Online Dispute Resolutionby

Karnika SethCyberlaw expert & Managing partner, Seth

AssociatesChairperson, Cyberlaws Consulting Centre

International Conference on ODR

India Habitat Centre, Delhi,

31 Jan 2013

We live in the Internet age- the new cyberplanet!

• According to latest World Internet use statistics,1,966,514,816 people in the world use Internet

• Asians constitute 42% of the Internet users in the world.

• Internet powerful medium for social interactions & business

Nature of e-disputes

E-disputes

IP/

Commercial

privacy

Consumer basedFamily

Social, defamation

Meaning of ODR

• Online Dispute Resolution adapts electronic means to traditional alternative dispute resolution processes, such as negotiation, mediation and arbitration and/or use software automated processes for dispute resolution

• Key advantage is that parties need not submit their disputes for adjudication before the courts of a different jurisdiction

• Broad approach-In ODR, not only e disputes are resolved online but also traditional disputes such as commercial or social disputes are capable of being resolved by use of information technology.

Communication devices

camera, fax, phones, computers, scanners ,webcam, ipod, mobile phones etc

Fig 14. 1 NATURE OF DISPUTES RESOLVED BY MEANS OF ODR

Commercial Contract performance

Partnership differences

Industrial Construction contracts

Personal injury

Family disputes,defamation, privacy

Intellectual property rights

Product liability

Business disputes

Insurance coverage

Professional liability

Banking Joint ventures Real estate and securities

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Essence of ODR

According to Katsh and Rifkin, the three important factors, namely convenience, trust and expertise forms the essence of ODR.

Other Essential factors

Affordability

Accessibility

Secure

Flexibility

Enforceable

Transparency

ODR vs litigation

Qualitatively distinct from judicial process Can be initiated and terminated at any point of time Neutral third party of the parties own choice settles

the dispute Proceedings are informal -without procedural

technicalities Proceedings are conducted in the manner agreed by

the parties or as per ODR institution’s set of laws Confidentiality of the subject matter of the dispute is

maintained Reduces acrimony between parties Encourages customer loyalty in B2C

Figure 14.2 ODR process

Filing of complaint with ODR provider

Appointment of panelist

Respondent may respond

File supporting

doc,Oralhearing

If dispute resolved Settlement

TECHNIQUES OF Online DR• E-Mediation • E-Conciliation• E-Arbitration• E-Minitrial• E-Negotiation• E-Rent a Judge• And other Hybrid

techniques like Medarb, Medola

• Neutral listener • Final offer arbitration

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Mediation

6 steps to a Mediation:

1) Introduction by the mediator, 2) statement of the disputes by the

parties, 3) information collection time, 4) identification of the problems, 5) bargaining and finding options, and 6) reaching an agreement.

Advantages of Mediation

• Opportunity for parties to discuss problem issues

• heard by neutral person

• Mediator does not impose a solution• Parties are more likely to abide by an

agreement they mutually draft

When goal is maintaining/keepingrelationship with the customer/client

.

14.2 ODR is recommendedWhen goal is resolving

a straight-forward dispute in a cost effective manner

Disputes can be easily documented

Parties have geographical limitations

Time is of the essence

No existing relationship

Figure 14.1 Multiple Benefits of ODR

Inexpensive• Save money on travel, attorney and court costs

Time saving

Parties have more control & flexibility

Private

Reduces workload of the judicial system

Voluntary-Need not submit to laws of another country for dispute resolution

Can overcome language and cultural differences

Reduces acrimony

Enforceable by agreement e.g mediation, arbitral award

MODELS OF ONLINE SETTLEMENTS

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Online settlements. These generally use a blind bidding procedure, and an automated or facilitated negotiation mechanism. Most often they involve only monetary settlements. e.g. Cybersettle , ResolveitNow, Settle Online, SettleSmart etc

Online mediation services. These might utilize an automatic software program, or could employ the services of a live mediator who uses email or listservers. E.g. One Accord,WebMediate,Internet Neutral,BBBonline for consumer disputes etc

Online adjudication. These include arbitration services, med-arb services, and virtual juries e.g,Resolution Forum,,i-Courthouse, NAF

Figure 14.3 POPULAR INTERNET BASED DR SERVICE PROVIDERS

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Cybersettle, clicknsettle-use of automated

softwares –negotiating monetary settlements

WIPO Domain name DRS-Domain Names

NOVAFORUM-resolve commercial disputes

within 72hrs

i-Courthouse-Jury trials online

Internet Neutral- Settles Online disputes,B2B,B2C

The claim room-U.K based-bidding tool-

N/M

Virtual Magistrate-Settles disputes arising out of internet activity involving users,ISP,etc.

