s o b r i e f O D R h i s t o r y. T h i s w a y i t p r o v i d e s a

better understanding of ODR and how it operates as well as

a l l o w s i d e n t i f yi n g t h e s u c c e s s f u l i n i t i a t i v e s a n d t h e e l e m e n t s

t h a t l e d t o t h e i r s u cc e s s .

From 1995 to 1998, there was an unprecedented growth of

i n f o r m a l o n l i n e d i s p u t e r e s o l u t i o n m ec h a n i s m s w h i c h p ro v i d e d

the necessary recognition to realize that ODR was not only a

s u i t a b l e m e a n s t o re s o l v e d i s p u t e s , b u t a l s o a w h o l e n e w s e c t o r

o f i n d u s t r y. T h e r e c o r d b r e a k i n g i n c r e a s e o f d i s p u t e s a r i s i n g o u t

of online activities pointed the spotlight to the new possibilities

that ODR mechanisms could provide. The “National Center for


334
Automated In f o r m a t i o n Research” ( N C A IR ) sponsored a

conference on online dispute resolution in 1996, which in turn

334
“Professors Ethan Katsh and Janet Rifkin founded the National Center for Technology and
Dispute Resolution, which supports and sustains the development of information technology
applications, institutional resources, and theoretical and applied knowledge for better
understanding and managing conflict”. See BETANCOURT C. Julia and ZLATANSKA Elina, op.
cit., p. 257.

196
led to the funding of three experimental ODR projects. The

“Virtual Magistrate project”, the University of Massachusetts

“ O n l i n e O m b u d s Of f i c e ” a n d t h e p r o j e c t o f t h e U n i v e r s i t y o f

M a r yl a n d w e r e t h e p r e c u r s o r s o f O D R . 335 R e g a r d l e s s o f t h ei r

s u c c e s s t h o s e p r o j ec t s i l l u s t r a t e d t h a t re s o l v i n g d i s p u t e s o v e r t h e

internet was no longer science fiction but a realistic and viable

p o s s i b i l i t y. F u r t h e r m o r e , t h e v i a b i l i t y o f O D R i s e v i d e n t b y t h e

interest shown in this phenomenon by organizations such as the

“ H a g u e C o n f e r e n c e o n P r i v a t e In t e r n a t i o n a l La w ” , t h e “ W o r l d

In t e l l e c t u a l P r o p e r t y O r g a n i z a t i o n ” , a n d t h e “ E u r o p e a n U n i o n ” .

A c c o r d i n g t o P a b l o C o r t e s t h e e v o l u t i o n o f O D R c a n b e d i v i d ed

i n t o f o u r s e p a r a t e p h a s e s . T h e fi r s t o n e i s d e s c r i b e d a s t h e

h o b b yi s t p h a s e p r i o r t o 1 9 9 5 , w h e n o n l i n e d i s p u t e s w er e o n l y

limited and ODR mechanisms not really existing. The second

p h a s e w a s t h e ex p er i m e n t a l p h a s e f r o m 1 9 9 5 t o 1 9 9 8 t h a t g a v e

b i r t h t o t h e p r e c u r s o r s i n O D R . Th e t h i r d p h a s e wa s t h e

entrepreneurial phase from 1998 to 2002, when private

s t a k e h o l d e r s s a w OD R ’ s g r e a t p o t e n t i al i n d i s p u t e r e s o l u t i o n a n d

c r e a t e d m a n y s u c c e s s f u l p r i v a t e i n i t i a t i v e s s u c h a s EB a y’ s

S q u a r e T r a d e a n d C yb e r S e t l l e . F i n a l l y, t h e l a s t p h a s e t h a t i s

ongoing until today is the institutional phase, which describes an

era when ODR is seen as a viable and successful solution for

dispute resolution not only by private entities but also by public

335
Ibid., p. 256.

197
b o d i e s a n d t h i s r ea l i z a t i o n l e a d s t o n e w i n i t i at i v e s an d t h e

w i d e s p r e a d a d o p t i o n o f O D R p r o g r a m s . 336

S e c t i o n 1 : T h e Vi r t u a l M a g i s t r a t e Pr o j e c t ( V M P)

The “Virtual Magistrate” was one of the first ODR projects

launched in M a rc h 1996 and sponsored by academics

s p e c i a l i z i n g i n c yb e r l a w u n d e r t h e au s p i c e s o f t h e “ N a t i o n a l

Center for Automated In f o r m a t i o n R e s e a r c h ” ( N C A IR ) , the

“ C yb e r s p a c e La w I n s t i t u t e ” ( C LI) , t h e “ A m e r i c a n A r b i t r a t i o n

A s s o c i a t i o n ” ( A A A ) , a n d t h e “ V i l l a n o v a C e n t e r f o r In f o r m a t i o n

La w a n d P o l i c y” l o c a t e d i n V i l l a n o v a U n i v e r s i t y ( P h i l a d el p h i a ,

U S A ) . T h e V M P w a s a p i l o t p r o j e c t a n d i t s p r i n ci p a l g o a l w a s t o

demonstrate that online technology could be used to resolve

o n l i n e d i s p u t e s t h ro u g h o n l i n e a r b i t r a t i o n i n a q u i c k a n d c o s t -

e f f e c t i v e w a y. T h e V M P u s e d a s i t s m e t h o d o f r e s o l u t i o n

v o l u n t a r y, contractual online a r b i t r at i o n to resolve mainly

d i s p u t es b e t w e e n In t e r n e t S e r v i c e P r o v i d e r s ( IS P s ) a n d u s e r s . 337

The VMP heard cases arising s o l el y from In t e r n e t - r e l a t e d

336
CORTES Pablo, op. cit., pp. 55, 56.
337
“It was a voluntary procedure better described as a contractual arbitration that had some
binding effects but not the executory effects within the meaning of the legislation and treaties on
recognition and execution of arbitral awards”. See BENYEKHLEF Karim and GELINAS Fabien,
op. cit., p. 90.

198
a c t i v i t y i n v o l v i n g u s e r s o f o n l i n e s ys t e m s a n d s ys t e m o p e r a t o r s ,

“such as complaints about wrongful electronic messages and

postings, c o p yr i g h t and trademark infringement,

m i s a p p r o p ri a t i o n o f t r a d e s e c r e t s , d e f a m a t i o n , f r a u d , d e c e p t i v e

trade practices, inappropriate m a t er i a l s , and invasion of

p r i v a c y” . 338 T h e d i s p u t e s i n v o l v e d s ys t e m o p e r a t o r s ( " s ys o p s ")

w h e r e o n e p a r t y p o s t s a m e s s a g e o r f i l e o n t h e s ys o p ' s s ys t e m

t h a t a n o t h e r p a r t y f i n d s o f f e n s i v e d e f a m a t o r y, l i b e l o u s , a n

i n f r i n g e m e n t o f t h e c o m p l a i n i n g p a r t y' s t r a d e m a r k o r c o p yr i g h t ,

f r a u d u l e n t , o b s c e n e, e t c . a n d d e m a n d t h a t t h e s ys o p r e m o v e t h e

o f f e n d i n g m e s s a g e . 339

Complainants could visit the web and file a formal

complaint with which they submitted their dispute to the Virtual

Magistrate and provided the necessary information about the

d a t e o f t h e d i s p u t e, t h e p a r t i e s c o n c e r n e d a n d t h e c a t e g o r y o f

d i s p u t e . Th e r e w a s a s m a l l f e e o f $ 1 0 p e r f i l i n g i n o r d e r t o

discourage frivolous action. The arbitration process was

338
“In particular the Virtual Magistrate’s agenda aimed to establish the feasibility of using online
dispute resolution for disputes that originate online; provide system operators with informed and
neutral judgments on appropriate responses to complaints about allegedly wrongful postings;
provide users and others with a rapid, low-cost, and readily accessible remedy for complaints
about online postings; lay the groundwork for a self-sustaining, online dispute resolution system as
a feature of contracts between system operators and users and content suppliers (and others
concerned about wrongful postings); help to define the reasonable duties of a system operator
confronted with a complaint; explore the possibility of using the Virtual Magistrate Project to
resolve other disputes related to computer networks; develop a formal governing structure for an
ongoing Virtual Magistrate operation”. See PONTE M. Lucille, The Michigan Cyber Court: A
Bold Experiment in the Development of the First Public Virtual Courthouse, North Carolina
Journal of Law and Technology, vol. 4, 2002, p. 67.
339
VICTORIO M. Richard, op. cit., pp. 6, 7.

199
conducted using email. After receiving complaints, the Virtual

M a g i s t r a t e w o u l d ra n d o m l y s e l e c t a n i m p a r t i a l a r b i t r a t o r f r o m a

p o o l o f a r b i t r a t o r s fa m i l i a r w i t h c yb e r l a w , q u a l i f i e d b y C L I a n d

t h e A A A a n d t r a i n e d b y t h e A A A . T h e a r b i t r a t o rs w o u l d

generall y decide, “whether the activity complained of was

r e a s o n a b l e i n l i g h t o f a v a i l a b l e i n f o rm a t i o n , n e t w o r k et i q u e t t e ,

a p p l i c a b l e c o n t r a c t s , a n d a p p r o p r i a t e s u b s t a n t i v e l a w s ” ; 340 t h e

“ V i l l a n o v a C e n t e r f o r In f o r m a t i o n La w a n d P o l i c y” r e c e i v e d t h e

complaint and the AAA reviewed it before formally accepting it

for resolution. After the start of the procedure, the dispute

w o u l d b e r e s o l v e d w i t h i n t h r e e d a ys .

Unfortunately the Virtual M a g i s t r at e was not p r o v en

s u c c e s s f u l m a i n l y b e c a u s e o f t h e l i m i t ed s c o p e o f d i s p u t e s t h a t i t

c o u l d h a n d l e ( s o c i al r e l a t i o n s a r i s i n g o u t o f u s e o f t h e In t e r n e t ,

and did not include economic relationships created through

electronic transactions) and because the project was not widely

a d v e r t i s e d , t h e r e b y c r e a t i n g l e s s a wa r e n e s s o f t h i s s e r v i c e .

Furthermore, since the ODR method used was voluntary

a r b i t r a t i o n t h e r e w as a c o n s i d e r a b l e d i f f i c u l t y c o n v i n c i n g p a r t i e s

to take part in the procedure. Not only AOL which had agreed to

r e f e r d i s p u t e s t o t h e V M P d e c i d e d n o t t o r i s k i t s p o we r a n d

i n d e p e n d e n c e b y o u t s o u r c i n g t h e s e d e c i s i o n s , b u t al s o t h e V M P

d i d n o t m a n a g e t o p e r s u a d e o t h e r IS P s t o p a r t i ci p a t e i n t h e

340
SHAH Aashit, op. cit., p. 2.

200
s c h e m e . 341 F i n a l l y, t h e u s e o f c o n t r a c t u a l a r b i t r a t i o n w h i c h co u l d

not render binding awards and the use of outdated software were

additional reasons for the failure of this initiative. The Virtual

Magistrate project handled only one case and rendered only a

single decision, the significance of which was adulterated by the

fact that the one of the parties, the alleged wrongdoer, did not

e v e n p a r t i c i p a t e . T h e V M P ' s c a s e i n v o l v e d J a m e s T i e r n e y, a n

“ A m e r i c a O n l i n e ” ( A O L) u s e r , w h o c o m p l a i n e d , m ai n l y b e c a u s e

i t p r o m o t e d s p am m i n g , a b o u t a n a d v e r t i s e m e n t p o s t e d b y “ E M a i l

A m e r i c a ” o n A O L' s w e b s i t e t h a t o f f e r e d f o r s a l e m a s s e - m a i l

addresses. The parties involved in the resolution of the case

were Tierney and AOL while “EMail America” did not

participate. AOL responded to the complaint by removing the ad

f r o m i t s s ys t e m . A l t h o u g h t h e d i s p u t e w a s r e s o l v e d , t h e p r o j e c t

did not manage to attain credibility and convince users to utilize

it mainly because of two reasons. First, because one of the

p a r t i e s i n t h e d i s p u t e , t h e c o m p l a i n a n t J a m e s T i e r n e y, h a d a l s o a

r o l e a s a n a d v i s o r i n t h e V M P , a n d s e co n d , b e c a u s e a n o t h er p a r t y

in the dispute, “EMail America” did not take part in the

procedure, claiming that it was not contacted by the VMP.

In s t e a d , t h e d i s p u t e w a s r e s o l v e d b y A O L a l o n e , b y r e m o v i n g t h e

a d v e r t i s e m e n t b a s ed o n t h e f a c t t h at “ E M a i l A m e r i c a” h a d

violated the policy regarding spamming. Because of the

341
CORTES Pablo, op. cit., pp. 54, 55.

201
aforementioned reasons, the VMP did not manage to take off,

since “it was easy to discount the case as a publicity stunt and

a t t r a c t i n g m o r e c a s e s w a s a p r o b l e m fo r V M P ” . 342 E v e n t h o u g h

the project was considered unsuccessful, it m a n ag e d to

e f f e c t i v e l y p a v e t h e r o a d f o r f u t u r e O DR p r o v i d e r s .

S e c t i o n 2 : T h e O n l i n e O mb u d s O f f i c e

Another one of the early ODR initiatives was the “Online

Ombuds Office” (OOO) project which was launched in 1996 as a

beta version of the “Virtual Magistrate”. The Hewlett

Foundation provided an award to establish the “Center for

In f o r m a t i o n Technology and Dispute Resolution” at the

U n i v e r s i t y o f M a s s a c h u s e t t s wi t h t h e ai m o f d e v e l o p i n g a r i c h e r

s e t o f o n l i n e d i s p u t e r e s o l u t i o n t o o l s . 343 T h e “ O n l i n e O m b u d s m an

Office” was sponsored by the “Center for In f o r m a t i o n

Technology and Dispute Resolution” of the U n i v e rs i t y of

Massachusetts and also funded by “National C e n t er for

A u t o m a t e d In f o r m a t i o n R e s e a r c h ” ( N C A IR ) . T h e O n l i n e O m b u d s

Office was a mediation service aiming to resolve disputes

342
HANG Q. Lan, op. cit., p. 861.
343
SHAH Aashit, op. cit., p. 3.

202
a r i s i n g o u t o f o n l i n e a c t i v i t i e s . S i n c e 1 9 9 6 , t h e O n l i n e Om b u d s

Office has been using mediation for the resolution of disputes

a r i s i n g o n t h e In t e r n e t , “ s u c h a s d i s p u t e s b e t w e e n m e m b e r s o f

d i s c u s s i o n g r o u p s , d i s p u t es c o n c e r n i n g d o m a i n n a m e s , d i s p u t e s

b e t w e e n c o m p e t i t o rs , b e t w e e n In t e r n e t a c c e s s p r o v i d e r s a n d t h e i r

s u b s c r i b e r s a n d d i s p u t e s c o n c e r n i n g i n t e l l e c t u a l p r o p er t y”. 344

The OOO resolved disputes through an ombudsperson, whose

f u n c t i o n w a s p r a c t i c a l l y t h a t o f a m e d i a t o r . It w a s a n a t t e m p t t o

transplant the ombudsman model of dispute resolution into

c yb e r s p a c e b y p r o v i d i n g i n f o r m a t i o n , co n s u l t at i o n a n d r e s o l u t i o n

b y e x p e r i e n c e d o m b u d s p e r s o n s f r o m a n yw h e r e i n t h e w o r l d .

The procedure was similar to that of the Virtual Magistrate

since each part y provided the OOO information about the dispute

and if both parties agreed to resolve their dispute, the

ombudsperson s t a rt e d the mediation. The initiating of the

process took p l a ce when a user provided the OOO with

information on the dispute. An ombudsperson was assigned to

t h e c a s e a n d c o n t a ct e d t h e u s e r i n i t i a t i n g t h e p r o c e d u r e , a s w e l l

as the other party to ask questions about the dispute. The OOO

also had an Online Ombuds Conference Room where, using

“ In t e r n e t Relay Chat”, the ombudsperson could have live

d i s c u s s i o n s wi t h t h e p a r t i e s e i t h e r i n o n e c h a t r o o m wi t h b o t h

parties or could put each party in a different chat room and

344
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 91.

203
shuttle back and f o r t h . 345 E v e n though there is not m u ch

information about the disputes resolved, the OOO's web site

demonstrates its operation by referring to the resolution of one

dispute.

T h e c a s e i n v o l v e d t w o p a r t i e s R o b e r t G r a y, w h o p r o v i d e d

a news and information service through his web site and the

newspaper Hampshire County News, which was accusing the

former of posting material acquired from the paper as his own,

t h e r e b y i n f r i n g i n g t h e p a p e r ’ s c o p yr i g h t s . G r a y c o n t a c t e d t h e

OOO to initiate the resolution of the dispute. The OOO assigned

Ethan Katch as the ombudsperson, who communicated via e-mail

with both parties. The ombudsperson facilitated the effective

c o m m u n i c a t i o n b e t w e e n t h e p a r t i e s . Th e n e w s p a p e r ex p r e s s e d i t s

c o n c e r n r e l a t i n g t o t h e s o u r c e s o f t h e m a t e r i a l p o s t e d b y G r a y,

w h o i n t u r n e x p l ai n e d t h a t t h e m a t er i a l w a s g a t h e r e d u s i n g

various sources. The newspaper was convinced and the dispute

w a s r e s o l v e d . “ T h e p r o c e s s t o o k l e s s t h a n o n e m o n t h an d a t

v i r t u a l l y n o c o s t t o e i t h e r o f t h e p a r t i e s ” . 346 A m o n g t h e i n i t i at o rs

of the OOO were Professors Ethan Katsh and Janet Rifkin, who

are also main consultants for another ODR p r o v i d e r, the

“SquareTrade” project.

345
VICTORIO M. Richard, op. cit., pp. 7, 8.
346
HANG Q. Lan, op. cit., p. 847.

204
S e c t i o n 3 : Cy b e r T ri b u n a l

“ C yb e r T r i b u n a l ” w a s a n ex p e r i m e n t al p r o j e c t l a u n c h e d i n

1 9 9 6 b y t h e U n i v er s i t y o f M o n t r e a l ’ s “ C e n t r e d e r e c h e r c h é e n

d r o i t p u b l i c ” (C R D P ) a n d i t s m a i n g o a l w a s t o d et e r m i n e

w h e t h e r o r n o t d i s p u t e s c o u l d b e s u cc e s s f u l l y r e s o l v e d i n a n

online environment and particularly through the use of mediation

a n d a r b i t r a t i o n . T h e “ C yb e r T r i b u n a l ” m e d i a t o r s a n d a r b i t r a t o r s

included highly trained professionals specializing in mediation,

c o m m e r c i a l a r b i t r at i o n a n d i n f o rm a t i o n t e c h n o l o g y l a w . T h e

procedure included two steps but this time the methods were

m e d i a t i o n a n d a r b i t r a t i o n . “ C yb e r T r i b u n a l ” p r o v i d e d e a s y- t o - u s e

software that guarantied c o n f i d en t i a l i t y and facilitated

communications between the parties to a dispute, allowing them

t o r e a c h s e t t l e m e n t . If t h e p a r t i e s c o u l d n o t r e a c h a n am i c a b l e

s e t t l e m e n t t h r o u g h m e d i a t i o n , “ C yb e r T r i b u n a l ” h a d a s e c o n d

s t e p i n w h i c h t h e p a r t i e s w o u l d p r o c e e d t o a r b i t r a t i o n , s i n ce t h e y

were bound by an arbitration clause.

M o r e s p e c i f i c a l l y, i n m e d i a t i o n , i n o r d e r f o r t h e p r o c e d u r e

t o b e i n i t i at e d , o n e o f t h e p a r t i e s c o n t a c t e d t h e p r o v i d er a n d

shared all the relevant information of the dispute, such as

p e r s o n a l i n f o r m at i o n a n d i n f o r m a t i o n re g a r d i n g t h e f a c t s o f t h e

dispute as well as the goal and the potential of resolution.

205
“ C yb e r T r i b u n a l ” w o u l d t h e n a s s i g n a m e d i a t o r t o t h e c a s e w h o

w o u l d c o n t a c t t h e o t h e r p a r t y a n d i f t h e l at t e r a g r e e d , t h e

r e s o l u t i o n p r o c e d u re w o u l d b e g i n . U s u a l l y t h e r e w a s a p r i o r

agreement between the parties to resolve any disputes that would

arise between them through mediation or arbitration. Once the

p r o c e d u r e w a s i n i t i a t e d , “ C yb e r T r i b u n a l ” p r o v i d e d a s e c u r e

online framework through which the parties and mediator could

effectively communicate towards the resolution of the dispute.

Arbitration operated in a similar environment, although “the

process was structured by more formal rules that were based

freely on the rules of procedure generally used in commercial

a r b i t r a t i o n , s u c h as t h e a r b i t r a t i o n r u l e s d e v e l o p e d b y t h e

‘United Nations Commission on In t e r n a t i o n a l Trade La w ’

( U N C IT R A L) a n d t h e ‘ In t e r n a t i o n a l C h a m b e r o f C o m m e r c e ’

( IC C ) ” . 347 T h e “ C yb e r T r i b u n a l ” p r o j e c t r e s o l v e d h u n d r e d s o f

d i s p u t es and was considered highly successful especially

because it managed to incorporate arbitration into the online

environment. The experiment ended in 1999 and the project

evolved into a commercial venture called “e-Resolution”.

347
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 93.

206
Section 4: EBay and SqaureTrade

In 1 9 9 9 , t h e o n l i n e a u c t i o n s i t e “ e B a y” 348 a s k e d t h e

“ C e n t e r f o r In f o r m a t i o n T e c h n o l o g y a n d D i s p u t e R e s o l u t i o n ” a t

the University of Massachusetts to conduct a pilot project to

determine whether ODR mechanisms could assist in the

resolution of disputes arising out of the transaction between

e B a y’ s b u ye r s a n d s e l l e r s . T h e r e s u l t w a s t h e U n i v e r s i t y o f

Massachusetts pilot project which handled hundreds of disputes

a n d w a s c o n s i d e r e d f a i r l y s u c c e s s f u l . T h e s u c c e s s o f t h i s i n i t i al

project prompted eBay to select an In t e r n e t start-up,

“SquareTrade”, to be its dispute resolution p r o v i d er . The

p a r t n e r s h i p b e t w e e n “ e B a y” a n d “ S q u a r e T r a d e ” e n d e d i n 2 0 0 8 .

However, “SquareTrade” was for a long time the leading ODR

p r o v i d e r i n c o n s u m e r d i s p u t e s a n d t h e r e f o r e i t s ex a m i n a t i o n

p r e s e n t s a g r e a t a n a l yt i c a l i n t e r e s t f r o m a r e s e a r c h e r ’ s p o i n t o f

v i e w s i n c e i t s i g n i f i c a n t l y f u r t h e r e d t h e d e v e l o p m e n t o f O DR .

348
“EBay is an online auction site created in 1995 by Pierre Omidyar as a way to improve online
classifieds and allow users on the internet from anywhere in the world to buy or sell personal items
faster and easier. The EBay Company was founded in 1996 and since then has grown from a small
start up to multibillion dollar company making it one of the most successful examples of
ecommerce with experience in business-to-business, business-to-consumer, and consumer-to-
consumer transactions. EBay has made numerous acquisitions over the years, including the PayPal
payment service in 2002. More than forty-five billion dollars in merchandise is sold on eBay each
year and eBay has more than ninety-million active buyers and sellers, in 16 languages and 36
countries around the globe”. See DUCA D. Louis, RULE Colin, LOEBL Zbynek, op. cit., pp. 66,
68.

207
“SquareTrade” has proven that mechanisms such as online

negotiation and online mediation can be effectively and easil y

u s e d t o r e s o l v e e -c o m m e r c e d i s p u t e s . “ S q u a r e T r a d e ” h a n d l e d

d i s p u t es b e t w e e n s e l l e r s a n d b u ye r s o n e B a y r e l a t e d t o a s p e c i f i c

number of problems, such as non-delivery of goods or services,

d e l a ys , i m p r o p e r s e l l i n g p r a c t i c e s , u n s a t i s f a c t o r y s e r v i c e s , b a d

d e s c r i p t i o n s a n d n e g a t i v e f e e d b a c k . 349 It s g r e a t s u c c e s s w a s

m a i n l y b a s e d o n t wo r e a s o n s . F i r s t , t h e f a c t t h a t “ S q a u r e T r a d e ”

dealt with specific disputes in a high volume of cases made it

p o s s i b l e t o c r e a t e a n a u t o m a t e d p r o c e s s t h a t g u a r a n t i e d a cc u r a c y

of information and evaluation of the specific issues in each

category of disputes. Second, “SquareTrade” handled low value

d i s p u t es b e t w e e n u s e r s t h a t w o u l d o t h e rw i s e h a v e n o r e d r e s s a n d

w e r e c o m p e l l e d t o p a r t i c i p a t e b e c a u s e o f t h e f e e d b a c k s ys t e m ;

sellers wanted to obtain positive feedback in order to retain their

g o o d r e p u t a t i o n i n t h e “ e B a y” c o m m u n i t y a n d b u ye r s w a n t e d

redress.

“SquareTrade” offered a two-step dispute resolution

process. The first step was an online negotiation procedure in

which the parties attempted to resolve the dispute by themselves

w i t h o u t t h e i n v o l v em e n t o f a t h i r d n e u t r a l p a r t y. A u s e r c o u l d

f i l e a c o m p l a i n t t h ro u g h t h e w e b s i t e a n d i n i t i a t e t h e n e g o t i a t i o n

process which was automated and free. “SquareTrade” contacted

349
WANG Fangfei Faye, op. cit., p. 65.

208
t h e o t h e r p a r t y, w h o w o u l d t h e n b e a b l e t o r e s p o n d t o t h e

c o m p l a i n t . Al l c o rr e s p o n d e n c e t o o k p l a c e t h r o u g h a s e c u r e ,

password protected virtual area where only the parties had

a c c e s s a n d c o u l d co m m u n i c a t e t o r e s o l v e t h e i r d i s p u t e . Fo r t h e

filing of the complaint and the communication the website

p r o v i d e d s t r u c t u r e t h r o u g h w e b - b a s e d s o f t w a r e a n d f o r m s t h at

allowed users to standardize complaints through “radio buttons”

and this way pinpoint the problem more clearly and spare the

process from unnecessary confusion. Parties seemed more

w i l l i n g t o n e g o t i a t e v i a t h e W e b t h a n em a i l a n d t h e n e g o t i a t i o n s

were more frequently successful. “SquareTrade” recognized that

“almost all eBay disputes fall into eight to ten categories and

created forms that clarified and highlighted both the parties’

disagreements and their desired solutions and reduced the

a m o u n t o f f r e e t ex t f o r c o m p l a i n i n g a n d d e m a n d i n g , a l t h o u g h

s t i l l a l l o wi n g p a r t i e s t o d e s c r i b e c o n ce r n s i n t h e i r o w n w o r d s ,

a n d l o w e r e d t h e a m o u n t o f a n g e r a n d h o s t i l i t y b e t w e e n t h e m ”. 350

The great revolution of this process lied on the innovative

software that created a constructive environment, stimulated the

proposition of agreements and avoided confusion by associating

s o l u t i o n s t o t h e p ro b l e m s . T h e s o f t w ar e i l l u s t r a t e d h o w t h e u s e

o f IC T t o o l s c o u l d t r u l y b e t h e “ f o u r t h ” p a r t y i n t h e r e s o l u t i o n

p r o c e s s s i n c e i t a s s i s t e d p a r t i e s t o r e fo r m u l a t e t h e p r o b l em a n d

350
KATCH Ethan, Online Dispute Resolution: Some Implications for the Emergence of Law in
Cyberspace, Lex Electronica, vol.10 n°3, 2006, pp. 4, 5.

209
the solution and allowed to focus more on the solution rather

t h a n t h e p r o b l e m . 351 Th e m a j o r i t y o f t h e d i s p u t es , a p p r o x i m at e l y

eighty percent were resolved through negotiation, without the

n e e d t o r e s o r t t o m ed i a t i o n . 352

If t h e f i r s t s t e p d i d n o t l e a d t o a n a m i c a b l e r e s o l u t i o n o f

the dispute, there was a second step where the parties could

r e q u e s t t h e i n v o l v em e n t o f a n e u t r a l t h i r d p a r t y t h o u g h a n o n l i n e

mediation procedure. Users could request a professional

mediator for a minimal fee of $15 to $30. Upon the parties’

r e q u e s t t h e m e d i at o r r e c o m m e n d e d p o s s i b l e s o l u t i o n s fo r t h e

resolution of the dispute and assisted in reaching a fair and

mutually agreeable settlement. The online mediator provided the

disputants “with the tools to solve their own p ro b l e m s

effectively b y helping each part y see the other's perspective,

guiding the parties toward the goal of finding a resolution,

asking them questions and proving information to each other's

needs and i n t e r e s t s ” . 353 The settlement agreements w e re

c o n f i d e n t i a l a n d b ec a m e b i n d i n g a s c o n t r a c t s . B u s i n e s s e s w h o

agreed to mediate any possible disputes through “SquareTrade”

c o u l d p u r c h a s e a “ S q u a r e T r a d e ” s e a l w h i c h c o u l d b e p l ac e d o n

t h e w e b s i t e o f o n l i n e b u s i n e s s e s . T h e s e a l o r T r u s t m a r k as s u r e d

351
“Moving the parties from a problem mode to a solution stance”. See RABINOVICH-EINY
Orna, ‘Technology’s Impact: The Quest for a New Paradigm for Accountability in Mediation’,
Harvard Negotiation Law Review, vol. 11, 2006, p. 258.
352
KATSH Ethan and RIFKIN, Janet, op. cit., p.142.
353
MOEVES S. Amy and MOEVES C. Scott, op. cit., p. 19.

