Session 5: Disputes
Teaching Fellows: Kah-Wei Chong & Len Kardon
Prof. Ethan Katsh
Professor of Legal Studies
Director of the Center for Information Technology and Dispute Resolution
University of Massachusetts, Amherst
Prof. Anita Ramasastry
Associate Director, Center for Law, Commerce & Technology
Assistant Professor of Law
University of Washington School of Law
President and co-founder
Online Resolution, Inc.
DISPUTES - TABLE OF CONTENTS
III. Types of Foreseeable Disputes
IV. Conflict Management and Avoidance
V. Form of Dispute Resolution
VI. Online Dispute Resolution
VII. Can/Should ODR be Made Mandatory?
VIII. Other Legal Issues
XI. Additional Materials
Disputes are traditionally settled within the physical territory where one or both of the disputants is located. With an online enterprise, however, customers could be located anywhere in the United States or around the world. How does the enterprise cope with such broad exposure? Verifying the consumer's location is virtually impossible, especially if the customer takes advantage of the many "anonymizer" devices which protect identity in cyberspace. (See Matthew P. Graven, Anonymous Browsing, (Website) (Graven)) A consumer may even be able to pay for services anonymously using the digital equivalent of cash e.g. eCash (Website) (eCash) or using a service such as PrivateBuy.com (Website) (PrivateBuy.com). Where goods require a physical delivery, an online enterprise can restrict its customer base to those jurisdictions where it is willing to submit to regulation. With digital goods and services that are delivered online, this is almost impossible, and the enterprise may have to rely on the truthfulness of the customer's information regarding their location. Many e-commerce enterprises, of course, have come online specifically seeking a global market. This segment will look at the efforts to resolve cyberspace's jurisdictional quandary and will consider other methods for resolving disagreements and complaints in a global online marketplace.
The creation of the Internet as a global network has raised significant jurisdictional issues at both the US interstate and international levels. According to Henry Perritt, Dean of Chicago-Kent Law School, jurisdiction is generally divided into three types: "Prescriptive jurisdiction limits legislative power. When a sovereign state has jurisdiction to prescribe, it legitimately may apply its legal norms to conduct. Adjudicative jurisdiction limits judicial power. When a state has jurisdiction to adjudicate, its tribunals may resolve disputes. Enforcement jurisdiction limits executive power. When a state has jurisdiction to enforce, its police, and customs authorities may restrict the flow of trade, detain individuals, and alter property interests." (Website) (Perritt1)
Historically, jurisdiction was limited by the impracticality of enforcing a judgment against someone or something over which the court has no control. However, a sovereign can extend its prescriptive jurisdiction beyond its enforcement jurisdiction in two ways. It can ask other sovereigns to enforce its judgments and, where it does not have adjudicative jurisdiction, it can ask other sovereigns to apply its laws to certain controversies. Both courts and sovereigns, recognizing limits on prescribing law to controversies that have no connection to the sovereign, have developed choice of law rules to determine which sovereign's laws to apply. Choice of law and the enforcement of judgments are also governed by international treaty as well as norms of international law. As international law has developed, respecting the sovereignty of other nations has become an important governing principle in limiting prescriptive jurisdiction and preventing overreaching.
International jurisdiction disputes often sound similar to the "minimum contacts" issues found in American cases, as discussed below. To be effective, jurisdiction over foreign nationals or corporations must rely on international treaties or reciprocal enforcement agreements. These agreements often look at the contacts that the foreign entity has within the sovereign district in order to determine if the sovereign's interest in the matter is legitimate. For a more complete discussion of international jurisdiction and the Internet, please review Dean Perritt's presentation at Internet Law and Policy Forum (Website) (Perritt2) and/or the article by Stephan Wilske & Teresa Schiller (Website) (Wilske) .
The European Union ("EU") recently adopted a regulation, effective in March 2002, allowing an EU consumer who purchases goods or services online to sue the seller either in the EU country in which the consumer resides or in the EU country in which the seller is physically located, even if the seller has no business operations or employees in that country. See the coverage in The Industry Standard (Website) (Hong). In an explanatory note to the Regulation, two key EU bodies have indicated that a passive website alone (which advertises products but does not allow the consumer to order or download the products online) will not invoke the consumer jurisdiction clause.
B. Yahoo and the French ban on Nazi memorabilia
The most closely watched international jurisdiction case involves the website Yahoo and auctions on its site of Nazi memorabilia. A French court ruled that the sales, which could be accessed by French Internet users, violated French law. After hearing from a panel of experts that it was technically possible to block 70 to 90 percent of French users from a website, the court gave Yahoo 90 days to block French users or face a fine of $13,000 per day. For a summary of the case, see The Industry Standard (Website) (Muehlbauer).
It may be impossible for the French court to enforce the ruling, since Yahoo has no assets in France (although it does have an interest in Yahoo-France). Yahoo is already fighting the ruling in U.S. in Federal District Court in San Jose, Calif., arguing that the French order cannot be enforced for several reasons, including conflicts with the First Amendment. Meanwhile, it has voluntarily banned the sale of hate group related merchandise. See the CNET article (Website) (Wolverton).
