Do We Need Exclusivity for ODR?

Notwithstanding the fact that, as we mentioned in a previous column, it remains difficult to find a business model that could ensure the availability of a fair and accessible online dispute resolution service, ODR has come a long way. When we first launched the CyberTribunal, back in 1996, and tried to convey our objectives at various conferences on information technology law (thus before audiences that could be considered informed), many legal practitioners questioned the possibility of modeling mediation and arbitration procedures. They cited legal reasons, which were quickly swept away through examination of relevant texts, as well as the impossibility of resolving disputes without the physical presence of all parties. This was the recurring argument: that the physical presence of all parties in the same place at the same time was an essential ingredient in all processes designed to resolve disputes.

Of course, this objection has been disproven time and time again. In fact, recent history seems to have given credence to the position we and other ODR proponents have held since the mid-nineties. With the Americas, UNCITRAL, and more recently the European Commission all jumping on the ODR bandwagon, the question is no longer “is ODR possible?”, but rather “how should it be promoted?”. In fact, the recent debate concerning B2C online dispute resolution mostly centers on how far we should go to encourage consumers and online merchants to use ODR platforms – or rather, if the use of such platforms can and should it be imposed – and not if B2C ODR is feasible.

As mentioned, most observers now believe that ODR offers a viable way to settle high-volume, low-value claims, something the courts, outside of class action suits, have always struggled with. No matter how much effort is put forward to reduce court costs, it will never be economically rational to take a day off from work to settle a fifty-dollar lawsuit. Hence the idea of using asynchronous arbitration and mediation methods as those offered by most ODR platforms. Unfortunately, over the years, this more pragmatic approach to dispute resolution has been somewhat hijacked by merchants with ulterior motives. As pointed out by justice Sharpe in Griffin v. Dell Canada Inc. :

 The seller’s stated preference for arbitration is often nothing more than a guise to avoid liability for widespread low-value wrongs that cannot be litigated individually but when aggregated form the subject of a viable class proceeding”. This has led many jurisdictions across Canada, and around the World, to simply forbid the inclusion of what the courts refer to as conclusive or complete undertakings to arbitrate”[1], i.e. exclusive arbitration clauses.

As the Supreme Court pointed out in Seidel v. TELUS Communications Inc.,

[t]he choice to restrict or not to restrict arbitration clauses in consumer contracts is a matter for the legislature”, and many legislators in Europe, South-America, and Africa have made the choice to protect consumers by outlawing such clauses… At least, that was the goal. However, there are those that see such an interdiction as going against the interests of commerce in general, and consumers in particular. Both sides of this debate make reasonable and rational arguments, yet we believe that neither position is supported by factual evidence.

As pointed out above, the anti-exclusivity proponents see exclusive ODR clauses as a means to stop consumers from filing class action suits and, more generally, to forego their fundamental right to a public trial before an impartial third party. On the other hand, those who argue that exclusivity clauses should be recognised claim that international commerce is hurt by the status quo since merchants will not conclude cross-border transactions for fear of being subject to foreign legislation with which they are not familiar. In this sense, exclusive ODR clauses serve to offer legal certainty and predictability to the parties.

Yet, ODR solutions are being sought out as an alternative to the courts BECAUSE consumers are currently choosing to not pursue legal actions. Therefore, both positions are based on faulty premises: although it’s honourable to want to protect a consumer’s right to a trial, this right is mostly fictitious since, for the most part, consumers do not care to appear in front of a court for low value claims. On the other hand, since consumers very rarely sue, merchants’ fears of being brought before a foreign court are mostly unfounded. Furthermore, even if a Canadian consumer were willing to go to court and obtain a judgement against a foreign merchant, he would still have to go abroad to have said judgement homologated…

If this is the case, then why not simply allow the parties to turn to ODR once a problem emerges? As numerous pilot projects have demonstrated over the years, merchants are rarely interested in mediation or arbitration once they know that there is little to no chance that they will be sued… There are therefore only two possible scenarios left: allow ODR clauses that only bind the merchant, and let the free market decide (i.e. consumers may prefer to deal with a business that has such a policy even if its prices are higher), or change the law so that ODR and class action claims are no longer seen as being mutually exclusive (i.e. that ODR is exclusive unless the consumer joins a class action suit). These solutions could split the pear in two and give both sides of this issue more comfort. On the other hand, as with king Solomon’s ruling, we could also be left with two baby halves, a scenario that satisfies neither party…