The Settlement of disputes through Online Dispute Resolution (ODR): A Literature Review
Tuan Nurhafiza Raja Abdul Aziz1, Nor ‘Adha Abdul Hamid2*
1 Lecturer, Faculty of Syariah and Law, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri Putra, 43000 Kajang Selangor
2 Associate Professor, Faculty of Syariah and Law, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri Putra, 43000 Kajang Selangor
*Corresponding Author: [email protected]
Accepted: 15 December 2020 | Published: 28 December 2020
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Abstract: The modern world is moving fast and requires all disputes to be solved quickly and delays bring a loss to the parties involved. Every individual wants all disputes involving them are solved immediately without inhibiting their activities. Developments and advancement of ICT nowadays has led to high increase of using online system. The introduction of Online Dispute Resolution (ODR) a few decades ago in developing countries aims to expand access to justice and provide fast and fair resolutions to disputants. ODR is an outgrowth from the Alternative Dispute Resolution (ADR) field, which is focused on face-to-face dispute resolution practice. ODR first emerged in the late 1990s as a means of resolving disputing regarding purchases conducted over the Internet. Since that time, a few countries have already recognized and practiced ODR as a dispute resolution. Therefore, this research aims to study the concept of online dispute resolution and how the fairness can be applied through this method. This research uses qualitative method, adopts a library-based research, and applies the method of literature review through content analysis of documents. The literature highlights the opinions and views of researchers who have raised the topic and issues in the study. Hence, the analysis used was based on the content analysis especially previous academic studies conducted on the settlement of disputes through Online Dispute Resolution (ODR). The findings of these studies show that ODR is often discussed in relation to access to justice which provides for a timely resolution and also effective remedies at reasonable cost, and even ODR can prove to be successful, it will however could not completely replace litigation and somehow rather both compliments each other.
Keywords: Access to Justice, Fairness, Alternative Dispute Resolution, Online Dispute Resolution
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1. Introduction
Online dispute resolution (ODR) is a form of online settlement that uses alternative methods for dispute resolution. The term covers disputes that are partially or fully settled over the Internet, having been initiated in cyberspace but with a source outside it (Abdel Wahab, Katsh,
& Rainey, 2012). ODR describes a field of activity that has developed since the mid-1990s.
The e-commerce boom brought with it a wave of disputes resulting from online activity resolving these disputes online seemed to be a logical act of fitting the forum to the fuss as a long-held principle in the ADR field (Frank E. Sanders & Stephan B. 1994). Since this time, however, ODR has crossed many boundaries assumed by its early innovators, and is practiced
across a wide range of contexts, regardless of whether the disputes it services originated online or in traditional settings (Mohammed S. Abdel Wahab, Ethan Katsh, & Daniel Rainey, 2012 )
Online Dispute Resolution (‘ODR’) is a virtual process of alternative dispute resolution that is technology facilitated. Its function is to provide effective access to justice at reasonable cost, in particular for online disputes that often are of a ‘low value, high-volume’ type and have a
‘cross-border’ dimension (Jurgen Basedow et al, 2017). ODR is ‘online’ because it is a service provided on the Internet using means of information and communication technology (ICT).
While some ODR procedures employ ICT such as email, chats or video conferencing, others are integrated into an ODR platform that is essentially a software tool, accessible through a password-protected webpage or via a software application for mobile devices. An ODR platform allows asynchronous electronic communication, to share digital documents, pictures and videos, and to create an electronic case file or written proceedings.
In addition, the ODR platform may also provide for simultaneous exchange of text, voice and video to enable live negotiations and consultations. Thus, the parties to the dispute and the neutral third party are not physically present at the same place and not necessarily at the same time. The same applies to expert witnesses, documentary evidence or any other form of proof, which is usually allowed in digitized form only. In a comprehensive sense, the ODR process should also be initiated online, the statement of claim should be served on the respondent online, a resulting agreement or decision should be issued and distributed in a digital form, and ideally should be enforceable by electronic means As a result, the ODR process can be qualified as ‘virtual’. One perspective on ODR is, as we shall see, that ODR is not merely a tool helpful to e-commerce, but, instead, a natural evolution of the trend towards using alternative approaches to litigation across a wide range of civil, commercial, and family disputes.
2. Methodology
This study aims to look at the discussion the researchers wrote about the settlement of dispute resolution through Online Dispute Resolution (ODR). The study included about 25 literature review of the literature about the settlement of dispute resolution through Online Dispute Resolution (ODR). This research uses qualitative method, adopts a library-based research and applies the method of literature review through content analysis of documents. The literature highlights the opinions and views of researchers who have raised the topic and issues in their studies. Hence, the analysis used was based on the content analysis especially previous academic studies conducted on the settlement of disputes through Online Dispute Resolution (ODR). The findings show that there are an increasing number of writings and research on the settlement of dispute resolution through Online Dispute Resolution (ODR). At the end of the study, the findings show that ODR is often discussed in relation to access to justice which provides for a timely resolution and also effective remedies at reasonable cost, and even ODR can prove to be successful, it will however could not completely replace litigation and somehow rather both compliments each other.