C. United States Law
In the U.S., each of the 50 states has its own substantive commercial laws and court systems. Each state has a law called a "long-arm statute" which defines the persons and the entities over which the local courts have jurisdiction. Under the Full Faith and Credit clause of the United States Constitution (Art. IV. Sec. 1) and the Implementing Act of 1790, 28 U.S.C. §1738, judgments in one state are enforceable in all the others. While this makes jurisdiction over residents of another state practical, states are limited in their jurisdictional reach. Under the Due Process clause of the Constitution, as interpreted by the Supreme Court in International Shoe Company v. Washington, (Website) (International Shoe) each state court can only exercise personal jurisdiction over a non-resident defendant if the defendant has had sufficient "minimum contacts" with the state to justify jurisdiction. In the context of interstate commerce, a corporation from another state that sells products directly within another state is "purposefully availing" itself of the laws of the other state, which is sufficient contact to justify jurisdiction. However, a state cannot exercise jurisdiction over an out-of-state corporation that sells goods that unforeseeably end up in the state. See World-Wide Volkswagen Corp. v. Woodson (Website) (Volkswagen).
In the context of the Internet, a website operator will not normally limit its viewers or customers to those residing in a certain state. A significant amount of cases have addressed this issue, with most following the lead of the court in Zippo Manufacturing Co. v. Zippo Dot Com, Inc. (Website) (Zippo). The Zippo court said that jurisdiction should be determined based on "the level of interactivity and commercial nature of the exchange of information that occurs on the web site." It divided websites into three areas:
Courts are likely to find jurisdiction over the out-of-state operator of fully interactive sites, unless the operator avoided selling to those within the state or at least did not target them. In Zippo, the Pennsylvania court found that it had jurisdiction over the out-of-state vendor from California since the latter's website sold 3,000 passwords over the Internet to Pennsylvania subscribers and entered into seven contracts with Pennsylvania access providers. On the other end, fully passive websites are not likely to be sufficient for jurisdiction. See, for example, Soma Medical Int'l v. Standard Chartered Bank (Website) (Soma) which held that defendant's maintenance of a website accessible in Utah was not sufficient to establish personal jurisdiction where the website was purely passive in nature.
In the middle, courts have examined a variety of factors, including the number of hits a website gets from users within the state or the presence of an e-mail link or toll-free number on the site. The trend has been not to find jurisdiction even when some sales have occurred. See, e.g. Winfield Collection Ltd. v. McCauley (Website) (Winfield), which held that two sales to state residents via eBay's online auction was not sufficient to establish jurisdiction since sales resulted from the random bids of parties beyond the defendant's control and not from targeting of state residents. The court also found that the act of maintaining a website with interactive features does not alone subject the site's sponsor to jurisdiction anywhere in the United States. See also Mink v. AAAA Dev. LLC (Website) (Mink) declining jurisdiction where defendant's website allowed viewers to send email but did not allow them to enter into contracts with defendant online. Customers were directed to print order forms and mail or fax them to defendant.
D. Practice Issues
Companies that do not wish to be subject to jurisdiction in foreign states and countries should consider limiting their websites to passive activity. Alternatively, they could only allow residents of certain states to order things on their site or participate in it, although in cases where the goods or services are delivered electronically it may be a difficult and costly process to verify the customer's residency. The company would also need to strictly limit any non-Internet contacts with foreign states. Also, online vendors could use forum selection and choice of law clauses in the Terms of Service for the site, but see the clickwrap discussion in Session 3: Transactions for information on enforceability.
Our ComeStudyAbroad.com site is specifically designed for residents of foreign countries worldwide. We can try to limit exposure to foreign jurisdiction by including forum selection and choice of law clauses, but their enforceability is highly questionable.
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III. Types of Foreseeable Disputes
Disputes are inevitable in the course of the life of a business, whether online or offline. The business disputes which the enterprise may encounter include the following:
A. Contractual disputes
B. Non-contractual disputes
These are the common kinds of non-contractual disputes that may arise in an online enterprise.
Although many of the issues (e.g. jurisdiction, choice of law, high cost of cross-jurisdictional litigation) which arise in relation to the different categories of disputes are similar, the difficulties are perhaps more pronounced in respect of B2C transactional disputes which are often of small monetary value. Traditional methods of resolving cross-jurisdictional commercial disputes, such as international commercial arbitration, are often too costly, inconvenient and burdensome in the context of consumer disputes. This segment will therefore focus on the management of disputes arising from B2C transactions. It should however be noted that many of the issues and principles discussed here are equally applicable to other types of disputes.
IV. Conflict Management and Avoidance
Given the importance of repeat customers and referrals in business, especially in e-commerce, it is often in the best interest of companies and individuals to settle their disputes quickly.
The enterprise may consider developing an integrated conflict management system. This includes both grievance processes and mediation, but goes beyond them, introducing a systematic approach to preventing, managing, and resolving conflict. The Society of Professionals in Dispute Resolution (SPIDR) has practical guidelines for designing and implementing such systems (Website) (SPIDR).