210
p o t e n t i al u s e r s t h a t t h e r e i s a n e a s y a n d s e c u r e w a y o f r e c o u r s e

i n c a s e t h e t r a n s a c t i o n p r o v e d p r o b l em a t i c a n d t h i s w a y b u i l d

c o n f i d e n c e a n d t r u s t i n t h e o n l i n e e n v i r o n m e n t . 354 S q u a r e T r a d e

entered into partnerships with several online businesses and had

agreements to be the dispute resolution provider for over a

dozen marketplaces including “ e B a y” , “Verisign”, and

“ P a yP a l ” . 355 D u r i n g t h e t i m e i t o p e r a t ed a s a n O D R p r o v i d e r,

SquareTrade resolved over 2 million disputes across 120

c o u n t r i e s i n f i v e d i f f e r e n t l a n g u a g e s a n d e m p l o ye d a r o u n d 2 0 0

m e d i a t o r s f r o m o v e r 1 5 d i f f e r e n t c o u n t ri e s . 356

As stated, the partnership between “ e B a y” and

“ S q u a r e T r a d e ” e n d e d i n J u n e 2 0 0 8 f ro m w h i c h p o i n t t h e l a t t e r

s t o p r e s o l v i n g “ e B a y” f e e d b a c k d i s p u t e s . T o d a y, “ S q u a r e T r a d e ”

continues to provide services to “eBay” users, such as warranty

s e r v i c e s a n d t h e T r u s t m a r k p ro g r a m b u t a s f a r a s t h e O D R

services formerly provided by “SquareTrade go, these are

c u r r e n t l y p r o v i d e d b y “ e B a y” a n d “ P a yP a l ” d i s p u t e r e s o l u t i o n

s e r v i c e s . In 2 0 0 9 , “ e B a y” a d d e d t h e d i s p u t e r e s o l u t i o n s e r v i c e s

available through “ P a yP a l ” and initiated an on-eBay ODR

p l a t f o r m c a l l e d “ eB a y B u ye r P r o t e c t i o n P o l i c y” . T h i s O D R

s c h e m e a l l o w s b u ye r s t o i n i t i at e a d i s p u t e r e s o l u t i o n p r o c e d u r e

when they have not received an item they purchased or if the

354
MANEVY Isabelle, op. cit., p. 17.
355
SHAH Aashit, op. cit., p. 3.
356
CORTES Pablo, op. cit., pp. 66, 68.

211
item was received but did not match the seller's description; in

s h o r t i t h a n d l e s t wo k i n d s o f d i s p u t es d e s c r i b e d a s " i t e m n o t

r e c e i v e d " a n d " i t e m n o t a s d e s c r i b e d " . 357 T o d a y, t h e “ e B a y”

platform handles over 60 million e-commerce disputes annuall y

through its online platform and the number rises as the

t r a n s a c t i o n v o l u m e o n t h e s i t e i n c r e a s e s , a b o u t 1 3 % p e r ye a r .

“ T h e s e d i s p u t e s h av e a n a v e r a g e v a l u e o f $ 7 0 - 1 0 0 a n d t h e y a r e

processed through a Resolution Center that enables parties to

resolve their problems am i c a b l y through direct

c o m m u n i c a t i o n ” . 358

S e c t i o n 5 : T h e I n te r n e t C o r p o r a t i o n f o r A s s i g n ed N a me s a n d

N u mb e r s ( I C A N N )

One of the most successful initiatives of O DR was

launched in 1999 in the United States of America under the

357
“The types of claims for buyers offered for resolution under the policy include: The buyer did
not receive the items within the estimated delivery date, or the item received was wrong, damaged,
or different from the seller’s description. For example: Buyer received a completely different item;
the condition of the item is not as described; the item is missing parts or components; item is
defective during the first use; the item is a different version or edition displayed in the listing; the
item was described as authentic but is not; the item is missing major parts or features, and this was
not described in the listing; the item was damaged during shipment; the buyer received the
incorrect amount of items”. See DUCA D. Louis, RULE Colin, LOEBL Zbynek, op. cit., pp. 66,
68.
358
Ibid., p. 68.

212
auspices of the Department of Commerce and was called the

“ In t e r n e t Corporation for Assigned Names and Numbers”

( IC A N N ) . IC A N N ’ s a i m w a s t h e s e t t l em e n t o f d i s p u t e s r e l a t i n g

t o d o m a i n n am e s . 359 H o w e v e r , IC A N N i s n o t a n O D R p r o v i d er

but an organization that provides a list of ODR providers which

serve as dispute resolution forums to arbitrate domain names

d i s p u t es , a s w e l l a s t h e r u l e s f o r t h e re s o l u t i o n o f t h e d i s p u t e s .

IC A N N i m p l e m e n t ed t h e “ U n i f o r m D i s p u t e R e s o l u t i o n P o l i c y”

(UDRP) establishing the process and the set of rules for

r e s o l v i n g d o m a i n n am e d i s p u t e s .

T h e U D R P i s n o t cl a s s i c a r b i t r a t i o n b u t c o r r e s p o n d s m o re

to non-binding arbitration since no monetary damages are

awarded and the only decision concerns the right to use the

domain name. The UDRP, unlike traditional arbitration, is not

intended to supplant court proceedings, but merely to afford an

a d d i t i o n a l a n d a l t er n a t i v e f o r u m f o r d i s p u t e r e s o l u t i o n , w h i c h ,

359
“For the Internet to function, every computer connected to it must have a unique identifying
number or Internet address. Such addresses typically look something like 128.119.28.27. Because
humans find it difficult to remember strings of numbers, a system was developed that allowed a
domain name, such as adr.org, to be typed in instead of the number string. What occurred when
someone typed in the domain name was that a machine somewhere translated it into the number
string, something the computer could process to find a particular machine. The demand for domain
names grew as commercial activity on the Internet grew and as businesses wanted potential
customers to have an easy way to find them. The domain name system had been designed before
commercial activity was permitted on the Internet and it had not been anticipated that many
businesses with similar names might want the same domain name, or that owners of trademarks
would be upset if someone registered a domain name that was similar to a trademark. The
combination of domain name scarcity and the concerns of trademark holders led to disputes over
domain names.” See KATCH Ethan, Online Dispute Resolution: Some Implications for the
Emergence of Law in Cyberspace, op. cit., pp. 5, 6.

213
h o w e v e r , s t i l l al l o w s p a r t i e s t o r e c o u r s e t o c o u r t a t a n y t i m e. 360

T h e d i s p u t e r e s o l u t i o n p r o f e s s i o n a l s a re c a l l e d p a n e l i s t s i n s t e a d

of arbitrators and nothing hampers the parties to a dispute to

resort to litigation in order to enforce their rights after the

“award” is handed down. However, only a very small percentage

goes to court compared to the overall number of cases handled

b y t h e U D R P . U DR P p a n e l i s t s a r e em p o w e r e d b y t e r m s i n t h e

contract agreed to, when a domain name is registered, and the

decisions are enforced by making necessary changes in the

d o m a i n n a m e r e g i s t r y. T h e U D R P p r o c e d u r e c o n s t i t u t e s a n

e f f i c i e n t O D R s ys t e m w i t h a n e v i d e n c e b a s e d p r o c e s s t h a t l i m i t s

t h e r e s u l t s t o t h e c a n c e l l a t i o n o r t r an s f e r o f a d o m a i n n a m e

registration making the execution of the decision relatively eas y

and straight forward.

“The fees vary according to the number of panelists and

the number of domain names in dispute but are approximately

b e t w e e n 2 , 0 0 0 $ a n d 5 , 0 0 0 $ a n d t h e re s o l u t i o n t a k e s u p t o 6 0

d a ys w h e r e a s t h r o u g h t r a d i t i o n a l j u d i c i a l m e c h a n i s m s t h e c o s t

c o m e s t o a n a v e ra g e o f 1 5 , 0 0 0 $ a n d c a n t a k e u p t o t h r e e

ye a r s ” . 361 S i n c e 1 9 9 9 , IC A N N h a s a c c r e d i t e d s e v e r a l d i s p u t e

r e s o l u t i o n p r o v i d e rs t o r e s o l v e In t e r n e t d o m a i n n a m e d i s p u t e s

including the “World In t e l l e c t u a l Property Organization”

( W IP O ) , the “National Arbitration Forum” (NAF), “e-


360
CORTES Pablo, op. cit., pp. 167, 168.
361
HANG Q. Lan, op. cit., p. 850.

214
R e s o l u t i o n ” , t h e “ C e n t e r f o r P u b l i c R e s o u r c e In s t i t u t e ” ( C P R )

and the “Asian Domain Name Dispute Resolution Centre”

(ADNDRC). Among those providers “e-Resolution” was the first

that realized the potential of using the online environment in a

full way by transferring most parts of the process to the virtual

world.

T h e f i r s t a w a r d w a s r e n d e r e d o n 2 0 0 0 b y t h e W IP O

A r b i t r a t i o n a n d M ed i a t i o n C e n t e r i n t h e c a s e W o r l d W r es t l i n g

Federation Entertainment, In c . v. Michael Bosman. Even

Michael Bosman, who was f o rc e d to relinquish the

“ w o r l d w r e s t l i n g f e d e r a t i o n . c o m ” d o m a i n n a m e , w a s s a t i s fi e d b y

the fairness and efficiency of the process. Overall the UDRP

s ys t e m i s c o n s i d e re d a f a i r l y s u c c e s s f u l ex a m p l e o f O n l i n e

D i s p u t e R e s o l u t i o n . 362

362
BENYEKHLEF Karim and GELINAS Fabien, op. cit., pp. 29-36.

215
Chapter 3

The Advantages and the Challenges of ODR

ODR methods provide hope for the future of international

t r a n s a c t i o n s a n d e- c o m m e r c e , b y o v e r c o m i n g s e v e r a l o f t h e

p r o b l e m s r e l at e d t o t r a d i t i o n a l j u s t i ce , a s w e l l a s t r a d i t i o n al

A D R . O D R m a k e s p o s s i b l e t h e r e l o c a t i o n o f t h e t r a d i t i o n al

m e t h o d s o f a l t e r n a t i v e d i s p u t e r e s o l u t i o n f r o m t h e p h ys i c a l t o

t h e v i r t u a l w o r l d . 363 O D R i s a u s e f u l t o o l , w h i c h h e l p s t h e p a r t i es

to a dispute reach an agreement by electronic means; the

technology essentially intervenes during the procedure in order

t o a s s i s t t h e c o m m u n i c a t i o n b e t w e e n t h e p a r t i e s . 364 H o w e v e r , t h e

u s e o f IC T t o r e s o l v e d i s p u t e s c h a n g e s t h e w a y i n w h i c h p a r t i e s

c o m m u n i c a t e a n d i n t e r a c t . T h e r e a r e p r o s a n d c o n s w h en u s i n g

IC T ; t h e o b j e c t i v e i s t o d e s i g n O D R p l a t f o r m s t h at m ax i m i z e t h e

p r o s a n d m i n i m i z e t h e c o n s . 365 N e g o t i a t i n g , m e d i a t i n g an d

a r b i t r a t i n g t h r o u g h t h e In t e r n e t m e d i u m h a v e s e v e r a l i m p o r t a n t

advantages such as the increased efficiency of the process and

ease of application.

363
BELLUCCI Emilia, LODDER R. Arno and ZELEZNIKOW John, Integrating artificial
intelligence, argumentation and game theory to develop an online dispute resolution environment,
ICTAL ,18TH IEEE International Conference on Tools with Artificial Intelligence, 2004, pp. 749-
754.
364
GLASS M. Carolyn, Online counseling: A descriptive analysis of therapy services in the
Internet, British Journal of Guidance and Counseling, vol. 34, 2006, pp. 145-160.
365
RULE Colin, op. cit., p. 85.

216
In c yb e r s p a c e t h e r e i s n o u n i f o r m l e g a l a n d c o u r t s ys t e m

w h i c h m a k e s t h e r e s o l u t i o n o f d i s p u t e s q u i t e p r o b l e m at i c . T h e

In t e r n e t i s g l o b a l a n d w i t h o u t b o rd e r s w h i c h h a m p er s t h e

r e s o l u t i o n o f d i s p u t e s b y t h e t r a d i t i o n al c o u r t s o f a n y s t a t e a n d

p r e s e n t s s u b s t a n t i al d i f f i c u l t i e s r e g a r d i n g t h e c h o i c e o f t h e

applicable law as well as the recognition and enforcement of

d e c i s i o n s . In t h e c o n t e x t o f e - c o m m e r c e , “ t h e l a c k o f w e l l -

established and credible online conflict resolution

mechanisms dampens consumer confidence in the online

m a r k e t p l a c e ” . 366 H o w e v e r , ODR e n j o ys many of the s am e

advantages as ADR, such as avoiding traditional litigation

mechanisms which can be time consuming, costly and raise

j u r i s d i c t i o n al p r o b l e m s . B u t , O D R g o es o n e s t e p f u rt h e r a n d b y

t r a n s f e r r i n g A D R s e r v i c e s t o t h e o n l i n e e n v i r o n m e n t i n cr e a s e s

t h e c e l e b r a t e d a d v a n t a g e s i n t e r m s o f c o s t , t i m e , f l ex i b i l i t y a n d

appropriateness for current trade practices, “provided of course

that the transition to online delivery is smooth and does not

i n v o l v e a n y l o s s e s ” . 367

366
PONTE M Lucille, Boosting Consumer Confidence in E-business: Recommendations for
Establishing Fair and Effective Dispute Resolution Programs for B2C Online Transactions,
Albany Law Journal Science and Technology, vol. 12, 2002, p. 441.
367
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 85.

217
S e c t i o n 1 : Ad v a n t a g e s o f O n l i n e D i s p u t e R e s o l u ti o n

O D R h a s t o o f f e r g r e a t a d v a n t a g e s f o r p a r t i e s , t h i rd

neutrals and in the case of e-commerce for businesses and

c o n s u m e r s . In t h e f i r s t p a r t o f t h e t h e s i s t h e a d v a n t a g e s o f

t r a d i t i o n a l A D R w e r e e x a m i n e d . 368 T h e s e a d v a n t a g e s n o t o n l y

translate to ODR but are also heightened and complemented by

additional advantages. The advantages of ODR relate to time and

c o s t s a v i n g s , c o n v en i e n c e a n d f l e x i b i l i t y. T h e u s e o f t h e I n t e r n e t

t o r e s o l v e d i s p u t e s c a n s p e e d u p t h e p ro c e d u r e s i n c e p a r t i es h a v e

m o r e o p t i o n s w h e n u s i n g O D R ; i n f o rm a t i o n a n d e v i d e n c e i s

transmitted faster, and the use of the email a l l o ws for

a s yn c h r o n o u s c o m m u n i c a t i o n , w h i c h a d d s t o t h e o v e r a l l p ro c e s s

of resolving disputes. The parties in dispute can communicate

t o w a r d s t h e r e s o l u t i o n a t a n y t i m e , t w e n t y- f o u r h o u r s a d a y ,

s e v e n d a ys a w e e k , a n d n o t j u s t d u r i n g w o r k i n g h o u r s o r d u r i n g

meetings that are difficult to plan and must be scheduled well in

advance. Furthermore, the parties can communicate from any

place of their convenience, such as from their home or their

workplace. For instance, people living in remote areas will be

able to resolve their dispute from afar without having to travel

hundreds or even thousands of miles to meet the other party and

r e s o l v e t h e d i s p u t e. T h e u s e o f d i s t a n c e c o m m u n i c a t i o n a l l o w s

368
See supra at advantages of ADR.

218
p a r t i e s t o r e s o l v e d i s p u t es w i t h o u t t h e n e e d t o t r a v e l a n d t h e

corresponding cost and time consumption. Documents can be

accessed from a n yw h e r e a n d at any time and the use of

a s yn c h r o n o u s c o m m u n i c a t i o n a l l o w s f o r a d i s p u t e r es o l u t i o n

procedure that revolves around the needs of the parties. These

features make dispute resolution cheaper, quicker and more

a c c e s s i b l e . 369

A. Time savings

O n e o f t h e g r e a t a d v a n t a g e s o f O D R i s t h at i t o f f e rs

considerable time and money savings. Traditional ADR was

already less time consuming and costly than litigation. But ODR

i s e v e n l e s s t i m e c o n s u m i n g a n d c o s t l y t h a n t r a d i t i o n al A D R .

D i s p u t e s , w h i c h i n t h e p a s t r e q u i r e d m o n t h s o r ye a r s t o b e i n g

r e s o l v e d , w i t h O DR t h e y m a y n o w r e q u i r e o n l y d a ys o r h o u r s .

When a dispute arises, the parties using ODR have the ability to

address and resolve the matter much faster that through

l i t i g a t i o n o r t r a d i t i o n a l A D R . In f a c t t h e p a r t i e s c a n s t a r t t h e

r e s o l u t i o n p r o c e s s al m o s t i m m e d i a t e l y i n s t e a d o f w a i t i n g m o n t h s

or at least weeks before their case goes to trial or before they


369
HÖRNLE Julia, op. cit., p. 87.

219
a g r e e t o a l l t h e d et a i l s (s u c h a s s el e c t i n g t h e v e n u e , t h e A D R

professionals and travelling to the meetings) for the ADR

procedure to b e g i n . 370 W h e r e a s traditional judicial s ys t em s

welcome delay as a means to ensure the serious intentions of

l i t i g a n t s a n d t r a d i t i o n a l A D R s ys t e m s b e c o m e l e s s e f f i c i e n t w i t h

e a c h p a s s i n g d a y, O D R i s m u c h f as t e r a n d c a n b e i n i t i a t ed

a l m o s t i n s t a n t l y a f t e r t h e d i s p u t e a r i s es , “ s i n c e a v i r t u a l m e e t i n g

r o o m c a n b e o p en e d i n s t a n t a n e o u s l y a n d a n e u t r a l c a n b e

e n g a g e d f r o m a n yw h e r e a r o u n d t h e w o r l d ” . 371 E s p e c i a l l y t o d a y

“ b r o a d b a n d c o n n e c t i o n s ” , w i r e - l e s s In t e r n e t a n d s m a r t p h o n e s

provide the ability to conduct instantly high-quality

v i d e o c o n f e r e n c e s , s a v i n g c o n s i d e r a b l e t i m e a n d m o n e y. O D R

s ys t e m s c a n i n s t a n t l y p r o v i d e a v i r t u a l r o o m , f o r p a r t i e s t o

c o m m u n i c a t e a t a n y t i m e a n d f r o m a n yw h e r e i n t h e w o r l d a n d t o

w o r k t o w a r d s t h e r es o l u t i o n o f t h e i r d i s p u t e . “ It t a k e s a n a v e r a g e

of only four months to resolve a dispute online, but 18-36

months to obtain a decision through the courts or using

t r a d i t i o n a l A D R ” . 372 In t h e c a s e o f e - c o m m e r c e d i s p u t e s , t i m e

s a v i n g s a r e i n v a l u a b l e f o r b o t h c o n s u m e r s a n d b u s i n e s s es , s i n c e

ODR allows for the early intervention, the prevention of

370
HANG Q. Lan, op. cit., pp. 856- 859.
371
RULE Colin, op. cit., p. 63.
372
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 86.

220
escalation and the addressing of grievances before they evolve

i n t o f o rm a l c o n f l i c t s . 373

B. Cost savings

ODR s ys t e m s are cost effective. ODR can provide

s i g n i f i c a n t c o s t s a v i n g s c o m p a r e d t o l i t i g a t i o n a n d c o m p ar e d t o

t r a d i t i o n a l A D R , b o t h o f w h i c h c a n b e q u i t e e x p e n s i v e . 374 A g a i n ,

traditional ADR was already less costly than litigation and ODR

is even less costly than traditional ADR. The lower costs

associated with the ODR are often cited as an advantage in

choosing these methods. The cost for those involved in an online

dispute resolution varies depending on the nature of the dispute,

the technology utilized, the complexity of the dispute and the

time needed to reach resolution. Ex p e n d i t u r e on computer

software should also be considered. For the parties of course

that already have access, there is no additional cost. However,

e v e n f o r t h o s e t h a t d o n o t h a v e ye t a c c e s s , b u yi n g a c o m p u t e r

a n d g a i n i n g In t e r n e t a c c e s s b e c o m e s c h e a p e r a s e a c h d a y p a s s e s .

373
RULE Colin, op. cit., p. 77.
374
G. H. Friedman, (1997) Alternative Dispute Resolution and Emerging Online Technologies:
Challenges and Opportunities, Hastings Communications and Entertainment Law Journal, vol. 19
pp. 695- 712.

221
The main reason why ODR is less costly is because overall

e x p e n s e s a r e o f t e n m u c h l o w e r a n d m ai n l y b e c a u s e t h e r e a r e n o

t r a v e l e x p e n s es . O D R a l l o w s p a r t i e s w h o a r e l o c a t e d i n m u l t i p l e

c o u n t r i e s o r d i f f e r e n t t i m e z o n e s , o r wh o c a n n o t a g r e e o n a t i m e

o r p l a c e , t o m e e t w i t h o u t t r a v e l a n d r e l a t e d e x p e n s e s . 375 It i s

only natural, “when the raw material of an institution is software

rather than bricks and mortar, bits rather than atoms,

construction costs and costs of modification are likely to be

reduced. When delivery can occur at electronic speed rather than

a t t h e s p e e d o f a u t o m o b i l e o r a i r p l an e , i t w i l l o c c u r b o t h a t

c h e a p e r c o s t a n d f a s t e r ” . 376 O D R i s 3 5 - 6 0 % c h e a p e r t h a n j u d i c i al

proceedings and traditional A DR . 377 E s p e c i a l l y in case of

a r b i t r a t i o n , t h e e n fo r c e a b l e n a t u r e o f t h e a w a r d s a v e s f r o m t h e

c o s t o f a p p e a l s o f o t h e r r e s o l u t i o n s m e t h o d s . In t h e c a s e o f e -

commerce, there are great financial benefits for businesses,

since by using ODR businesses can prevent many of the disputes

from going to court and limit the financial exposure of the

c o m p a n y. 378 M o d e r n b u s i n e s s a r e o p e r a t i n g w o r l d w i d e a n d a r e

facing countless disputes all over the world, many among them

a r e r e l a t i v e l y s m a l l d i s p u t e s a n d i t w o u l d t o o ex p e n s i v e , t i m e -

consuming and therefore impractical to travel to each country in

375
WANG Fangfei Faye, op. cit., p. 28, 29.
376
KATCH Ethan, RIFKIN Janet and GAITENBY Alan, E-commerce, e-disputes, and e-dispute
resolution: in the shadow of ‘eBay Law’, Ohio State Journal of Dispute Resolution, vol. 15, 2000,
p. 727.
377
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 86.
378
RULE Colin, op. cit., p. 77.

222
an attempt to resolve each of these disputes. On the contrary

ODR by taking place on the In t e r n e t via e-mail, instant

messaging, chat conference rooms, or In t e r n e t

videoconferencing, mitigates the costs related to travel. Sending

a document via e-mail or posting it on a web site for the parties

t o v i e w i s v i rt u a l l y e f f o r t l e s s , f a s t a n d c h e a p w h e r e a s t h e

d o c u m e n t a t i o n r e q u i r e d i n t h e o f fl i n e w o r l d c r e a t e s m o u n t a i n s o f

p a p e r a n d s p e n t c a s h . 379

C. Access to justice

As stated, O DR is better s u i t ed for cross-border

transactions, as it eliminates the problems of transition to

certain places, since it easily crosses between borders, with

transactions made regardless of the distance separating the

parties to the dispute. This achieves lower costs and reduces

t i m e c o n s u m p t i o n , 380 i l l u s t r a t i n g t h a t O D R m a y b e t h e o n l y

feasible option for people who are unable to travel long

d i s t a n c e s 381 o r f o r p e r s o n s o f t e n e n g a g e d i n e - c o m m e r c e a n d

379
VICTORIO M. Richard, op. cit., p. 12.
380
BATES M. Donna, op. cit., p. 854.
381
BORDONE C. Robert, Electronic Online Dispute Resolution: A Systems Approach - Potential
Problems and a Proposal, Harvard Negotiation Law Review, vol. 3, 1998, p. 176.

223
involved in low values disputes where the parties cannot meet

f a c e t o f a c e u n l e s s t h e y s p e n d a s u b s t a n t i a l a m o u n t o f m o n e y,

often more than the value of the dispute; there are no travel and

accommodation ex p e n s e s , “which in international consumer

d i s p u t es a r e f r e q u e n t l y h i g h e r t h a n t h e v a l u e o f t h e d i s p u t e”. 382

O D R r e d u c e s t i m e d e l a ys a n d c o s t s , e s p e c i a l l y t h o s e r e l a t e d t o

travel and by providing cheaper and quicker dispute resolution

and allows access to parties with limited resources; access to

O D R a n d c o n s e q u e n t l y a c c e s s t o j u s t i c e.

Furthermore, ODR provides access to justice by removing

the problem of bias, a problem that cannot successfully be

a d d r e s s e d i n t r a d i t i o n a l f a c e t o f a c e AD R . A l t h o u g h i m p o s s i b l e

in t r a d i t i o n al A DR , online dispute resolution c r e a t es an

e n v i r o n m e n t w h e r e b i a s c a n b e r e m o v ed a s a f a c t o r i n b u i l d i n g

an agreement between two disputants, since it is not immediately

obvious in an online interaction if the other party or neutral is

male or female, black or white, gay or straight, or old or

yo u n g . 383 F i n a l l y, O D R p r o v i d e s a c c e s s t o j u s t i c e b y r e d u c i n g

power imbalances between the p a r t i e s . 384 Especially by

c o m m u n i c a t i n g t h r o u g h t h e a s yn c h r o n o u s a n d t ex t u a l m e d i u m o f

e-mail, parties can overcome the power i m b a l a n ce s and

communicate m o re freely than with face to face

382
HÖRNLE Julia, op. cit., pp. 89, 90.
383
RULE Colin, op. cit., p. 68.
384
HÖRNLE Julia, op. cit., pp. 89, 90.

224
c o m m u n i c a t i o n . 385 P a r t i e s a r e n o t i n t i m i d a t e d w h e n t h e r e i s a

power imbalance and also can more effectively save face after

the settlement of the dispute.

Any economic or other power imbalance that ex i s t s

between the parties is masked by the medium which can assist

t h e O D R p r a c t i t i o n e r f u r t h e r b y r e n d e r i n g i n e f f e c t i v e a p a r t y' s

attempt to dominate and the parties can have a more balanced,

fair and effective communication. Furthermore, the internet

medium provides a neutral forum for the procedure and “the

‘ c o n f e r e n c e t a b l e i n c yb e r s p a c e ’ d e n i e s a d o m i n a t i n g p a r t y t h e

p o t e n t i al t o ex p l o i t t h e ‘ h o m e c o u r t a d v a n t a g e ’ ” . 386

385
“Research into the use of email in organizations has found that lower-level employees are
willing to send emails to upper management with comments and observations that they would be
uncomfortable saying in person. I’ve spoken with parents who had a very difficult time
communicating with their children when they are in the same house, yet after they send their
children off to college, a rich email correspondence began. The parent and child were not able to
communicate face-to-face partially because of the power dynamic between the two of them. Many
husbands and wives get into similar communication patterns based on the relative power in their
relationship, and when they begin to communicate textually through an online interface it’s
different enough from the normal modes of communication that they’re able to break out of those
patterns”. See RULE Colin, op. cit., pp. 64, 65.
386
VICTORIO M. Richard, op. cit., pp. 14, 15.

225
D. Convenience

Using ODR for the resolution of disputes is not only less

t i m e c o n s u m i n g a n d c o s t l y, b u t a l s o o f f e r s p a r t i e s a s o l u t i o n i n a

w a y t h a t p r o v i d e s co n v e n i e n c e a n d e a s e . T h e r o l e o f t e c h n o l o g y

replaces the meetings with communication t h at relies on

electronic transmissions, achieving significant reduction in cost

a n d t i m e 387 a n d p r o v i d i n g c o m f o r t a n d a c c e s s i b i l i t y, g i v i n g e a s y

a c c e s s f r o m h o m e o r t h e w o r k p l a c e t h ro u g h o u t d a y a n d n i g h t . 388

C o n v e n i e n c e r e l a t e s t o a v a i l a b i l i t y. In i t i a l l y O D R m a k e s i t

easier to start the process just by the click of a button and users

can initiate the process and be provided with all the necessary

i n f o r m a t i o n w i t h o u t h a v i n g t o r e s o r t t o s o m e p h ys i c a l o f f i c e o f

the provider during office hours, but instead all can be done

f r o m t h e c o m f o rt o f t h e p a r t y’ s h o m e 2 4 h o u r s a d a y, 7 d a ys a

w e e k , b y f i n d i n g t h e a p p r o p r i a t e s i t e an d f i l l i n g o u t a w eb f o r m

o r w r i t i n g a n e - m a i l , w i t h o u t d e l a ys a s s o c i a t e d w i t h w a i t i n g f o r

forms or for changes to become available, since the full content

o f a l l m a t e r i al s i s d i r e c t l y a c c e s s i b l e . 389

387
KLAMING Laura, VEENEN V. Jelle, LEENES Ronald, I want the opposite of what you want:
summary of a study on the reduction of fixed - pie perceptions in online negotiation. ‘’Expanding
the horizons of ODR‘’, Proceedings of the 5th International Workshop on Online Dispute
Resolution (ODR Workshop ’08), 2008, pp. 84-94.
388
MELAMED Jim and HELIE John, The World Wide Web Main Street of the Future is there
Today, 1999, available at http://www.mediate.com/articles/jimmjohn.cfm
389
VICTORIO M. Richard, op. cit., p. 13.

