UNCITRAL’s Working Group III on Online Dispute Resolution Is All but Done

Between February 9th and 13th, 2015, the United Nations Commission on International Trade Law’s Working Group III held its 31st session, the 10th session devoted to “the preparation of legal standards on online dispute resolution” (ODR) and, most probably, the last. After close to fifty days of negotiations (over five years), United States and European delegates proposed that the Working Group cease its work on ODR and redirect its resources to projects that had a better chance at reaching a successful outcome since discussions had been at a stalemate for a few sessions.

After a disastrous 30th session where almost as much time was spent taking “consultation breaks” as actually discussing matters as a group, the 31st session was seen by many observers as the quintessential “make it or break it” point for the Working Group. Unfortunately, notwithstanding the efforts put forth by the secretariat to help reach a compromise, it now seems as if the Working Group will not “make it”. Granted, countries such as Egypt and Japan are still trying to salvage the project, but without two of the three most important ecommerce economies in the World (China being the other with a stronghold on the second spot after the US), any rules coming from the Working Group would be likely to have as little success as other UNCITRAL ecommerce efforts such as the 2005 United Nations Convention on the Use of Electronic Communications in International Contracts, that has, to this day, been ratified by merely six countries, only one of which – Russia – has cracked the top ten of the world’s largest economies (the next highest ranked being Singapore in 36th place).

It’s obviously too early to write the eulogy for the Working Group’s efforts since the Commission, not the Working Group itself, has the power to dictate that a project should or should not be abandoned. However, taking into account economic considerations, the current state of negotiations, as well as the last version of the draft procedural rules, all signs point to this being the end, and participating delegations will have no one to blame but themselves for this failure. Where the Commission instructed delegates to keep in mind that “low value, high volume transactions […] require an efficient and affordable dispute resolution process”, some delegations pushed for a somewhat convoluted process compatible with the New York Convention. Taking into account the most recent data that suggests that average online purchases range between $94.80 and $126.26, depending on the device, it seems obvious that such a process was ill conceived. In fact, the secretariat had warned against it when it wrote, back in 2010, that the New York Convention might not be seen as “an optimal solution for small value claims in the context of ODR”. If only they had listened…

To summarize our position, although we still believe that clearly drafted, simple, rules – such as was the plan put forth by the Commission – would have been welcomed by the international ecommerce community, this is not what these rules were shaping up to be. In fact, important legal problems regarding application of the rules can be identified throughout the draft documents, starting with paragraph 1, which states that:

“The Rules shall apply where the parties to a sales or service contract concluded using electronic communications have, at the time of a transaction, explicitly agreed that disputes relating to that transaction and falling within the scope of the Rules shall be resolved under the Rules.”

This definition is much too broad since it does not limit the rules’ reach to “the context of disputes arising out of cross-border, low-value transactions conducted by means of electronic communication” (the agreed upon reach of the rules according to their preamble). In fact, as it is currently written, paragraph 1 of the draft rules goes far beyond “cross-border, low-value transactions”. Moreover, it does not limit itself to electronic commerce in the common sense of the term (activities that relate to the buying and selling of goods and services over the Internet). Granted, it might not be a bad thing to expand on the definition to allow for the rules to evolve with the times, but the current definition technically covers ticket purchases at your local cinema, or the purchase of public transport titles, if one or the other is done through a terminal, something that is more and more common, although not considered electronic commerce by most. In fact, in places like Quebec, it’s not even considered a distance contract. Now, suggesting that parties to such transactions should turn to ODR to settle disputes is not, as such, a bad idea. We would in fact encourage it – although, depending on the final version of the rules, it might be impossible in certain jurisdictions. However, this clearly falls outside of the Working Group’s mandate, i.e.: “to undertake work in the field of online dispute resolution relating to cross-border electronic commerce transactions”.

As for the rest of paragraph 1 of the draft rules, since four different proposals remain on the table, some of which deal with the somewhat complex two-track system we addressed in previous posts, needless to say that it does not correspond to the idea of clearly drafted, simple, rules.

We could spend page after page going through every problematic idea, phrase, and comma within the rules, but the very fact that the delegates present at the last session could not agree on the meaning or reach of the draft rules seems sufficient to substantiate our argument that the rules were too complex. When two well-meaning, educated, and well-informed experts read the same paragraph and cannot agree as to what it allows, it seems obvious that clarity and accessibility have been neglected in the search for an ever-fleeting consensus…

Have we witnessed the last session of the UNCITRAL’s work on ODR? We cannot say for sure. Working Group III is tentatively scheduled to meet again in Vienna between October 5th and 9th, 2015. However, if we were betting men, we would wager that said meeting will not be held or, at the very least, its focus will most probably move away from ODR… If such is the case, expect one of our future blogs to be titled “We Told You So”, since we announced our scepticism as to the possibility for the Working Group to reach a consensus back in 2013. That being said, we get no joy in knowing that yet another ODR project could fail since it shines a very bad light on a struggling but promising practice.

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