The enterprise should consider establishing a customer satisfaction system. Such a system offers after-sale services by which the customer is invited to firstly submit his or her complaint to such a service, e.g. a call center or complaint services. As customer experience is the single most important factor in the success of e-commerce, such a system can help keep customers satisfied, and retain them as customers. Nora Femenia has presented a paper on how cultural differences affect customer experiences (Website) (Femenia).
Most codes of practice recommended and adopted by various trustmark code owners require online merchants to establish internal complaint resolution procedures that are quick, accessible, free (or low-cost) and fair. (Website) (Wiener)
V. Form of Dispute Resolution - Online or Offline, Adjudication or ADR
In the event that the dispute is unable to be resolved through the enterprise's internal complaint resolution procedure, third party dispute resolution may be necessary. When disputes do arise, both merchants and their consumers will be more likely to conduct business online if they can rely on a dependable and inexpensive resolution process which can support cross-border disputes.
Traditional dispute resolution processes include court litigation (court adjudication), arbitration, mediation and other alternative dispute resolution (ADR) procedures. All these processes are traditionally conducted offline, i.e. face-to-face in a physical environment.
A. Court Litigation or Alternative Dispute Resolution (ADR)?
If a dispute arises, the enterprise will first have to decide whether it would prefer to have the dispute resolved through court litigation, or through ADR methods. Due to the difficult choice of law and jurisdictional problems that arise in cross-jurisdictional transactions, ADR has the advantage of offering quicker and less expensive resolution. If a customer complainant decides to commence court proceedings in his or her home jurisdiction, the enterprise may still reduce the cost of dispute resolution by seeking to resolve the dispute through ADR.
In an online business environment, it is advantageous to be able to resolve disputes online as well. Online dispute resolution (ODR) offers the advantage of speed, reduced cost, greater convenience and accessibility. It enables parties to resolve their disputes without the need to physically travel or meet with dispute resolution professionals. ODR therefore has the potential to significantly reduce the transaction costs arising from a dispute. Over the past few years, numerous ODR forums have arisen.
B. Other Dispute Resolution Methods
Before discussing online dispute resolution in greater detail, it is appropriate at this point to note the various "alternative" dispute resolution methods that are available from the perspective of the customer. These methods include credit card charge back mechanisms, complaint resolution mechanisms established by merchants (described above), consumer complaints to governmental authorities (e.g. state Attorneys-General's offices, Federal Trade Commission), consumer protection agencies (e.g. National Fraud Information Center / Internet Fraud Watch of the National Consumers League), small claims courts, and litigation. Each of these alternatives has its own disadvantages.
VI. Online Dispute Resolution
A. What is Online Dispute Resolution (ODR)?
Online dispute resolution (ODR) utilizes the Internet as a more efficient medium for parties to resolve their disputes through a variety of ADR methods similar to traditional ADR. Using computer-networking technology, ODR brings disputing parties together "online" to participate in a dialogue about resolving their dispute.
ODR is still a fairly recent industry. Many new ODR providers have arisen while others have stopped operating. ODR providers include private sector companies, public sector agencies and academic institutions. Currently, the majority of ODR providers are private sector companies.
Generally, the complainant begins the ODR process by registering the complaint online with an ODR provider. The ODR provider will then contact the other party using the information provided, and invite that other party to participate in the ODR process. If the other party accepts the invitation, he or she will file a response to the complaint.
The ODR providers employ one or more of the following dispute resolution techniques or mechanisms - (1) arbitration, (2) mediation, or (3) negotiation, which may be assisted by software or rules, and includes blind bidding (defined below). Some providers incorporate a technique that has been called "peer pressure" services.
Arbitration involves a decision by an arbitrator, which parties have agreed by contract to be binding. Mediation involves facilitation of communication and problem-solving by a mediator. A settlement is reached only if both parties consent.
The arbitration and mediation processes utilize email, chat or messaging software, audio-conferencing or video-conferencing software for communication between the arbitrator/mediator and the parties.
Online negotiation may involve use of email or messaging, or may utilize heavily automated systems. Blind bidding refers to a system of settlement in which the ODR provider's software accepts confidential offers and demands from the parties, and records a settlement if the offer and demand are within a pre-specified range from each other. If there is no settlement, the other party will not know what the submitted bids were. For examples of blind bidding systems, see Cybersettle (Website) (Cybersettle) or clickNsettle (Website) (clickNsettle).
So-called "peer pressure" services involve the use of publicity about the ongoing dispute to create an incentive for the online merchant to resolve the dispute. An example of an ODR provider that utilizes this technique is iLevel (Website) (iLevel).
B. Standards for ODR providers
Recently, governments around the world, industry groups, consumer advocacy groups and dispute resolution professionals devoted great attention to the development of ODR services and the standards and oversight over these ODR providers. In June 2000, the Federal Trade Commission (U.S.) and the Department of Commerce (U.S.) held a public workshop to explore ADR for online consumer transactions. (Website) (FTC).
In December 2000, the Organization for Economic Co-operation and Development (OECD), Hague Conference on Private International Law (HCPIL), and International Chamber of Commerce (ICC) jointly organized a conference entitled "Building Trust in the Online Environment: Business-to-Consumer Dispute Resolution" held at the Hague, Netherlands. (Website) (OECD)
Please refer to the Additional Materials for a list of ODR providers.
