- Introduction
In the contemporary world of internet usage, there is an increasing concern regarding the rise in the number of disputes emanating from internet commerce. The good news is that there has been significant development of several websites to remedy the disputes of online commerce and also perform dispute resolution, which may take place offline.[1] Thus, it is important for all parties in e-commerce transactions to have a feeling that their safety is guaranteed while carrying out their business operations online. In this case, the state needs to establish a proper mechanism to ensure adequate resolving of the online disputes. By definition, online dispute resolution (hereafter, ODR) refers to a branch of dispute resolving utilizing technology in the facilitation of the dispute between one or more parties in internet commerce.[2] This paper will provide a critical evaluation of the current legal and technical developments in relation to consumer ODR from a European point of view.
- Challenges to ODR
Notwithstanding the performance of the national litigation of e-disputes being costly and impractical, it is still hard for ODR to attain its extensive market implementation. Thus, this section focuses on the examination of the main challenges that the consumer ODR service providers face in their pursuit to achieve such an implementation that is effective and efficient. The first challenge is the funding of ODR projects as well as the risks of impartiality. These projects have been getting support from both public and private funding. Since governments have realized that efficient ODR has played a big role in promoting the sustainable e-commerce growth, they have gone ahead to promote the models of ODR as an instrument of public policy. For instance, public bodies have financially supported projects such as B2C ODR, ICT, ADR, and court processes. Additionally, private funding that aims at securing sufficient income jeopardize ODR service provider’s independence.[3] One of the affected projects is the B2C transactions, which involves a unilateral fees model from the business seeming to be the obvious way of providing encouragement to the participation of consumers. It is an undeniable fact that the funding processes are devoid of transparency and mechanism that ensure impartiality. This situation calls for the member states of the EU to come up with systems that may handle the complaints of the participants whenever the funding agents fail to follow the required procedures.
Another challenge that faces the effectiveness of the consumer ODR service providers is directing the disputants to the services of ODR.[4] Several research studies have looked at this concept at different legal and technical angles. In the first place, researchers argue that it is necessary for the EU to be greatly aware and as well have an understanding of the concepts and processes of ADR for the ODR to be successful.[5] Nonetheless, the aspect of creating this awareness has proved to be hard, especially where there is a power imbalance between the parties. Thus, this situation may be a presentation of legal issues within the EU, unless it is a binding or non-binding arbitration only on the business. Additionally, there has been an issue of trust where some parties have not been given relevant information, especially since the provider of ODR arranges for an alternative platform for solving the rights recognized by the consumers in a legal process.[6] In spite of the efforts ODR made to offer trust in the online commercial contexts, a considerable trust still lacks in ODR itself. In other words, the feedback system in the EU has been invaluable.
Additionally, there has been an increased concern vis-à-vis the power imbalance between the consumers and businesses. In this way, a consumer may be required to apply ODR one time or two times in a year, whereas a business may be making use of it on many occasions at any time since it is a repeated player. This situation has led to the increased imbalance that can make businesses to arrive at informed choices as compared to customers[7]. Therefore, this situation calls for external bodies to establish standards that ensure procedural fairness in the ODR projects such as B2C to ensure impartiality and proper legal representation.
Some researchers have presented evidence that there are security problems while using ODR services. At the first stance, the forum of ODR was dependent on emails, where the level of privacy has been compromised. Additionally, the websites of ODR are also at risk of virus infections, computer or networking crashes, or intrusions.[8] This problem requires Firewalls, backup policies, as well as antivirus systems, which are standard mechanisms for mitigating these risks. Therefore, it is arguable that ODR relies on the developments of ICT and other aspects like legal standards with the support of the legal community and courts.
- ODR Methods in the EU
- Consensual Methods
Automated negation is one of the approaches under ODR and refers to the method where technology overrides a negotiation. The process of negotiation aims at determining the economic settlements for the claims where there is the challenge posed to liability. Thus, the Automated Negotiation constitutes an appropriate approach to the monetary value claims. In this case, the ODR algorithm engages in computing of an amount of settlement between the range of offer and the range of demand so long as the figures lie within a certain range. This approach involves the parties being informed about the settlement.[9] Whenever the bid seems not to be matching, it is possible for the parties to make another try, where any number of trials is allowed for a certain case within a specified period, say 30 days. This method occurs in two ways including the demanding party and offering the party. The demanding party involves the party making demands or looking for payments, while the offering party refers to the party who is going to make payments or offer.