Fig 14.4 VIRTUAL MAGISTRATE AND DISPUTE RESOLUTION

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Virtualmagistrate.org is an ODR Service provider

Dispute arises from online activity

Party files it’s complaint with V Mag

V Mag contacts the other parties

Other party agrees to online arbitration

The party answers to the complaint electronically

V Mag assigns an arbitrator

Arbitrator contacts both parties online requesting more information

Resolution of the dispute within 72 hrs of filing

Netneutrals.com(including direct negotiation, mediation, voluntary arbitration, and/or

independent feedback review) Voluntary Arbitration and IFR decisions are final and are not subject to negotiation or appeal.

Case study 1-Square Trade

Step 1-Direct Negotiation

Step2

Step 3

Step 3

Step 4

Step 5

Smartsettle Process

The Smartsettle process goes through six phases:

Phase I:Two or more parties wish to

negotiate an agreement about certain matters.

Parties may engage a single Smartsettle

facilitator to serve both of them or each have

their own private facilitator.

Smartsettle Process

Phase II: A Smartsettle facilitator

sets up the case online and gives

access codes to each party.

Facilitator helps parties work together

to discuss their interests –framework

agreement made with unresolved

issues

Phase III. Bargaining ranges are created

with optimistic values from each party.

Facilitator works independently with each party to elicit their confidential

preferences.

Smartsettle Process

Phase IV: Parties exchange information (may include telephone and/or face-to-face meetings) and offer

visible or invisible concessions.

Smartsettle generates suggestions based on party preferences and

concessions.

Equity is achieved when parties reach a tentative solution by agreeing on

the same package.

Smartsettle Process

Phase V:Preference representations are refined

with help from the facilitator.

Optimization is used to generate improvements to

the current tentative solution.

Phase VI: When any party wishes to end the

negotiation, the Framework for Agreement is filled out with the current solution and signed by all parties.

ODR across countries

• In Netherlands, the electronic commerce platform is a joint initiative of the business community and the Dutch ministry of Economic affairs that drafted the Code of Conduct for electronic commerce

• In Singapore, e ADR was launched which is jointly operated and supervised by Singapore Subordinate Courts, Ministry of Law, Singapore Mediation Centre and Singapore International Arbitration Centre, the Trade Development Board and Economic Development Board to resolve e commerce disputes

• E courts in India also aim to promote ODR and deal with litigation and court based ODR using online resources and CBI (Central Bureau of Investigation) is in the process of establishing e courts

Indian legal framework & ODR

• Information Technology Act, 2000 based on UNCITRAL Model law of e-commerce 1996

• Section 4- Legal recognition of electronic records• Section 5- Legal recognition of electronic signatures• Section 10A Validity of contracts formed through electronic means• Section 11-13-Attribution, acknowledgement and dispatch of

electronic records• Section 14-Secure electronic record• Section 15- Secure electronic signatures• Chapter IX on cyber contraventions and chapter XI on offences• Section 72 A punishment for disclosure of information in breach of

lawful contract

Other supporting legislations

• Indian Evidence Act ,1872-Section 65A,B-Admissibility of electronic records

• Indian Arbitration Act, 1996-Act permits an arbitral tribunal to use mediation,conciliation or other procedures during the arbitration proceedings to encourage settlement of disputes( S.30)

• Section 89 of Code of Civil Procedure, 1908 promotes ADR, Order X Rule 1A

• Legal precedents encouraging ODR- State of Maharashtra vs Dr. Praful B. Desai, Grid Corporation of Orissa Ltd. vs. AES Corporation

Existing lacunae-ODR regime in India

• Need more awareness & training• More funding to set up ODR• Creating Uniform standards and rules for ODR• Logs-Rules pending under Section 67C,IT Act,2000• Rules pending under Section 3A, 15,16 IT Act,2000-secure

electronic signatures, security procedure and practices-other electronic signatures