3. Analysis and Discussion
The literature review on the settlement of disputes through Online Dispute Resolution
Access to Justice
Like ADR, ODR is often discussed in relation to access to justice. This principle has traditionally been defined as access to court. It received the status of a human right when states acquired a monopoly in the legitimate use of force. It is enshrined in art 47 CFR (Charter of
Fundamental Rights of the European Union, 2000). In the context of ODR, access to justice means that everyone involved in a dispute is entitled to an easily accessible redress mechanism that provides for a timely resolution and effective remedies at reasonable cost. It is argued that a modern understanding of the rule of law requires not only access to courts but also access to ADR and that ODR in both respects could facilitate party access to dispute resolution with or without the help of lawyers (Karolina Mania. 2015).
The concept of justice has become the focus in creating a civilized society since the beginning of time. However, today, the concept of universal justice is prioritized and taken more seriously. Today, difficulties to access justice have always been debated, encompassing various issues that require resolution and arbitration. It includes judgment in choosing the best resolution mechanism, methods to hasten dispute resolutions and using legal services without involving complicated bureaucracy through various alternative techniques (Hamid, N. B. A., Aziz, T. N. R. A. (2020). What does it mean by ‘justice’? Aristotle, a Greek philosopher is among the earliest scholars that are responsible in introducing several thoughts and philosophies on justice. His thoughts are still being used and are invaluable until today. He assumed that a fair law will cause an individual to feel that he belongs to a society. Besides, he can also differentiate between ‘distributive justice’ and ‘corrective justice’ (C. Elliot and F.
Quinn 2001).
Sothi Rachagan and Mimi Kamariah (1993) stated that the term, ‘access to justice’, in the context of consumers is ‘encompassing all existing channels provided to amend any offence, if committed and detected, or to prevent from any oppression in the future.’ Hon Russell Fox Ac QC (2000) too mentioned that ‘access to justice includes access to courts and tribunals involved in providing justice. Justice for governance and manifestation must be made opened as well as easily accessible by all, in a level of equal power and position.’
Alternative Dispute Resolution (ADR)
In the years 1995 and 1996, Lord Woolf has carried out a comprehensive survey to increase access to justice in English Courts. His last report suggested a new civil justice landscape to be introduced wherein the litigation process must be avoided as best as we can and the landscape will include a less adversarial and complex resolution mechanism besides providing a stricter case management process by judges (Lord Woolf, 1996). From Woolf’s survey a code of procedural rules incorporated holistically also known as the Civil Procedure Rules or CPR that prepared a proposal toward the objective and reformation program introduced. These rules are enforced on 26th April 1999 and applied in every High and District Courts’ proceedings in England as well as Wales. After that, it has become the court’s responsibility to manage cases actively by encouraging disputing parties to cooperate and use available ADR mechanism channels.
In principle, any kind of dispute resolution service can be provided online, including court litigation. To meet the formal requirements of litigation in a completely digitize process is either impossible or very costly. In similar terms, this holds true for formal arbitration.
Consequently, ODR providers tend to use the less formal mechanisms of alternative dispute resolution (ADR). Like ADR, ODR is often discussed in relation to access to justice. One reason for this phenomenon is that average trials are getting longer and more complex, and the cost of pursuing traditional legal recourse is rising. Focusing on traditional disputes, researchers explain that the potential transaction costs of litigation provide an incentive for nearly all legal suits to settle (George L. Priest & Benjamin Klein. 1984). ODR provides solutions for cases that do not justify long, complex trials such as in the case of low-value
transactional disputes, in cross-border and cross-jurisdictional contexts. Second reason for the trend towards ADR lies in its growing acceptance by mainstream conflict systems, including court systems. This acceptance has trickled down to affect the attitudes of litigants themselves (Donna Shestowsky. 2014).
The Online Litigation
Many countries have adapted their codes of civil procedure to allow for electronic exchange of documents, case files, and hearings. At the international level since 2016, the European Union (EU) Regulation on electronic identification, authentication and trust services (eIDAS) provides that qualified electronic signatures, seals, time stamps, and registered delivery services shall have the same legal effect than their offline ancestors, and shall be mutually recognized among the Member States. In theory, this allows for a comprehensive online litigation. However, the technical requirements such as a qualified electronic signature or reliable equipment for video conferences are expensive and, thus, often not available to either one of the parties and their representatives or the judges.