C. Criteria for Selection of ODR provider
Great attention has been devoted around the world to the standards which ODR processes and providers ought to meet. Different proposals put forward by multi-lateral organizations, industry groups, consumer groups and trustmark accreditation agencies place emphasis on slightly different lists of elements. The following elements have been suggested by one or more of the proposals that have been put forward.
Independence / Neutrality / Impartiality - The ODR provider must be sufficiently independent from both the online merchant and the consumer in order to guarantee the impartiality of its actions.
Low cost - The ODR service should be provided to the consumer free of charge or at a moderate cost, while taking into account the need to avoid frivolous claims. (E.g. the Online Ombuds Office by Center for Information Technology and Dispute Resolution at the University of Massachusetts (Website) (UMass) does not charge for its service.
Accessibility - The ODR service should be easily accessible to the consumer.
Efficiency - The ODR process should provide quick decisions or settlements, as the case may be. An inefficient process adds to the total cost of dispute resolution that the online merchant and the consumer would have to bear.
Transparency - ODR mechanisms should function according to published rules of procedure that describe unambiguously all relevant elements necessary to enable customers seeking redress to make fully informed decisions on whether they wish to use the ADR services offered.
Adversarial procedure - The procedure should provide a reasonable opportunity for all parties to present their viewpoints before the ODR professional and to hear the arguments and facts put forward by the other party.
Qualifications of personnel - The dispute resolution professionals employed by the ODR provider should be properly qualified in dispute resolution.
Principle of representation - The process should permit (but not require) representation by third parties.
Legality - ODR providers may reach decisions or settlements based on equitable principles, and/or on the basis of codes of conduct, rather than strict legal rules.
Liberty - Some stakeholders feel that the ODR process should be undertaken on a voluntary basis by the consumer, and that the decision by the ODR provider may be binding only if the parties were informed of its binding nature in advance and specifically accepted this. Other stakeholders feel that mandatory participation in ODR should be permissible.
Recourse to courts - A significant number of stakeholders have taken the view that ODR processes should be without prejudice to the consumers' entitlement to seek redress in the courts.
Confidentiality / Publicity - Some stakeholders want ODR proceedings and results to be confidential, while others want these proceedings, results and statistics to be published, as a means of ensuring public accountability.
The various stakeholders continue to hold discussions and consultations regarding guidelines for ODR providers, and no agreement on a universally accepted set of criteria has yet been reached.
For a list of various protocols and principles, see the B2C Resources page from the ABA E-commerce and ADR Task Force (Website) (ABA).
VII. Can/Should ODR be Made Mandatory?
An online merchant's terms and conditions for its services may require that all disputes arising from the transaction be submitted to binding arbitration. For example, see Amazon.com's conditions of use (Website) (Amazon), eBay's user agreement (Website) (eBay) and Dell.com's terms of sale (Website) (Dell).
An issue which arises is whether a pre-dispute arbitration agreement by a consumer should be enforceable. A pre-dispute agreement is contrasted with a post-dispute arbitration agreement, which does not create difficulty. A pre-dispute arbitration agreement is also to be distinguished from a pre-dispute agreement by the parties to refer any arising dispute to mediation, which does not raise as significant problems for the consumer, as no binding result can be achieved in that situation without the consumer's consent.
A. Enforceability of domestic arbitration agreements in the United States
In the United States, the enforceability of arbitration agreements is generally addressed by statutes, which were enacted to overcome traditional resistance by the courts towards arbitration. The Federal Arbitration Act, 9 U.S.C. is the arbitration law applicable to transactions involving interstate or foreign commerce. Section 2 of the Federal Arbitration Act provides that:
"[a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
The U.S. Supreme Court has upheld the validity of pre-dispute domestic arbitration agreements contained in commercial contracts. In Allied-Bruce Terminix Companies, Inc. v. Dobson (Website) (Allied-Bruce), the U.S. Supreme Court noted that the legal background to the Federal Arbitration Act demonstrates that the Act had the basic purpose of overcoming judicial hostility to arbitration agreements and applies in both federal diversity cases and state courts, where it pre-empts state statutes invalidating such agreements. In Allied-Bruce, the Supreme Court enforced a pre-dispute arbitration agreement contained in the respondent's termite prevention contract.
A second question which arises is whether the arbitration agreement contained in the online merchant's standard terms and conditions constitutes an unenforceable contract of adhesion. A contract of adhesion is a standard form contract offered by a party with stronger bargaining power to a party with weaker power on a take-it-or-leave-it basis. Such a contract is not a result of a negotiation between the parties. A contract of adhesion is generally drafted by the party that participates in numerous transactions of that particular type, while the other party (adhering party) enters into relatively few such transactions. The form of contract is presented to the adhering party on the understanding that the drafting party will enter into the transaction only on the terms contained in the document, and the adhering party is in practice unlikely to have read the standard terms before entering the transaction. In Carnival Cruise Lines, Inc. v. Shute (Website) (Carnival), which was a case involving a forum selection clause in a consumer contract selecting a court forum rather than arbitration, the U.S. Supreme Court enforced the forum selection clause despite the fact that it was contained in a contract of adhesion. Not all contracts of adhesion are unenforceable - only those that are unreasonable. Forum selection terms are enforced unless they are fundamentally unfair. See the Huber and Trachte-Huber article (Huber).
