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The Emergence of ODR

About The Author

Hannah Larsen (Writer)

Hannah graduated from the University of Bristol in 2013, with a LLB Hons. Hannah works for an organisation issuing multinational employers with guidance on employment law and labour relations across the globe, and is undertaking her BPTC part-time at BPP Holborn.

By now most of us have heard of alternative dispute resolution (“ADR”). In fact, it has been pretty well rammed down the throats of practitioners and law students across the country. In contrast, online dispute resolution (“ODR”) does not seem to have attracted anywhere near as much press. Professor Richard Susskind, the independent IT adviser to the Lord Chief Justice of England and Wales, has commented that he expects ODR to ‘become the dominant way to resolve all but the most complex and high value disputes’; I am inclined to agree with him, despite learning about ODR only recently.  

What is ODR? 

As the name suggests, ODR is the use of information technology and the Internet in resolving disputes between parties. ODR may be used for the whole process, for part of it or to supplement other processes. Similar to ADR, online resolution is used as an alternative or precursor to litigation. The aim is that the parties will be able to reach a written agreement or settlement that will be binding upon them, eliminating the need for a court decision. A range of procedures can facilitate settlement, although mediation and negotiations appear to be the most common means adopted by ODR providers.

You may be more familiar with ODR than you realise: have you ever used eBays dispute resolution centre? It is quite possible that you have, given that it handles more than 60 million disagreements per year. What you may not realise however, is that the centre is actually just software which allows each user to input their grievances into an online portal and it is not until a very late stage that humans are involved in the resolution of our shopping troubles. 

Outside of eBay, ODR can be used in respect of disputes that have arisen both online and offline. Within England and Wales, ODR is already mandated in respect of certain uncontested low-value personal injury claims (up to £25,000), as per the Pre-Action Protocol for Low Value Personal Injury (Employer’s Liability and Public Liability) Claims and the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents. The ‘Claims Portal’ is essentially a not-for-profit ODR platform providing for the online filing of claims and subsequent document transmission, introduced as part of the Governments response to the ‘compensation culture’. It was noted by the Law Society in 2013 that each year 400,000 road traffic accident claims alone are reported using the portal.  

Why is ODR set to become so popular?

ODR is already internationally recognised; the United Nations Commission on International Trade Law (UNCITRAL) has been producing guidelines for the use of ODR for over a decade and holds regular conferences to discuss the progress of ODR. In addition, the National Center for Technology and Dispute Resolution (NCTDR) was founded in 1998 at the University of Massachusetts. The Centre is primarily concerned with providing information on ODR processes and providers, as well as ODR’s development across the globe. An International Forum on ODR was also established in 2002 by the United Nations Economic Commission for Europe.

One of the prompts for the introduction of the Claims Portal was the acknowledgement that ODR can provide quicker resolution of disputes than offline models. Even if only used as a supplement to ADR, for example to send data between the parties in support of a telephone mediation (as done by LawWorks), parties receive the information instantaneously in stark contrast to the more traditional means of delivery (i.e. in person or by post). Hence, where parties are conscious to resolve a dispute as soon as possible, ODR will provide a very attractive option.

An additional concern influencing the design of the Claims Portal was the need to keep parties’ costs down and as a result, legal representatives involved in the Portal receive a fixed fee. ODR processes often eliminate the need for legal representatives at all; for example, the automated mediation software utilised by eBay requires the parties to complete a simple claim form outlining the issue on a factual basis only. Software then compares the forms and detects whether an agreement can be made. If it cannot the software refers the parties to a dialoguesection comprising of text boxes with automated deadlines for submission. Only once the system is exhausted and 8 days have passed are the parties invited to refer the matter to a mediator at a small cost. Cost is also reduced as the need to hire a venue for the ADR process, transport to it and even accommodation are saved.

By removing the need for a venue, one of the complexities in scheduling is also removed when one bears in mind that ADR traditionally requires finding a place that is available at a time that is convenient for all parties and the ADR facilitator. ODR also provides the parties with much more flexibility, as they can usually input into the ODR systems as and when they wish (within the overall deadlines). This is particularly advantageous where the parties are separated by distance and perhaps even a time difference.

Significantly, the prominent issue of jurisdiction is removed in cross-border disputes if settlement is reached. Where litigation is undertaken issues are encountered as to which jurisdiction legal proceedings should commence, and once a court judgment is issued, how to enforce it. If an agreement is reached using ADR this is recorded in writing and acts to bind the parties. Resolution of this issue alone will be of huge influence on parties involved in cross-border disputes. Further, it was estimated that there were 15.9 million cross-border shoppers in the UK alone last year; ODR could be set to expand exponentially following increased promotion in this area.

Why might people prefer not to use ODR?

An underlying reason why many people do not favour the use of ODR is a belief that the personal element of dispute resolution is lost. This may be due to the fact that parties do not believe that they have “had their day in court”, since they have not voiced their grievances in a traditionally formal setting. Further, it can be much harder for parties to convey their emotions in an online system, especially where only text submissions are made. This can be particularly important in relationships where the dispute is not financial or where one or both parties are conscious to maintain an on-going relationship despite contesting individual points. 

This is not wholly a disadvantage however; on the flip side, where there is particular hostility between the parties the use of online submissions can separate the emotional element and allow them to focus on the substantive issues of the dispute. Further, where an ODR system allows for written submissions parties are able to draft their answers and consider them thoroughly before issuing them to the other party. In so doing, the risk of hasty comments and ill-considered offers is reduced, which otherwisecould have had the effectof making negotiations futile.