Even where the technical infrastructure is provided by the state free of charge, the base of possible applications remains too small to attract a critical number of users. States are reluctant to make large scale ICT investments into their civil justice systems. Model projects are frequently announced, but rarely implemented with success. Furthermore, referring to the 2015 UK Civil Justice Council recommendation on an ODR-like court service recently materialized into the Online Civil Money Claim project. However, the constitutional rights to a fair trial and due process require that at least the statement of claim must be served formally to the defendant or its representative to initiate court proceedings. As litigation does not require a prior agreement, in which the parties could submit to online communication and online hearings, comprehensive online litigation will remain a major exception, unless states require all inhabitants to maintain a registered electronic post-box (Pietro Ortolani. 2016).
The Online Arbitration
This is different in arbitration where the parties could agree on digital proceedings in a pre- dispute arbitration agreement. However, as an arbitration agreement entails an opt-out of the human right to a fair trial, and as an arbitral award has the same effect on the parties as a final judgement, legal requirements regarding the form of agreements and awards as well as to proper notice of the proceedings and delivery of the award to the parties apply. As these legal requirements are harmonized only in part, it is quite difficult to predict, if and under which circumstances online arbitration proceedings based on digital agreements will be recognized and resulting digital awards will be enforced in the relevant jurisdictions (Reinmar Wolff, 2017). Here the so-called ‘petrification-effect’ of international treaty harmonization becomes evident, as UNCITRAL refrains from amending the 1958 New York Convention with a view to digital documents as the necessary ratification process of such amendment would endanger the unparalleled level of harmonization and thus, in 2006 issued only a recommendation proposing an interpretation of the formality requirements which reflects the wide use of electronic commerce.
The eADR
Under the acronym ODR, the entire range of traditional ADR procedures are discussed, inter alia assisted negotiation, mediation, conciliation, ombudsman, or next to formal arbitration non-mandatory or non-binding forms of arbitration. If provided online, these mechanisms are also referred to as ‘electronic ADR’ (eADR). Thus, the distinction between ADR and ODR has been somewhat blurred, as many traditional providers of ADR operate a webpage and make
use of e-mail communication or video conferences. However, the term ‘ODR’ extends to dispute resolution mechanisms beyond traditional ADR, such as ‘virtual juries’ or ‘blind bidding’ procedures. Beyond that ODR differs from ADR in that different forms of ADR are integrated into a comprehensive process with several stages. Thus, the dispute resolution process usually starts with a negotiation phase, in which the parties are enabled to define the dispute and are assisted in finding a solution without the interaction of a neutral third party.
Only where this is not successful, the dispute is forwarded to a mediation phase, which involves the intervention of a human assisting the parties. Finally, if parties cannot agree on a solution, a third phase is entered, where the neutral may suggest a solution.
At this stage it is quite controversial, if such decision shall be non-binding (conciliation) or binding (arbitration) on one (the business) or both parties (also the consumer) (Amy J. Schmitz, 2012). An intermediate solution is the electronic enforcement of an ODR decision by a third party, the effect of which essentially entails a reversal of the risk of litigation. If a claimant wins in an ODR procedure and a third party has accordingly implemented the decision, the result is yet not binding to the respondent. But the latter would have to go to court in order to receive payment, which is burdensome and costly. A further proposed alternative envisions an enforcement of ODR decisions by smart contracts (Pietro Ortolani, 2016). After all, ODR is not sufficiently characterized by the term eADR, as its goal is not simply to digitize inefficient offline processes (Ethan Katsh and Colin Rule, 2016).
Online Dispute Resolution (ODR) in Consumer Disputes
Related in-depth studies conducted by scholars have outline a set of laws and dispute resolution system that is efficient in protecting consumers in any trade disputes they are involved in. As discussion on globalization issues and requirements of the best consumer trade dispute resolution mechanism is done, most of the discussion highlights the best practices of developed countries in the subject matter. Countries such as Australia, United Kingdom, United States of America, Japan, Hong Kong, Singapore and India have advanced and time-tested dispute resolution systems that have been proven to be efficient from time to time and can be a benchmark to Malaysia (Hamid, N. B. A., Aziz, T. N. R. A. (2020).
There have essentially been four phases in the development of online dispute resolution (Tyler, 2003). The first which ran from 1990 to 1996, was an amateur stage in which electronic solutions were in a test period. In the ensuing years on 1997 to 1998, ODR developed dynamically and the first commercial web portals that offered services in this area were established. The next phase ran from 1999 to 2000. Given the favorable period of economic development especially in IT services, many companies had initiated projects based on electronic dispute resolution, but a large number no longer operate on the market. The year 2001 marked the beginning of an institutional phase, during which ODR techniques were introduced into institutions such as the courts and administration authorities. Technological advancement is not only spurred by the development of digital currents, but also can be felt in all aspects such as banking, education, economic and so on. Due to the inherent human nature of wanting something that is simple concise and quick, the method of dispute resolution when melded with technological developments is irresistible and will be irrefutable in future.