226
P a r t i c u l a r l y i n t h e w o r l d o f o n l i n e co m m e r c e , i t i s o n l y

n a t u r a l t o r e s o l v e d i s p u t es o n l i n e , s i n c e t h e r e l a t i o n s h i p o f t h e

parties in most cases has developed in the online environment; it

makes sense and it is only natural to use the same medium for

the resolution of their dispute. Online consumers, who interact

w i t h b u s i n e s s e s p u re l y o n l i n e , w o u l d f i n d i t v e r y s t r a n g e i f t h e y

were asked to meet face to face for the resolution of the

d i s p u t e . In offline dispute resolution parties have to spend

considerable time, money and energy simply to sit down at the

table and discuss the issues of the dispute. This considerable

e f f o r t f r o m t h e p ar t i e s i s c a l l e d “ c o n v e n i n g p e n a l t y” . 390 O DR

provides online interactivity by establishing dialogue and

c o m m u n i c a t i o n b e t w e e n m u l t i p l e u s er s v i a e - m a i l , c h at a n d

videoconference and all that through a computer screen, fast and

comfortable.

The convenience factor increases the potential of ODR for

time and cost savings; parties and practitioners need not travel

distances to attend meetings and there is no need to coordinate

schedules because of the use of a s yn c h r o n o u s messages.

Regarding third party neutrals, ODR allows them to keep

a s s i s t i n g t h e p a r t i e s a f t e r k e y c o m m u n i c a t i o n s . 391 T h e p a r t i e s c an

s t a y c o n n e c t e d t o t h e d i s c u s s i o n b y r e s p o n d i n g a t a v a i l a b l e t i m es
390
“In a face-to-face process, the participants must dress up, take time off of work, travel perhaps
long distances to the meeting place, and spend hours discussing the issues underlying the dispute”.
See RULE Colin, op. cit., p. 69.
391
Ibid., p. 62.

227
and have also the ability to postpone their response to consult

w i t h o t h e r s , d o r e s ea r c h , l o o k a t t h e d at a , o r j u s t “ t a k e t h e t i m e

n e e d e d t o f o rm u l a t e c a l m , c o n s t r u c t i v e q u e s t i o n s a n d a n s w e r s

a n d p r o d u c e t h e i r b e s t r e s p o n s e ” . 392 C o m m u n i c a t i o n i s r e c o r d ed

and archived which allows parties to go back at any time and

revisit all the available information so that they can make their

decisions better informed. An additional benefit from keeping

digital records is that they also “serve as a check on the

behavior of mediators, parties and their representatives, even if

n o f o r m a l a p p e a l p ro c e d u r e e x i s t s ” . 393

Even the p h ys i c a l absence of the parties, which is

considered one of the greatest drawbacks of ODR, can prove

beneficial in some occasions. The distance provided by ODR

c o m m u n i c a t i o n c o m b i n e d wi t h t h e a b i l i t y f o r a s yn c h r o n o u s

communication allows parties to cool down, reflect on the

arguments and their responses and allows neutrals control the

aggressiveness of the communication and defuse a possible

e s c a l a t i o n o f t h e d i s p u t e . 394 T h e a s yn c h r o n o u s n a t u r e o f o n l i n e

communication and the lack of face-to-face contact prevent

escalations like name calling and violence much more

e f f e c t i v e l y, m a k e c o n f r o n t a t i o n l e s s i n t e n s e a n d t h e p r o c e s s

m o r e p r o d u c t i v e ; p ar t i e s c a n r e f l e c t o n a n i s s u e , c o m m u n i ca t e i n

392
RAINES S. Susan and TYLER C. Melissa, op. cit., p. 6.
393
WANG Fangfei Faye, op. cit., p. 29.
394
HÖRNLE Julia, op. cit., p. 89.

228
a c o n s i d e r e d w a y a n d “ b e a t t h e i r b e s t ” . 395 T h i s l a c k o f p e r s o n al

interaction can p ro v e essential in d i s p u t es in which “the

e m o t i o n al i n v o l v em e n t o f t h e p a r t i e s i s s o h i g h t h at i t i s

p r e f e r a b l e t h a t t h e y d o n o t s e e e a c h o t h e r ” . 396 T h e a b s e n c e o f

p h ys i c a l p r e s e n c e p r o v i d e s t h e p a r t i e s w i t h a d i s p a s s i o n at e w a y

to look at dispute, especially when there is a lack of trust

between the parties and emotions stand in the way of effective

communication, then the “cooling distance” provided by the

means of communication can allow parties not to focus on the

“ e n e m y” party but instead on the dispute. P a r t i cu l a r l y,

a s yn c h r o n o u s c o m m u n i c a t i o n v i a e - m a i l a l l o w s p a r t i e s t i m e t o

r e f l e c t o n t h e i r p o s i t i o n s b e f o r e a r t i cu l a t i n g t h e m w i t h o u t t h e

t i m e p r e s s u r e o f a n i m m e d i a t e c o n f ro n t a t i o n a n d t h e w r i t t e n

nature of the arguments allow better articulating, reducing

e m o t i o n al h o s t i l i t y a n d d i m i n i s h i n g e x p r e s s i o n s o f p o w e r o r

b i a s . 397

395
“This dynamic has come to be called cooling distance”. See RULE Colin, op. cit., pp. 66, 67.
396
WANG Fangfei Faye, op. cit., p. 29.
397
VICTORIO M. Richard, op. cit., pp. 14, 15.

229
E. Flexibility

B e s i d e s t h e c o n v e n i e n c e a n d t h e f a s t e r d e c i s i o n s , 398 ODR

a l l o w s f o r g r e a t e r f l e x i b i l i t y a n d m o r e c r e a t i v e s o l u t i o n s . 399 T h e

i n f o r m a l n at u r e o f O D R b u i l d s a t ru s t i n g e n v i r o n m e n t t h a t

f o s t e r s s e t t l e m e n t a n d e n c o u r a g e s h o n e s t y, w h e r e p a r t i e s s t a r t

working on the resolution of their disputes immediately and

consequently have a better chance of voluntary compliance.

Parties can usually be legally unrepresented, since ODR allows

f o r “ a g r e a t e r c o n t r o l o v e r p r o c e s s e s a n d t h e d e c i s i o n an d t h e

r u l e s o f e v i d e n c e d o n o t a p p l y s o p r o c e d u r e s a r e m o r e f l e x i b l e. 400

H e n c e p a r t i e s c a n r e a c h a n y t yp e o f a g r e e m e n t w i t h o u t t h e

limitations imposed by the law; parties create their own

agreement without having it imposed. Furthermore, “the parties

a n d t h e n e u t r a l t h i rd p a r t y h a v e t h e f l e x i b i l i t y t o c h o o s e f o r m s

o f c o m m u n i c a t i o n m o r e t a i l o r e d t o t h e c i r c u m s t a n c e s ” . 401

T h e f l ex i b i l i t y o f O D R a l l o ws p a r t i e s n o t o n l y t o c h o o s e

t h e m o s t c o n v e n i e n t p r o c e d u r e , b u t al s o a s i n A D R , s el e c t t h e

m o s t c o n v e n i e n t t h i r d n e u t r a l , w h o c a n a l s o b e a n e x p e rt o n a

398
COM (2002) 196 final, Alternative Dispute Resolution for Online Consumer Transactions,
Public Workshop, Federal Trade Commission / Department of Commerce, June 6-7, 2000. Green
paper on alternative dispute resolution in civil and commercial law , presented by the
Commission.
399
KAUFMANN-KOHLER Gabrielle and SCHULTZ Thomas, op. cit., p. 68.
400
PONTE M. Lucille and CAVENAGH D. Thomas, op. cit., p. 24.
401
BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 87.

230
specific field. As in ADR, also in ODR parties can choose a

mediator or arbitrator that is an expert and even more so online,

where the number and availability of experts as well as the

ability to reach them more easily allows obtaining a more

e q u i t a b l e s o l u t i o n t h a n c o u l d b e a c h i e v e d i n c o u r t . 402 C h o o s i n g

an expert neutral is less costly in ODR, since there is larger

a v a i l a b i l i t y. O D R b r i n g s n e u t r a l s i n s t a n t l y i n t o u c h w i t h t h e

parties. Parties can choose any neutral and consequently the best

neutral for their case, “regardless of where that neutral is in the

world, his time zone, or even his other commitments, since

g e o g r a p h y, schedule, and ex p e r t i s e are no longer major

c o n c e r n s ” . 403

T h e f l e x i b i l i t y o f O D R r e l a t e s t o t h e u s e o f v a r i o u s IC T

tools for the resolution of the dispute, something which is not

p o s s i b l e i n o f fl i n e d i s p u t e r e s o l u t i o n . T h e t e c h n o l o g y i m p r o v e s

c o m m u n i c a t i o n a n d a i d s t h e c o n v e yi n g o f t h e m e s s a g e s b y u s i n g

IC T t o o l s t h at m a k e r e s o l u t i o n m o r e ef f e c t i v e a n d l e a d t o f a i r e r

o u t c o m e s . F o r i n s t an c e , t h e t e c h n o l o g y a i d s t h e u n d e r s t a n d i n g o f

what a person is alleging or explaining by visualization, such as

with the use of collaborative workspaces or by providing access

to knowledge resources, such as with the use of legal databases

a n d c a s e - m a n a g e m e n t s ys t e m s a n d t h e d i r e c t v i s u a l i z at i o n o f

402
VICTORIO M. Richard, op. cit., pp. 14, 15.
403
WANG Fangfei Faye, op. cit., p. 29.

231
t h a t k n o w l e d g e w i t h t h e h yp e r t e x t l i n k i n g o f t ex t w i t h l e g a l

a u t h o r i t y o r e v i d e n c e . 404

Furthermore, there is greater flexibility during the

resolution process. During the process the parties have the

ability to simultaneously conduct any necessary research by

g o i n g o n l i n e a n d v e r i f yi n g a n y r e c e i v e d i n f o r m a t i o n a n d s h a r e

the findings with the other parties; this way the parties are

b e t t e r i n f o r m e d a n d m o r e e q u i p p e d t o r e a c h a n a g r e e m e n t . 405

F u r t h e r m o r e , t h e p a r t i e s h a v e t h e a b i l i t y t o u s e i n f o rm a t i o n

processing tools such as electronic document management and

i n f o r m a t i o n - r e t r i e v a l s ys t e m s , w h i c h a l l o w s t h e m t o p r o c e s s

i n f o r m a t i o n f a s t e r , a n d m o r e e f f i c i e n t l y; r e d u c i n g d e l a y a n d

costs and making the process more effective than it would be in

t h e o f f l i n e w o rl d . 406 T h e f l e x i b i l i t y d u r i n g t h e p r o c e s s a l l o ws

third party neutrals to multitask and at the same time conduct

the joint discussion as well as separate discussions with each

p a r t y, i n a w a y s i m i l a r t o h a v i n g s e v e r a l d o c u m e n t s o p e n i n a

word processor; the ability to multitask increases the

e f f e c t i v e n e s s o f t h e p r o c e s s . 407

404
HÖRNLE Julia, op. cit., p. 88.
405
For instance “If a representation is made by one side about the cost of a component or the value
of an item, the other side can easily verify the cost over the Internet”. See RULE Colin, op. cit.,
pp. 65, 66.
406
HÖRNLE Julia, op. cit., p. 89.
407
RULE Colin, op. cit., p. 73.

232
S e c t i o n 2 : T h e ch a l l e n g e s o f O D R

ODR by substituting the real world with the virtual world

a l s o p r e s e n t s s e v e ra l n e w d i f f i c u l t i e s c o m p a r e d t o t r a d i t i o n a l

forms of alternative dispute resolution, mainly because ADR

c a n n o t e a s i l y b e r e p l i c a t e d o n l i n e , s i n c e C yb e r s p a c e i s n o t a n

a c t u a l r e p r e s e n t a t i o n o f t h e p h ys i c a l w o r l d . 408 O D R c h a n g e s t h e

way parties communicate with the use of IC T tools. As

evidenced, these changes lead to significant advantages of ODR

compared to traditional ADR. However, at the same time these

changes present d r a w b a c k s . 409 These drawbacks relate to

practical challenges of communication, challenges regarding

a u t h e n t i c i t y, data security and confidentiality and finally

challenges in enforcing ODR decisions.

A . P r a c t i c a l c h a l l e n g es

T h e p r a c t i c a l c h a l l en g e s f o r O D R a r e r e l a t e d t o t h e a b i l i t y

of the parties to participate in the online resolution just as they

408
EISEN Joel, op. cit., p. 1308.
409
“Many of the characteristics of ODR processes are double-edged, with both plusses and
minuses”. See RULE Colin, op. cit., p. 80.

233
w o u l d i n a n y o f t h e t r a d i t i o n a l m et h o d s . T h e s e c h a l l e n g e s

i n c l u d e m a t t e r s l i k e t h e a b i l i t y o f t h e p a r t i e s t o h a v e a cc e s s t o

the necessary equipment, the ability to develop the skills to

make proper use of that equipment and finally the ability of the

parties and practitioners to adjust to the changes resulting from

t h e t r a n s p o r t at i o n o f t h e r e s o l u t i o n t o t h e v i r t u a l w o rl d .

i. The literacy of participants

First of all, to take part in ODR, one must have access to a

c o m p u t e r a n d t h e In t e r n e t . A l t h o u g h i t b e c o m e s i n c r e a s i n g l y

easier to gain that access, “there are sharp differences among

c o u n t r i e s ” . 410 T h e u n fa m i l i a r i t y o f t h e p a r t i e s u s i n g t h e i n t er n et

and the disparity in the level of infrastructure of communication

and proper use of electronic equipment are few of the major

d i s a d v a n t a g e s o f OD R . E v e n a s yn c h r o n o u s c o m m u n i c a t i o n c a n

c a u s e f r u s t r a t i o n wh e n i n t e r n e t a v a i l ab i l i t y i s m o r e l i m i t e d . 411

The problem is also known as the digital divide. The fact that

o n l y a r e l a t i v e l y s m a l l p e r c e n t a g e o f t h e t o t al p o p u l a t i o n h a s

410
In 2001 about one-third of a billion people were already online. Almost one-half (147 million)
were from North-America, just over a quarter (92 million) European, and roughly 6 per cent (19
million) British. France had only 17% of its population using Internet against 26% for England.
See MANEVY Isabelle, op. cit., p. 33.
411
RULE Colin, op. cit., p. 68.

234
a c c e s s t o a n d u s e o f t h e In t e r n e t , u r g e d P r e s i d e n t C l i n t o n , i n h i s

2 0 0 0 S t at e o f t h e U n i o n A d d r e s s , t o e m p h a s i z e t h e n e e d t o c l o s e

the gap between the technology haves and have-nots, because the

N e t i s b e c o m i n g a m a j o r e n g i n e o f e co n o m i c g r o w t h a n d t h o s e

p e o p l e l e f t o u t o f t h e In t e r n e t r e v o l u t i o n s t a n d t o l o s e o u t o n t h e

b e n e f i t s o f a w i r e d n a t i o n . 412

Besides access to the equipment, participating in online

resolution also requires certain skills both for the parties and the

ODR practitioner. Parties must be able to navigate on the web

and participate in the online procedure. Third party neutrals

m u s t a l s o a d j u s t t h e i r s k i l l s t o b e b et t e r s u i t e d f o r t h e o n l i n e

environment. Of course ODR providers and practitioners have an

important role in delivering meaningful communications and

b u i l d i n g t r u s t , b u t i t r e q u i r e s d i f f e r e n t t r a i n i n g , f o r i n s t a n ce , t h e

interpretation of written communications, which although

d i f f e r e n t f r o m p h ys i c a l c o m m u n i c a t i o n s , i s a l s o p o s s i b l e .

M a n y O D R s ys t e m s m a y r e q u i r e p a r t i e s i n a d i s p u t e t o u s e

advanced technological platforms an d technology advances

d i f f e r e n t l y i n e v e r y c o u n t r y. 413 A n o n l i n e f o r m o f c o m m u n i c at i o n

m a y i n t i m i d at e s o m e u s e r s d u e t o i n c o m p l e t e k n o wl e d g e o n n e w

t e c h n o l o g i e s t h a t a re c o n s t a n t l y c h a n g i n g . T h e a r g u m e n t r e l a t e s

t o t h e a s ym m e t r y o f c o m p u t e r ex p e r t i s e a c c o r d i n g t o w h i c h t h e

412
VICTORIO M. Richard, op. cit., pp. 20, 21.
413
For instance, within the EU many people still use various speeds of internet connections.

235
p a r t y w h o i s m o r e co m f o r t a b l e w i t h c o m p u t e r t e c h n o l o g y w i l l b e

at an advantage as compared to the party with less computer

e x p e r t i s e . T h e d i s ad v a n t a g e d p a r t y c a n o v e r c o m e t h i s d i ff i c u l t y

by hiring an expert to take care of the technical details, but, this

w o u l d a d d c o n s i d e ra b l e c o s t s m a k i n g i t a l e s s d e s i r a b l e o p t i o n . 414

H o w e v e r , t h e a r g u m e n t t h a t O DR f a v o u r s t h o s e w h o a r e

familiar with computers is losing support since the number of

p e o p l e u s i n g c o m p u t e r s i s i n c r e a s i n g a n d e v e r yo n e b e c o m e s

m o r e i n t o u c h w i t h t e c h n o l o g y. T h i s a r g u m e n t a l s o r e l a t e s m o r e

t o o f f l i n e d i s p u t es t h a n d i s p u t e s t h a t a r o s e i n t h e o n l i n e

environment because in the latter cases it can be assumed that if

the parties had the adequate knowledge to take part in the online

transaction that gave rise to the dispute they can also take part

in ODR.

ii. Lack of face-to-face encounters

O n e o f t h e g r e a t e s t d r a w b a c k s o f O DR i s c o n s i d e r e d t h e

l a c k o f f a c e - t o - f a c e e n c o u n t e r s . It i s a r g u e d t h a t i n t r a d i t i o n al

ADR where the parties are p h ys i c a l l y present during the

414
VICTORIO M. Richard, op. cit., pp. 20, 21.

236
p r o c e d u r e , 415 t h e p r o c e s s i s m o r e e f f i c i e n t b e c a u s e t h e r e i s a

d i r e c t t w o - w a y i n f o r m a t i o n f l o w . 416 On t h e c o n t r a r y, o n l i n e

communication cannot fully replace face-to-face conversations

and therefore lacks the ability to promote important values of

the dispute resolution p r o c e s s . 417 In an online s e t t i n g,

c o m m u n i c a t i o n i s d i s t r i b u t e d i n t i m e a n d t h e a s yn c h r o n o u s

nature of some forms of online communication, such as the e-

m a i l , c a n c r e a t e a n u n c e r t a i n r h yt h m . A n e m a i l s e n t b y o n e p a r t y

m a y b e a n s w e r e d i n a f e w m i n u t e s , d a ys o r w e e k s w i t h o u t

knowing when.

Furthermore, the distance of online communication makes

it harder to maintain the attention and focus of the parties.

Whereas in traditional ADR the parties are in the same room

w h i c h m a k e s i t ea s i e r f o r t h e m t o f o c u s o n t h e r e s o l u t i o n

process, in ODR “it is very easy for parties to drop out or

s t o n e w a l l t h e o t h er s i d e a n d i t i s h a r d e r t o e n s u r e t h a t t h e

p a r t i e s s t a y e n g a g e d w i t h t h e p r o c e s s ”. 418 T h e d i s t a n c e o f o n l i n e

communication and the fact that parties are not in the same room

c r e a t e s c o n c e r n s a b o u t t h e i n a p p r o p r i a t e n e s s o f t h e In t e r n e t

m e d i u m . T h e c o n ce r n s r e l a t e t o t h e d i f f i c u l t y c o n t r o l l i n g t h e

c o n d i t i o n s o f t h e p r o c e d u r e , s i n c e t h e l a c k o f p h ys i c a l p r e s e n c e

415
KATCH Ethan, RIFKIN Janet and GAITENBY Alan, op. cit., pp. 705, 714.
416
The great paradox of ODR is that it requires an electronic distance for parties, while ADR is
usually a verbal dispute resolution and is designed to engage participants in a direct face to face
communication. See EISEN Joel, op. cit., p. 1310.
417
D' ZURILLA T. William, op. cit., p. 352.
418
RULE Colin, op. cit., p. 82.

237
i n t h e o n l i n e p r o c e s s c a n m a k e i t d i f fi c u l t f o r t h e p r a c t i t i o n e r t o

maintain effective control over the procedure; as well as the

inability to coordinate (especially in multiparty disputes), which

m a y c a u s e c o n f u s i o n . 419

But more importantly the concerns relate to the difficulty

of building rapport between the parties. In the online

e n v i r o n m e n t a n d es p e c i a l l y w h e n t h e p a r t i e s u s e n o n - v e r b a l ,

textual communication they tend to be more businesslike and

therefore building rapport between them often does not come as

n a t u r a l l y o n l i n e a s i t m i g h t f a c e - t o - f a c e . 420 F u r t h e r m o r e m a n y

ADR methods are considered valuable not just for the outcome

they produce but also for their transformative and reconciliatory

p o t e n t i al . For instance mediation can be about healing,

educating, informing, persuading, opening lines of interpersonal

communication and allowing parties to reexamine the dispute.

H o w e v e r , t h e l a c k o f p h ys i c a l p r e s e n c e h i n d e r s t h e e s t a b l i s h m e n t

o f t r u s t s i n c e e s t ab l i s h i n g t r u s t v i a w r i t i n g o v e r a n e l ec t r o n i c

distance is as effective as a therapist treating a patient by

r e a d i n g h e r j o u r n a l . 421 F u r t h e r m o r e , i t i s a r g u e d t h a t f a c e t o f a c e

interactions can result in a catharsis that is lacking in ODR,

since an element of the catharsis is not simply to tell one's

419
MANEVY Isabelle, op. cit., pp. 29- 34.
420
RULE Colin, op. cit., p. 84.
421
VICTORIO M. Richard, op. cit., pp. 15- 17.

238
s t o r y, b u t a l s o t o h a v e a n e f f e c t o n t h e l i s t e n e r , b u t i n OD R t h e

e l e c t r o n i c m e d i u m cr e a t e s d i s t a n c e f r o m t h e l i s t e n e r .

With many forms of online communication, mostly written

c o m m u n i c a t i o n s u ch a s t h e e m a i l , p a rt i e s c a n n o t p a r t i c i p a t e a t

the same time, making them unable to react instantly or ask for

c l a r i f i c a t i o n ; 422 i n t e r f e r e n c e w i t h f o l l o w- u p q u e s t i o n s b e c o m es

h a r d e r a s t h e m a t t e r i s i n g e n e r a l m o r e t e r s e l y p r o m o t e d . In s t e a d

c o m m u n i c a t i o n i s b a s e d o n l a r g e r , m o r e c o m p l e x m es s a g e s

without the ability to interrupt the other party and provide

v e r b a l a f f i r m a t i o n o f t h e i r u n d e r s t a n d i n g . 423 F u r t h e r m o r e , t h e

f a c t t h a t c o m m u n i ca t i o n i n O D R i s r e c o r d e d a n d a r c h i v e d c a n

hinder the resolution of the dispute if at any point during the

p r o c e s s t h e r e i s h o s t i l i t y b e t w e e n t h e p a r t i e s a n d ex c h an g e o f

i n s u l t s ; t h e s e i n s u l t s w i l l a l s o b e a r c h i v e d a n d r e c o r d e d an d w i l l

remain a constant reminder which may not allow parties to move

o n t o w a r d s a r e s o l u t i o n . 424 T h i s i s t r u er e s p e c i a l l y f o r t e x t u al

c o m m u n i c a t i o n ; a s t h e La t i n p r o v e r b g o e s “ V e r b a v o l a n t , s c r i p t a

m a n e n t ” w h i c h m e a n s " s p o k e n w o r d s f l y a w a y, w r i t t e n w o r d s

remain".

422
KRIVIS Jeffrey, Taking mediation online: how to adapt your practice, paper presented at the
ABA Section on Dispute Resolution Conference, Seattle, April 4, 2002, p. 27.
423
MORRIS W. Michael, NADLER Janice, KURTZBERG Terri, & THOMPSON Leigh,
Schmooze or lose: Social friction and lubrication in e-mail negotiation, Group Dynamics: Theory,
Research, and Practice, vol. 6, 2002, pp. 89-100.
424
RULE Colin, op. cit., pp. 80, 81.

239
Body language, tone of voice and facial expressions which

are important components and can give an extra quality to

communications, are absent in some forms of online

c o m m u n i c a t i o n . 425 T h e r e p l a c e m e n t o f fa c e t o f a c e c o n t a c t b y

means of communication such as the email is difficult to give

a n y w e i g h t t o e m o t i o n . It i s h a r d e r t o u s e “ i n t u i t i v e c u e s o f b o d y

l a n g u a g e , f a c i a l e x p r e s s i o n s a n d v e r b a l t o n a l i t y, a s c yb e r s p a c e

c u r r e n t l y c o m e s w i t h o u t a l l f i v e s e n s e s a t t a c h e d ” . 426 T h e a b s e n ce

of non-verbal cues makes it easier to perceive messages out of

c o n t e x t a n d c r e a t e m i s u n d e r s t a n d i n g s . 427

Misunderstandings may occur because one party may not

e x p r e s s w e l l i n wr i t i n g a n d t h e m e s s a g e m a y b e u n d e r s t o o d

under a different intend or because the other party misreads the

actual intend, no matter how well written, or finally

misunderstandings may occur because of the practitioner’s

inability to filter the messages between the communications with

the parties. Non-verbal communication may work against the

development of trust in online communication because such an

absence develops gaps in communication and creates an

425
GIBBONS Llewellyn Joseph, KENNEDY Robin & GIBBS Michael John, Cyber-mediation:
Computer-mediated Communications medium massaging the message, New Mexico Law Review,
vol. 32, 2002, pp. 43- 45.
426
EISEN Joel, op. cit., p. 1308.
427
However, “the loss of non-verbal information may be compensated by the increased comfort
that participants feel because they are in their own homes. In the case of videoconferencing
comfort can also bring patterns of interaction that could not otherwise be seen”. See GILKEY L.
Sonia, CAREY Joanne & WADE Shari, Families in crisis: Considerations for the use of web-
based treatment models in family therapy, Families in Society: The Journal of Contemporary
Social Services, vol. 90, 2009, pp. 37- 45.

240
a t m o s p h e r e o f u n c er t a i n t y. T h i s a m b i g u i t y l e a d s p a r t i e s t o o f t e n

ignore each other and possibly assume malice.

Furthermore, although the ability to conduct

s i m u l t a n e o u s l y r e s e a r c h o n l i n e al l o w s p a r t i e s t o v e r i f y m u c h o f

t h e i n f o r m a t i o n ex c h a n g e d , h o w e v e r , i n o n l i n e c o m m u n i c a t i o n

parties are more likely to lie to each other because lies can be

harder to detect. The distance of online communication and

e v e n m o r e t h e u s e o f t e x t u a l c o m m u n i ca t i o n m a k e i t e a s i e r t o l i e

than in offline communication, where nonverbal cues may help

d e t e c t a l i e . 428 Li e s c a n c r e a t e d i s t r u s t b e t w e e n p a r t i e s a n d h i n d er

e f f e c t i v e c o m m u n i ca t i o n .

For all these reasons, the lack of F2F communication was

until recently considered the greatest drawback of ODR to the

extent that it was considered the main reason why dispute

resolution could not work in the online environment. However,

t h i s a s s u m p t i o n h as b e e n p r o v e n w ro n g b y s u c c e s s f u l O D R

providers, such as the “UDRP” and “ S q u a r e T r a d e ” . 429

Furthermore, these proposed difficulties relate more closely to

o l d e r a n d o u t - d a t ed f o r m s o f o n l i n e c o m m u n i c a t i o n . N e w e r

forms like videoconferencing and other online technologies that

are developed with an extraordinary rate compensate for the lack

428
“If someone looks you in the eye and says, ‘Yes, I sent the check’, most people believe that
they will be able to tell if that person is being truthful. In an online interaction, that person could
be laughing while he typed, ‘Yes, I sent the check’, and the other side would never know”. See
RULE Colin, op. cit., pp. 82, 83.
429
CORTES Pablo, op. cit., pp. 83, 84.

241
of face to face contact. Until recently the objection of the lack

of face-to-face contact was accompanied by the inability of

technology to provide v i d e o c o n f e r e n c i n g . 430 T o d a y, w h en

i n t e r n e t s p e e d h a s r e a c h e d u n p r e c e d e n t e d h e i g h t s a n d c am e r a s

a n d s o f t w a r e a r e ea s i l y a c c e s s i b l e a n d ex t r e m e l y e a s y t o u s e ,

videoconferencing seems as an obvious solution to the problem.