Another form of the consensual method is the assisted negation where parties engage in negotiations and settle their conflict or grievances as well. Technology facilitates the negotiations between the conflicting parties in this approach. In this case, technology serves as a mediator. In other words, technology provides particular processes or offers the parties with an evaluative device with no direct involvement in the conflict of such parties regardless of whether they are business and consumer or business and business. Notably, the procedures of the assisted negotiations aim at improving the communications of the parties with the help of a software or a third party.
- Traditional Mediation by use of Online Technologies
It is worth mentioning that websites do not only primarily depend on the online technologies like chat rooms, instant messaging, and emails, but have also incorporated the traditional communication techniques into the processes of negotiation. In this case, a party takes part in contacting the service and filling out an online form which notes the issue as well as its possible remedy. Thus, it is necessary to have a mediator who reviews the form and as well communicates with the other party to figure out if they can take part in the mediation process. Upon the agreement of the other party to participate in the process, it is then necessary for them to fill in their form or give the response to the previous communication via email. Thus, this communication is imperative to the disputing parties because it makes them have a better understanding of the problem and then reach a consensus.
- Adjudicative Approaches
Online arbitration constitutes one of the adjudicative methods whose definition is a process that involves a third party that is neutral or an arbitrator, who delivers a final decision and binds the two disputing parties. In this approach, parties are allowed to make a choice of an arbitrator and also the basis of making the decision by an arbitrator. Importantly, online arbitration is useful in resolving the conflicts of businesses since it is known for its high-level privacy and is faster as compared to litigation. Furthermore, it has been proved its award is enforceable nearly everywhere because of the broader adoption of the New York Convection on the Recognition and Enforcement of Foreign Arbitral Awards in 1958.[10] It is worth to mention that online arbitration has currently drawn the attention of the legal scholars from mid-nineties. In some studies, scholars have placed emphasis on the difference between the arbitrations utilized in resolving the conflicts arising from offline and online. In a similar vein, they tried to narrow down the scope of the online arbitration concept merely similar to the way it appeared in the past. In such studies, the authors have also viewed the consumer disputes emanating offline as an old fashion aspect whose submission is done to the online arbitration. This activity occurs through the exchange of messengers, emails, and also via other appropriate electronic communication approaches based on the agreement parties that have been resolved with a greater involvement of different online methods.[11] Today, many providers of arbitration permit the parties to perform the online process of arbitration.
- Legal Frameworks for the Development of Consumer ODR in the EU
It is needful to note that the development of e-commerce that is sustainable in the EU calls for ODR. This need stems from the fact that the traditional court has limitations on the basis of the current mechanism of dispute settlement for addressing online disputes. Nevertheless, there have been significant efforts in the recent years on the encouragement of utilizing the ODR as an option that is viable in resolving consumer conflicts, especially those resulting from the internet use. Additionally, ODR development currently appears to be considerably modest, and particularly the publicly funded and free of charge services like ECODIR are not appealing to the participants. In this case, it will be important to investigate the legislative role the EU needs to adopt so as to further the development of ODR.
- The necessity for the regulatory balance in the ODR field
- The Purpose of ODR Regulation at the EU Level
It is crucial for the EU member states to engage in negotiations with one another to secure the simplification of the formalities regulating the reciprocal recognition of processes of extra-judicial activities such as ODR.[12] The European Parliament and Council need to establish regulatory policies to ensure the mutual recognition of the decisions of ODR. In addition to this requirement, the council should aim at attaining a tremendous co-operation with the services of the documents across the border with a view to enhance the alternative approaches’ development of the dispute settlement.
It is not surprising that the call for the uniform legal standards is an idea whose conception is not new. For instance, there is evidence that this concept began in 2003 when the European Parliament’s Committees concerning the Legal Affairs and Internal Markets appreciated the significance of ADR flexibility. From that time, there has been an increasing need for coherence, uniform quality standards, and uniform procedural guarantees to ensure the protection of consumers and as well shun proliferation of diverse systems between the EU member states.[13] This aspect requires that the legal offerings do not need to be extensively detailed because it could constrain the operations of the ODR service providers.