In addition, ODR is continuing to develop to take account of some of the more subtle aspects of negotiation that have been noted as important in achieving settlement. For example, blind bidding systems can take account of the speed at which parties make offers and use algorithms to calculate a (slightly) more favourable outcome as a result of the party’s willingness to negotiate. Moreover, blind bidding systems can also seek to negate party tactics or an unwillingness to make offers and engage in the process. The method allows each party to input what they believe is a positive outcome for each issue, for example: an amount of damages in respect of a particular loss. The software then displays the given answers on a scale, with added computer generated outcomes. The parties are free to add more outcomes to the range, however, the parties will not be able to identify which outcomes were generated by the computer or the other party. Each party then picks an option that they feel is an appropriate settlement. If the parties choose different options, the software is able to generate a compromise.

Data confidentiality can be of concern to the parties, however ODR providers usually address this this by means of encryption (i.e. the use of public key cryptography and digital signatures). General duties of confidentiality are imposed on the parties and, if required, a mediator. Courts uphold the duty of confidentiality, except in very limited circumstances e.g. where there may be concerns of money laundering and innocent parties are entitled to redress.

It can be suggested that ODR is more suited to particular types of disputes, for example e-commerce and financial transactions, and is not always as suited to dealing with non-quantifiable disagreements. Whilst it is clear that ODR may not be appropriate in all circumstances, for example family cases involving children, many of the ODR mechanisms do provide a dialogue style procedure giving parties the opportunity to discuss all types of issues, not just those which are quantifiable. In the event that this is not considered adequate by the parties, ODR can still provide a useful supporting mechanism for traditional or telephone dispute resolution.

Finally, although it is very easy to assume that using online means increases accessibility to dispute resolution, a note should be made for those who cannot easily obtain Internet access. Some mechanisms require repeated or prolonged Internet usage, which may not be available for everyone. Further, there are underlying concerns as to legal dispute resolution when it is not face-to-face, for example Ehrlich et al (2006) suggested that where consumers did not understand advice or instructions given to them over the telephone they were inclined to drop their claim and take no further action. However, as ODR is increasingly developed with a lay user in mind, utilising clear systems and a support system, it is arguable that this concern is minimised and outdated. Further, in many disputes it is not necessary to involve legal terminology or procedure, i.e. it will be concerned solely with factual arguments akin to eBay’s resolution procedure.

The future of ODR

UNCITRAL is currently working on new procedural rules to be introduced with regards to ODR and cross-border electronic commerce transactions. However, the most prominent activity with regards to ODR recently has been that in the EU. In June 2013 the European Parliament and Council published Directive 2013/11/EU on ADR for consumer disputes  (“the Directive") and Regulation No 524/2013 on ODR for consumer disputes (“the Regulation”). Bearing in mind the EU’s overall aim of creating a single European market with free movement of goods and services, the key advantage of ODR avoiding jurisdictional issues was recognised and accordingly presented an opportunity for the EU to simplify measures of redress for consumers across the EU.

The Directive is designed to ensure ADR coverage for all contractual disputes within every market sector, except health and education, in all Member States. There will also be quality criteria imposed on ADR entities, particularly with regards to independent and transparent operations. ADR entities will be required to provide their services to consumers for free or at nominal cost. One or more competent authorities in each State must be designated to monitor ADR providerscompliance with the Directive.

The Regulation provides for the establishment of an EU-wide online platform for resolving e-commerce disputes using ODR and then if necessary ADR. An aggrieved consumer will be able to register a complaint on the site and the trader will be notified of this, starting a dialogue between them. If the issue cannot be resolved as a result of the dialogue, the parties can then select an ADR provider from the online network and choose whether to pursue the dispute online or offline. In most cases that provider will be expected to resolve the dispute within 90 days of receiving the electronic request. ODR advisers from each Member State will be engaged by the system to facilitate communication between the parties, provide general guidance and assist in any issues with using the platform.

The online platform is designed to be a champion of accessibility by being free to use, available in all EU official languages and providing a comprehensive portal to all ADR entities across the EU. It will also provide much needed clarity to consumers on the means of redress available to them, as traders will be expected to place a link to the platform on their website. This requirement alone is likely to provoke a great increase in the use of ODR. As per national law, traders may additionally be required to state details of their preferred ADR providers and should notify consumers of whether they will utilise ADR before any such dispute arises. However, as the Competition and Market’s Authority has acknowledged, traders will need to be encouraged of the benefits of ADR if they are to properly fulfil these requirements.

The expected accumulation of these measures is that EU consumers will make a direct financial saving of approximately 22.5 billion per year (EUROPA) on dispute costs.

EU member states have until July 2015 to adopt the legislation, with the ODR platform going live in January 2016. Consultation in the UK closed in June 2014 and conclusions from this have yet to be published. However, the general reception received by the Directive and Regulation does appear to be good, with many seeing it as an opportunity to improve and perhaps rationalise the ADR systems already in place in the UK. 

Extension of the use of ODR platforms is also becoming more frequently considered in the UK, independent of EU influence. For example, the Civil Justice Council established an advisory group in April 2014, chaired by Professor Susskind, to assess a potential role for ODR in resolving civil disputes with an expected value of less than £25,000. A general appraisal of ODR is also expected in the groups report.

As discussed above, there are many advantages to the use of ODR: reduced cost, increased flexibility and convenience, as well as the elimination of cross-border resolution issues. In addition, the potential disadvantages or concerns, which have affected the frequency of ODR usage, are becoming less pertinent as ODR providers seek to address them. The EU portal will provide a useful reference point for future development, further it is likely to enhance consumer awareness and usage of ODR. 

I believe that an expansion of ODR will be beneficial to individuals and traders; I eagerly await the presentation of the UKs implementing legislation for the EU Regulation and the Civil Justice Councils report.

Note: ODR may also be referred to as Internet Dispute Resolution (iDR) and Electronic ADR (eADR).

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Tagged: Commercial Law, Consumer Rights, European Union

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