F u r t h e r m o r e , O D R c a n p r o v i d e v a r i o u s IC T t o o l s t o f a c i l i t a t e

e f f e c t i v e c o m m u n i ca t i o n . E v e n t e x t u al c o m m u n i c a t i o n m a y n o t

be consisted simply by the use of words but also by the use of

i m a g e s , g r a p h i c s , s h a p e s , s ym b o l s a n d e v e n c o l o r s c o u l d b e u s e d

to represent emotions, creating a unique “screen-to-screen”

c o m m u n i c a t i o n . 431

On the other hand, one could also argue that face-to-face

communications t en d to favour those who are p h ys i c a l l y

a t t r a c t i v e a n d b e t t er a r t i c u l a t e d , a n d i t c a n c r e a t e b i a s i n t e r m s

o f r e l i g i o n , s e x , n a t i o n a l i t y o r l o o k s . 432 In t h i s c a s e , c e r t a i n

forms of ODR may provide a solution for people who feel more

comfortable avoiding face to face communication and otherwise

would not reach out to alternative dispute r e s o l u t i o n . 433

F u r t h e r m o r e , F 2 F c o m m u n i c a t i o n i s n o t a l w a ys n e c e s s a r y o r

practical to resolve online disputes and lacks other advantages

430
BEAL Bruce Leonard, “Online Mediation: Has its Time Come?”, Ohio State Journal on
dispute resolution, vol. 15, 2000, p. 736.
431
HÖRNLE Julia, op. cit., p. 80.
432
GIBBONS Llewellyn Joseph, KENNEDY Robin & GIBBS Michael John, op. cit., p. 44.
433
RULE Colin, op. cit., p. 68.

242
like the ability of calming down the parties which is an

important advantage of other forms of communication such as

a s yn c h r o n o u s c o m m u n i c a t i o n v i a e -m a i l . F i n al l y, a s i n t h e

offline world, also in the online world the effectiveness of the

r e s o l u t i o n p r o c e s s d e p e n d s o n t h e w ay t h e a v a i l a b l e t o o l s a r e

used by the parties and the provider; the process will be

e f f e c t i v e i f t h e t o o l s a r e u s e d a p p r o p r i a t e l y a n d c o r r e c t l y, b u t i f

mishandled can create new problems and challenges.

B . A u t h e n t i ci t y , d a t a s e c u r i t y a n d c o n f i d en t i a l i t y

Some of the major concern about ODR have to do with the

authenticity of identities and documents, the security of

electronic communication, during the exchange of documents


434
and data (for instance, through the exchange of e-mails) or

d u r i n g d i s c u s s i o n s c o n d u c t e d t h r o u g h v i d e o c o n f e r e n c e , 435 a n d t h e

c o n f i d e n t i a l i t y o f t h e p r o c e d u r e . T h e m a i n c o n c e r n i s t h at u s e r s

c a n n o t b e s u r e t h at t h e d a t a s e n t a n d r e c e i v e d i n t h e v i r t u a l

world, will not be tampered with or become accessible to

434
CHOSH K. Anup, E-Commerce Security: Weak Links, Best Defenses, (John Wiley and sons),
1999, p. 98.
435
ZEKOS I. Georgios, Issues of Intellectual Property in Cyberspace, Journal of World
Intellectual Property, vol. 5, 2002, p. 233.

243
u n w e l c o m e e ye s . O D R p a r t i e s n e e d t o b e a s s u r e d t h a t t h e i r

c o m m u n i c a t i o n s a r e p r o t e c t e d f r o m e x t e r n a l p a r t i e s t o e n co u r a g e

open participation.

As far as the authenticity goes, contrary to traditional

A D R w h e r e m o s t i n t e r a c t i o n s o c c u r i n p e r s o n , i n O DR i t m i g h t

b e d i f f i c u l t b e c er t a i n a b o u t t h e i d e n t i t y o f a p e r s o n , f o r

e x a m p l e t h e s e n d e r o f a n e - m a i l . In t e r n e t u s e r s m a y u s e d i f f e r e n t

n i c k n a m e s ( p s e u d o n ym s ) o r s i m p l y d i s g u i s e t h e i r i d e n t i t y. In

c yb e r s p a c e , a s t h e s a yi n g g o e s , " n o o n e k n o w s yo u ' r e a d o g " . F o r

i n s t a n c e , t h i s r e l a t e s t o In t e r n e t r o m a n c e s s t a r t e d i n c h a t r o o m s

and carried out over e-mail, in which one participant often finds

out the other is not the woman of his dreams, but possibly not

e v e n h i s s e x o f p r e f e r e n c e . 436 H o w e v e r , t e c h n o l o g y h a s m a n a g e d

t o f i n d s o l u t i o n s b as e d o n a u t h e n t i c a t i o n s o f t w a r e s u c h a s d i g i t a l

s i g n a t u r e s , “ w h i c h a r e c o d e s t h a t a r e e m b e d d e d i n a m e s s ag e t h a t

c a n b e e m p l o ye d t o a u t h e n t i c a t e i t s o r i g i n ” . 437 O D R p r o v i d ers

a n d p r a c t i t i o n e r s m u s t t a k e c e r t a i n p r ec a u t i o n s a n d s a f e g u a r d s t o

ensure the parties are who they say they are, and that the ideas

discussed in the virtual forum are protected from malicious

disclosure.

For an ODR procedure to be successful, confidentiality is

e s s e n t i a l . As p r e v i o u s l y s e e n , c o n f i d e n t i a l i t y i s o n e o f t h e

436
VICTORIO M. Richard, op. cit., pp. 18- 20.
437
MANEVY Isabelle, op. cit., p. 31.

244
g r e a t e s t a d v a n t a g e s t h a t m a k e al t e rn a t i v e d i s p u t e r e s o l u t i o n

more attractive than traditional dispute resolution, i.e. litigation.

Where litigation is a public affair, settlement resulting from

A D R i s p r i v at e a n d c o m p l e t e l y c o n f i d e n t i a l a n d e n s u ri n g t h i s

s a m e l e v e l o f c o n f i d e n t i a l i t y i n c yb e r s p a c e i s e s s e n t i a l t o O D R ’ s

success.

During the online communication the ODR provider

creates digital files containing information. In f o r m a t i o n

archiving is one of the advantages of ODR and a permanent

record of the session helps the parties document each stage of

the process leading to the settlement of each issue and the

o v e r a l l d i s p u t e . 438 Ho w e v e r , t h i s i n f o r m a t i o n m u s t b e p r o t ec t ed

f r o m t h i r d i n t r u d e rs a n d d el e t e d f o r d e f a u l t a t t h e e n d o f t h e

p r o c e s s , e x c e p t p e r h a p s s o m e n o n - p e rs o n a l d a t a f o r s t a t i s t i c al

a n a l ys i s . Otherwise, parties may be afraid of sharing

c o n f i d e n t i a l i n f o r m a t i o n e s p e c i a l l y i n a t e x t u a l f o r m , 439 i f t h e re

a r e n o g u a r a n t i e s o f p r i v a c y a n d c o n f i d e n t i a l i t y. T h e a b s e n c e o f

s u c h a s s u r a n c e s m ay p r e v e n t t h e d e v e l o p m e n t o f h o n e s t o n l i n e

438
“To transfer the data over the Internet there are numerous temporary copies made along the
way. This is inherent to the nature of the Internet. It is necessary to make copies on the routers
when transferring data from one computer to another, to make copies when downloading or
uploading Information. In Cyberspace communication takes place through constant copying.
When the confidentiality has been guaranteed by means of encryption, the fact that the Internet is
built up from copies also has its advantages. The complete written file is accessible to both parties
and the mediator at all times to check certain details or to see how things are. It is not necessary to
take notes because everything is already written down”. See HEUVEL V. D. Esther, op. cit., p. 15.
439
“Many people have had the experience of an email written months (if not years) before coming
back and later embarrassing them”. See RULE Colin, op. cit., p. 81.

245
e x c h a n g e s i n C yb e r s p a c e . 440 W h e r e a s i n t r a d i t i o n a l , o f f l i n e A DR

“ i t i s m u c h h a r d e r t o s u r r e p t i t i o u s l y c a p t u r e c o m m u n i ca t i o n s

through the use of voice recording devices or similar


441
techniques”, in ODR, concerns about privacy and

confidentiality of the communication may seriously discourage

p o t e n t i al p a r t i c i p an t s . T h e r e f o r e , i t m u s t n o t b e p o s s i b l e f o r

unknown third parties to intercept messages, or for the parties to

tamper with the content of the messages.

Another prerequisite for ODR is the security of

communications. “C o m p u t e r viruses and worms lead us to

q u e s t i o n t h e v a l u e a n d r e l i a b i l i t y o f t h e o n l i n e e n v i r o n m e n t . ” 442

One must keep in mind that no communication method is

absolutely secure and even paper documents can be intercepted,

copied or otherwise compromised. Furthermore, technology has

c o n s i d e r a b l y i m p r o v e d o v e r t h e p a s t s e v e r a l ye a r s p r o d u c i n g

security mechanisms to ensure the security and confidentiality of

e x c h a n g e s . 443

440
GOODMAN W. Joseph, The Pros And Cons of Online Dispute Resolution: An Assessment of
Cyber –Mediation Websites, Duke Law and Technology Review, 2003, pp. 10- 13.
441
RULE Colin, op. cit., pp. 81, 82.
442
LARSON A. David, Online Dispute Resolution: Technology Takes a Place at the Table,
Negotiation Journal, vol. 20, 2004, p. 131.
443
“Protocols such as SSL, S-HTTP and SET that ensure the confidentiality and authenticity of
exchanges by encrypting the data; firewalls that make it possible to screen the flow of information
between an internal network and a public network and thereby neutralize attempts to penetrate the
internal system from the public network; access to an ODR platform that is protected by a
password, and managed and protected by the service provider; internal messaging tools so as to
avoid the use of unprotected email, and the Secure Multipurpose Internet Mail Exchange Protocol
(S/MIME), which makes it possible to authenticate the origin of every email while ensuring the

246
One way to provide security is through the use of web-

page communication instead of the lesser secure e-mail

communication, since in web-page communication parties are

provided with a secure password that limits u n a u t h o r i z ed

a c c e s s . 444 A n o t h e r w a y c u r r e n t l y u s e d t o g r e a t e x t e n d t o p r o v i d e

c o n f i d e n t i a l i t y a n d d a t a s e c u r i t y i s e n c r yp t i o n . 445 E n c r yp t i o n

allows the parties and ODR provider to communicate and

exchange information without risking a breach of confidentiality

b y u n a u t h o r i z e d p a rt i e s . 446 T h e m o s t c o m m o n e n c r yp t i o n m e t h o d s

a r e t h e u s e o f “ H yp e r T e x t T r a n s f e r P r o t o c o l ” ( h t t p ), p l u s

“ S e c u r e S o c k e t La ye r ” ( S S L) w h i c h i s i n d i c a t e d b y a d o m a i n

n a m e p r e c e d e d b y “ h t t p s ” a n d d i s p l a yi n g a l o c k s ym b o l i n t h e

c o r n e r o f t h e u s e r ’ s s c r e e n , a n d t h e “ P u b l i c K e y In f r a s t r u c t u r e ”

( P K I) e n c r yp t i o n s ys t e m , w h i c h i s c o m p r i s e d o f a p u b l i c k e y

(held by the client and server) and a private key (held

exclusively by the client) so that only clients can decode the

confidentiality and integrity of its content, thereby making it very difficult for the sender to
repudiate it or the addressee or a third party to forge it (electronic signature can also serve the
same purposes)”. See BENYEKHLEF Karim and GELINAS Fabien, op. cit., p. 84. For instance,
“Cyber Settle blind-bidding process encrypts all communications using a 128-bit SSL and Smart
Settle uses OpenSSL algorithms with a 168-bit triple-DES encryption algorithm”. See PONTE M.
Lucille and CAVENAGH D. Thomas, op. cit., p. 41.
444
“However, there is no foolproof way to prevent parties from copying information off of their
screen for later use. Even if the parties are prevented from cutting and pasting text, they can still
take a screen capture of the text.” See RULE Colin, op. cit., pp. 81, 82.
445
“Encryption is the automated process of making data inaccessible to unauthorized people by
means of an algorithm and a key”. See HEUVEL V. D. Esther, op. cit., p. 15.
446
RABINOVICH-EINY Orna, Going Public: Diminishing Privacy in Dispute Resolution,
Virginia
Journal of Law and Technology, vol. 7, 2002, p. 43.

247
i n f o r m a t i o n u s i n g b o t h k e ys . 447 In E u r o p e , a l t h o u g h t h e r e a r e i s

s t i l l d r a w b a c k s w i t h t h e u s e o f e n c r yp t i o n , i t i s a r g u e d t h a t E U

d a t a p r o t e c t i o n l a w r e q u i r e s t h e u s e o f e n c r yp t i o n i n o r d e r t o

e n s u r e t h e c o n f i d e n t i a l i t y o f t h e p r o c e d u r e . 448 In c o n c l u s i o n ,

t h e r e a r e c o n c e r n s a b o u t s e c u r i t y, c o n f i d e n t i a l i t y a n d p r i v a c y o f

online communication, but there are also solutions to the

c h a l l e n g e s . It i s e s s e n t i a l f o r O D R p r o v i d e s t o t a k e al l t h e

necessary steps to ensure the safeguarding of online

c o m m u n i c a t i o n . 449

C. Enforcement of ODR decisions and S e l f - e n f o r c e m en t

mechanisms

One of the major issues related to ODR is the one

concerning the compliance of the parties with the result of the

447
CORTES Pablo, op. cit., pp. 84, 85.
448
For instance, “In France, encryption was long only used by the military. Until 1996, French law
was restrictive regarding the use of encryptions, it has been relaxed but after a certain level of
encryptions, user are submitted to an obligation of declaration or prior authorization if the
technology used exceeds a certain level of bits. However, restrictions on the use of encryption
technologies should be eliminated due to the implementation of the EU Directive on a Community
Framework for Digital Signatures which prevents all EU Member States from not recognizing the
validity of an electronic writing. In France, it was done by the law n°2000-230 of March 13 2000
and the Décret d’application of March 31 2001. In the UK, in May 2001, the government was still
consulting for the implementation of the e-sign directive”. See MANEVY Isabelle, op. cit., pp. 30,
31.
449
RULE Colin, op. cit., pp. 81, 82.

248
r e s o l u t i o n p r o c e d u re . H o w c a n c o m p l i a n c e w i t h t h e o u t c o m e o f

t h e d i s p u t e r e s o l u t i o n p r o c e s s b e e n s u r e d ? T h e p r o b l e m b ec o m e s

even greater in e-commerce disputes and in general in cross-

b o r d e r d i s p u t e s . F i r s t , a d i s t i n c t i o n m u s t b e m a d e b e t w ee n t h e

m e t h o d s o f O D R , r el a t i n g t o t h e e f f e c t o f t h e p r o c e s s , t o b i n d i n g

a n d n o n - b i n d i n g O D R m e t h o d s . In t h e f o r m e r c a t e g o r y t h e r e i s

binding online arbitration, which can produce a binding arbitral

award and secure the compliance of the losing party and the

enforcement of the award. Especially for cross-border disputes,

arbitral awards are usually easier to enforce, because of the

existing international treaties; the winning party has only to

i n i t i a t e e n f o r c e m e n t p r o c e e d i n g s b y a p p l yi n g f o r a n e x e q u at u r. 450

However, at this point binding online arbitration will not be

examined since this task will take place in the relevant section.

In t h e l a t t e r c a t e g o r y o f n o n - b i n d i n g O D R m e t h o d s t h e r e

a r e m a i n l y o n l i n e n e g o t i a t i o n , o n l i n e m e d i a t i o n a n d n o n -b i n d i n g

a r b i t r a t i o n . T h e s e m e t h o d s , a l t h o u g h p r e s e n t a l e s s e r d eg r e e o f

f o r m a l i t y, u n f o r t u n a t e l y a l s o p r e s e n t a s i g n i f i c a n t p r o b l e m ,

w h i c h i s t h e e n f o r c e m e n t o f t h e i r o u t co m e s . A m a j o r i s s u e w i t h

all ODR methods except binding arbitration is that these

mechanisms may prove ineffective, when parties do not comply

voluntarily with the outcome, which is not binding. There is of

c o u r s e a m a j o ri t y o f c a s e s w h e r e i t i s i n b o t h p a r t i e s ’ b e s t

450
KAUFMANN-KOHLER Gabrielle, op. cit., pp. 453, 454.

249
interest to resolve the dispute in a final way and without further

complications. But, there are other cases where one party might

not be willing to comply voluntarily with the outcome of the

p r o c e s s . E v e n w h en p a r t i e s i n i t i a l l y v o l u n t a r i l y a g r e e o n a

s e t t l e m e n t , c o m p l i an c e m a y b e e x p e c t e d , b u t i t c a n n o t b e a l w a ys

assured.

In n o n - b i n d i n g O D R m e t h o d s t h e o u t co m e o f t h e p r o c e d u re

c a n b e n o n - b i n d i n g a t a l l , i n w h i c h ca s e w i t h o u t t h e v o l u n t a r y

c o m p l i a n c e o f t h e p a r t i e s , t h e r e i s n o t h i n g m o r e t o b e d o n e. B u t ,

i n m o s t c a s e s t h e o u t c o m e c a n b e c o m e b i n d i n g a s a c o n t ra c t , o r

o t h e r w i s e k n o w n a s a b i n d i n g s e t t l e m e n t a g r e e m e n t . 451 Y e t , a

b i n d i n g s e t t l e m e n t a g r e e m e n t d o e s n o t r e a l l y s o l v e t h e p ro b l e m

because again without the voluntary compliance of the parties,

the only way to enforce the outcome would be to go to court.

H o w e v e r , t h i s s o l u t i o n l e a d s t o t h e s am e j u d i c i a l r o u t e t h a t t h e

p a r t i e s h o p e d t o av o i d , d e f e a t i n g t h e a c t u a l p u r p o s e o f O D R .

W i t h o u t v o l u n t a r y c o m p l i a n c e , t h e wi n n i n g p a r t y h a s t o g o t o

court and start a new court action, not simply enforcement

proceedings, as in the case of binding awards. However, this

process is highly time and cost consuming, w h i ch may

451
“This type of enforcement mechanism (a binding settlement agreement) could be implemented
either unilaterally e.g. only the merchant could agree to be bound by the result of the ODR
procedure which would be easier to enforce by court because it would be protective the consumer.
It could be implemented bilaterally and be binding on both parties. Generally speaking such are
binding in US, UK and France as contracts, which can be sued upon under national law if they are
not complied with. In the European Union, the resulting judgment could then be enforced in all
other Member States under the Brussels Convention”. See MANEVY Isabelle, op. cit., p.29.

250
discourage the winning party from seeking enforcement,

especially in low value disputes which is the common case in e-

commerce. Furthermore, in cross border disputes the problem is

e v e n g r e a t e r d u e t o h i g h e r c o s t s a n d c o m p l ex j u r i s d i ct i o n a l

i s s u e s . In c r o s s - b o r d e r d i s p u t e s , d u e t o t h e g r e a t e r e x p e n s e a n d

legal complexities, “the winning party will have only limited

incentives to go to court, and the losing party will also have

only limited incentive to obey the contract, because it is

u n l i k e l y t o b e c o m e e n f o r c e a b l e ” . 452 C o n s e q u e n t l y, t h e v o l u n t a r y

nature of non-binding ODR methods when combined with

unwillingness of the losing party to comply can create an

absence of enforceability for ODR settlements wi t h no

practically available solution. For these reasons, ODR’s lack of

enforcement mechanisms is c o n s i d er e d one of its greatest

shortcomings.

O n e p r o p o s i t i o n t o o v e r c o m e t h i s p r o b l e m i s t o s u p p o rt

e x t r a - j u d i c i a l O DR b y c o u r t s w h i c h w i l l o p e r a t e a s s e co n d a r y

entities and enforce outcomes reached through ODR methods.

One such example would be the online appeal processes

proposed for the UDRP; however, “these proposals faced

c r i t i c i s m s b a s e d o n p e r c e i v e d d e l a ys , e x p e n s e s , e a s e o f a b u s e

a n d l a c k o f fi n a l i t y” . 453 C o n s e q u e n t l y, i n O D R o u t c o m e s a r e

452
SCHULTZ Thomas, 'Online Arbitration: Binding or Non-Binding?' ADR Online Monthly,
2003, p. 1.
453
CORTES Pablo, op. cit., pp. 204, 206.

251
enforced without recourse to the courts, through what is known

a s s e l f - e x e c u t i o n o r o t h e r w i s e a s s e l f -e n f o r c e m e n t m e c h a n i s m s .

Under circumstances, these mechanisms can give the outcome of

a non-binding ODR method, binding force.

T h e r e a r e b a s i c a l l y t h r e e w a ys b y w h i c h a d e c i s i o n a r i s i n g

out of a voluntary ODR procedure can be enforced without the

need for a court decision but instead with low costs and

c o n v e n i e n c e . E a c h o f t h e s e w a ys r e q u i r e s t h a t t h e O D R p ro v i d e r

has exclusive control over one of the three corresponding things.

The provider may have technical control, financial control or

c o n t r o l o v e r r e p u t at i o n . S e l f - e n f o r c e m e n t c a n b e d i v i d ed i n t o

two categories; direct self-enforcement and indirect self-

enforcement. In direct self-enforcement the ODR provider

controls the resources at play and particularly has either

technical (UDRP) or financial control (escrow, chargebacks),

whereas in indirect self-enforcement, incentives are created for

t h e l o s i n g p a r t y t o c o m p l y v o l u n t a r i l y, f o r ex a m p l e t h r o u g h t h e

u s e o f “ t r u s t m a r k s , r e p u t a t i o n m a n a g e m e n t a n d r a t i n g s ys t e m s ,

publicly accessible reports, ex c l u s i o n of participants from

m a r k e t p l a c e s , a n d p a ym e n t s f o r d e l a y i n p e r f o r m a n c e ” . 454 T h e

e x a m i n a t i o n o f t h es e m e c h a n i s m s a t t h i s p o i n t o f t h e t h e s i s i s

essential because these mechanisms, in more than one role, will

454
WANG Fangfei Faye, op. cit., pp. 83, 84.

252
b e a n i n t e g r a l p a r t o f t h e p r o p o s e d O DR s ys t e m t h a t f o l l o w s i n

t h e s e c o n d p a r t o f t h i s t h es i s .

i. Self-enforcement mechanisms based on Technical

control

ODR decisions can be made self-enforcing in few cases

when the ODR provider has technical control. The most

r e p r e s e n t a t i v e e x am p l e i n t h i s c a s e i s t h e s e l f - e n f o r c e m e n t

m e c h a n i s m a p p l i e d b y t h e U D R P p r o c ed u r e f o r t h e r e s o l u t i o n o f

domain name disputes. However, this is a particular situation

w h e r e t h e IC A N N h a s u n i q u e c o n t r o l o v e r d o m a i n n a m e s a n d t h e

power to bind registrants to cancel or transfer domain names

d e p e n d i n g o n t h e o u t c o m e o f t h e d i s p u t e . 455 “ T e n d a ys a f t e r t h e

decision by the panel of experts, the domain name is either

c a n c e l l e d o r t r a n s f e r r e d t o t h e w i n n i n g p a r t y, b y t h e r e g i s t r a r

t h a t r e g i s t e r e d t h e d o m a i n n a m e a n d ex e r c i s e s t e c h n i c a l c o n t r o l

455
“The success of the UDRP as an ODR model for domain names rests on getting disputants to
use the UDRP and its efficient self-enforcement mechanism. This self-enforcement mechanism
may not be available for some types of disputes, such as mainstream disputes arising out of a
transaction between an online vendor and a buyer; except if there is the collaboration of entities
that could enforce the outcome, for instance, the payment service (e.g. VISA or PayPal) or if a
dispute arouse on a third party platform or other intermediary, such as disputes arising out of
market places (e.g. eBay) or disputes originated from information posted on mass collaboration
sites (e.g. Facebook and Wikipedia)”. See CORTES Pablo, op. cit., pp. 167, 168.

253
o v e r t h e r e g i s t r a t i o n ” . 456 T h e r e i s a n ex ce p t i o n i n t h e c a s e l e g a l

proceeding have been initiated, but the high cost of litigation

and the short time period make self-enforcement the majority

r u l e . 457 T h e U D R P ex a m p l e w i l l b e e x a m i n e d f u r t h e r i n t h e

second part of the thesis.

ii. Self-enforcement mechanisms based on Reputation

incentives

In C 2 C a n d B 2 C d i s p u t e s o n e e f f e c t i v e w a y t o e n s u r e t h e

compliance of the parties with the outcome of the ODR process

i s b a s e d o n t h e r e p u t a t i o n o f i n d i v i d u a l b u ye r s o r s e l l e r s o r

c o m p a n i e s . B a s i c a l l y, t h e r e p u t a t i o n o f u s e r s i s l i n k e d w i t h t h e i r

performance and the compliance to both the ODR procedure and

i t s r e s u l t , s o t h at f a i l u r e t o c o m p l y w o u l d h a r m t h e i r r e p u t a t i o n .

This in turn would hamper the user’s trustworthiness and

consequently the sales in the virtual marketplace. Therefore,

h o l d i n g a g o o d r e p u t a t i o n i s a n i n c e n t i v e t o c o m p l y.

456
KAUFMANN-KOHLER Gabrielle, op. cit., pp. 453, 454
457
CORTES Pablo, op. cit., p. 82.

254
1. Feedback systems

F e e d b a c k s ys t e m s p r o v i d e i n f o rm a t i o n a b o u t t h e r e l i a b i l i t y

o f o n l i n e u s e r s b as e d o n ex p e r i e n c e a n d c o m m e n t s o f fo r m e r

u s e r s f r o m p r e v i o u s t r a n s a c t i o n s . Th e y a r e b e i n g u s e d m o s t l y b y

online auction sites where there is no other viable way for users

to adequately assess each other. Ratings allow transaction

parties “who do not know each other to see a record of the other

s i d e ’ s p o s i t i v e o r n e g a t i v e f e e d b a c k f r o m p r i o r t r a n s a c t i o n s ”. 458

Positive feedbacks increase the users’ confidence and the desire

to acquire positive feedbacks facilitates compliance. This was

c l e a r l y s h o w n b y e - b a y, w h e r e c o m p l i a n c e w i t h t h e o u t co m e o f

the ODR process is ensured to a high extent because of what has

b e c o m e k n o w n a s t h e “ e B a y La w ” . E - B a y u s e s a F e e d b a c k

s ys t e m , 459 w h i c h i n c en t i v i z e s m a r k e t p a r t i c i p a n t s t o b e o n t h e i r

b e s t b e h a v i o r . W h en e v e r o n e o f t h e p a r t i e s d o e s n o t c o m p l y, i t

h a s a s a r e s u l t a n e g a t i v e f e e d b a c k , w h i c h i n t u r n h u rt s t h at

p a r t y’ s r e p u t a t i o n a n d h a s a n e g a t i v e e f f e c t i n t h e a b i l i t y o f

o t h e r s t o t r u s t a n d s e l e c t t h a t p a r t y f o r f u t u r e t r a n s ac t i o n s .

Therefore, the losing party feels compelled to comply in order

458
RULE Colin, op. cit., p. 102.
459
“Currently eBay houses more than four billion feedback ratings left by transaction participants
for each other… EBay assigns parties a “star” based on how many positive reviews they have
received. For example, if the seller has 10 to 49 positive ratings, they get a yellow star and if the
seller has 50 to 99 positive ratings they get a blue star. A seller with a million or more positive
ratings is entitled to a ‘shooting silver star’”. See DUCA D. Louis, RULE Colin, LOEBL Zbynek,
op. cit., pp. 66, 67, 68.

255
n o t t o j e o p a r d i z e i t s p o s i t i o n i n t h e e B a y c o m m u n i t y. In a

similar fashion wo r k the compliance incentives known as

“ b l a c k l i s t s ” . 460 A s o n e c a n g u e s s b y t h i s m e c h a n i s m ’ s s e l f-

e v i d e n t n a m e , n a m e s p u b l i s h e d i n a b l a c k l i s t a r e p a r t i es t h at

failed to comply with dispute resolution decisions. This allows

users to inform themselves about those users and avoid

transacting with them and consequently the fear of being

blacklisted compels compliance.

2. Trustmarks

Particularly in the case of B2C disputes, a way to ensure

the compliance of the companies is through affiliate programs.

T h e u s e o f t r u s t m ar k s a n d s e a l s p r o v i d e s w e b t r a d e r s w i t h t h e

n e c e s s a r y i n c e n t i v e s t o c o m p l y. “ A b u s i n e s s s i t e g r a n t e d a

Trustmark certifies that it complies with a certain code of

conduct that provides for ODR and for compliance with the

r e s u l t i n g d e c i s i o n s ” . 461 If a c o m p a n y d i s p l a ys t h e T r u s t m a r k o r

460
For instance “The Consumer Complaint Board in Denmark states that 80 per cent of its
decisions are voluntarily complied with by the businesses. The remaining decisions are published
in a blacklist of defaulters on the consumer agency’s website. This strategy of ‘naming and
shaming’ has led to eventual compliance with an additional 30 per cent of the remaining
decisions”. See CORTES Pablo, op. cit., pp. 82, 83.
461
KAUFMANN-KOHLER Gabrielle, op. cit., pp. 453, 454.

256
the seal of an ODR provider, it means that the company in case a

d i s p u t e a r i s e s w i l l a g r e e t o r e s o l v e t h e d i s p u t e t h r o u gh t h a t

provider and consequently will comply with the outcome of the

p r o c e s s . In c a s e t h e c o m p a n y f a i l s t o c o m p l y, t h e O D R p r o v i d e r ,

i n c o l l a b o r a t i o n wi t h t h e a p p r o p r i a t e c o n t r o l l i n g e n t i t y, w i l l

r e m o v e t h e T r u s t m ar k .