In Brower v. Gateway 2000, Inc. (Website) (Brower), the Supreme Court of New York enforced an arbitration clause in a consumer contract between the defendants, Gateway 2000, Inc. and the plaintiffs, rejecting the plaintiffs' argument that the sales agreement containing the arbitration clause was unenforceable as a contract of adhesion. The court held that the agreement was not an unenforceable contract of adhesion, notwithstanding the plaintiffs' unequal bargaining power, since the plaintiffs were not placed in a "take or leave it" position - they had the ability to purchase the merchandise elsewhere and also had the unqualified right to return the merchandise within 30 days for any reason. While returning the goods required affirmative action on the part of the consumer and even some expense, this may be seen as a trade-off for the convenience and savings which the consumer presumably opted for in choosing to make the purchase by phone or mail as an alternative to on-site retail shopping. The fact that a consumer does not read the agreement or thereafter claims to have failed to understand or appreciate some term therein does not invalidate the contract.
B. Enforceability of foreign arbitration agreements in the United States
The United States is a party to two treaties requiring the enforcement of international arbitration awards and arbitration agreements:
The provisions of the conventions are incorporated into U.S. law through 9 U.S.C. sections 201 and 301.
Where a foreign arbitration clause is involved, the Federal Arbitration Act should be construed with due regard for the doctrine that the "emphatic federal policy in favor of arbitral dispute resolution . . . applies with special force in the field of international commerce." The U.S. Supreme Court has held that foreign arbitration clauses selecting a foreign forum are enforceable in the United States. See Vimar Seguros Y Reaseguros SA v M\V Sky Reefer, (Website) (Vimar). An article by John Levingston (Website) (Levingston) discusses the Vimar Seguros case.
In Vimar Seguros, Justice Kennedy stated:
It would also be out of keeping with the objects of the [Brussels Convention for the Unification of Certain Rules Relating to Bills of Lading, 51 Stat 233 (1924) (Hague Rules)] for the courts of this country to interpret the Carriage of Goods by Sea Act (COGSA) 46 U.S.C. App 1300 to disparage the authority or competence of international forums for dispute resolution. Petitioner's skepticism over the ability of foreign arbitrators to apply COGSA or the Hague Rules, and its reliance on this aspect of Indussa Corp. v. S.S. Ranborg, 377 F.2d 200 (1967) must give way to contemporary principles of international comity and commercial practice. As the Court observed in The Bremen v Zapata Off-Shore Co, 407 US 1 (1972), when it enforced a foreign forum selection clause, the historical judicial resistance to foreign forum selection clauses "has little place in an era when ... businesses once essentially local now operate in world markets. ... The expansion of American business and industry will hardly be encouraged, ... , if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our Courts. ... see Mitsubishi Motors Corp v Solar Chrysler-Plymouth, Inc, 473 US 614, 638 (1985) (if International arbitral institutions are to take a central place in the international legal order, national courts will need to "shake off the old judicial hostility to arbitration", and also their customary and understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal) (citation omitted); Scherk v. Alberto-Culver Co., 417 U.S., at 516, 94 S.Ct., at 2456 ("A parochial refusal by the courts of one country to enforce an international arbitration agreement" would frustrate "the orderliness and predictability essential to any international business transaction").
In Mitsubishi Motors Corp, the parties to an international commercial transaction agreed to arbitration in Japan. The U.S. Supreme Court reiterated that the presumption in favor of freely negotiated choice-of-forum provisions is reinforced by the "emphatic federal policy in favor of arbitral dispute resolution." The Court held that although Soler's antitrust claims may have been unarbitrable if the arbitration agreement arose from a domestic transaction, it was enforceable in the international context because "concerns of international comity . . . and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that a contrary result would be forthcoming in a domestic context." Therefore, in the international context, the courts will construe the provisions of arbitration agreements, the Federal Arbitration Act, and the applicable conventions with an even stronger preference for arbitration than in the domestic context. See James M. Zimmerman, "Recognition and Enforcement of Arbitral Awards in the United States" (Website) (Zimmerman), for a discussion of the applicable law for recognition and enforcement of foreign arbitral awards.
In the paper "Alternative Dispute Resolution and e-Confidence" (Website) (GBDe), the Global Business Dialogue on Electronic Commerce's (GBDe) working group on Alternative Dispute Resolution (ADR) recommends that a consumer's participation in ODR as an alternative to litigation should not be as the result of a commitment made prior to the materialization of the dispute, where the consumer's participation has the effect of depriving him or her of his or her right to bring an action in court.
VIII. Other Legal Issues
Enforceability / Remedies - When a dispute is successfully resolved through ODR providers, it may result in a binding or non-binding outcome. Where the dispute was resolved through mediation, the online settlement would be enforceable only to the extent allowed by contract law. One issue which may merit further consideration is the question of which state's contract law determines the validity of the settlement agreement.
Contract Formation - See Session 3:Transactions on enforceability of "clickwrap" agreements.