• low cost internet access • Trust seals by a government/private entity • Need clear Law on Internet surveillance• Need stronger security mechanisms• Institutional ODR providers missing in India

To design an ODR system for India-• What kind of disputes can be settled through ODR?• How much information can parties submit?• Should audio/video/documentary attachments be allowed?• Procedure & time frame for appointment of neutral judges/panelists

and decision making • Can a party access updated status of the case?• Should each party get the opportunity to rebut?• How is payment processing handled?• What is a reasonable number of attempts to contact the

respondent?• Enforceability of settlements and decisions arrived at during dispute

resolution

Self Regulation vs Government role in ODR

• Schultz was of the opinion that government’s role is more important as compared to the self regulation approach.

• Accreditation-Symbolic capital-authenticity, credibility• Financial aid• Supervision• Provision of appeal for accountability• In USA, Australia, New Zealand, Singapore, Canada,

U.K. special funding is being granted by the government to initiate ODR projects.

• I would advocate Public –Private partnership model

Self regulation -Use of Trust seals & certification

Use of Trust seals & certification

Truste certification

Challenges in ODR

• Requirement of consent of both parties• Legal recognition to ODR clause-B2C contracts- EU view• Maintaining standards and quality• Accountability and impartiality of neutrals and arbitrators. • Confidentiality of information gathered during the Arbitration process. • Lack of homogenous cyberlaws –core principles same- UNCITRAL Model law of e-

commerce• Will national courts recognize awards rendered online. • For the purposes of statutes and treaties such as the New York Convention, where

will an online arbitration take place, and where will the award have been made. • How does one ensure the authenticity of and integrity of documents,

electronically. • Lack of personal interaction may reduce chances of settlement ( Goffman, face

theory)• Differences in language and culture

Solutions to ODR hurdles• Need for an ODR law analogous to lex mercatoria.• In European Union, the E commerce Directive, provides in article 17 that in case of

an e-dispute, the member states are required to ensure that the parties are not hindered from using ADR process for dispute resolution ‘including appropriate electronic means’ . Some harmonization is in place-UNCITRAL Model law on e-commerce & electronic signatures

• Use of encryption & other security tools-The electronic court house uses multiple security layers including sophisticated server, complex pass word and software which backs up complete data of its servers and stores information submitted by the parties in a protected environment. Such technical infrastructures is required to alleviate any concerns a breach of privacy, confidentiality in the ODR process.

• Many paralegal rights such as money back guarantees and buyer protection clauses and authentication seals are becoming popular on most e commerce websites- to generate trust

• ODR reduces acrimony – no disadvantage if personal interactions not there• Overcome differences in language and culture through translators

IT & DISPUTE RESOLUTION-RECOMMENDATIONS

Nature of Virtual world of cyberspace- devoid of physical boundaries

Improvisation and extension of ODR system application to new subject areas worldwide.

Online International Court of Justice for e—Disputes—Need for political reconciliation between main trading blocks

Organization or system of law to regulate e-disputes through uniform means e.g ICANN Policy for domain name disputes till uniform ODR law is achieved

IT enabled DR should be introduced in all model legislative texts, national laws as an internationally accepted uniform method of dispute resolution

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Figure 14.4 Overcoming Enforcement Challenges

Parties to a mediation conditionally agree that mediation will convert to arbitration. Where an agreement is reached, the mediator can render an arbitral award consistent with the agreement

Parties put into escrow each party’s consideration involved in dispute. The escrow agent can distribute the assets in accordance with the outcome of the ODR process.

Parties to a settlement agreement provide in the agreement that incase of non compliance, the parties agree to have an arbitrator appointed to draft an arbitral award according to the terms of the settlement agreement.

Thank you!

SETH ASSOCIATESADVOCATES AND LEGAL CONSULTANTS

New Delhi Law Office:

C-1/16, Daryaganj, New Delhi-110002, India

Tel:+91 (11) 65352272, +91 9868119137

Corporate Law Office:

B-10, Sector 40, NOIDA-201301, N.C.R ,India

Tel: +91 (120) 4352846, +91 9810155766

Fax: +91 (120) 4331304

E-mail: mail@sethassociates.com