However, the current legal regulations have concentrated on the specified tax-economies, with mediation and arbitration in particular. While addressing the issue of B2C disputes, it was proposed that the European Commission needs to advance its steps through the development of a regulation that has legal standards for the extra-judicial ODR. This proposal could borrow from the existing procedural standards, such as the Recommendations 1998/257/EC, the Mediations Directive, and 2001/310/EC, 2008/52/EC, and the initiatives of the industry regarding ODR.[14] Therefore, a legal instrument of EC calls for accredited bodies of ODR to adhere to the current consumer law as well as the already-established procedural standards.
- Unmet Expectations
Notwithstanding all the potentials of ODR, achieving the widespread implementation of the market is still a hard nut to crack for ODR. This idea gains support from the fact that the operators of ODR who were established in the recent years have stopped offering the services and thus making the efforts of ODR unfruitful. Nevetheless, there are still some operators who exist, but working under some different names of trade such as WeCanSettle, which was altered initially to The Claim Room and today known to be The Mediation Room.[15] Most importantly, the key reason for the failure of the expectations of ODR is the ODR development having been slowed by the challenge in the software design due to its complexity, expensive, and time-consuming.[16] Therefore, legal scholars have proposed that the mitigation of these problems in the EU region require appropriate legal changes as well as technological developments.
- The self-regulation risks
The e-commerce is facing an issue whereby the developments of the new regulations have isolated themselves from the parliaments and government support. This concept has resulted in self-regulation which occurs as a market regulation and taking diverse kinds like the online community engaging in the development of its own social norms to attain harmonious co-existence. Examples of this phenomenon are the law of eBay and net-etiquette. Several scholars have argued that e-commerce utilizes its own customs and usage to the shape ODR regulations. However, if ODR is taken a responsibility of the industry to develop it, the providers of ODR services will considerably engage in competition with each other in the supply of efficient services to the consumers.[17] It is worth noting that such self-regulatory attempts established standards and rules that will be used everywhere in spite of the problems of jurisdiction. Based on this understanding, it can be suggested that this form of market regulation is imperative since it plays a role in creating legal harmonization and as well as quickens ODR development and globalization.
Despite the self-regulation being necessary for the establishment of a regulatory system, there are limits within which it should operate. Based on this fact, the creation of new rules or rather transplanting online regulations to the online world with no regard to the social and industry practices deems it ineffective.[18] There has been a rising fear that allowing this type of market regulation can make some corporations making ODR mandatory, and thus, locking out the right of the consumer to access consumer class and court actions. This situation is more pronounced when there is no impartiality and independence of the solution providers of extrajudicial disputes. Therefore, the EU needs to set limits where self-regulation needs to reach without causing any harm to the existing ODR development systems.
- Creation of a balance between self-regulation and regulation
Some authors have presented an argument that ODR’s legal maturity relies on a balance between self-regulation and regulation. This situation indicates there is not only a requirement of the legal quality, impartiality, and certainty but also innovation and flexibility. Thus, it is possible that a legal framework of ODR may promote the occurrence of the quality services of ODR and also the creating awareness and increasing trust among the consumers.[19] It should be noted that when the regulation is extremely intrusive, there are high chances that it will impede the ODR industry progress. The reason for this scenario could be that the law in such a field can be exclusive in technological terms and rapidly become outdated can be the probable outcome.
- Increased access to justice via ODR
It is also important to critically review the aspect of justice accessibility as well as the alternate dispute approaches. Indeed, governments, as well as commentators, have started to consider the latest appropriateness concept of the approaches the conflict resolution. Some authors have suggested that the justice accessibility needs not to be viewed as a concept that is already put in place concerning the right of the consumer to take part in a legal procedure that is adversarial in the public courts.[20] Instead, it should be considered as the right to get redress via the appropriate mechanism for dispute resolution, through which most of the disputes may be seen as ODR, especially the ones emanating from electronic transactions. Therefore, if such disputes are effectively solved by outsourced and reputable services of ODR, the confidence of consumers SMEs will grow, leading to an e-market that is more competitive and sustainable.