The Trustmark increases the consumers’ trust in the

c o m p a n y t h a t d i s p l a ys i t a n d r e a s s u r e s t h e m t h a t i n c a s e a

transaction goes awry there will be a secure and relatively eas y

w a y t o r e s o l v e t h e d i s p u t e . Th e r e f o r e , i t i n c r e a s e s t h e ch a n c e

that consumers will choose that company for their transaction.

T h e t h r e a t o f r e m o v i n g t h e T r u s t m ar k a n d l o s i n g t h e t r u s t

a c c o m p a n i e d b y i t c r e a t e s t h e c o m p a n y’ s i n c e n t i v e t o co m p l y

with the outcome of the ODR process. At European level

T r u s t m a r k p r o v i d e r s i n c l u d e “ T r u s t e d S h o p s ” , “ E u r o - La b e l ” ,

“ T r u s t U K ” a n d “ W eb T r a d e r U K ” . In t h e U S t h e m o s t p o p u l a r a r e

the “Better Business Bureau” (BBB) and “TRUSTe”. There have

also been attempts for the establishment of an international

Trustmark scheme such as the “Global Trustmark Alliance”

( G T A ) . 462

462
CORTES Pablo, op. cit., pp. 59- 64.

257
iii. Self-enforcement mechanisms based on Financial

control

ODR decisions can be enforced when the ODR provider

h a s c o n t r o l o v e r t h e f i n a n c e s . M e t h o d s o f e n f o r c e m e n t r e l yi n g

on money include setting up “judgment funds” to cover the

o u t c o m e o f O D R p ro c e e d i n g s , o r e s c r o w a c c o u n t s o p e r a t e d b y a

secure third party which holds temporarily the funds of a

transaction until it is completed or any disputes are settled, as

well as charge-back agreements with credit card companies.

Escrow accounts, where a secure third party holds the

funds until the goods are delivered, “help to solve the problem

o f f r a u d u l e n t s e l l e r s ” . 463 C r e d i t c a r d c h a r g e b a c k s a r e b a s i c a l l y

a g r e e m e n t s b e t w e e n O D R p r o v i d e r s an d c r e d i t c a r d c o m p a n i e s .

A c c o r d i n g t o t h e s e c h a r g e b a c k s a g r e e m e n t s , w h e n a b u ye r h a s

used a credit card to pay for a transaction, the credit company

reserves the authority to charge back the amount of the

t r a n s a c t i o n t o t h e b u ye r s a c c o u n t d e p e n d i n g o n t h e d e c i s i o n o f

the ODR provider.

Chargebacks mechanisms are used not only for online

transaction but also for offline transactions and generally for

a n y t r a n s a c t i o n i n w h i c h t h e b u ye r u s e s a c r e d i t c a r d , s u c h a s

463
RULE Colin, op. cit., p. 102.

258
p a ym e n t s i n c o m m er c i a l s t o r e s a n d r e s e r v a t i o n s o f h o t e l ro o m s .

Chargebacks mechanisms are widely utilized throughout the

w o r l d a n d s u p p o r t ed b y t h e m o s t r e l i a b l e c r e d i t c a r d c o m p a n i e s ,

s u c h a s “ V i s a ” , “ M a s t e r C a r d ” a n d “ A m e r i c a n E x p r e s s ” . 464 A f t er

the purchase, if a dispute arises the consumer can initiate the

chargeback mechanism. The consumer notifies the credit card

c o m p a n y, w h i c h t r a n s f e r s b a c k t h e m o n e y f r o m t h e s e l l e r t o t h e

b u ye r ’ s a c c o u n t u n t i l t h e t r a n s a c t i o n t ak e s p l a c e o r t h e p o t e n t i a l

dispute is resolved. The most common reasons that may lead to a

chargeback are the non-delivery of goods or services, the

d e l i v e r y o f g o o d s o r s e r v i c e s t h a t d o n o t m a t c h t h e d e s cr i p t i o n

and the processing of charges that do not match the amount of

the transaction. These chargeback mechanisms are useful for

consumers not only because credit cards are the main method

u s e d t o t r a n s f e r m o n e y o n l i n e , b u t a l s o b e c a u s e t h ey d o n ’ t

r e q u i r e e v i d e n c e f ro m t h e c o n s u m e r a n d t h e b u r d e n o f p r o o f l i e s

e n t i r e l y o n t h e s e l l e r . O n l y i f t h e s el l e r s u c c e e d s t o p ro v i d e

s u b s t a n t i a l p r o o f , t h e b a n k m a k e s t h e p a ym e n t . B a s i c a l l y, t h e

464
“In the United States, federal law requires credit card companies to allow chargebacks. To take
advantage of this system, a buyer must notify the credit card company of the disputed charge
within sixty days of receiving notice of the charge from the credit card company. In Europe, credit
card companies are not required to provide chargeback services. Although chargebacks are not as
prevalent in Europe as in the United States, they are still used fairly frequently”. See DUCA D.
Louis, RULE Colin, LOEBL Zbynek, op. cit., pp. 72- 75.
“However, the coverage of debit and credit cards varies considerably among different countries.
Commonly, debit card holders have fewer protections than credit card holders, but these also vary
depending on the jurisdiction. In the UK, for instance, credit card holders have more protections
than debit card holders, while in Ireland the protections afforded to consumers are the same. This
disharmony occurs even though the same European directives are applicable to both Member
States; this is due to the fact that most of these services do not depend exclusively on the
regulations, but also on self-regulatory provisions”. See CORTES Pablo, op. cit., pp. 69, 70.

259
c r e d i t c a r d c o m p a n y a c t s a s a n a r b i t r at o r w i t h o u t e n g a g i n g i n a n

adversarial hearing process and by favoring the consumer.

A representative example of e n f o rc e m e n t based on

f i n a n c i a l c o n t r o l i s p r o v i d e d b y “ P a yp a l . c o m ” . W h e n a d i s p u t e

a r i s e s i n t h o s e c as e s w h e r e t h e p r o d u c t o r s e r v i c e wa s n o t

delivered, or the description of the product was “significantl y

d i f f e r e n t ” t o t h e ac t u a l p r o d u c t d e l i v e r e d , “ P a yP a l ” h o l d s t h e

m o n e y t r a n s f e r r e d b y t h e b u ye r u n t i l t h e d i s p u t e i s s e t t l e d . A f t e r

a c o m p l a i n t i s m a d e b y t h e b u ye r w i t h i n f o r t y f i v e d a ys f r o m t h e

p a ym e n t , “ P a yP a l ” c o n d u c t s a d o c u m en t - o n l y o n l i n e a r b i t r a t i o n ,

examines the documentary evidence provided by the parties and

r e s o l v e s t h e d i s p u t e . If t h e d i s p u t e i s r e s o l v e d i n f a v o r o f t h e

seller the funds are resealed, but if the dispute is settled in favor

o f t h e b u ye r t h e f u n d s a r e t r a n s f e r r e d b a c k ; t h i s w a y P a yP a l

p r o v i d e s i n s t a n t a n d e f f e c t i v e e n f o r c e m e n t . 465

T h e e x a m i n a t i o n o f f e w o f t h e m o s t co m m o n l y u s e d s e l f -

enforcement mechanisms reveals promising solutions. However,

o n e m u s t k e e p i n m i n d t h a t t h e s e s el f - e n f o r c e m e n t m e c h a n i s m s

are possible in very limited and specific t yp e s of cases.

Furthermore, the efficiency of these mechanisms is based,

e s p e c i a l l y i n l o w v a l u e d i s p u t e s , o n t h e u n l i k e l i h o o d t h at “ t h e

l o s i n g p a r t y w o u l d s e e k t o l i t i g a t e a f t e r a d e c i s i o n h a s b e en s e l f -

465
“However, in circumstances where the seller withdraws the money from his account before the
buyer makes the claim, Paypal.com will not be responsible for the buyer’s loss”. See CORTES
Pablo, op. cit., pp. 63, 64.

260
e x e c u t e d ” . 466 B u t , i n r e a l i t y n o t h i n g a c t u a l l y p r e v e n t s t h e l o s i n g

p a r t y t o s e e k r e d r e s s t h r o u g h t h e t r a d i t i o n al j u d i c i a l r o u t e a n d

therefore these mechanisms do not technically provide finality in

the resolution of the dispute.

466
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., pp.
10-13.

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Part 2

The ODR system

T h e f i r s t p a r t o f t h e t h e s i s a n a l ys e d d i s p u t e r e s o l u t i o n a s a

m o v e m e n t a n d i t s ev o l u t i o n f r o m t r a d i t i o n a l A DR t o O DR . T h e

s e c o n d p a r t i s a n e c e s s a r y s u b s e q u e n t t o t h e f i r s t . T h e f i rs t p a r t

d e m o n s t r a t e s t h a t as t h e e v o l u t i o n o f d i s p u t e s i n t h e p a s t cr e a t e d

the need for a faster and more efficient way to resolve disputes

a n d A D R w a s t h e a n s w e r t o t h a t n e e d ; t o d a y, o n c e m o r e t h e

evolution of disputes makes evident the need for a new dispute

r e s o l u t i o n s ys t e m t h a t c a n r e s p o n d a d e q u a t e l y t o t h e n e e d s o f

r e c e n t t i m e s a n d OD R i s t h e a n s w e r t o t h a t n e e d . A s s t a t ed O D R

was a result of the evolution of ADR and the combination of

A D R t e c h n i q u e s w i t h t h e m o d e r n IC T t o o l s o f t h e d i g i t a l e r a .

Therefore, the first part started from the examination of ADR,

i t s d e f i n i t i o n , t h e d i f f e r e n t f o r m s , t h e r e a s o n s t h a t c r e at e d t h e

need for ADR as well as the drawbacks that paved the way for

ODR. The first part continued the evolutionary journey of

dispute resolution to the digital era, where the changes in the

w a y h u m a n s c o m m u n i c a t e a n d i n t er a c t a n d t h e n e w w o r l d

n e c e s s i t i e s l e d t o t h e a p p e a r a n c e o f O D R . O D R i s ex a m i n e d i n

d e p t h f r o m i t s d e f i n i t i o n a n d t h e u s e o f t e c h n o l o g y, t o i t s

262
advantages and drawbacks and is more clearly illustrated

t h r o u g h r e a l w o r l d e x a m p l e s o f O D R p r o v i d e r s . T h i s wa y t h e

f i r s t p a r t p r o v i d e d a n e x t e n s i v e a n a l ys i s o f d i s p u t e r e s o l u t i o n i n

g e n e r a l a n d O D R m o r e p a r t i c u l a r l y.

The first part serves to provide an understanding of the

d i s p u t e r e s o l u t i o n m o v e m e n t n e c e s s a ry f o r t h e s e c o n d p a r t . T h e

first part by examining the advantages of both ADR and ODR

illustrated the necessary attributes of dispute resolution and by

examining the drawbacks again of both ADR and ODR it

i d e n t i f i es t h e p r o b l e m s t h at m u s t b e o v e r c o m e . T h e ex a m p l e s o f

real world attempts by ODR providers allow distinguishing

s u c c e s s f u l f r o m f a i l e d a t t e m p t s a n d i d e n t i f yi n g t h e r e a s o n s t h a t

led to either success or failure. The first part provides the

lessons learned from the past of dispute resolution that must

shape the future of it. ODR as a concept has the potential to be

an effective way to resolve disputes and some of the initiatives

e x a m i n e d i n t h e p r e v i o u s c h a p t e r w e re p r o o f o f t h a t . B u t , t h e r e

a r e a l s o d i f f i c u l t i es a n d p i t f a l l s a n d t h e l i m i t e d p o p u l a r i t y o f

O D R s ys t e m s i s e v i d e n c e t o t h a t . S o , t h e q u e s t i o n i s h o w c a n

ODR be improved and truly become an alternative method of

dispute resolution. By knowing the evolution in the dispute

r e s o l u t i o n f i e l d c o m b i n e d wi t h a d et a i l e d ex a m i n a t i o n o f O D R

a n d w i t h t h e e x am p l e s o f O D R , o n e g a t h e r s t h e n e c e s s a r y

e x p e r i e n c e t o i d e n t i f y w h a t w o r k s an d w h a t d o e s n o t a n d i s

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equipped with all the essential information to draw conclusions

about the necessary characteristics successful ODR must have

and consequently make the corresponding suggestions about the

f u t u r e o f d i s p u t e r es o l u t i o n .

The second part takes advantage of those lessons to

i l l u s t r a t e t h e a p p r o p r i a t e l a yo u t o f t h e O D R s ys t e m b o t h a s a

p r o c e s s a n d a s a s t r u c t u r e a s w e l l a s t h e n e c e s s a r y s t e p s t h at

must be taken so that ODR fulfils all its promising potential.

The second part learns from the lessons of the ADR movement

a n d t h e O D R m o v e m e n t u p t o t o d a y, a n d a p p l i e s t h a t k n o w l e d g e

to demonstrate the necessary future steps for an optimal ODR

s ys t e m . T h e s e c o n d p a r t o u t l i n e s t h e p a r a m e t e r s f o r a w o r k a b l e

model of fair and effective online dispute resolution, drawing on

t h e c o n c l u s i o n s f r o m t h e fi r s t p a r t o f t h e t h e s i s . T h e s e c o n d p a r t

i d e n t i f i es a l l t h e n e c e s s a r y r e q u i r e m e n t s s o t h a t O D R p ro v i d e s

t h e u n i q u e a d v a n t ag e s a n d o v e r c o m e s t h e p o t e n t i a l d r a w b a c k s

that are described in the first part. The second part demonstrates

h o w f u t u r e O D R s h o u l d ex e m p l i f y f r o m t h e p r e v i o u s r e a l w o r l d

a t t e m p t s d e m o n s t r a t e d i n t h e f i r s t p a r t . In s h o r t , t h e s e c o n d p a r t

describes how ODR should work based on the experience on

dispute resolution provided by the first part. The second part

designates how ODR should work in order to fulfil its full

p o t e n t i al a s a c o m p l e t e , f a i r a n d e f f e c t i v e w a y t o r e s o l v e

d i s p u t es . T o t h a t e x t e n d , t h e f i r s t h a l f o f t h e s e c o n d p a r t r e l a t e s

264
to the process of ODR and the second half relates to the ODR

architecture.

The first half envisions ODR as a process which has

learned from the experience of ADR, that a dispute resolution

s ys t e m t o b e c o m p l e t e , i t m u s t p r o v i d e a p r o c e s s t h at t a k e s

advantage of the different strengths of the main dispute

r e s o l u t i o n m e t h o d s e x a m i n e d i n p a r t o n e . It e n v i s i o n s a t h r e e

step process with negotiation as the first step, mediation as the

second and arbitration as the third step. For B2C disputes it

envisions an additional pre-emptive step of online dispute

p r e v e n t i o n . 467 T h e f i r s t h a l f t a k e s a c l o s e r l o o k t o o n l i n e

arbitration, advocates its necessity as the final step of the ODR

p r o c e s s a n d ex a m i n e s i n d e p t h t h e c o n c e r n s a n d o b j ec t i o n s

a g a i n s t i t . It e x a m i n e s t h e e n t i r e p r o ce s s o f o n l i n e a r b i t r a t i o n

f r o m t h e a r b i t r at i o n a g r e e m e n t , t o t h e p r o c e d u r e , t o t h e o u t c o m e

o f t h e p r o c e s s . In p a r t i c u l a r , i t a d v o c a t e s t h e n e c e s s i t y o f o n l i n e

arbitration as the final step of dispute resolution because only

a r b i t r a t i o n c a n p r o v i d e t h e e s s e n t i a l fi n a l i t y a s w e l l a s p r o v i d e

s o l u t i o n s t o d i s p u t es t h a t d o n o t l e n d t h e m s e l v e s t o c o m p r o m i s e .

However, the choice of online arbitration as the final step of the

d i s p u t e r e s o l u t i o n p r o c e d u r e g i v e s r i s e s t o c e r t a i n i s s u es a n d

questions regarding online arbitration. The first half of the

s e c o n d p a r t a n s w e rs t h e q u e s t i o n s d u r i n g t h e e x am i n a t i o n o f t h e

467
Hereafter referred to as ODP.

265
key parts of an online arbitration process, i.e. the agreement, the

procedure and the outcome of the process.

T h e s e c o n d h a l f o f t h e s e c o n d p a r t en v i s i o n s O DR a s a

c o m p l e t e s ys t e m a n d i l l u s t r a t e s a l l t h e k e y f a c t o r s f o r i t s

s t r u c t u r e . It e n v i s i o n s a n i n t e r n a t i o n a l O D R s ys t e m t h a t w i l l b e

comprised of private initiatives backed by governmental support

a n d s u p e r v i s i o n a n d c o o p e r a t i o n o n a n i n t e r n a t i o n a l l e v el u n d e r

t h e a u s p i c e s o f a g l o b a l o r g a n i z a t i o n . It e n v i s i o n s a g l o b a l

n e t w o r k w i t h o n l i n e c l e a r i n g h o u s e s f o r e v e r y c o u n t r y. T h e

parties will be able to access the clearinghouse which will direct

them to the appropriate ODR provider depending on the nature

of the dispute, the specifics of each case and the method of

resolution. It e n v i s i o n s a n e t w o r k t h a t w i l l a c c r e d i t O D R

providers and ensure the compliance with some minimum

regulatory standards as well as the safeguarding of fundamental

principles. It identifies the core principles that must be

s a f e g u a r d e d t o e n s u r e t h a t t h e O D R s ys t e m w i l l b e b o t h f a i r a n d

effective and illustrates how this translates in actual practice.

More specifically it demonstrates how to address the relevant

technological considerations as well as how ODR should be

f u n d e d . S o m e o f t h e f u n d a m e n t a l p r i n ci p l e s s u c h a s a c c e s s i b i l i t y

a n d t r a n s p a r e n c y a r e i n ex t r i c a b l y c o n n e c t e d t o t h e t e c h n o l o g y

u s e d a n d t h e w a y O D R i s f u n d e d . F i n a l l y, i t e n v i s i o n s a n et w o r k

t h a t w i l l r a i s e a wa r e n e s s a b o u t t h e e x i s t e n c e o f O DR a n d

266
i n c r e a s e u s e r s ’ t r u s t a n d c o n f i d e n c e . In s h o r t , t h e s e c o n d h a l f o f

t h i s p a r t p r o v i d es a c o m p l e t e l a yo u t o f a n O D R s ys t e m f r o m i t s

f u n d i n g a n d i t s t ec h n o l o g i c a l s t r u c t u r e , t o i t s r e g u l a t i o n a n d

finally to the extra step of creating awareness and trust

necessary for ODR to fulfil its full potential.

A l t h o u g h O D R ex a m p l e s d em o n s t r a t e t h e s u c c e s s o f O DR

in the resolution of a wide range of disputes, such as e-

commerce disputes and domain name disputes and despite the

f a c t t h a t t h e f i rs t p a r t o f t h e t h e s i s i l l u s t r a t e d t h a t O DR c o u l d

s e r v e a s a s u c c e s s fu l , f a i r a n d e f f e c t i v e w a y t o r e s o l v e d i s p u t e s ,

h o w e v e r , t o d a y t h e s o c i a l i m p a c t o f OD R r e m a i n s l i m i t e d . M a n y

reasons can be identified for that, such as the lack of awareness

a b o u t t h e ex i s t e n ce o f O D R o r a b o u t i t s g r e a t p o t e n t i a l f o r

s u c c e s s a n d t h e l a ck o f a u n i f o r m f r a m e w o r k f o r O D R i n i t i a t i v e s

t h a t w i l l p r o v i d e c l a r i t y a b o u t O D R s er v i c e s , i n c r e a s e p o t e n t i a l

u s e r s ’ c o n f i d e n c e a n d p r o v i d e w o r l d w i d e s t a n d a r d s t h at w i l l

e n s u r e t h e o p e r a t i o n o f O D R as a fa i r a n d e f f e c t i v e s ys t e m .

Because of the above reasons, potential users may still be

discouraged from choosing ODR for the resolution of their

d i s p u t es . T h e s e c o n d p a r t o f t h e t h e s i s p r o v i d e s s o l u t i o n s o n a l l

the above issues.

T h e m o d e l d e m o n s t r a t e d i n t h e t h es i s w i l l b e g e n e r a l a s t o

i n c l u d e a l l d i s p u t e s . H o w e v e r , w h e n n e c e s s a r y, t h e v a r i a t i o n s i n

certain points will be highlighted. For instance, variations from

267
t h e g e n e r a l m o d e l w i l l b e a d d r e s s e d i n o r d e r f o r t h e O D R s ys t e m

t o c o v e r t h e s p e c i f i c d e m a n d s o f B 2 C d i s p u t es . T h e s e v a r i a t i o n s

i n c l u d e ex t r a s t e p s i n t h e O D R p r o c e s s , t h e u s e o f d i ff e r e n t

methods as well as specific requirements that result from the

d yn a m i c o f t h e p a r t i e s i n B 2 C d i s p u t e s i . e . t h e p o w e r i m b a l a n c e

between the parties.

268
Title 1

The ODR process

T h e f i r s t h a l f o f t h e s e c o n d p a r t re l a t e s t o t h e O D R

p r o c e s s . P a r t i c u l a r l y, i t d e s c r i b e s h o w t h e O D R p r o c e s s s h o u l d

work in order to ensure a fair and effective online resolution of

d i s p u t es . M o r e s p ec i f i c a l l y, t h e f i r s t c h a p t e r d e m o n s t r a t e s t h e

different steps of the ODR process and envisions a three step

process comprised of negotiation, mediation and arbitration,

w h i l e i n B 2 C d i s p u t e s a n a d d i t i o n al s t e p i s i n c l u d e d , t h a t o f

o n l i n e d i s p u t e p r e v e n t i o n . C h a p t e r s t wo a n d t h r e e r e l a t e t o t h e

t h i r d s t e p o f t h e p r o c e s s , o n l i n e a r b i t r a t i o n . Th e y d e m o n s t r a t e

t h e n e c e s s i t y o f o n l i n e a r b i t r a t i o n a s p a r t o f t h e p r o c es s a n d

provide solutions and answers to all the proposed concerns and

objections against online arbitration.

269
Chapter 1

The Three step process

T h e f i r s t c h a p t e r d e m o n s t r a t e s t h e s p e c i f i c s o f a n O DR

process designed to provide fair and effective online resolution

o f d i s p u t e s . B a s e d o n t h e ex p e ri e n c e o f t h e A D R m o v em e n t a n d

the conclusions drawn from the practice of ODR providers over

t h e p a s t ye a r s , t h e t h e s i s i d e n t i f i e s t h e n e e d f o r a m u l t i - s t e p

d i s p u t e r e s o l u t i o n p r o c e s s . T h e f o c u s i n t h i s t h es i s h a s b e e n o n

the three main methods of dispute resolution, mainly

negotiation, m e d i at i o n and arbitration. This preference is

j u s t i f i e d b y t h e f a c t t h a t t h e s e m e t h o d s r e p r e s e n t t h r e e d i ff e r e n t

b u t a l l f u n d am e n t a l w a ys t o r e s o l v e a d i s p u t e . T h e n e g o t i a t i o n s

b e t w e e n t h e p a r t i e s t h e m s e l v es , t h e r e s o l u t i o n t h r o u g h t h e

assistance of a third neutral and the resolution of the dispute by

a third party decision maker. Th e s e three f u n d am e n t a l

approaches to resolve a dispute must be offered to the parties,

i d e a l l y a s e s c a l a t i n g s t e p s o f a c o m p l e t e p r o c e s s . Th e f i r s t

section of the chapter describes the three step process and

d e m o n s t r a t e s t h e r e a s o n s o f i t s n e c e s s i t y. T h e s e c o n d s e c t i o n

r e l a t e s s p e c i f i c a l l y t o B 2 C d i s p u t e s a n d d e s c r i b e s t h e a d d i t i o n al

s t e p o f O n l i n e D i s p u t e P r e v e n t i o n . Fi n a l l y, t h e t h i r d s e c t i o n

270
examines the U NC IT R A L proposal which also states the

necessity for a multi-method process.

S e c t i o n 1 : A mu l t i - s t e p p r o c e s s

T h e e x a m i n a t i o n o f O D R m e t h o d s a n d s p e c i f i c s ys t e m s i n

the previous sections provides some insight about the future of

ODR. As seen in the first part of the thesis, in 1976 when the

r e b i r t h o f t r a d i t i o n a l A D R s t a r t e d t o g a i n p o p u l a r i t y, t h e v i s i o n

for a more efficient and successful dispute resolution as

described by Frank E.A. Sander was the formulation of a multi-

door courthouse. The goal was to tailor dispute resolution by

choosing the appropriate ADR method for each specific dispute

and take advantage of the variety of methods in a way that would

l e a d t o t h e r e s o l u t i o n o f e v e r y d i s p u t e . In f l u e n c e d b y t h o s e i d e a s

traditional ADR fo r m e d into a t h re e step s ys t e m for the

resolution of disputes. The parties usually try to resolve the

d i s p u t e i n i t i a l l y t h r o u g h n e g o t i a t i o n ; i f t h a t d o e s n o t w o rk t h e y

enlist the help of a neutral third party to guide them to a

mutually acceptable settlement; and if that also does not work

they resort to a third party neutral for a binding and final

resolution of their dispute.

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Although the best place to resolve any dispute is as early

in the life of the dispute as possible, because the longer a

d i s p u t e g o e s o n , t h e m o r e i s s u e s t h at n e e d t o b e r e s o l v e d i n

order for the parties to feel the matter has been dealt with and in

g e n e r a l t h e h a r d e r i t i s t o r e s o l v e t h e d i s p u t e; h o w e v e r , m o s t

d i s p u t e r e s o l u t i o n s ys t e m s a r e d e s i g n e d l i k e l o c k s i n a c a n a l , i n

which a matter advances to a more formal process only after a

simpler process was unsuccessful in helping to resolve that

d i s p u t e a n d t h i s w a y t h e s ys t e m a l l o w s b o t h f o r a f a s t e r

resolution when it is possible, but has also further options when

t h e e a r l i e r s t e p s a r e n o t a b l e t o g e n e r a t e a r e s o l u t i o n . 468

T o d a y, t h e s a m e p r i n c i p l e s c a n b e m o d i f i e d a n d a p p l i e d t o

t h e f i e l d o f O D R . It i s d i f f i c u l t t o c o m p a r e t h e d i f f e r e n t m e t h o d s

of ODR and come to a definite decision about whether or not one

of them is preferable or “better” than the others. This is mainly

b e c a u s e t h e m o s t s u i t a b l e O DR m e t h o d d e p e n d s o n t h e t yp e o f

case for resolution as well as the specific circumstances of each

case. For example, it is well known that for family disputes the

advantages of mediation are better suited for their resolution. On

t h e c o n t r a r y, f o r e - c o m m e r c e d i s p u t e s t h e p r e f e r a b l e m e t h o d m a y

468
“For example, if an employee in a corporation is beginning to feel that her workplace is
uncomfortable, it does not make sense for that employee immediately to jump into formal labor
arbitration. Initially the employee may discuss the situation with her supervisor and ask for certain
changes to be made in the working environment. If that strategy is not successful in resolving the
matter, she may contact the human resources department. Should internal mechanisms prove
inadequate for resolving the concerns of the employee, the employee might ask that an outside
mediator be brought in to attempt to resolve the situation. If that is not successful, the matter may
escalate to arbitration and/or a court proceeding”. See RULE Colin, op. cit., pp. 290, 291.

272
v a r y; f o r e x a m p l e f o r p u r e l y m o n e t a r y d i s p u t e s t h e e f f i c i e n c y,

ease and fast pace of blind bidding negotiation may in several

o c c a s i o n s p r o v e t o b e m o s t s u i t a b l e . In o r d e r t o h a v e e f f i c i e n t

and successful ODR more than one method must be incorporated.

Multi-method dispute resolution processes must become the

norm in ODR. Only this way may parties take advantage of the

full potential that the different fundamental methods provide for

the resolution of a dispute. The necessity of a multi-method

dispute resolution became also evident by the strategic alliance

between the “American Arbitration Association” (AAA) and

“ C yb e r s e t t l e ” , w h i ch a l l o w s p a r t i e s t o u s e t h e d i s p u t e r e s o l u t i o n

services of both companies and ensure that no one walks away

w i t h o u t a r e s o l u t i o n . P a r t i e s wi l l at t e m p t t o s e t t l e t h r o u g h

“ C yb e r s e t t l e ” a n d t h r o u g h o n l i n e n e g o t i a t i o n a n d i f a s e t t l e m e n t

i s n o t p o s s i b l e t h e y w i l l u s e A A A ’ s d i s p u t e r e s o l u t i o n p r o ce s s e s ,

i n c l u d i n g c o n c i l i a t i o n , m e d i at i o n a n d a r b i t r a t i o n . 469

In a n a l o g y w i t h t h e m u l t i - d o o r c o u r t h o u s e , t h i s t h e s i s

suggests a multi-door ODR where clearinghouses will redirect

users to the appropriate provider and procedure, and a process

which will be comprised by three steps. The first step must be an

attempt from the disputants to resolve the dispute through

negotiations wi t h o u t a third n e u t r al p a r t y, but with the

i n v o l v em e n t o f t h e “ f o u r t h ” p a r t y. S o t h e f i r s t s t e p w i l l i n c l u d e

WANG Fangfei Faye, op. cit., p. 75.