Choice of Law - The use of ODR providers for dispute resolution minimizes the jurisdictional problems related to cross-jurisdictional disputes, but does not eliminate the need to decide the choice of law question. The parties could agree on the choice of law in exercise of party autonomy, or could leave the decision to the online arbitrator.
Evidence of Agreement (of terms and of acceptance) - The use of ODR does not remove the practical difficulties associated with collecting and presenting evidence of the formation of the contract and the terms thereof.
Lack of Uniform Regulatory Scheme - Currently, the ODR providers set their own standards, as regulatory regimes are still being discussed and formulated. To enable ODR providers to tap the global market for dispute resolution, there would be a need for a uniform regulatory scheme across national boundaries.
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Trustmarks or seals of approval are currently one of the chief mechanisms for promoting consumer confidence and self-regulation in ecommerce. Independent organizations (referred to as Code Owners) establish standards (Codes of Practice) for conducting e-commerce and certify that particular online businesses (Code Subscribers) have met those standards. The Code Subscriber is then permitted to display the Code Owner's seal or trustmark on their website. This is expected to improve customer confidence.
Trustmark programs vary considerably in their terms and operation. Some certify only particular aspects of online business, such as privacy, while others certify a broad range of issues including advertising, disclosures, contract terms and performance, and security. Most include provisions concerning internal and/or third-party dispute resolution, and some Code Owners provide or monitor dispute resolution services involving their Subscribers. Some programs certify only that the Subscribers have accurately disclosed their own policies, while others certify that Subscribers follow the Code Owner's standards.
Please refer to the Additional Materials for a list of trustmark Code Owners and their trustmarks.
Please see the Additional Materials for a list of relevant websites and texts.
Matthew P. Graven, Anonymous Browsing, PC Magazine, January 3, 2001, at http://www.zdnet.com/products/stories/reviews/0,4161,2669356,00.html [back to text]
eCash at http://www.transaction.net/payment/anon.html [back to text]
PrivateBuy.com at http://see www.privatebuy.com [back to text]
Henry H. Perritt, Jr., Jurisdiction and the Internet: Basic Anglo/American Perspectives, presentation at Internet Law and Policy Forum, Jurisdiction: Building Confidence in a Borderless Medium, Montréal, Canada, 26-27 July 1999, available at http://www.ilpf.org/confer/present99/perrittpr.htm [back to text1] [back to text2]
Stephan Wilske & Teresa Schiller, International Jurisdiction in Cyberspace: Which States May Regulate the Internet? 50 Federal Communications Law Journal 119 (1997), at http://www.law.indiana.edu/fclj/pubs/v50/no1/wilske.html [back to text]
Victorya Hong, 'Brussels 1' Angers EC Businesses, The Industry Standard Europe, Dec 01 2000, available at http://www.thestandard.com/article/0,1902,20531,00.html [back to text]
Jen Muehlbauer, Borderless Net, RIP?, The Standard, November 21, 2000, available at http://thestandard.com/article/display/0,1151,20331,00.html [back to text]
Troy Wolverton and Jeff Pelline, Yahoo to charge auction fees, ban hate materials, CNET News.com, January 2, 2001, available at http://news.cnet.com/news/0-1007-200-4352889.html [back to text]
International Shoe Company v. Washington, 326 U.S. 310 (1945), available at http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=326&invol=310 [back to text]
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), available at http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=444&invol=286 [back to text]
Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 925 F. Supp. 1119 (E.D. Pa 1997) available at http://www.law.seattleu.edu/chonm/cases/zippo.html [back to text]
Soma Medical Int'l v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999) available at http://www.kscourts.org/ca10/cases/1999/12/98-4138.htm [back to text]
Winfield Collection Ltd. v. McCauley, 105 F. Supp. 2d 746 (E.D. Mich. 2000) available at http://cyber.law.harvard.edu/ecommerce/winfield.html [back to text]
Mink v. AAAA Dev. LLC, 190 F.3d 333 (5th Cir. 1999) available at http://www.ca5.uscourts.gov/opinions/pub/98/98-20770-cv0.htm [back to text]
Diane Cabell, "Using ICANN's UDRP", Berkman Center Online Lecture & Discussion Series 2000, available at http://cyber.law.harvard.edu/udrp/ [back to text]
Guidelines For The Design Of Integrated Conflict Management Systems Within Organizations" by SPIDR's ADR in the Workplace Track 1 Committee, available at http://www.spidr.org/article/icmsD.html (last visited April 8, 2001) [back to text]
Nora Femenia, ODR And The Global Management Of Customers' Complaints: How Can ODR Techniques Be Responsive To Different Social And Cultural Environments?, paper presented at "Building Trust in the Online Environment" joint conference by OECD, HCPIL & ICC, at http://www.mediate.com/articles/femenia.cfm (last visited March 12, 2001)) [back to text]
Alan Wiener, Regulations and Standards for Online Dispute Resolution - A Primer for Policymakers and Stakeholders, February 15, 2001, available at http://www.odrnews.com/wienerintro.htm (last visited February 26, 2001) [back to text]
Cybersettle at http://www.cybersettle.com [back to text]
clickNsettle at http://www.clickNsettle.com [back to text]
iLevel at http://www.ilevel.com [back to text]
FTC & DOC, 2000 A summary of the discussions can be found at http://www.mediate.com/articles/ftc1.cfm [back to text]
Online Ombuds Office by Center for Information Technology and Dispute Resolution at the University of Massachusetts at http://aaron.sbs.umass.edu/center/ombuds/default.htm [back to text]