- The Regional Regulatory initiatives of EU
It is an undisputable fact that the EU has generated many legal instruments that harmonize ADR/ODR and highlight their resolving potential for the consumer disputes at a regional level. One of the major initiatives of promoting the access of consumers to justice was first established in November 1993 involving the Green Paper which performed a survey on the national measures. This initiative sought to address the particular issues of disputes across the border and then recommend several strategies for the improvement of dispute resolving in the internal market.[21] Today, the provisions of relating to ADR include ODR under the EU law. Furthermore, the initiatives of EU are mostly considered as soft laws complementing the professional code of conduct of the arbitrator as well as the internal rules of the providers of ODR.
- Advantages and Disadvantages of ODR
- Advantages of ODR
The first benefit associated with ODR is that the online mediation makes it possible for the mediator to adapt the process to respond to specified needs of the disputants. Secondly, ODR has the advantage of the dispute resolution via the Internet. Scholars have pointed out that this process brings about a tremendous flexibility, quicker decisions, and solutions that are more creative.[22] Additionally, the process of ODR is convenient and cost-saving. In this case, the mediation over the internet offers substantial savings as opposed to the extremely expensive traditional litigation. In a similar connection, this approach is convenient for the people who cannot manage traveling for longer distances or rather the ones have issues of e-commerce disputes for dollar amounts that are lower. In general, the core advantage of the dispute resolution via ODR is that it shuns the problem of whether a certain court has a dispute jurisdiction.
- Disadvantages of ODR
The main argument concerning the disadvantages of ODR is based on the electronic communication is not a substitute for the capability for the one-on-one conversation for the improvement of the imperative mediation values.[23] In the first place, there is a limited range of disputes where various demerits are specific to the cyber-mediation approach selected. For instance, it is possible that a full automated online mediation can only find its application in resolving specific kinds of conflicts. It also addresses the disputes with the amount of settlement as the only problem that has not been solved. The confidential issue is another limitation that ODR has.[24] The creation of an electronic record through online mediation encourages one party to print out and distribute the conversations running online without the knowledge of the other disputant. As a result, there is a lack of confidentiality in the process and thus impeding the development of honest and open exchanges of the online mediation in the EU perspective.
- Conclusion
In this study, it has been necessary to critically evaluate the current legal and technical developments in relation the consumer ODR from a European perspective. Arguably, the existing traditional litigation has called for an efficient, cost-saving, less-time-consuming, and convenient approach. ODR has been found to be a method that meets the legal and technical requirements. Additionally, the legal frameworks have been developed by the EC to ensure consumer ODR services providers provide quality services which comply with the existing laws concerning dispute resolution in the e-market. It was also to have an understanding the advantages and disadvantages of ODR.
References
Books
Wang, F. Internet Jurisdiction and Choice of Law, Cambridge: Cambridge
University Press, 2010.
Wang, F., Law of Electronic Commercial Transactions. Oxon: Cavendish-Routledge
Publishing, 1st edition 2010 and/or 2nd edition 2014.
Wang, F.F. Law of electronic commercial transactions: contemporary issues in the EU, US and China, 2014
Journal articles
Beecher, S., “Can the Electronic Bill of Lading go Paperless?” Int’l Law 273 (available at Westlaw), 2006, Issue 40
Katsh, E., “Online Dispute Resolution: Some Implications for the Emergence of Law
in Cyberspace.” International Review of Law, Computers and Technology, 2007, Vol.
21, No.2, pp. 97-107.
Martin, C. H., “The Electronic Contracts Convention, the CISG, and New Sources of E-Commerce Law.” Tulane Journal of International and Comparative Law, 2008, Vol.16, No.2, pp. 467-503.
Patrikios, A., “Online Dispute Resolution: the Role of Transnational online arbitration in regulating cross-border e-business Part II”, Computer Law & Security Report, 2008, Vo.24, pp. 129-138.
Rosas, R., “Comparative study of the formation of electronic contracts in American
law with references to international law,” Computer and Telecommunications
Law Review, 2007, Vol.13, No.1, pp. 4-26
Wang, F., “Obstacles and Solutions to Internet Jurisdiction: A comparative analysis of
the EU and US laws.” Journal of International Commercial Law and Technology, 2008, Vol.3, No.4, p.233-241.