273
assisted negotiation or blind-bidding negotiation when

appropriate for the dispute. The success of automated processes

for consumer disputes depends on the nature of the dispute, the

accuracy of the information provided, and the capability of the

software or fourth party in assessing the dispute. However, the

limit of these platforms is that they deal only with repetitive and

s i m p l e d i s p u t e s . Bu t a s a f i r s t s t e p i t w i l l s i g n i f i c a n t l y r e d u c e

the number of cases going to third party neutral for resolution.

The second step will include the attempt to settle with the

h e l p o f a t h i r d p a r t y n e u t r a l ; t h e p r e v a i l i n g m e t h o d a t t h i s s t ep

w i l l b e o n l i n e m e d i a t i o n . It c a n l e a d t o a f a s t s e t t l e m e n t w i t h

relatively little cost and at the same time keep the relationship

between the parties intact. Non-binding forms of dispute

resolution can terminate a dispute without the need for a binding

decision. As seen in the first part of the thesis from the

e x a m p l e s o f S q u a re T r a d e , e B a y a n d P a yP a l , b o t h a s s i s t e d

negotiation and online mediation can be very successful for

certain kind of disputes.

T h e e x i s t e n c e o f co n s e n s u a l n o n - b i n d i n g m e t h o d s a t t h e

first steps before adjudication can serve as important method to

filter out certain disputes where a compromise can be found and

s e t t l e m e n t c a n b e r e a c h e d . 470 M e d i a t i o n p r o v i d e d i n c o n j u n c t i o n

w i t h a d j u d i c a t i o n an d a t t e m p t e d b e f o re a d j u d i c a t i o n a l l o w s f o r

470
EU study on the Legal analysis of a Single Market for the Information Society, op. cit., p. 10.

274
the resolution of disputes and removes disputes at an earlier

stage without the need for adjudication. However, the fact that

these methods are followed by an effective adjudicative method

a s a n e x t s t e p a l l o ws t h e m t o b e m o r e ef f i c i e n t a s t h e p a r t i e s a r e

more incentivized to utilize these consensual non-binding

methods, early on in the dispute, in order to reduce potential

f o r m a l i t y, c o s t s a n d t i m e c o n s u m p t i o n . F u r t h e r m o r e , a cc e s s t o

adjudication guards against unfairness in negotiation and

m e d i a t i o n , s i n c e l a ck o f a v a i l a b l e o r a cc e s s i b l e a d j u d i c a t i o n m a y

lead to unfair settlements with parties pressurized in accepting

compromises that do not reflect their interests or rights and

e n t i t l em e n t s . 471 H o w e v e r , “ s u c h a n a p p r o a c h s h o u l d n o t c o n s i d er

consensual ODR just as a first step before adjudication, but as

an invaluable tool for the resolution of disputes that is offered

i n c o n j u n c t i o n t o a d j u d i c a t i o n ” . 472 T h e e v o l u t i o n o f d i s p u t e

r e s o l u t i o n a n d t h e s u c c e s s o f c o n s e n s u al n o n - b i n d i n g m e t h o d s i n

t r a d i t i o n a l A D R s u g g e s t t h a t i t i s l i k el y n o n - b i n d i n g m e t h o d s o f

dispute resolution will continue to be equally important in ODR,

since they do not suffer from the inefficiencies of traditional

j u s t i c e , c l a s s i c a l a rb i t r a t i o n i n cl u d e d . 473

471
HÖRNLE Julia, op. cit., pp. 57, 58.
472
CORTES Pablo, op. cit., p. 20.
473
“A reflection of what the French legal philosopher Mireille Delmas-Marty calls ‘veritable
triomphe du mou, du flou, du doux’ (blandly, ‘the true victory of soft law’)”. See KAUFMANN-
KOHLER Gabrielle, Online Dispute Resolution and its Significance for International Commercial
Arbitration, Global Reflections on International Law, Commerce and Dispute Resolution, 2005,
pp. 19, 20.

275
The third step of the process will be online arbitration.

Online negotiation and online mediation were ex t e n s i v e l y

examined in the first part of the thesis so there will be no need

f o r f u r t h e r a n a l ys i s . T h i s p a r t o f t h e t h es i s w i l l h o w e v e r ex a m i n e

in detail the last step of the process i.e. online arbitration. As

a r b i t r a t i o n i n t r a d i t i o n a l A DR , a l s o o n l i n e a r b i t r a t i o n i n O D R

has several advantages that make it a unique and unparalleled

method. These special characteristics differentiate online

arbitration from litigation, traditional ADR and especially its

c o u n t e r p a r t t r a d i t i o n a l a r b i t r a t i o n , b u t a l s o f r o m o t h er O D R

m e t h o d s . Un f o r t u n a t e l y, m o s t O D R i n i t i a t i v e s a s w e l l a s t h e

s c h o l a r s h i p o n O DR h a s f o c u s e d m o r e o n n o n - b i n d i n g O D R

options or automated processes such as blind bidding

n e g o t i a t i o n . 474 “ A r b i t r a t i o n i s p r o b a b l y t h e l e a s t p o p u l a r O DR

m e t h o d f o r t h e r e s o l u t i o n o f c o n s u m e r d i s p u t es , e s p e c i a l l y a t a n

i n t e r n a t i o n a l l e v e l ”. 475 T h i s t h e s i s a i m s t o r e m e d y t h i s i n j u s t i ce

a n d i l l u s t r a t e t h a t t h e u n i q u e a d v a n t ag e s o f o n l i n e a r b i t r a t i o n

can provide an invaluable solution for the online resolution of

474
“ODR scholarship is fairly limited. Most commentators mainly have discussed use of the
Internet for filing, scheduling, and managing ADR processes, or for numbers-focused processes
such as Cybersettle’s ‘double blind-bidding’ that gathers parties’ confidential settlement offers and
demands and determines if and what settlement the parties should mutually accept. Furthermore,
articles and reports have provided more facial discussion of ODR’s inevitability with the rise of e-
communities and the Internet-savvy generation, or have focused on jurisdiction or technical
aspects of encryption and Internet security. This has left binding online arbitration largely
overlooked”. SCHMITZ J. Amy, op. cit., pp. 6, 7.
475
CORTES Pablo, op. cit., pp. 68, 69.

276
d i s p u t es . 476 T h e p r e v i o u s p a r t i l l u s t r a t e d t h e l i m i t a t i o n s o f co u rt

procedures, traditional ADR and consensual O DR m et h o d s .

These limitations demonstrated a need for binding online-

arbitration mechanisms to solve In t e r n e t disputes. Online

a r b i t r a t i o n p r o v i d es a c c e s s t o j u s t i ce b e c a u s e i t w i d e n s t h e

access to binding dispute resolution and captures a whole range

o f In t e r n e t d i s p u t e s t h a t c a n n o t b e s o l v e d b y a n y o t h e r m e a n s . 477

A s s t a t e d s o m e s p e c i f i c m e n t i o n s d u r i n g t h i s p a r t wi l l

a d d r e s s i s s u e s r e l a t e d t o B 2 C d i s p u t e s . In B 2 C d i s p u t es t h e t r e e

step process is complemented by an additional pre-emptive step.

Online dispute prevention is a concept often considered as a part

o f O D R . A l t h o u g h , t e c h n i c a l l y O D P a i m s t o t h e a v o i d an c e o f

d i s p u t e a n d n o t t h ei r r e s o l u t i o n , i t i s n o n e t h e l e s s a n i m p o r t a n t

ally for successful ODR.

S e c t i o n 2 : O n l i n e D i s p u t e Pr e v e n t i o n

Whether Online Dispute Prevention should be considered a

p a r t o r a c o m p l e m en t t o O D R i s a m a t t e r o f o p i n i o n . B e s i d e s , a s

476
Currently, adjudicatory online dispute resolution processes are rare among ODR alternatives,
with one study indicating that such arbitration-like processes handled only 1% of cases settled
online. This is despite the rise in Internet transactions. See SCHMITZ J. Amy, op. cit., p. 18.
477
HÖRNLE Julia, op. cit., pp. 220, 225.

277
w i l l b e d em o n s t r a t e d , s o m e o f t h e s a m e e n f o r c e m e n t m e c h a n i s m s

e x a m i n e d i n t h e f i r s t p a r t o f t h e t h es i s h a v e a d u a l f u n c t i o n

before the dispute arises and at its end, which blurs the clear

b o r d e r s b e t w e e n O D R a n d O D P . T h i s t h e s i s c o n s i d e r s OD P a s a

separate preemptive step before ODR. However, what becomes

c l e a r e r d a y b y d a y i n d i s p u t e r e s o l u t i o n i s t h a t O DP w i t h i t s

dispute avoidance mechanisms can definitely become a solid

f o u n d a t i o n f o r a n e ff i c i e n t d i s p u t e r e s o l u t i o n s ys t e m . O D P r e f e r s

t o t h e u s e o f IC T f o r t h e e m p l o ym e n t o f m e c h a n i s m s t h a t a i m t o

d e a l w i t h p o t e n t i al d i s p u t es a t a n e a r l y s t a g e a n d e i t h e r p re v e n t

them from happening or resolve the issues before requiring the

parties to turn to an external ODR provider and a fully engaged

d i s p u t e r e s o l u t i o n p r o c e d u r e . 478

ODP is essential, especially in B2C and C2C transactions,

where the high volume of potential disputes demands businesses

a n d u s e r s t o a t t em p t a l l t h e m o r e c o n f l i c t p r e v e n t i o n . T h i s

r e d u c e s t h e n u m b er o f c o n f l i c t s t h a t e s c a l a t e t o d i s p u t e s a n d

subsequently allows ODR to be more efficient but also more

valuable to the parties as ODR will deal with the hard cases

w h e r e t h e r e a r e c o n c e r n s o f i m p a r t i a l i t y, c o m p l e x i t i e s i n c a s e s

478
“Colin Rule, Director of eBay’s ODR services, undoubtedly the person with the best
understanding of the workings and finalities of ODR, mentions for instance that when he arrived at
eBay, almost no one used the word ‘dispute’ and terms such as ‘report [and] complaint’ were the
normal language. He then goes on to describe one of the main strengths of ODR at eBay as the
possibility to handle complaints so early on that ‘we were able to resolve the issue before it
became a dispute’”. See SCHULTZ Thomas, Online Dispute Resolution: an Overview and
Selected Issues, op. cit., p. 16.

278
and lack of trust. For instance, in a B2C transaction the use of

a n e x t e r n a l O D R p ro v i d e r w i l l b e e m p l o ye d o n l y i f t h e b u ye r a n d

t h e m e r c h a n t a r e n o t a b l e t o r e s o l v e t h e d i s p u t e i n t e r n a l l y. T h i s

w a y O D P r e d u c e s t h e n e e d f o r ex t e rn a l r e s o l u t i o n p r o c e d u r e s

a n d s a v e s b u s i n e s s e s a n d c o n s u m e r s ’ t i m e a n d m o n e y. In C 2 C

t r a n s a c t i o n s , E B a y i s a g a i n a p r i m e e x a m p l e . “E B a y’ s i n - h o u s e

O D R p r o c e s s h a s re s o l v e d h u n d r e d s o f m i l l i o n s d i s p u t e s , w h i l e

S q u a r e T r a d e r e s o l v e d j u s t o v e r t w o m i l l i o n i n i t s l i f e t i m e ” . 479

There are many t ypes of dispute avoidance mechanisms

and many of the self-enforcement mechanisms ex am i n e d

p r e v i o u s l y h a v e a l s o a d u a l r o l e a s OD P m e c h a n i s m s , b e c a u s e

besides incentivizing parties to comply with decisions of ODR

providers, they can also help prevent disputes. Mechanisms

based on financial control like escrow accounts and chargebacks

when used early on can identify fraudulent sellers and prevent

p o t e n t i al d i s p u t e s . M e c h a n i s m s b a s ed o n r e p u t a t i o n a re a l s o

O D P m e c h a n i s m s . In C 2 C t r a n s a c t i o n s , f e e d b a c k s ys t e m s l i k e

t h e e B a y f e e d b a c k r a t i n g s ys t e m c a n i n f o r m b u ye r s b e f o r e h a n d

about the reliability of the seller based on positive, negative and

n e u t r a l f e e d b a c k a n d t h e r e f o r e a v o i d d e a l i n g w i t h u n re l i a b l e

o n e s . In B 2 C t r a n s a c t i o n s , T r u s t m a r k s c a n a s s u r e c o n s u m er s t h a t

Trustmark carriers comply with quality standards of good

p r a c t i c e f o r p r i v a c y, d i s p u t e r e s o l u t i o n a n d e - c o m m e r c e a n d

479
CORTES Pablo, op. cit., pp. 59- 64.

279
consequently operate as a way to identify reputable businesses.

Other mechanisms based on reputation are online shopping

a s s i s t a n t s w h i c h a r e m e c h a n i s m s t h a t u s e s o f t w a r e i n o rd e r t o

better inform co n s u m e r s in online marketplaces. A

r e p r e s e n t a t i v e e x am p l e i s t h e “ H o w a r d S h o p p i n g A s s i s t a n t ”

created by the “European Consumer Centre” (ECC) in

D e n m a r k . 480 R e p u t a t i o n m e c h a n i s m s e m p o w e r u s e r s i n o n l i n e

market places and make it more difficult for rogue traders to

operate.

F i n a l l y, a n o t h e r p o p u l a r a n d e f f e c t i v e O D P m e c h a n i s m i s

t h e u s e o f i n t e r n al c o m p l a i n t p r o c ed u r e s , s u c h a s c u s t o m e r

s e r v i c e d e p a r t m e n t s , w h e r e t h e u s e o f IC T c a n h e l p p r e v e n t

issues before they become disputes and require the use of

external ODR. These procedures should be e m p l o ye d and

p r o m o t e d b y b u s i n e s s e s b e f o r e t h e u s e o f e x t e r n a l O DR . A

dispute should only go to external ODR after the internal

procedures to resolve the matter have been attempted and failed,

t h e c u s t o m e r s e r v i ce d e p a r t m e n t h a s b e e n u n a b l e t o r e s o l v e t h e

matter after repeated interactions with the complainant and the

480
“The consumer only has to type the domain name of the business and the software will deliver
the following information: when the website was registered/updated, the results of an archive.org
search, which shows the images of the website of the online business during the last few years,
official company register information, the results of a Google search excluding the website of the
online business, the adherence of the online business to a Trustmark scheme, the existing
trustmarks in the country where the online business is based, the general limitation period, e.g. a
minimum of two years, the general cancellation period, i.e. 14 days, examples of website
comparison in the country of the online business and contact information of the national ECC”.
Ibid., pp. 59- 64.

280
b u s i n e s s h a s p u t a g o o d f a i t h e f f o r t an d h a s d o n e a l l i t c a n t o

r e s o l v e t h e m at t e r . 481

S e c t i o n 3 : T h e U NC I T R A L p r o p o s a l

A t t h i s p o i n t t h e e x a m i n a t i o n o f t h e U N C IT R A L i n i t i a t i v e

w o u l d b e b e n e f i c i al s i n c e i t c a n o p er a t e a s a n ex a m p l e o r a

source of inspiration in several issues. The “United Nations

C o m m i s s i o n o n In t e r n a t i o n a l T r a d e La w ” ( U N C IT R A L) , w h i c h

w a s e s t a b l i s h e d b y t h e “ U n i t e d N a t i o n s G e n e r a l A s s e m b l y” b y

r e s o l u t i o n 2 2 0 5 ( XX I) o f 1 7 D e c e m b e r 1 9 6 6 , i s t h e l e g a l b o d y o f

the UN which aims “to further the progressive harmonization

and modernization of the law of international trade by preparing

and promoting the use and adoption of legislative and non-

legislative instruments in a number of key areas of commercial

l a w . O n e o f t h e s e a re a s i n c l u d e s d i s p u t e r e s o l u t i o n ” . 482

T o s p e c i f i c a r e a s o f r e s e a r c h a n d d e v e l o p m e n t , U NC IT R A L

has projects, programs and agendas as well as creates specific

w o r k i n g g r o u p s . U N C IT R A L c r e a t e d W o r k i n g G r o u p II I t o

481
RULE Colin, op. cit., pp. 289, 290.
482
A Guide to UNCITRAL. Basic facts about the United Nations Commission on International
Trade Law, United Nation, Vienna 2013 available at
http://www.uncitral.org/pdf/english/texts/general/12-57491-Guide-to-UNCITRAL-e.pdf

281
research ODR as a solution to overcome issues related to e-

commerce transactions, especially those with c r o s s -b o r d e r

e l e m e n t s a n d p a r t i cu l a r l y B 2 B a n d B 2 C t r a n s a c t i o n s . T h e p r o j e c t

is fuelled by the realization that “ t r a d i t i o n al dispute

mechanisms, including litigation through the courts, were

i n a d e q u a t e f o r a d d r e s s i n g l o w - v a l u e / h i g h - v o l u m e , c r o s s -b o r d e r

e-commerce disputes because they were too costly and time-

consuming in r e l at i o n to the value of the transaction in

c o n t r o v e r s y a n d b e c a u s e o f c o m p l ex i t i e s i n t h e c r o s s -b o r d e r

c o n t e x t r e g a r d i n g j u r i s d i c t i o n a n d a p p l i c a b l e l a w ” . 483

T h e W o r k i n g G r o u p II I i s s u e d d r a f t p r o c e d u r a l r u l e s t o b e

used as a model by ODR providers in the resolution of e-

commerce transactions, especially those with c r o s s -b o r d e r

e l e m e n t s a n d p a r t i cu l a r l y B 2 B a n d B 2 C t r a n s a c t i o n s . T h e g o a l i s

to create an internationally accepted framework for ODR that

would give clear solutions to the drawbacks of ODR and

c o n s e q u e n t l y g i v e a p u s h t o O D R . T h e O D R m o d e l p r o p o s ed i s a

three step process that consists of a negotiation step, a

c o n c i l i a t i o n s t e p a n d a n a r b i t r a t i o n s t ep . A s a f i r s t s t e p , p a r t i e s

u s e n e g o t i a t i o n f o r t h e r e s o l u t i o n o f t h e i r d i s p u t e . As a s e c o n d

step, the parties use conciliation and are assisted by a third

neutral in order to reach an agreement and resolve the dispute.

As a third step, the parties use arbitration and a third neutral

483
DUCA D. Louis, RULE Colin, LOEBL Zbynek, op. cit., pp. 17- 28.

282
p a r t y, p e r h a p s t h e o n e i n v o l v e d i n t h e c o n c i l i a t i o n , r e s o l v e s t h e

dispute by issuing a decision.

U N IC T R A L a p p r o a c h e s t h e O D R f r a m e w o r k f r o m t h e

p e r s p e c t i v e o f i t s p r e v i o u s w o r k o n a r b i t r a t i o n . In a n a t t e m p t t o

p r o v i d e p r a c t i c a l av e n u e s o f r e d r e s s f o r s m a l l - v a l u e d i s p u t e s

where currently none exists, attempts to stay clear from private

international law questions, such as whether pre-dispute

arbitration agreements are valid in consumer contracts, and from

u s i n g c o u r t s a s e n f o r c e m e n t m e c h a n i s m s . In s t e a d i t m a k e s a s h i f t

towards non-binding voluntary ODR and relies more on private

self-enforcement mechanisms as a way to incentivize parties to

a g r e e t o p a r t i c i p a t e i n O D R a n d c o m p l y w i t h a s e t t l em e n t o r

d e c i s i o n . 484 U n f o r t u n a t e l y t h e p r o p o s e d m o d e l b y U N IC T R A L

fails to provide answers to several questions and overcome

s e v e r a l o f t h e d r a w b a c k s o f O D R es p e c i a l l y c o n c e r n i n g t h e

s t r u c t u r e o f t h e O D R s ys t e m a n d t h e e n f o r c e m e n t o f d e c i s i o n s

and in any case it fails to provide the complete, fair and

e f f e c t i v e O D R s ys t e m . C o n t r a r y t o t h a t , t h i s t h e s i s o v e r t h e

following sections provides a complete, fair and effective ODR

s ys t e m a n d d e s c r i b e s i t s e n t i r e a r c h i t e c t u r e .

484
HÖRNLE Julia, op. cit., pp. 4- 9.

283
Chapter 2

Online arbitration as the final step of the

process

The first part of the thesis examined traditional

a r b i t r a t i o n . A s s t at e d , o n l i n e a r b i t r a t i o n w a s c r e a t e d b y t h e

s yn e r g y o f t r a d i t i o n a l a r b i t r a t i o n a n d IC T . In o r d e r t o p r o v i d e a

better understanding of online arbitration it was essential to

identify the characteristics of traditional arbitration from which

it evolved. As illustrated in the first part of the thesis,

t r a d i t i o n a l a r b i t r a t i o n i s a n A DR m et h o d i n w h i c h a t h i r d n e u t r a l

party resolves the dispute by issuing a final and binding

d e c i s i o n . It i s c h a r a c t e r i z e d a s a q u a s i - j u d i c i al m e t h o d s i n c e i t

at the same time a private procedure but also produces an award

w h i c h c a n b e e n f o r c e d l i k e a c o u r t j u d g e m e n t . It i s h i g h l y

p r e f e r r e d i n b u s i n e s s d i s p u t e s a s i t a l l o w s f o r c o n f i d e n t i al i t y a n d

fast resolution, both highly revered in the business world. “Cost

savings, shorter resolution times, a more satisfactory process,

e x p e r t d e c i s i o n m a k e r s , p r i v a c y a n d c o n f i d e n t i a l i t y, a n d r e l a t i v e

finality made arbitration a wide-ranging surrogate for civil trial,

w i t h a r b i t r a t i o n p r o v i s i o n s u t i l i z e d i n a l l k i n d s o f c o n t r a ct s ” . 485

The wide adoption of the 1958 “New York Convention on the

485
STIPANOWICH J. Thomas, op. cit., p. 4.

284
Recognition and Enforcement of Foreign Arbitral Awards” has as

a result the enforceability of awards in many states and to the

extent that arbitral awards frequently “prove easier to enforce

t h a n c o u r t d e c i s i o n s f r o m o v e r s e a s ” . 486

T h e f i r s t p a r t o f t h e t h e s i s a l s o b r i ef l y e x a m i n e d o n l i n e

a r b i t r a t i o n a n d p r o v i d e d a d e f i n i t i o n an d a b e t t e r u n d e r s t a n d i n g

of online arbitration. Online arbitration is a process conducted

t h r o u g h t h e u s e o f IC T t o o l s i n w h i c h a t h i r d n e u t r a l p a r t y

c h o s e n b y t h e p a r t i e s t o a d i s p u t e , o r n o m i n at e d b y t h e O D R

p r o v i d e r c h o s e n b y t h e p a r t i e s , r e n d e rs a d e c i s i o n o n t h e c a s e

after having heard the relevant arguments and seen the

a p p r o p r i a t e e v i d e n ce . O n l i n e a r b i t r a t i o n a p p e a r e d a s a n e v o l v e d

form of traditional arbitration and the transplant to the virtual

world had as a result the appearance of different forms of online

arbitration. Based on the binding nature of the outcome, the

f o r m s i n w h i c h o n l i n e a r b i t r a t i o n m ay a p p e a r i n c l u d e o n l i n e

b i n d i n g a r b i t r a t i o n a n d o n l i n e n o n - b i n d i n g a r b i t r a t i o n . 487

According to legal theory nothing inhibits the transplant of

arbitration into the online environment and today there are

s e v e r a l O D R p r o v i d e r s o f f e r i n g o n l i n e a r b i t r a t i o n . 488 D u e t o i t s

unique potential, “online arbitration is a notable advancement in

486
CORTES Pablo, op. cit., pp. 68, 69.
487
BADIEI Farzaneh, Online Arbitration Definition and its Distinctive Features, In Proceedings of
ODR, 2010, p. 93.
488
CORTES Pablo, op. cit., pp. 106 107.

285
international arbitration and there are no insurmountable

obstacles for online arbitration within the view of international

c o m m e r c i a l a r b i t r a t i o n r u l e s ” . 489 E x a m p l e s o f w e l l - e s t a b l i s h ed

online arbitration providers in the past and today include the

“ V i r t u a l M a g i s t r a t e” , “ O n l i n e R e s o l u t i o n . c o m ” , “ N o v a - Fo r u m ” ,

t h e “ A m e r i c a n A rb i t r a t i o n A s s o c i a t i o n ” ( A A A ) , t h e “B e t t e r

Business Bureau” (BBB), the “National Arbitration Forum”

( N A F ) , t h e “ W o r l d In t e l l e c t u a l P r o p e r t y O r g a n i z a t i o n ” (W IP O )

A r b i t r a t i o n a n d M ed i a t i o n C e n t r e , t h e “ J u d i c i a l A r b i t r a t i o n a n d

M e d i a t i o n S e r v i c e s ” ( J A M S ) a n d t h e “ In t e r n a t i o n a l C h a m b e r o f

Commerce”. For instance, in the US the AAA “maintains a

roster of over 9,000 trained neutrals, has a long history of

working with the federal government and has e s t ab l i s h e d

a r b i t r a t i o n p a n e l s f o r t h e Li b r a r y o f C o n g r e s s , f o r t h e U S A i r

F o r c e , t h e D e p a r t m e n t o f t h e In t e r i o r , t h e N a t i o n a l F i n a n c e

C e n t e r , a n d t h e In t e r n a l R e v e n u e S e r v i c e ” . 490 In t e r n a t i o n a l l y, t h e

“ In t e r n a t i o n a l C h a m b e r o f C o m m e r c e ” o f f e r s t o p a r t i e s t h e

a b i l i t y t o t a k e a d v a n t a g e o f o n l i n e a r b i t r a t i o n t h r o u g h a we b s i t e

called “Net Case”.

T h i s p a r t o f t h e t h es i s ex a m i n e s o n l i n e a r b i t r a t i o n i n d e p t h

a s a n e s s e n t i a l p a r t o f t h e O DR p r o c e s s . T h e f i r s t s e c t i o n o f t h i s

chapter demonstrates the necessity of online arbitration as an


489
YÜKSEL, Armağan Ebru Bozkurt, Online International Arbitration, Ankara Law Review,
Vol.4, No.1, 2007, pp. 92, 93.
490
RODRIGUEZ Miguel Roberto, Online Arbitration, (Daniel Erdmann / World-Mediation-
Centre), 2011, pp. 8, 9.

286
integral part of the ODR process as well as its numerous

advantages which make arbitration an ideal method for resolving

d i s p u t es o n l i n e . U n f o r t u n a t e l y, o n l i n e a r b i t r a t i o n d i f f e rs f r o m

other ODR methods not only because of its u n p a r al l e l e d

advantages, but it also faces some additional issues that spawn

out of its unique nature. There are the general drawbacks that

a r e c o m m o n t o a l l O D R m e t h o d s s u c h a s t e c h n o l o g i c a l i s s u es

and lack of face to face interaction (which, however, are

becoming less of a problem due to astonishing technological

a d v a n c e s ) , b u t t h e re a r e a l s o l e g a l i s s u e s c o n n e c t e d m a i n l y t o

the fact that online arbitration r en d e r s binding decisions

( a r b i t r a l a w a r d s ) w h i c h a r e e n f o r c e a b l e . 491 T h e e n f o r c e a b i l i t y o f

outcomes, as well as the reconciliation of online arbitration with

the existing legal framework raise several legal issues and

present new criteria and conditions as well as the increased

d e p e n d e n c e b y l a w s e i t h e r n a t i o n a l o r i n t e r n a t i o n a l . “O n l i n e

arbitration is the most powerful method of ODR and has the

g r e a t e s t p o t e n t i a l , b u t i t a l s o r a i s e s t h e m o s t i s s u e s ” . 492 These

i s s u e s r e s u l t f r o m t h e f a c t t h a t t h e c o m m u n i c a t i o n t a k es p a r t

online and there are concerns, such as those relating to the

validity and the binding force of online arbitration agreements

and awards.

491
MANEVY Isabelle, op. cit., p. 34.
492
SCHULTZ Thomas, Does Online Dispute Resolution Need Governmental Intervention? The
Case for Architectures of Control and Trust, North Carolina Journal of Law and Technology, vol.
6, Is. 1, 2004, p. 75.

287
The issues relating to online arbitration are being explored

in relation to its different phases, i.e. the arbitration agreement,

the arbitration process, and the arbitration award and more

p a r t i c u l a r l y r e l a t e t o t h e c o n c l u s i o n o f a r b i t r a t i o n c o n t r ac t s i n

the c yb e r s p a c e , the procedure of arbitration, the seat of

arbitration, the applicable law, the establishment of awards, and

t h e e n f o r c e m e n t o f a w a r d s . S e c t i o n s t w o a n d t h r e e o f ch a p t e r

two as well as the entire chapter three identify these drawbacks

and demonstrate the necessary solutions in order for online

arbitration to fulfil its full potential and become a fair and

efficient way to resolve disputes online that will overcome all

the drawbacks relating to ODR.

Section 1: Why online arbitration?

The first special characteristic that makes online

a r b i t r a t i o n n e c e s s a ry i s t h e f a c t t h a t c o n t r a r y t o o t h e r m e t h o d s ,

arbitration is an adjudicative method. This means that the third

n e u t r a l h a s d e c i s i o n - m a k i n g a u t h o r i t y. W h e r e t h e o t h e r m e t h o d s

aim to an agreed settlement, arbitration is fundamentally

d i f f e r e n t a s i t f o c u s e s o n e a c h p a r t y’ s r i g h t s a n d e n t i t l e m e n t s .

