Online Dispute Resolution at UNCITRAL – Some Creativity Needed

The UNCITRAL Working Group on Online Dispute Resolution (ODR) meets next month in Vienna to continue discussion of model rules for international ODR. Here are the working documents for the meeting, and past meetings. .

The perspective of the project since its inception in 2010 has been to find a way to resolve high-volume, low-value disputes – not necessarily just consumer disputes, but many would be of this kind.

One of the problems has been to figure out a way to get both buyers and sellers into the ODR system, whatever it is (and there might be many such systems, with basic or generic rules.) Can they agree before the transaction, in general terms, to resolve any future disputes through ODR? If so, then the would-be purchasers may have some confidence that they will have some recourse if things go badly, and the merchants would want to participate to show purchasers they were trustworthy.

However, many legal systems, notably most of those in the European Union, plus Quebec, and some other places, do not recognize as valid an agreement to arbitrate made before an actual dispute arises. (Ontario has such a rule for family arbitrations.) The consumer – according to this principle – must know what the dispute is and his or her options for dealing with it, including by litigation, before he or she can be bound to arbitrate the dispute.

After much debate about the reality in a low-value international transaction of a consumer ever being able to litigate a dispute, the Working Group has divided the project into two tracks. One of them is designed for the no-pre-dispute-arbitration places, and a sequence of alternative dispute resolution procedures would culminate with further discussions between parties. The rules for the other track, a ‘real arbitration’ option, have not been developed yet.

One argument for the ‘real arbitration’ track is that awards arising from it could be enforced internationally under the New York Convention on foreign arbitral awards. However, is the Convention procedure really usable for an award from a ‘low value’ dispute? Is there much hope that the Convention would be used? Is it worth trying to design a system that assumes it will be?

Some people have expressed a concern that the ‘real arbitration’ advocates want arbitration so as to avoid consumer class actions under their domestic civil procedure. However, we are talking about international transactions here, and international class actions are not common, if they exist much at all. (There have been some across the Canada/US border.) Further, the UNCITRAL Rules, whatever legal form they ultimately take, will probably yield to mandatory rules of the member states. If the mandatory rules would prevent arbitration agreements from standing in the way of class actions, then the rules would be preserved for that purpose.

Perhaps the enforcement angle is the most important: if the Convention route is too expensive for most of the disputes using the new system, how does one get the award enforced? Some kind of closed-system sanction might work best. But would merchants want to join such a system if it were just going to be a talk shop in many countries? If consumers only stayed in the system for disputes they thought they would win, where is the attraction for merchants?

Some creativity is needed

* perhaps to find an enforcement mechanism that will work in a mediation-based process or a low-value dispute;
* perhaps to attract merchants to a system that in some countries will not produce certain results;
* perhaps to find a way to persuade the no-predispute-arbitation-agreement advocates that international litigation is not a credible alternative for resolving low-value cross-border disputes, so consumers give up little of value in signing on to a more rigorous dispute-resolution process that ends in arbitration.

Is the absence of a pre-dispute agreement to arbitrate a problem for you, or ‘normal’? How do you think the results of the ODR process should be enforced? Would you advise your merchant clients to participate in the system that UNCITRAL is creating?

How else should the ODR working group move forward?

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