OECD conference papers are available at http://www.oecd.org/dsti/sti/it/secur/act/online_trust/presentations.htm (last visited February 10, 2001) [back to text]
B2C Resources page from the ABA E-commerce and ADR Task Force at. http://www.law.washington.edu/ABA-eADR/resources/web.html [back to text]
Amazon.com's conditions of use at http://www.amazon.com/exec/obidos/tg/browse/-/508088/107-1308457-9762911 [back to text]
eBay's user agreement at http://pages.ebay.com/help/community/png-user.html [back to text]
Dell.com's terms of sale at http://www.dell.com/us/en/gen/misc/policy_008_policy.htm [back to text]
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, (1995) available at http://supct.law.cornell.edu/supct/html/93-1001.ZO.html [back to text]
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) available at http://www.unl.edu/workslaw/carnival.html [back to text]
Stephen K. Huber & E. Wendy Trachte-Huber, Top Ten Developments In Arbitration In The 1990s, 55-JAN DISP. RESOL. J. 24 (January, 2001)] [back to text]
Brower v. Gateway 2000, Inc. 246 A.D.2d 246 (1998) available at http://www.law.seattleu.edu/chonm/cases/brower.html [back to text]
Vimar Seguros Y Reaseguros SA v M\V Sky Reefer, 515 U.S. 528, 115 S.Ct. 2322 (1995) available at http://supct.law.cornell.edu/supct/html/94-623.ZO.html [back to text]
John Levingston, United States - Enforceability of Foreign Arbitration Clauses, October 1996 available at. http://www.anu.edu.au/law/pub/icl/adr/UnitedStatesEnforceability.html [back to text]
James M. Zimmerman, Recognition and Enforcement of Arbitral Awards in the United States, Joint U.S.-China Arbitration Seminar, April 7, 1998, available at http://www.ita.doc.gov/legal/zim2.html [back to text]
Global Business Dialogue on Electronic Commerce's (GBDe) working group on Alternative Dispute Resolution (ADR), Alternative Dispute Resolution and e-Confidence, June 9, 2000, available at http://www.mediate.com/articles/econfidence.cfm [back to text]
XI. Additional Materials
Below is list of operational ODR providers, categorized according to their countries/regions of origin. By virtue of the fast-changing nature of the ODR industry, this list is not exhaustive.
1-2-3-Settle.com at http://www.123settle.com
AllSettle.com at http://www.allsettle.com
Better Business Bureau OnLine at http://www.bbbonline.org
ClaimChoice.com at https://www.claimchoice.com
ClaimResolver.com at http://www.claimresolver.com
ClicknSettle at http://www.clicknsettle.com
CPR Institute for Dispute Resolution at http://www.cpradr.org
CyberSettle at http://www.cybersettle.com
Disputes.org at http://www.disputes.org
I-courthouse at http://www.I-courthouse.com
ILevel at http://www.ilevel.com
IntelliCOURT at http://www.intellicourt.com/
InternetNeutral at http://www.internetneutral.com
Mediate-Net at http://www.mediate-net.org
Mediation Arbitration Resolution Services (MARS) at http://www.resolvemydispute.com
National Arbitration Forum at http://www.arb-forum.com/domains
NewCourtCity at http://www.courtcity.com
Online Mediators at http://www.onlinemediators.com
Online Ombuds Office at http://www.ombuds.org
Online Resolution at http://www.onlineresolution.com
Rent-a-Court.com at http://www.rent-a-court.com
Resolution Forum at http://www.resolutionforum.org , http://www.resolutionforum.com
ResolveItNow at www.resolveitnow.com
SettlementOnline.com at http://www.settlementonline.com/
SettleOnline at http://www.settleonline.com
SettleSmart at http://www.settlesmart.com
Settlex.com at http://www.settlex.com
SmartSettle at http://www.smartsettle.com
Square Trade at http://www.squaretrade.com
USSettle.com at http://www.ussettle.com
Virtual Magistrate at http://www.vmag.org
WebMediate at http://www.webmediate.com
Better Business Bureau OnLine at http://www.bbbonline.org
eResolution at http://www.eresolution.org , http://www.eresolution.ca
Novaforum at http://www.novaforum.com
Peruvian Cibertribunal (Peru) at http://www.cibertribunalperuano.org/ingles_prin.htm
e@dr (Singapore judiciary) at http://www.e-adr.org.sg
Chartered Institute of Arbitrators (United Kingdom) at http://www.arbitrators.org
Cybercourt (Germany) at http://www.cybercourt.org
e-Mediator (United Kingdom) at http://www.consensus.uk.com/e-mediator.html
Internet Ombudsman (Austria) at http://www.ombudsman.at/index_e.html
Internet Ombudsman (Sweden) at http://www.internetombudsmannen.se/io/
TheClaimRoom.com (United Kingdom) at http://www.theclaimroom.com/
WeCanSettle.com (United Kingdom) at https://www.wecansettle.com/
Word&Bond (United Kingdom) at http://www.wordandbond.com/
WIPO at http://arbiter.wipo.int/center/
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BBBOnline - Reliability Seal at http://www.bbbonline.org
BetterWeb - BetterWeb Seal at http://www.pwcbetterweb.com/betterweb
Clicksure - Confidence Standard for Electronic Business at http://www.clicksure.com
Federation of European Direct Marketing (FEDMA) - Code of Conduct on e-Commerce & Interactive Marketing at http://www.fedma.org/code/page.cfm?id_page=74
Secure Assure - Secure Assure Faith Entrusted (S.A.F.E.) seal program at http://www.secureassure.org
Square Trade - Square Trade Seal Program at http://www.squaretrade.com/learnmore/seal_092100.jsp
TRUSTe - TRUSTe privacy seal at http://www.truste.org
Trusted Shops at http://www.trustedshops.com/en/home/index.html
WebTrust - WebTrust Seal at http://www.cpawebtrust.org
Which? Web Trader - Which? Web Trader scheme at http://www.which.net/webtrader
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C. WEBSITES and TEXTS
The ABA's Internet Jurisdiction Project at http://www.kentlaw.edu/cyberlaw/
The Hague Conference on Private International Law at http://www.hcch.net/e/workprog/jdgm.html
European Commission ecommerce materials at http://europa.eu.int/ISPO/ecommerce/Welcome.html (including a link to Council Regulation (EC) on jurisdiction).