Although s e t t l e m en t is u s u al l y very useful, without the

288
p o s s i b i l i t y t o r e c o u r s e t o a n a d j u d i c a t i v e m e t h o d a t t h e en d o f

the process, some of the most sacred values are endangered,

s i n c e s e t t l em e n t r e p r e s e n t s a s t e p a w a y f r o m l a w . 493 S e t t l e m e n t i s

not justice, instead it simply aims to make the best out of a

s i t u a t i o n i r r e s p e c t i v e o f e a c h p a r t y’ s r i g h t s a n d e n t i t l em e n t s ,

f o c u s i n g o n m o v i n g a c a s e a l o n g , r e g a r d l e s s o f w h et h e r j u s t i c e

h a s b e e n d o n e o r n o t . O n t h e c o n t r ar y a r b i t r a t i o n i s a t r u t h -

seeking process that fulfills the parties’ need for a day in court,

i n a m a t t e r o f s p e a k i n g . M o r e i m p o rt a n t l y, n o t a l l d i s p u t e s c a n

b e s o l v e d t h r o u g h s e t t l e m e n t . In s o m e c a s e s “ t h e u n d e r l yi n g

i n t e r e s t s o f t h e p a rt i e s c a n n o t b e a l i g n e d ” ; 494 t h e s e d i s p u t es d o

not lend themselves to compromise and it is therefore necessary

to resort to adjudication. Furthermore, processes leading to

settlements are voluntary and a part y can terminate the process

at any stage; again resorting to adjudication, where the process

cannot be abandoned, is necessary to provide an avenue of

redress.

The preference of voluntary methods leading to

s e t t l e m e n t s i n s t e a d o f d e c i s i o n s i s n o t a r e s u l t o f t h e s u p er i o r i t y

o f t h e f o r m e r i n a ch i e v i n g j u s t i c e ( o n t h e c o n t r a r y) , b u t r a t h e r

an easy “way out" of the complexities of arbitration. In

493
“Brutally simplified, an over-development of settlement as a means of dispute settlement would
be reminiscent of a family in which the parents systematically negotiate for peace with their
children, instead of facing the more draining tasks of parenthood, giving force to the values
forming their educational ideals”. See SCHULTZ Thomas, Online Dispute Resolution: an
Overview and Selected Issues, op. cit., p. 45.
494
HÖRNLE Julia, op. cit., pp. 55- 58.

289
t r a d i t i o n a l a r b i t r a t i o n t h e s e c o m p l ex i t i e s i n c l u d e p r o ce d u r a l

f o r m a l i t i e s a n d i n cr e a s e d c o s t s ; i n t h e o n l i n e e n v i r o n m e n t t h e

c o m p l ex i t i e s c o n c e rn m o s t l y t h e p e r c e i v e d l e g a l d i f f i c u l t i e s a n d

b u s i n e s s -m o d e l d i ff i c u l t i e s . 495 F u r t h e r m o r e , from a law and

economics perspective, the absence of an adjudicate method may

hinder the ability to reach a settlement since the defendant may

not be prepared to settle at all, or endanger availability of

r e d r e s s a n d f a i r n e s s b y p r o d u c i n g u n f a i r s e t t l e m e n t s . 496 A l s o i n

cases where power imbalance is significant, such as B2C

d i s p u t es , an adjudicative process where one party cannot

p r e s s u r e t h e o t h e r “m a y b e m o r e a d e q u a t e f o r c o r r e c t i n g p o s s i b l e

a b u s e s o f p o w e r ” . 497 F o r a l l t h e a b o v e r e a s o n s i t i s c l e a r t h a t i n

o r d e r f o r a n O D R s ys t e m t o b e e f f e c t i v e a n d t r u l y p r o v i d e a c c e s s

to justice, online arbitration as an adjudicative process must be

p r o v i d e d a s t h e f i n al s t e p o f t h e O D R p r o c e d u r e .

495
“In 2003, the co-founder, President and CEO of SquareTrade, which a few years ago was by far
the most successful ODR provider, mentioned that online arbitration would in principle have been
the first choice, but that because of the legal complexities of arbitration, they decided to
‘downgrade’ the services to online assisted negotiation and online mediation”. SCHULTZ
Thomas, The Roles of Dispute Settlement and ODR, op. cit., pp. 8- 15.
496
“By way of illustration, if each party bears its own costs, the claimant’s desire to settle could be
expressed as S>A – CC (‘S’ standing for settlement, A being the adjudicated decision and CC the
claimant’s costs). The defendant’s desire to settle could be expressed as S<A+CD (CD standing
for the costs of the defendant). Therefore, if the claimant’s costs are very high, the claimant will be
prepared to settle low. If the defendant’s costs are very high, the claimant can obtain a settlement
substantially exceeding the adjudicated decision. However, in a court system, where the loser pays
the winner’s cost, assuming that it is clear that the claimant will win, the respective settlement
desires would be S>A (claimant) and S< A+CC+CD (defendant). Hence, if the costs of either
party are very high, the claimant could obtain a settlement vastly exceeding the adjudicated
decision”. See HÖRNLE Julia, op. cit., pp. 52, 53.
497
CORTES Pablo, op. cit., p. 105.

290
A. Online arbitration versus litigation and traditional

arbitration

M o s t o f t h e a d v a n t ag e s t h a t d i f f e r e n t i a t e o n l i n e a r b i t r a t i o n

from litigation and traditional AD R can be found as

characteristics of ODR methods in general and were

demonstrated in depth at the relevant section about the

a d v a n t a g e s o f O D R . In s h o r t , t h e s e i n c l u d e c o n v e n i e n c e , t i m e,

c o s t , t r a v e l a n d e v e n p a p e r s a v i n g s . H o w e v e r , o n l i n e a r b i t ra t i o n

specifically has some additional features that underline its

i m p o r t a n c e . Li t i g a t i o n a n d t r a d i t i o n a l ar b i t r a t i o n a r e a d v e r s a r i a l

p r o c e d u r e s t h a t c an v e r y o f t e n c r e a t e p o w e r i m b a l a n c e s , m a k e

parties defensive, induce stress and increase the frustration

making the resolution of the dispute so much harder.

Furthermore, the formality of these procedures compels parties

to pay large amounts of money for legal representation and often

the costs may rise even higher because of the formalities and

d e l a ys r e l a t e d t o t h e p r o c e e d i n g s . O n t h e c o n t r a r y, o n l i n e

arbitration by transferring the procedure to the virtual world

reduces the intimidating nature and the formality of the

p r o c e e d i n g s a n d c o n s e q u e n t l y t h e c o s t s o f l e g a l f e e s , 498 a s w el l

498
“The comfort and freedom from having to go into a courtroom or other formal hearings also
may allow consumers to forgo or minimize costs of legal representation. Parties often feel
compelled to pay the costs of hiring attorneys when they face intimidating or unfamiliar
proceedings, but may feel less pressure to employ attorneys in online arbitration involving fewer

291
as reduces the hostility between the parties since the resolution

takes place from the safety and convenience of their home

i n s t e a d o f at t e n d i n g n e r v e - w r e c k i n g f o r m a l m e e t i n g s . B u t , t h e

greatest advantage of online arbitration compared to litigation

and traditional arbitration is the fact that the parties can resolve

t h e d i s p u t e m u c h fa s t e r . O n l i n e a r b i t ra t i o n c a n p r o d u c e a f i n a l

a n d b i n d i n g a w a r d i n a m a t t e r o f d a ys o r h o u r s w i t h o u t t h e n e e d

f o r t h e p a r t i e s t o t ra v e l , c o o r d i n a t e s c h e d u l e s o r w a i t m o n t h s f o r

a court date or a hearing and without the unnecessary formalities

t h a t m a y l e a d t o u n w a n t e d d e l a ys .

B . O n l i n e a r b i t r a t i o n ve r s u s o t h e r O D R m et h o d s

O n l i n e a r b i t r a t i o n a s o n e o f t h e O D R m e t h o d s e n j o ys a l l

the advantages of ODR such as convenience, flexibility and time

a n d c o s t e f f i c i e n cy. B u t , a m o n g t h e O D R m e t h o d s , o n l i n e

a r b i t r a t i o n i n p a r t i c u l a r d i s p l a ys s o m e u n i q u e c h a r a c t e r i s t i c s

that differentiate it from the other methods. The additional

advantages of online arbitration co n t r a r y to other ODR

m e c h a n i s m s r e l a t e t o t h e d e c i s i o n -m a k i n g a u t h o r i t y o f t h e t h i rd

procedural formalities and no F2F dealings. Online arbitration processes also may be more
automated, again easing need for counsel’s direction”. See SCHMITZ J. Amy, op. cit., pp. 26, 27

292
n e u t r a l , t o t h e b i n d i n g n a t u r e o f t h e r e s u l t a n d t o t h e r e l i an c e o f

the procedure on documentary evidence. The fact that the

d i s p u t e i s r e s o l v ed b y a t h i r d p a r t y h a s a r e s u l t t h e f a s t e r

resolution of the dispute since the parties do not have spent

c o u n t l e s s h o u r s ex c h a n g i n g p r o p o s a l s a n d c o u n t e r p r o p o s a l s

attempting to reach a mutually acceptable solution, which might

even never come at the end of the procedure. Contrary to online

n e g o t i a t i o n a n d m ed i a t i o n , i n o n l i n e ar b i t r a t i o n p a r t i e s ca n r e s t

assured that their dispute will be resolved by a third party who

w i l l d e c i d e b a s e d o n t h e m e r i t s o f t h e i r c l a i m s . F i n a l l y, o n l i n e

a r b i t r a t i o n s e e m s t o b e m o r e s u i t e d f o r t h e o n l i n e e n v i ro n m e n t

than the voluntary and non-binding ODR methods, because of its

increased reliance on documentary evidence.

Online arbitration is most suitable for a s yn c h r o n o u s

c o m m u n i c a t i o n b e ca u s e i t m a i n l y i n v o l v e s p a r t i e s ’ ex c h an g e o f

i n f o r m a t i o n , d o c u m e n t s , ex h i b i t s , a n d o t h e r e v i d e n c e . O n l i n e

arbitration does not require the same degree of interaction, and

F 2 F c o n t a c t , a s n o n b i n d i n g d i s p u t e re s o l u t i o n m et h o d s , s i n c e

a s yn c h r o n o u s communications in online arbitration allows

parties to post and carefully review briefs, affidavits, documents

a n d o t h e r e v i d e n t i a r y s u b m i s s i o n s o n t h e i r o w n s c h e d u l e s . 499 O n e

o f t h e m o s t u s e d a r g u m e n t s a g a i n s t O DR i n g e n e r a l i s t h e l a c k o f

face to face to interaction and consequently the lack of body

499
SCHMITZ J. Amy, op. cit., p. 25.

293
language and nonverbal cues. First of all, the advancement of

IC T t o o l s t o d a y a l l o w s f o r t e l e c o n fe r e n c i n g t h o u g h s e v e r a l

s o f t w a r e p r o g r a m s i n a n e a s y a n d a f f o r d a b l e w a y. B u t r e g a r d l e s s

of that, face to face interaction is especially important to

consensual and non-binding methods, such as negotiation and

m e d i a t i o n , w h e r e fa c e t o f a c e i n t e r a c t i o n c a n h e l p c r e a t e a

climate of cooperation and lead to the consensual settlement

e s s e n t i a l f o r t h e d i s p u t e r e s o l u t i o n . On t h e c o n t r a r y, i n o n l i n e

arbitration the resolution of the dispute is not based on a

consensual settlement with which the parties will co m p l y

v o l u n t a r i l y, b u t o n t h e d e c i s i o n o f t h e t h i r d p a r t y a s a r e s u l t o f

t h e p a r t i e s ’ p r e s e n t a t i o n s o f t h e i r c l a i m s a n d n o t a s a r es u l t o f

their cooperation. Online arbitration usually “is a much less

c o m p l ex c o m m u n i c at i o n s p r o c e s s t h a n o n - l i n e m e d i at i o n , a n d t h e

t e c h n o l o g y a n d s o f t w a r e r e q u i r e d f o r o n - l i n e a r b i t r a t i o n wi l l , as

a r e s u l t , t e n d t o b e l e s s c o m p l i c a t e d ” . 500 A r b i t r a t i o n i s m o re

s u i t a b l e fo r t h e o n l i n e e n v i r o n m e n t t h a n c o n s e n s u al m e t h o d s

since usually communication is less intense; proceedings are

m o s t l y w r i t t e n a n d t o u s e a r b i t r a t i o n fo r d i s p u t e r e s o l u t i o n t h e r e

is seldom a need for more than e-mail and secure

c o m m u n i c a t i o n s . 501

Furthermore, the binding nature of online arbitration

(binding online arbitration) provides finality in the resolution of


500
KATCH Ethan & RIFKIN Janet, op. cit., p. 138.
501
CORTES Pablo, op. cit., pp. 106, 107.

294
the dispute. Online arbitration provides an end to the dispute

w i t h o u t t h e n e e d t o r e s o r t l a t e r o n t o o t h e r O D R m et h o d s o r

costly and time consuming appeal processes. This is especiall y

important in e-commerce disputes where the usually low value of

the dispute commands a f i n al and financially proportional

r e s o l u t i o n w i t h o u t t h e l i k e l i h o o d o f d r a g g i n g o n t h e d i s p u t e. 502

In i n t e r n a t i o n a l a r b i t r a t i o n , d e a l i n g w i t h c r o s s - b o r d e r d i s p u t e s ,

the arbitral award often may prove easier to enforce than court

judgments, at least in the countries that have signed the 1958

“ U n i t e d N a t i o n s C o n v e n t i o n o n t h e R e c o g n i t i o n a n d E n f o r ce m e n t

of Foreign Arbitral Awards”, also known as the “New York

Convention”.

H o w e v e r , b e i n g s i n g e d o v e r f i f t y ye a r s a g o , t h e “ N e w

York Convention” has become outdated and creates concerns

about whether it can support and facilitate online arbitration and

the enforcement of awards. Since online arbitration still operates

u n d e r r u l e s d e s i g n e d f o r t r a d i t i o n a l a r b i t r a t i o n , i n o rd e r t o

overcome the aforementioned d i f f i cu l t i e s , the New York

Convention, at the very least, “would need to be interpreted

b r o a d l y” . 503 H o w e v e r , “ a l t h o u g h a n e x t en s i v e i n t e r p r e t a t i o n o f

i t s p r o v i s i o n s c a n b e o f s o m e h e l p , i d e a l l y, i t s m o d e r n i z a t i o n

502
RODRIGUEZ Miguel Roberto, op. cit., pp. 9, 10.
503
YÜKSEL, Armağan Ebru Bozkurt, op. cit., pp. 85-87.

295
and amendment is necessary in order to keep track with the

d e v e l o p m e n t s o f m o d e r n s o c i e t y” . 504

Section 2: The online arbitration agreement

W h e n e v e r t h e r e i s a d i s p u t e , t h e f i rs t s t e p i n o r d e r t o

resolve it through arbitration is for the parties to conclude an

arbitration agreement. This agreement can be formed either

before the dispute arises (pre-dispute agreement) in which case

the parties agree that any future disputes arising out of their

t r a n s a c t i o n w i l l b e r e s o l v e d t h r o u g h a r b i t r a t i o n , o r i t ca n b e

formed after the dispute arises for its specific resolution (post-

d i s p u t e a g r e e m e n t ) . T h e a g r e e m e n t c a n b e a s e p a r a t e c o n t ra c t o r

it can be a clause in an already existing contract. More

specifically there are several forms in which an online

arbitration agreement can be concluded. The parties can agree to

o n l i n e a r b i t r a t i o n b y e - m a i l o r b y r e f e r r i n g t o a n o t h e r d o cu m e n t

c o n t a i n i n g a n a r b i t ra t i o n c l a u s e .

In t h e c a s e o f B 2 C d i s p u t es o n e o f t h e m o s t c o m m o n w a ys

to form an arbitration agreement is through what today is known

504
HERBOCZKOVÁ Jana, Certain Aspects of Online Arbitration, Journal of American
Arbitration, vol. 1, No. 1, 2001, p. 11.

296
as “browse-wrap” or “click-wrap” agreements, according to

which a consumer agrees to arbitrate disputes arising out of the

transaction with the seller by accepting the “terms and

conditions” form that will appear on his computer screen during

the transaction, in which there is an arbitration cl a u s e .

Although, based on the party autonomy principle the parties can

freely determine the contents of the arbitration agreement, the

applicable procedural law as well as the composition of the

a r b i t r a l t r i b u n al ; h o w e v e r , b e c a u s e o f t h e h i g h v o l u m e o f e -

commerce disputes today it is very common for ODR providers

a n d b u s i n e s s e s t o u s e m o d e l a r b i t r a t i o n a g r e e m e n t s . T h er e a r e

s e v e r a l n a t i o n a l l aw s r e l a t i n g t o a r b i t r a t i o n a g r e e m e n t s , b u t i n

t h e i n t e r n a t i o n a l l e v e l t h e m o s t r e l ev a n t i n s t r u m e n t s ar e t h e

“ N e w Y o r k C o n v e n t i o n ” o f J u n e 1 0 , 1 9 5 8 a n d t h e “ U N C IT R A L

M o d e l La w ” o f 1 9 8 5 w h i c h p r o v i d e s t a n d a r d s f o r a r b i t r a t i o n

agreements by regulating the relevant issues. The main problems

faced relating to online arbitration agreements concern their

v a l i d i t y a n d e n f o r c e a b i l i t y.

297
A. Validity of arbitration agreements and the written

requirement

The first issue regarding the validity of the online

arbitration agreement relates to the requirement of a written

form. Agreements for online a r b i t ra t i o n are also t yp i c a l l y

concluded online. Since an agreement in order to be valid has to

be in writing, the obvious issue that arises in online arbitration

is whether or not an online agreement concluded over the

i n t e r n e t u s i n g IC T t o o l s i n s t e a d o f t h e t r a d i t i o n a l m e a n s o f

writing can fulfill this requirement of a written form? The “New

York Convention” provides for the requirement of an agreement

i n w r i t i n g i n t h e f i r s t p a r a g r a p h o f A r t i c l e I I. 505 A n d i n t h e

second paragraph of the same article specifies the “agreement in

w r i t i n g ” r e q u i r e m e n t . 506

The main problem with the writing requirement in the

“New York Convention” is that its description does not

e x p r e s s l y i n c l u d e o n l i n e m e a n s o f co n c l u d i n g t h e a g r e e m e n t ,

505
“Each Contracting State shall recognize an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual or not, concerning a
subject matter capable of settlement by arbitration”. See The United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards of June 10 1958 Article II available at
http://www.newyorkconvention.org/texts
506
“The term ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams”. See The
New York Convention of June 10 1958 Article II available at
http://www.newyorkconvention.org/texts

298
which is only natural since at the time it was formulated in

1958, the modern means of communicating such as the internet

a n d a l l t h e c o t e m p o r a r y IC T t o o l s d i d n o t ye t e x i s t . T h e r e f o r e ,

the “New York Convention” does not and could not include the

use of online communication as a way to conclude an arbitration

a g r e e m e n t . 507 C o n t r a r y t o t h e “ N e w Y o r k C o n v e n t i o n ” , t h e

“ U N C IT R A L Model La w on In t e r n a t i o n a l Commercial

Arbitration” of 1985 adopts a more broad description of the term

“agreement in writing” which includes all m ea n s of

t e l e c o m m u n i c a t i o n , 508 a n d “ u s e s t h e c o n ce p t o f ‘ d a t a m e s s a g e s ’,

w h i c h i n c l u d e e l e c t r o n i c d a t a i n t e r c h a n g e ( E D I) , t e l e g r a m , t e l e x

a n d t e l e c o p y, a n d a l l o f w h i c h s a t i s fy t h e r e q u i r e m e n t o f ‘ i n

writing’, if the information contained therein is accessible so as

t o b e u s a b l e f o r s u b s e q u e n t r e f e r e n c e ” . 509

One way to surpass this issue is to use the electronic

means to conclude the online arbitration agreement and to refer

t o a n o t h e r t a n g i b l e d o c u m e n t w h i c h wi l l i n c l u d e t h e a g r e e m e n t

in traditional writing. However, this solution decreases to some

507
HERBOCZKOVÁ Jana, op. cit., pp. 5, 6.
508
The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a
document signed by the parties or in an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement, or in an exchange of statements of
claim and defense in which the existence of an agreement is alleged by one party and not denied
by another. The reference in a contract to a document containing an arbitration clause constitutes
an arbitration agreement provided that the contract is in writing and the reference is such as to
make that clause part of the contract. See the UNCITRAL Model Law on International
Commercial Arbitration of 1985 article 7 available at
http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/06-54671_Ebook.pdf
509
HERBOCZKOVÁ Jana, op. cit., pp. 5, 6.

299
point the advantages of concluding the arbitration entirely

online. On the other hand it has been argued that there is no

such need, because concluding the arbitration agreement by

u s i n g IC T t o o l s l i k e e - m a i l s o r b y c l i c k i n g t h e a g r e e b u t t o n o n

click-wrap agreements is considered as transferring information

by letter or telegram. This solution that is most prominently

a c c e p t e d t o d a y, r e c o n c i l e s t h e “ N e w Y o r k C o n v e n t i o n ” wi t h t h e

“ U N C IT R A L Model law on In t e r n a t i o n a l Commercial

Arbitration”, by accepting a more liberal interpretation of the

t e x t o f t h e f o r m e r i n l i g h t o f t h e l a t t e r . M o r e s p e c i f i c a l l y, i t i s

c o n s i d e r e d t h a t s i n c e t h e N e w Y o r k C o n v e n t i o n i s a v er y o l d

d o c u m e n t , “ d r a f t e d a t a t i m e w h e n w ri t i n g n e c e s s a r i l y m e a n t i n k

o n p a p e r a n d n o t b yt e s o n a h a r d d i s k ” , 510 i t m u s t b e i n t e r p r e t ed

according to the modern technological developments; the

i n t e r n e t a n d IC T t o o l s c a n b e a n a l o g i z e d t o t h e m e n t i o n ed f a x

and telegram so that the convention will not include only the

limited cited methods.

The same conclusion can be supported by EU “Directive on

E l e c t r o n i c c o m m e r c e ” , w h i c h e n s u r e s t h a t c o n t r a c t s ca n b e

c o n c l u d e d b y e l e c t r o n i c m e a n s , 511 a s w e l l a s b y s e v e r a l n a t i o n al

510
KAUFMANN-KOHLER Gabrielle, Online Dispute Resolution and its Significance for
International Commercial Arbitration, Global Reflections on International Law, Commerce and
Dispute Resolution, 2005, pp. 444, 445.
511
“This definition covers any service normally provided for remuneration, at a distance, by means
of electronic equipment for the processing (including digital compression) and storage of data, and
at the individual request of a recipient of a service”. See 2000/31/EC Directive of the European
Parliament and of the Council of 8 June 2000 on certain legal aspects of information society
services, in particular electronic commerce, in the Internal Market ('Directive on electronic

300
laws. For instance, in the United Kingdom the UK “Arbitration

A c t ” o f 1 9 9 6 a c c e p t s a s w r i t i n g f o r m a n yt h i n g b e i n g r e c o r d e d b y

a n y m e a n s . 512 A l s o t h e “ E u r o p e a n C o n v e n t i o n o n In t e r n a t i o n al

C o m m e r c i a l A r b i t r at i o n ” c o n s i d e r s a s a n a g r e e m e n t i n w ri t i n g ,

o n e c o n c l u d e d t h r o u g h l e t t e r s , t el e g r a m s , o r i n a c o m m u n i c a t i o n

b y t e l e - p r i n t e r . 513

In t h e U n i t e d S t at e s o f A m e r i c a t h e r e q u i r e m e n t f o r a

written form according to the “Federal Arbitration Act” of 1925

i s i n t e r p r e t e d i n a m o r e l i b e r a l w a y s o t h a t i t i n c l u d e s e l ec t r o n i c

a g r e e m e n t s . 514 T h e s a m e i n t e r p r e t a t i o n i s s u p p o r t e d b y o t h er

i n s t r u m e n t s wi t h s i m i l a r o r i d e n t i c a l w o r d i n g , s u c h a s t h e U S

“ U n i f o r m C o m p u t e r In f o r m a t i o n T r a n s a c t i o n s A c t ” ( U C IT A ) , t h e

US “Uniform El e c t r o n i c Transactions Act” ( U E T A) , the

commerce'), Article 17 available at http://eur-lex.europa.eu/legal-


content/EN/TXT/HTML/?uri=CELEX:32000L0031&from=EN
512
“Agreements to be in writing: The provisions of this Part apply only where the arbitration
agreement is in writing, and any other agreement between the parties as to any matter is effective
for the purposes of this Part only if in writing. The expressions “agreement”, “agree” and “agreed”
shall be construed accordingly. There is an agreement in writing if the agreement is made in
writing (whether or not it is signed by the parties), if the agreement is made by exchange of
communications in writing, or if the agreement is evidenced in writing. Where parties agree
otherwise than in writing by reference to terms which are in writing, they make an agreement in
writing. An agreement is evidenced in writing if an agreement made otherwise than in writing is
recorded by one of the parties, or by a third party, with the authority of the parties to the
agreement. An exchange of written submissions in arbitral or legal proceedings in which the
existence of an agreement otherwise than in writing is alleged by one party against another party
and not denied by the other party in his response constitutes as between those parties an agreement
in writing to the effect alleged. References in this Part to anything being written or in writing
include its being recorded by any means”. See UK Arbitration Act of 1996 section 5 available at
http://www.legislation.gov.uk/ukpga/1996/23/section/5
513
European Convention on International Commercial Arbitration, article I, 1961, available at
http://www.jus.uio.no/lm/europe.international.commercial.arbitration.convention.geneva.1961/_1.
html
514
Federal Arbitration Act of 1925, available at
https://www.ilr.cornell.edu/alliance/resources/Legal/federal_arbitration_act.html

301
“ U N ID R O IT P r i n c i p l e s o f In t e r n a t i o n a l C o m m e r c i a l C o n t ra c t s ” ,

a n d t h e “ B r u s s e l s I R e g u l a t i o n ” . 515

C o n c l u s i v e l y, i t i s c e r t a i n l y t i m e t o r e c o g n i z e t h a t t h e

w r i t t e n r e q u i r e m e n t i n A r t i c l e II o f t h e “ N e w Y o r k C o n v e n t i o n ”

is fulfilled not only by agreements on paper but also by

agreements recorded through electronic communication, as long

as the information is accessible for further r e f e r e n c e. 516

T h e r e f o r e a n o n l i n e a r b i t r a t i o n a g r e e m e n t f u l fi l l s t h e w r i t t e n

r e q u i r e m e n t a n d i s c o n s i d e r e d a v a l i d a g r e e m e n t . T e c h n i c a l l y,

t h e a r g u m e n t i s t h a t s i n c e A r t i c l e II ( 2 ) o f t h e “ N e w Y o r k

C o n v e n t i o n ” i n t e r p re t e d b r o a d l y c o n s i d e r s t h a t o n l i n e a r b i t r a t i o n

agreements, concluded through means of telecommunication,

s u c h a s t h e u s e o f t e l e g r a m s , f u l f i l l t h e w r i t t e n r e q u i r e m en t a n d

s i n c e t h e u s e o f e - m a i l s c a n b e e q u a t e d t o t h e u s e o f t e l eg r a m s ,

therefore also online arbitration agreements concluded via e-

mail are valid. The argument follows the same logic to say that

o n l i n e a r b i t r at i o n ag r e e m e n t s , c o n c l u d e d b y a c c e p t i n g t h e “ t e r m s

and conditions” form and the included arbitration clause, also

fulfil the written requirement, because “there has been an

515
KAUFMANN-KOHLER Gabrielle, Ibid., pp. 444, 445.
516
“The electronic document must include the identity of the parties, the agreement itself (i.e. the
offer and the acceptance), and the content of the agreement (i.e. the specific terms and the general
conditions). This information must be stored in a manner that allows its accessibility for further
evidence and its admissibility as evidence. In other words, this information must be stored using a
technology which permits long-lasting compatibility and which excludes any serious risk of
manipulation of the stored data”. SCHULTZ Thomas, Online Dispute Resolution: an Overview
and
Selected Issues, op. cit., p. 9.

302
exchange of information entirely analogous to the exchange that

t a k e s p l a c e w h e n e - m a i l s o r f a x e s a r e ex c h a n g e d ” . 517

B. Expressing consent in electronic arbitration contract

A n o t h e r i m p o rt a n t i s s u e r e l a t i n g t o t h e o n l i n e a r b i t r a t i o n

a g r e e m e n t i s t h at o f c o n s e n t g i v e n b y t h e p a r t i e s t h a t c o n c l u d e

the agreement. The main problem lays on whether or not the

parties to an online arbitration agreement can express their

c o n s e n t f o r r e s o l v i n g t h e i r d i s p u t e t h ro u g h a r b i t r a t i o n b y u s i n g

IC T t o o l s , f o r e x am p l e v i a e - m a i l o r b y a g r e e i n g t o a “ t e r m s a n d

conditions” form on an internet webpage. The first objection

r e l a t e s t o t h e s e c u ri t y a n d t h e c o n c e r n i s t h a t t h e s e m e a n s a r e

n o t s e c u r e e n o u g h t o r e l y o n t h e m f o r t h e ex p r e s s o f c o n s e n t .

H o w e v e r , a s a l r e a d y m a d e e v i d e n t t h es e t e c h n o l o g i c a l c o n c e r n s

about security are becoming less and less of a problem because

o f t h e a d v a n c e m e n t s o f t e c h n o l o g y, c r yp t o g r a p h y a n d i n g e n e r a l

internet security mechanisms.