Wang, F., “The EU Regulation on Consumer ODR and EC Directive on Consumer
ADR: The Rise of ODR/ADR for Resolving Intellectual Property Disputes,”
(September 2013), Intellectual Property Forum, 2013, Issue 94, pp. 93-98.
Legislation
Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008
EC Directive on Consumer ADR, 2013
EC Regulation on Consumer ODR, 2013
UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards – the
“New York” Convention, 1958
Useful Website
United Nations Commission on International Trade Law (UNCITRAL),
https://www.uncitral.org/
European Commission, https://ec.europa.eu/index_en.htm.
[1] Katsh, E., “Online Dispute Resolution: Some Implications for the Emergence of Law
in Cyberspace”, (2007) International Review of Law, Computers and Technology, vol.
21, no.2, 97.
[2] Patrikios, A., “Online Dispute Resolution: the Role of Transnational online arbitration in regulating cross-border e-business Part II”, Computer Law & Security Report, 2008, Vo.24, pp. 129.
[3] Wang, F., Law of Electronic Commercial Transactions. Oxon: Cavendish-Routledge
Publishing, 1st edition 2010 and/or 2nd edition 2014
[4] Wang, F., “Obstacles and Solutions to Internet Jurisdiction: A comparative analysis of
the EU and US laws.” Journal of International Commercial Law and Technology, 2008, Vol.3, No.4, p.233
[5] EC Directive on Consumer ADR, 2013
[6] Wang, F., “Obstacles and Solutions to Internet Jurisdiction: A comparative analysis of
the EU and US laws.” Journal of International Commercial Law and Technology, 2008, Vol.3, No.4, p.234
[7] Wang, F. Internet Jurisdiction and Choice of Law, Cambridge: Cambridge
University Press, 2010
[8] Beecher, S., “Can the Electronic Bill of Lading go Paperless?” Int’l Law 273 (available at Westlaw), 2006, Issue 40
[9] Rosas, R., “Comparative study of the formation of electronic contracts in American
law with references to international law,” Computer and Telecommunications
Law Review, 2007, Vol.13, No.1, pp. 4-26
[10] UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards – the
“New York” Convention, 1958
[11] United Nations Commission on International Trade Law (UNCITRAL),
https://www.uncitral.org/
[12] Wang, F., “The EU Regulation on Consumer ODR and EC Directive on Consumer
ADR: The Rise of ODR/ADR for Resolving Intellectual Property Disputes,”
(September 2013), Intellectual Property Forum, 2013, Issue 94, pp. 93.
[13] Ibid, 94
[14] Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008
[15] Wang, F., “The EU Regulation on Consumer ODR and EC Directive on Consumer
ADR: The Rise of ODR/ADR for Resolving Intellectual Property Disputes”,
(September 2013), Intellectual Property Forum, 2013, Issue 94, pp. 95.
[16] Martin, C. H., “The Electronic Contracts Convention, the CISG, and New Sources of E-Commerce Law.” Tulane Journal of International and Comparative Law, 2008, Vol.16, No.2, pp. 467.
[17] Wang, F., Law of Electronic Commercial Transactions. Oxon: Cavendish-Routledge
Publishing, 1st edition 2010 and/or 2nd edition 2014
[18] Wang, F.F. Law of electronic commercial transactions: contemporary issues in the EU, US and China, 2014
[19] Wang, F., “The EU Regulation on Consumer ODR and EC Directive on Consumer
ADR: The Rise of ODR/ADR for Resolving Intellectual Property Disputes,”
(September 2013), Intellectual Property Forum, 2013, Issue 94, pp. 96.
[20] EC Regulation on Consumer ODR, 2013
[21] EC Regulation on Consumer ODR, 2013
[22] European Commission, https://ec.europa.eu/index_en.htm.
[23] Ibid, 1
[24] Katsh, E., “Online Dispute Resolution: Some Implications for the Emergence of Law
in Cyberspace.” International Review of Law, Computers and Technology, 2007, Vol.
21, No.2, pp. 98.
