Online Dispute Resolution - ODR Methods - Adjudicative

Adjudicative

Online Arbitration

Arbitration is a process where a neutral third party (arbitrator) delivers a decision which is final, and binding on both parties. It can be defined as a quasi-judicial procedure because the award replaces a judicial decision. However, in an arbitration procedure parties usually can choose the arbitrator and the basis on which the arbitrator makes the decision. Furthermore, it is less formal than litigation, though more than any other consensual process. It is often used to resolve businesses’ disputes because this procedure is noted for being private and faster than litigation. Once the procedure is initiated parties cannot abandon it. Another feature of arbitration is that the award is enforceable almost everywhere due to the wide adoption of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Moreover, arbitral awards prove frequently easier to enforce than court decisions from overseas.

The majority of legal studies on online arbitration agree that, neither law, nor arbitral principles, prevent arbitration from taking place online. However, there may be several aspects in online arbitration that need to be regulated. Although online arbitration seems admissible under the New York Convention and the E-Commerce Directive, this is arguably an assumption by most commentators, rather than a legal statement. Since arbitration is based on a contractual agreement between the parties, an online process without a regulatory framework may generate a significant number of challenges from consumers and other weaker parties if due process cannot be assured. Currently, most arbitration providers allow parties to carry out online only part of the arbitration process, e.g. parties may download claim forms, the submission of documents through standard email or secure web interface, the use of telephone hearings, etc.

The main challenge for online arbitration is that if judicial enforcement is required then it partly defeats the purpose of having an online process. Alternatively, some processes have developed self-enforcement mechanisms such as technical enforcements, black lists and trustmarks.

The Uniform Domain Names Dispute Resolution Policy (UDRP)

Traditionally arbitration resolves disputes by delivering a decision that will be legally binding, i.e. enforceable by the courts in the same manner as a judgment. Non binding arbitration processes may also be effective when using ODR tools because they often encourage settlements by imparting a dose of reality and objectivity. In addition, self-enforcement measures may reinforce the efficacy of non binding processes. The most significant example is the Uniform Domain Name Dispute Resolution Policy (UDRP) created by the Internet Corporation for Assigned Names and Numbers (ICANN). Some commentators have referred to the UDRP as an administrative process. In any case, the UDRP has developed a transparent global ODR process that allows trade mark owners to fight efficiently cybersquatting. The UDRP is used to resolve disputes between trade mark owners and those who have registered a domain name in bad faith for the purpose of reselling it for a profit, or taking advantage of the reputation of a trademark.

Trademark owners accessing the UDRP must prove to the panel three circumstances:

  1. similarity of the domain name to the trade or service mark;
  2. lack of rights or legitimate interest in the registered domain name;
  3. bad faith in the registration and use of the domain name.

However, the UDRP presents its own problems that show the challenges that an online adversarial system applied to mainstream e-commerce disputes would have. The main worry is that the evaluation of the panel decisions often shows a lack of unanimous consensus in the interpretation of the UDRP. This may be due to a number of reasons, such as the lack of an appellative review and panels composed by members from a multitude of jurisdictions and informed by different legal traditions.

On the other side, it is undeniable what ICANN with the UDRP has achieved in developing an effective ODR procedure based on contractual adherence that allows trade mark owners to transfer or cancel a domain that blatantly violates IP rights. The UDRP providers have dealt efficiently with over 30,000 domain name disputes. Their success derives from two aspects: First, the UDRP deals only with blatant disputes, which are abusive registrations made in bad faith in order to take advantage of the reputation of existing trademarks. Secondly, it has incorporated a self-enforcement mechanism, which transfers and cancels domain names without the need for judicial involvement. This is a positive accomplishment for the development of e-commerce because it favours consumers’ confidence in the Internet by reducing the number of fraudulent registered domain names.

Chargebacks

One of the main focuses of e-commerce up until recently has been related to secure payments. Chargebacks is a remedy used to reverse transactions made with credit or debit cards when a fraudulent use has occurred, or when there is a violation of the contract terms. This method is very popular among online consumers since this is the main mechanism to transfer money online. In addition, consumers are not required to give evidence to cancel a payment. The vendor has the burden of proving that the merchandise or service was given according to the contract terms. Once this is proved the bank makes effective the payment to the vendor.

Chargebacks are largely used around the world by banks and the main credit card suppliers i.e. Visa, MasterCard and American Express. Yet, the coverage of debit and credit cards varies considerably amongst different countries. Commonly, debit cardholders have fewer protections than credit card holders, but it also varies depending on the jurisdiction.

It is then not surprising why credit cards are the major source of payments for consumers in e-commerce. They provide a remedy that reverses all transactions when a fraudulent use has occurred, or when there is a violation of the contract terms. However this method has limitations; it offers one single remedy (the return of the payment), and not all disputes imply a breach of contract or fraud.

Similarly, Online Payment Providers, like Paypal.com, retain temporarily the money paid by a buyer when the latter makes a complaint within 45 days after the payment was made. Paypal.com holds the money until the dispute is settled, but only in those cases where the merchandise did not arrive, or the description of the product was significantly different to the product itself. In these circumstances Paypal.com acts akin to an online arbitrator. However, in those circumstances where the seller takes away the money from his account before the buyer makes the claim, Paypal.com will not be responsible for the buyer’s loss. Despite this, PayPal is in a very strong position since in most cases it is able to freeze the amount of money and resolve the dispute providing an instant and effective enforcement.

Overall, chargebacks intends to balance the inequality of power between consumers and businesses. It is regarded as a very efficient tool for consumers because the speed, accessibility and lack of charge for their clients, who would just have to notify their banks or card issuers to cancel a transaction. Thus, Edwards and Wilson suggested that it would be advisable to focus on developing chargebacks and other soft ODR methods because they are very effective amongst mainstream consumers. By contrast, the existing processes are considered largely inefficient and not transparent among businesses because puts businesses in bad light since the onus of the proof rests on them.

Read more about this topic:  Online Dispute Resolution, ODR Methods

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