O n e o f t h e b e s t w a ys f o r t h e p a r t i e s t o ex p r e s s t h e i r

consent and also a prerequisite for an arbitration agreement,

517
YÜKSEL, Armağan Ebru Bozkurt, op. cit., pp. 85-87.

303
besides the written form, is the use of signatures. The “New

York Convention” expressly requires the arbitration agreement

t o b e s i g n e d b y t h e p a r t i e s . Th i s r e q u i r e m e n t i s f u l f i l l e d b y t h e

u s e o f e l e c t r o n i c s i g n a t u r e s b e c a u s e i t i s c o n s i d e r e d t h at t h e u s e

o f a n e l e c t r o n i c s i g n a t u r e , f o r e x a m p l e i n a n e m ai l , ex p r e s s e s

t h a t p a r t y’ s c o n s e n t a n d i s e q u a t e d t o a t r a d i t i o n a l s i g n a t u r e b y

hand.

Electronic signature (or digital signature) and

a u t h e n t i c a t i o n i s a n e n c r yp t i o n t e c h n o l o g y, w h i c h i s e m p l o ye d i n

e l e c t r o n i c c o m m e rc i a l t r a n s a c t i o n s t o e n s u r e o n l i n e b u s i n e s s

s e c u r i t y. 518 T h e e q u a t i o n o f a n e l e c t ro n i c s i g n a t u r e w i t h a

traditional one is supported by several legal documents such as

t h e “ U N C IT R A L M o d e l La w o n E l e c t r o n i c S i g n a t u r e s ” a d o p t e d

by U N C IT R A L on 5 July 2001, which grants minimum

r e c o g n i t i o n t o m o s t a u t h e n t i c a t i o n t ec h n o l o g i e s , a n d p r o m o t es

the progressive harmonization and unification of measures and

p o l i c i e s o n e - s i g n a t u r e i s s u e s . F u r t h er m o r e , t h e “ In t e r n a t i o n a l

C h a m b e r o f C o m m e r c e ” ( IC C ) w i t h s e v e r a l i n i t i a t i v e s s u c h a s

the “General Usage for In t e r n a t i o n a l Digitally Ensured

C o m m e r c e ” ( G U ID E C ) , t h e IC C “ e - T e r m s ” o f 2 0 0 4 a n d t h e IC C

“Guide to Electronic Contracting”, attempt to create a general

framework for the use of digital signatures in international

c o m m e r c i a l t r a n s a c t i o n s . In E u r o p e t h e o p i n i o n i s a l s o s u p p o r t e d

518
WANG Fangfei Faye, op. cit., pp. 18 – 23.

304
by the EU “Directive on a Community Framework for Electronic

s i g n a t u r e s ” 519 w h i c h p r o m o t e s t h e u s e an d l e g a l r e c o g n i t i o n o f

electronic signatures as means of authentication and sets out a

framework for the recognition of e-signatures and certification

s e r v i c e r e q u i r e m e n t s f o r m e m b e r s t a t e s . In t h e U n i t e d S t a t e s t h e

a d o p t i o n o f t h e “ El e c t r o n i c S i g n a t u r e s i n G l o b a l a n d Na t i o n a l

C o m m e r c e A c t ” 520 ( E S IG N A c t ) c o n s o l i d a t e s t h e l e g a l e f f e c t a n d

v a l i d i t y o f e l e c t r o n i c s i g n a t u r e s a n d p r o m o t e s c o n s i s t e n cy a n d

c e r t a i n t y r e g a r d i n g t h e u s e o f e - s i g n a t u r e s i n t h e US .

519
“The purpose of this Directive is to facilitate the use of electronic signatures and to contribute
to their legal recognition. It establishes a legal framework for electronic signatures and certain
certification-services in order to ensure the proper functioning of the internal market. It does not
cover aspects related to the conclusion and validity of contracts or other legal obligations where
there are requirements as regards form prescribed by national or Community law nor does it affect
rules and limits, contained in national or Community law, governing the use of documents”. See
Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a
Community framework for electronic signatures available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0093:en:HTML
520
“Notwithstanding any statute, regulation, or other rule of law, with respect to any transaction in
or affecting interstate or foreign commerce— (1) a signature, contract, or other record relating to
such transaction may not be denied legal effect, validity, or enforceability solely because it is in
electronic form; and (2) a contract relating to such transaction may not be denied legal effect,
validity, or enforceability solely because an electronic signature or electronic record was used in
its formation”. See the Electronic Signatures in Global and National Commerce Act available at
http://www.gpo.gov/fdsys/pkg/PLAW-106publ229/pdf/PLAW-106publ229.pdf

305
C. Arbitrability and pre-dispute arbitration agreements

The biggest issue relating to online arbitration agreements

concerns the parties’ capacity to conclude these kinds of

a g r e e m e n t s . It i s a n i s s u e o f h i g h i m p o rt a n c e b e c a u s e c o n t r a r y t o

o t h e r O D R m et h o d s , o n l i n e a r b i t r a t i o n i s b i n d i n g a n d t h e r e i s a

c o n c e r n t h a t p a r t i es m a y a g r e e t o r e s o l v e t h e i r d i s p u t e t h r o u g h

arbitration over the internet without fully understanding the

legal effects of their consent and that their legal due process

rights may be infringed. The issue relates to the arbitrability of

d i s p u t es a n d t h e e n fo r c e a b i l i t y o f a g r e e m e n t s t o a r b i t r a t e .

T h e p r o b l e m c o n c er n s m o r e s p e c i f i c a l l y B 2 C d i s p u t e s . In

g e n e r a l , c o n s u m e r d i s p u t es a r e a r b i t r ab l e a s s u b j e c t m a t t e r b u t

many arbitration laws subject consumer disputes to certain


521
restrictions. An agreement to arbitrate involves a waiver of

the right to go to court and an obligation to take part in the

arbitration procedure. The parties’ consent must be voluntary

and fully informed. More specifically the problem relates to pre-

dispute agreements, where it is argued that the consent given

before the dispute arises may hinder the consumers’ access to

j u s t i c e . In p o s t - d i s p u t e a g r e e m e n t s a n d a f t e r a d i s p u t e h a s

arisen, the consumer usually will be fully informed of the

521
KAUFMANN-KOHLER Gabrielle, Online Dispute Resolution and its Significance for
International Commercial Arbitration, op. cit., p. 10.

306
possible resolution options and the choice of arbitration is

v o l u n t a r y a n d f u l l y i n f o r m e d . O n t h e c o n t r a r y, i n p r e - d i s p u t e

agreements it is possible that the consumer has not read the

standard terms and conditions (even if there was a clear link

from the ordering webpage) and thus that the consumer is not

even aware that there is an arbitration clause in the contract.

F u r t h e r m o r e , e v e n i f t h e c o n s u m e r i s a w a r e o f t h e e x i s t en c e o f

a n a r b i t r a t i o n c l a u s e i t i s l i k e l y t o b e u n a w a r e o f i t s s i g n i fi c a n c e

since, at the stage of contract conclusion consumers are unlikely

t o g i v e a n y t h o u g h t t o t h e i s s u e o f l a t e r d i s p u t e s . In t h e s e c a s e s

it cannot be said that the choice of arbitration is fully informed.

C o n s e q u e n t l y, several laws restrict in some way the

enforceability of pre-dispute arbitration clauses against a

consumer, but only very few jurisdictions disallow B2C

a r b i t r a t i o n a g r e e m e n t a f t e r t h e d i s p u t e h a s a r i s e n . 522

This issue becomes even more acute because of the power

imbalances between parties in disputes and “many arbitration

laws limit the arbitrability of disputes where the parties have

substantially different bargaining powers, thereby seeking to

protect tenants, em p l o ye e s , or consumers as the we a k e r

p a r t i e s ” . 523 In O D R t h e r e s t r i c t i o n s o n m a n d a t o r y p r e - d i s p u t e

a r b i t r a t i o n c l a u s e s a p p l y e x c l u s i v el y t o c o n s u m e r a r b i t r a t i o n

s e r v i c e s a n d n o t i n o t h e r c i v i l l a w a r e a s , s u c h a s l a n d l o r d -t e n a n t
522
HÖRNLE Julia, op. cit., p. 171.
523
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 9.

307
r e l a t i o n s . 524 T h e f i r s t c o n c e r n i s t h a t t h e c h o i c e i s n o t v o l u n t a r y

f r o m t h e c o n s u m e r ’ s s i d e , s i n c e a r b i t r at i o n c l a u s e s a r e i n c l u d e d

i n s t a n d a r d f o r m c o n t r a c t s a n d a r e o f f er e d o n a “ t a k e i t o r l e a v e

i t ” b a s i s . 525

T h e c o n s e n t o f t h e p a r t i e s i s a n es s e n t i a l p r e r e q u i s i t e f o r

traditional arbitration and their participation in the procedure

m u s t b e b a s e d o n t h e i r o w n f r e e w i l l . In o n l i n e a r b i t r a t i o n , t h e

concern is that the arbitration agreement might not be based on

the consent of the parties, who might be forced to participate.

For instance, “where there is a monopoly of power or where

there is a pre-dispute arbitration clause in a Business to

Consumers (B2C) agreement, the weaker party has to choose

between entering into an arbitration agreement or forgo

c o n t r a c t i n g , a n d d u e t o p o w e r i m b a l a n c e i n s u c h c a s es , t h e

parties may be considered to have been indirectly forced to enter

i n t o a n a r b i t r a t i o n ag r e e m e n t ” . 526

T h e s e c o n d c o n c e r n i s t h a t c o n s u m e rs a r e i n a n i n f e r i o r

p o s i t i o n s i n c e t h e y a r e o n e - s h o t p l a ye r s c o n t r a r y t o b u s i n e s s e s

w h i c h a r e r e p e a t p l a ye r s c o n d u c t i n g n u m e r o u s a r b i t r a t i o n s e a c h

ye a r a n d b e i n g f a m i l i a r w i t h t h e a r b i t r a t i o n i n s t i t u t i o n an d t h e

524
CORTES Pablo, op. cit., pp. 107, 108.
525
HÖRNLE Julia, op. cit., pp. 171- 173.
526
BADIEI Farzaneh, op. cit., pp. 88, 89.

308
527
procedure. A l s o t h e b u s i n e s s i s u s u a l l y t h e o n e t h a t c h o o s es

the ODR provider, a fact which can lead to some degree of

( u n c o n s c i o u s ) s ys t e m i c b i a s s i n c e t h e p r o v i d e r m a y r e g a r d t h e

s u p p l i e r a s a r e p e a t c u s t o m e r f o r r e f e r r a l . 528

B e c a u s e o f t h e a b o v e c o n c e r n s c o n s u m e r a s s o c i at i o n s

advocate that pre-dispute arbitration agreements should not bind

c o n s u m e r s a n d s e v er a l l a w s h a v e i m p o s e d c e r t a i n r e s t r i c t i o n . In

the European Union, according to the European Council

“Directive on Unfair Terms in Consumer Contracts”, many

Member States may not recognize the compulsory nature of an

online arbitration agreement on the grounds that it hinders

consumers’ rights to go to court. For instance, in France, as

e v i d e n c e d b y c a s e s s u c h a s J a g u a r c a s e , 529 “ p r e - d i s p u t e c o n s u m er

arbitration clauses are invalid in domestic matters but

considered valid in international arbitration, because French

consumer protection law concerning jurisdiction (French Civil

C o d e , A r t . 2 0 6 1 an d F r e n c h C o n s u m e r C o d e , A r t . L. 1 3 2 ( 2 ) )

d o e s n o t a p p l y t o i n t e r n a t i o n a l s i t u a t i o n s ” . 530 A l s o i n E n g l a n d

a n d W a l e s t h e 1 9 9 6 “ A r b i t r a t i o n A c t ” a n d t h e 1 9 9 9 “U n f a i r

527
O’ HARA A. Erin, Choice of law for internet transactions: the uneasy case for online consumer
protection, University of Pennsylvania Law Review, vol. 153, 2005, p. 1935.
528
HORNLE Julia, op. cit., pp. 171- 173.
529
“The first instance court stated the clause to be illegal, the Court of Appeal reversed that
decision and the Supreme Court admitted the arbitrability of the dispute in the circumstances at
hand (it was a transaction of high value and the consumer was not in a weaker position)”.
CORTES Pablo, op. cit., pp. 109, 110.
530
KAUFMANN-KOHLER Gabrielle, Online Dispute Resolution and its Significance for
International Commercial Arbitration, op. cit., p. 13.

309
T e r m s i n C o n s u m er C o n t r a c t s R e g u l a t i o n ” a l l o w p r e - d i s p u t e

arbitration agreements in consumer disputes only when the

amount at stake is more than £5000 and if the arbitration clause

is not unfair according to the regulation.

In the United States the t r e a t m en t of pre-dispute

a r b i t r a t i o n a g r e e m e n t s d i f f e r s . M a n y U S s t a n d a r d t er m s i n

e l e c t r o n i c c o n t r a c t s o f t e n i n c l u d e a r b i t r a t i o n c l a u s e s . T h e re i s a

d i s t i n c t i o n b e t w e e n t w o t yp e s o f a g r e e m e n t s , t h e “ b r o w s e -w r a p ”

a g r e e m e n t s a n d t h e “ c l i c k - w r a p ” a g r e e m e n t s . T h e “ b r o w s e- w r a p ”

a g r e e m e n t s a r e i n c l u d e d i n t h e s t a n d a rd “ t e r m s a n d c o n d i t i o n s ”

section of the business’ website and it is considered that the

c o n s u m e r b y a c c e p t i n g t o u s e t h e p r o d u c t s o r s e r v i c e s o f f e re d b y

t h e b u s i n e s s a l s o a c c e p t s t h o s e t e r m s . O n t h e c o n t r a ry, t h e

“click-wrap” agreements require consumers to a f f i r m at i v e l y

indicate their acceptance of the terms, by checking a box or

clicking a button labeled “I agree”. The enforceability of

browse-wrap agreements has been challenged in several

occasions with most notable the “Specht v. Netscape

Communications Corp. case where the Second Circuit denied

N e t s c a p e ’ s m o t i o n t o c o m p el a r b i t r a t i o n u n d e r a b r o ws e - w r a p

software license agreement, holding that users of Netscape’s

s o f t w a r e d i d n o t h a v e r e a s o n a b l e n o t i ce o f t h e l i c e n s e a g r e e m e n t

310
c o n t a i n i n g t h e a g r e e m e n t t o a r b i t r a t e” . 531 A s f a r a s t h e c l i c k -

wrap agreements go, although there are concerns regarding

illusory consent, generally they are held to be enforceable by

c o u r t s 532 w h e n t h e r e i s a n e x p l i c i t d i s p l ay o f a g r e e m e n t , t h r o u gh

means such as clicking or checking “I accept” or “I agree” prior

t o t h e t r a n s a c t i o n . 533 E x a m p l e s o f c a s e s , i n w h i c h t h e v a l i d i t y o f

consumer arbitration agreements included in the standard “terms

and conditions” is recognized, include the Spartech CMD, LLC

v . I n t e r n a t i o n a l A u t o m o t i v e C o m p o n e n t s c a s e , t h e B l a u v . A T &T

M o b i l i t y c a s e a n d t h e V e r n o n v . Q w es t C o m m u n i c a t i o n s I n t ’ l ,

I n c . c a s e . T h e “ F e d e r a l A r b i t r a t i o n Ac t ” ( F A A ) c o n s i d e r s p r e -

dispute binding agreements, as “v a l i d , irrevocable, and

enforceable”, without distinguishing or mentioning specifically

c o n s u m e r c o n t r a c t s . B u t e v e n w h e n t h e F A A d o e s n o t a p p l y,

u n d e r m o s t s t a t e l a w s , c o n s u m e r a r b i t ra t i o n a g r e e m e n t s a r e a l s o

e n f o r c e a b l e . In t h e U n i t e d S t a t e s c o n s u m e r a r b i t r a t i o n cl a u s e s

a r e l e g a l l y b i n d i n g a s e v i d e n t b y t h e r e l e v a n t c a s e l a w . 534

531
KAHN Sherman and KIFERBAUM David, Browse-wrap Arbitration? Enforcing Arbitration
Provisions in Online Terms of Service, New York Dispute Resolution Lawyer, Vol. 5, No. 2, Fall
2012, p. 35.
532
For example, I.Lan systems, Inc. v. Netscout Service Level Corp) on 2 January 2002 and
Lieschke, Jackson & Simon v. Realnetworks Inc.
533
SCHMITZ J. Amy, op. cit., p. 32.
534
“Several US Supreme Court cases have rejected challenges to pre-dispute arbitration clauses in
consumer contracts. “In Hill v. Gateway 2000 an arbitration clause was contained in the general
terms of contract on paper used by a computer vendor which were included in a computer box.
The seventh circuit held with reference to ProCD v. Seidenberg that the consumer was bound by
the terms because he had the opportunity to read them and reject them by returning the product”.
See MANEVY Isabelle, op. cit., p. 39. “In Buckeye Check Cashing, Inc. v Cardegna the court
ruled that the arbitration clause of an alleged illegal and void contract was enforceable. In Allied-

311
Only when the arbitration agreement does not comply with

f u n d a m e n t a l f a i r n es s o r i s f o u n d t o b e o p p r e s s i v e o r h i g h l y

u n r e a s o n a b l e , i t wi l l b e r e c o g n i z e d a s u n e n f o r c e a b l e b y t h e

courts, such as in cases where there are concerns about

n e u t r a l i t y o r a b o u t i m p o s i n g e x c e s s i v e a r b i t r a t i o n f e e s . 535 B u t , i n

g e n e r a l f o r a n a r b i t r a t i o n c l a u s e c o n t a i n e d i n a s t a n d a r d “t e r m s

and conditions” agreement to be valid, there must be a clear

manifestation of the consumer’s consent to the agreement (for

instance by clicking an accept button) and the agreement must be

clear and visible before the customer reaches the “I accept”

button. Overall there is still some legal uncertainty about the

validity of pre-dispute consumer arbitration agreements.

However, it is argued that even according to EU law, a pre-

dispute consumer arbitration clause clearly referenced in the

contract, which mandates all disputes to be resolved through an

Bruce Terminix Cos. v Dobson the US Supreme Court included consumers within the scope of the
FAA, stating that ‘[the] Congress, when enacting [the FAA] had the needs of consumers, as well
as others, in mind’. In this case the Supreme Court held that Alabama’s statute prohibiting
mandatory pre-dispute arbitration clauses was pre-empted by the FAA”. See CORTES Pablo, op.
cit., pp. 110- 111.
535
“In Comb and Toher v PayPal the judge found PayPal’s arbitration clause unconscionable for
consumers, holding that Santa Clara County in California was not a neutral forum”. Ibid. “The
New York court of appeals was concerned with a similar clause to the one in Hill v. Gateway
2000. The court found that the high cost of the International Chamber of Commerce (ICC)
arbitration made the designation of ICC unconscionable in a consumer context. Nevertheless, it did
not consider that the arbitration clause was invalid. It held that the dispute settlement should be
conducted by the less expensive American Arbitration Association”. See MANEVY Isabelle, op.
cit., p. 39.

312
arbitral procedure which is proven to be fair, inexpensive and

e a s i l y a c c e s s i b l e f o r c o n s u m e r s w o u l d b e c o n s i d e r e d v a l i d . 536

However, in order to avoid the possibility of some courts

and some countries not recognizing pre-dispute consumer

arbitration agreements as valid, unilaterally binding arbitration

agreements can be used, which are binding for the stronger part y

(i.e. the business), but allow the weaker party (i.e. the

consumer) to choose whether to resolve the dispute through

a r b i t r a t i o n o r g o t o c o u r t . 537 T h i s w a y t h e a g r e e m e n t e n s u r e s t h e

compliance of the stronger party and provides access to justice

f o r t h e w e a k e r p a r t y. If p r e - d i s p u t e a r b i t r a t i o n c l a u s e s a r e n o t

b i n d i n g f o r t h e s t r o n g e r p a r t y, i t w o u l d d e p r i v e t h e w e a k e r p a r t y

of access to redress, as the courts are not a viable or affordable

option for most B2C disputes because of the distance, the costs

and the legal complexities of litigation. The availability of

o n l i n e a r b i t r a t i o n as a f o r m o f r e d r e s s c a n o n l y b e s e c u r e d b y

some form of encouragement or compulsion to take part in

a r b i t r a t i o n . 538 T h e d i ff e r e n t t r e a t m e n t o f t h e p a r t i e s i s j u s t i f i ed

by the difference in the position of the parties (the weaker

position of the consumer) and the need to redress this power

536
KAUFMANN-KOHLER Gabrielle, Online Dispute Resolution and its Significance for
International Commercial Arbitration, op. cit., p. 13.
537
SCHULTZ Thomas, Online Dispute Resolution: an Overview and Selected Issues, op. cit., p. 9.
538
“If the ‘weaker’ party (such as an individual in state A) has no access to the courts, why would
the ‘stronger’ party (such as a multinational company involved in E-commerce established in state
B) agree to arbitration?” HÖRNLE Julia, Cross-border Internet Dispute Resolution, op. cit., p.
223.

313
i m b a l a n c e . T h i s w ay t h e m o r e p o w e r f u l b u s i n e s s e s a r e b o u n d b y

the agreement and the consumer gains access to justice, while

t h e c o n s u m e r i s f r ee t o c h o o s e l i t i g a t i o n i n s t e a d o f a r b i t ra t i o n ,

a l t h o u g h t h i s s c e n ar i o i s l e s s p o s s i b l e i n B 2 C d i s p u t e s w h e r e

litigation most times is not a viable option. An example of a

b i n d i n g s u b m i s s i o n t o a r b i t r a t i o n i s t h e IC A N N s ys t e m f o r

d i s p u t es o v e r d o m a i n n a m e r e g i s t r a t i o n s u n d e r t h e Un i f o r m

Dispute Resolution Policy (UDRP), which is administered by a

number of ODR providers. Furthermore, an example of a

unilaterally binding, pre-dispute consumer arbitration agreement

is “Ford J o u r n e y” , an online motor vehicle sales dispute

r e s o l u t i o n p r o g r a m m a n a g e d f o r F o r d b y t h e “ C h a r t e r e d In s t i t u t e

o f A r b i t r a t o r s ” i n Lo n d o n , a c c o r d i n g t o w h i c h t h e “ c l a i m a n t

(customer) has a choice of taking advantage of the service or

using the courts instead, whereas the respondent has no

c h o i c e ” . 539

539
KAUFMANN-KOHLER Gabrielle, Online Dispute Resolution and its Significance for
International Commercial Arbitration, op. cit., pp. 4, 5.

314
S e c t i o n 3 : T h e A rb i t r a t i o n p r o c e d u r e

When a dispute arises between the parties that have

e n t e r e d i n t o a n o n l i n e a r b i t r a t i o n a g r e e m e n t , t h e n ex t s t e p i s f o r

the actual procedure of the online arbitration to begin. The most

common way to initiate the process is for the plaintiff to contact

the ODR provider and request the beginning of the online

arbitration. After the request is registered, the provider contacts

the other party and requests the relevant documents and

evidences. The procedure may differ depending on the provider;

the way of communication between the parties (through e-mail or

w e b - b a s e d a r b i t r a t i o n ) a n d t h e u s e o f IC T t o o l s ( f o r e x a m p l e

document-only arbitration). The discussions with the arbitrators

and the submission of evidences can be performed online. The

p r o c e s s t a k e s n o r m a l l y b e t w e e n 4 h o u r s a n d 3 0 d a ys . T h e m a i n

concern about the introduction of technology into the arbitration

process was until recently that the lack of face to face

c o m m u n i c a t i o n wo u l d n o t a l l o w f o r t h e i m p l e m e n t a t i o n o f t h e

arbitration process in the online environment. However, today

IC T t o o l s s u c h a s e m a i l , c h a t r o o m s , w o r d - p r o c e s s i n g s o f t w a r e

and videoconference have greatly advanced and can fully

facilitate the online arbitration procedure. Especially lately use

of video-conference has become most common in the field

315
allowing parties to hear and see each other as in the real world

but also witnesses to give their testimonies online.

There are two fundamental p r i n ci p l e s that shape the

p r o c e d u r e o f o n l i n e a r b i t r a t i o n . T h e fi r s t o n e i s t h e p r i n ci p l e o f

p a r t y a u t o n o m y, w h i c h a l l o w s p a r t i e s t o d e t e r m i n e a n d o rg a n i z e

the specifics of the procedure by agreement. The second

p r i n c i p l e i s t h e eq u a l t r e a t m e n t o f t h e p a r t i e s a c c o r d i n g t o

w h i c h , “ t h e p a r t i es h a v e t h e r i g h t o f e q u a l a c c e s s t o t h e

information, so they must also have the ability to have equal

a c c e s s t o t h e e l e c t ro n i c m e a n s f o r c o n d u c t i n g t h e p r o c e d u r e ” . 540

Regardless of the specifics of the arbitration procedure the main

i s s u e s t h a t a r i s e f r o m t h e t r a n s p o rt a t i o n o f t h e a r b i t r a t i o n

p r o c e s s t o t h e v i r t u a l w o r l d o f c yb e r s p a c e r e l a t e t o t w o b a s i c

concepts of the arbitration procedure; the seat of arbitration and

the applicable law.

A. The place or seat of arbitration

The place where the arbitration takes place is called the

p l a c e o r t h e s e a t o f a r b i t r a t i o n . It s d e t e r m i n a t i o n i s i m p o r t a n t

540
YÜKSEL, Armağan Ebru Bozkurt, op. cit., pp. 87, 88.

316
b e c a u s e t h e s e a t af f e c t s o t h e r a s p e c t s o f t h e a r b i t r a t i o n . F o r

example, the seat may determine the nationality of the arbitral

a w a r d , t h e d e t e r m i n a t i o n o f w h i c h i s es s e n t i a l w h e n s e e k i n g t h e

a s s i s t a n c e o f n at i o n a l c o u r t s , t h e s u p e r v i s i o n o f a w a r d s b y t h e

courts of the seat, the recognition and enforcement of the award,

t h e p o w e r o f n at i o n a l c o u r t s t o s e t a s i d e t h e a w a r d , a s w e l l a s

the applicable law.

The obvious issue that arises in online arbitration is the

q u e s t i o n o f , h o w c an o n e d e t e r m i n e t h e s e a t o f a r b i t r a t i o n w h e n

the whole procedure of the online arbitration takes place online,

i n a v i r t u a l w o rl d w h e r e a p h ys i c a l l o c a t i o n c a n n o t b e d ef i n e d ?

In o n l i n e a r b i t r a t i o n t h e p r o c e d u r e d o e s n o t t a k e p l a c e i n a

single location; on the contrary the parties and the arbitrators

may take part in the procedure from opposite corners of the

w o r l d . T h e a b s e n c e o f a p h ys i c a l s e a t m a y l e a d t o w h a t i s k n o w n

as “floating arbitration” which in turn will lead to a “floating

a w a r d ” w i t h p o t e n t i a l l y g r a v e c o n s e q u e n c e s f o r i t s e n f o r c em e n t .

However, traditionally the parties according to party

autonomy can choose the seat of arbitration and based on “the

s e a t t h e o r y” , w h i c h i s wi d e l y a c c e p t e d i n l e g a l t h e o r y a n d

recognized by the arbitration laws of many countries, arbitration

p r o c e e d i n g s m a y b e c o n c l u d e d i n a co u n t r y d i f f e r e n t t h a n t h e

place of arbitration, without changing the seat of arbitration,

317
w h i c h i s t h e o n e a g r e e d b y t h e p a r t i e s . 541 F u r t h e r m o r e , t h i s

o p i n i o n i s s u p p o rt e d b y t h e t h e o r y o f d e l o c a l i z a t i o n , a c c o r d i n g

t o w h i c h t h e a r b i t ra t i o n s h o u l d b e d et a c h e d f r o m t h e p l a c e o f

a r b i t r a t i o n . 542

T o d a y, t h e r e i s a g e n e r a l c o n s e n s u s t h a t o n l i n e a r b i t r a t i o n

is a digitalized or virtual event that has no situs i.e. not a seat

d e f i n a b l e i n t r a d i t i o n a l t e r m s a s a s p ec i f i c p h ys i c a l l o c a t i o n . In

o n l i n e a r b i t r at i o n t h e s e a t i s n o t d e f i n e d a s t h e p l a c e o f t h e

procedure or of the place where the provider is situated or the

p l a c e w h e r e t h e a wa r d w a s m a d e . It i s d e t e r m i n e d b a s e d o n l e g a l

criteria and is defined as the place agreed to be the seat of

arbitration by the parties or by the arbitrators or the ODR

p r o v i d e r . If t h e p a r t i e s h a v e n o t c h o s en t h e s e a t o f a r b i t ra t i o n ,

t h e n t h e a r b i t r a l t r i b u n a l o r t h e a r b i t r a t i o n i n s t i t u t i o n d e t e rm i n e s

t h e s e a t o f a r b i t r at i o n . A c c o r d i n g t o t h e “ U N C IT R A L M o d e l

La w ” i f t h e p a r t i e s h a v e n o t c h o s e n t h e p l a c e o f a r b i t r a t i o n , t h e n

the arbitral tribunal decides on the place of arbitration, based on

t h e c i r c u m s t a n c e s o f t h e c a s e . 543

541
WANG Fangfei Faye, op. cit., p. 89.
542
HERBOCZKOVÁ Jana, op. cit., p. 7.
543
“Place of arbitration. The parties are free to agree on the place of arbitration. Failing such
agreement, the place of arbitration shall be determined by the arbitral tribunal having regard t