Perkins Coie, LLP case digests at http://www.perkinscoie.com/casedigest/icd_results.cfm?keyword1=jurisdiction&topic=Jurisdiction/Venu Virtual Jurisdiction (May 2000) at http://www.lw.com/pubs/articles/pdf/virtJurisdiction.pdf
Primers and Books
- Dan DeStephen and John Helie, Online Dispute Resolution: Implications for the ADR Profession, at http://www.mediate.com/articles/helie1.cfm
- Christine Hart, Online Dispute Resolution and Avoidance in Electronic Commerce, at http://www.law.ualberta.ca/alri/ulc/current/hart.htm
- Ethan Katsh, The Online Ombuds Office: Adapting Dispute Resolution to Cyberspace, at http://www.mediate.com/articles/katsh.cfm
- Ethan Katsh, Janet Rifkin, and Alan Gaitenby, E-Commerce, E-Disputes, and E-Dispute Resolution: In the Shadow of "eBay Law", (draft) at http://www.disputes.net/cyberweek2000/ohiostate/katsh.htm
- Ernest M. Thiessen & Joseph P. McMahon, Beyond Win-Win in Cyberspace, 15 Ohio S. J. On Disp. Resol. 643 (2000) at http://www.smartsettle.com/more/beyond/BeyondWinWin.html
- Esther van den Heuvel, Online Dispute Resolution as a Solution to Cross-Border E-Disputes: An Introduction to ODR (August 2000), at http://www.oecd.int/dsti/sti/it/secur/act/online_trust/vandenheuvel.pdf
Sites Where Dissatisfied Consumers May Report Internet Fraud
- ADR Cyberweek 2001 conference "A Laboratory In Online Dispute Resolution: Access to People, Processes, and Ideas", February 26 - March 2, 2001, sponsored by the Center for Information Technology and Dispute Resolution at the University of Massachusetts. Discussion website is available at http://webboard.mediate.com/~cyberweek
- ABA Task Force on E-commerce & ADR website at http://www.law.washington.edu/ABA-eADR/home.html
- SPIDR Online Sector WebBoard at http://webboard.mediate.com/~spidronline
- ODR News library page at http://www.odrnews.com/library.htm
- Mediate.com website at http://www.mediate.com including:
- Colin Rule, Online Dispute Resolution Links at http://www.mediate.com/articles/odrlinks.cfm
- Articles and discussion forum at http://www.mediate.com/odr/
- Useful ADR Sites on the WorldWideWeb at http://www.mediate.com/articles/boskey.cfm
- List of ADR Organizations on the Internet (July 2000) http://www.mediate.com/tan/articles/orgs0001.cfm
- National Consumer Complaint Center. Site where consumers can report cases of Internet fraud and false advertising at http://www.alexanderlaw.com/nccc/cb-ftc.html
- U.S. Federal Trade Commission (FTC) site for international e-commerce disputes. Consumers from any jurisdiction may file complaints involving fraud and similar activities involving online transactions with foreign companies. http://www.econsumer.gov/english/index.html
- U.S. Securities and Exchange Commission (SEC), "Internet Fraud: How to Avoid Internet Investment Scams" (October 1998) at http://www.sec.gov/consumer/cyberfr.htm. An online complaint form is provided for online securities fraud at http://www.sec.gov/investor/pubs/cyberfraud/tellus.htm
- National Fraud Information Center, Internet Fraud Watch of the National Consumers League. A U.S. nationwide toll-free hotline for advice on telephone solicitations and how to report telemarketing fraud. The Internet Fraud Watch section provides tips and information on how to avoid fraud, protect privacy, and surf the Internet safely at http://www.fraud.org
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