Therefore, there are many views expressed by academicians and legal experts on the need for this ODR process (Nikita, 2018).
One of the first cases of online dispute resolution involved a procedure started in the United States of America in which the opposing sides decided to seek a new method to settle their dispute (Wang, 2008). The case was pending before the Online Ombuds Office at the Center
for Information Technology and Dispute Resolution at the University of Massachusetts and started mediation procedures via only e-mail communications and this eventually resulted in a settlement being signed (Katsh & Rifkin, 2001). Among others, the Online Ombuds Office offered mediation services for auction portal eBay. In 1999, this collaboration had transformed into the SquareTrade portal, one of the first commercial ODR providers in the area of consumer disputes in the US market (Lodder & Zeleznikow, 2010, p. 76). Among its most prominent services was online mediation, which was initiated by filling in a complaint form on which the methods for dispute resolution were indicated. After voluntary acceptance of the electronic method for resolution, the other party would respond by choosing the relevant option. In the event of failure to reach a settlement, the parties would be directed to the negotiation phase.
This was supported by the mediator, which communicated with them using the tool for electronic communication.
Another example of an early portal that offered automated online mediation is Cyber Settle, which was established in 1998 and in the US. Its main advantage was the functionality acquired through creating a network of specialized Internet applications that enabled various forms of communication. The system enabled negotiations to be conducted using the Internet platform, starting by logging in and providing basic information such as first name, surname, e-mail address, date of the event and type of case. The party would then issue an invitation to participate in a so-called out-of-court blind-bidding process, specifying the maximum amount in the event of signing a settlement. Upon acceptance by the other party, a phase started in which offers were collected the contents of which were known only by the interested parties.
The number of proposals would not exceed three, but until the other party proposed an equal or lower amount, they were not disclosed to the other party. The adopted solution allowed the settlement of disputes regarding specific values of claims, excluding consideration of the issue of legal liability. When the parties reached consensus, the offer would be mutually presented.
The confidentiality of the procedure provided significant value, particularly in the event of ultimate failure to reach an agreement and referral to court. The portal offered additional services in the form of support from the mediator, which communicated with each party separately without disclosing the contents of their offers.
Establishing electronic platforms that enable the transfer of dispute resolution processes to the Internet incurs significant initial costs. To ensure the security of the system, it is necessary to introduce safeguards to protect against loss of data and hacking, which significantly increases starting costs. Moreover, in most cases ODR systems were created in the US. In the European Union, such services started to appear at the start of the 21st century, so their adoption was less dynamic. It seems that the number of entities providing ODR services will increase in the EU.
Existing examples, such as the ombudsmen in Austria and Germany and online mediation systems in Italy and the UK, might in the future be replaced with new forms of ODR systems (Gill et al., 2014).
The protection of consumers lies within the competences of the EU and member states, with its formal basis, inter alia, in article 169 clause 1 and article 169 clause 2a of the Treaty on the Functioning of the European Union (2012), article 2c of the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community (2007), and in article 38 of the Charter of Fundamental Rights of the European Union (2010). This obligation is important given the existence of the European internal market, which should ensure unified protection of consumer rights. A guarantee of this is provided, inter alia, by ADR and ODR systems, which allow quicker and less-expensive settlement of disputes in comparison with common courts. Each member state implements competition and consumer-
protection policies individually, resulting in differing levels of access to ADR services. The resolution of consumer disputes that arise base on the commercial transactions by means of electronic communication are an example of effective implementation of ODR techniques. The creation of a system that enables the conclusion of disputes between a consumer and trader using the same medium over which the purchase or sales transaction was made that is, the Internet is a logical extension of introducing e-commerce.
Fairness in Online Dispute Resolution
One of the major concerns raised by people using negotiation processes is about the fairness or justice of the process. Trust has deep roots in the context of dispute resolution and stretching the concept to include technological aspects has strained its meaning to some extent. Security has deep roots in the field of computing and online communications, but its application to issues in dispute resolution requires refining. Incorporating ODR into systems such as e- commerce is one measure expected to raise consumers’ level of trust in the system. Continuing development of the Internet, from a financial perspective, has always depended on the success of e-commerce, which is, in turn absolute dependent on trust. As a field, ODR must convince users that they can trust that the technology used will be benevolently designed or at least neutral. Practitioners must convince user that the technology will not fail or freeze up, will be able to support their dispute, will be competent in performing as promised, will not involve time or costs beyond what the consumer envisions and will be in general, user-friendly.
Parties utilizing the ODR experience not only levels of distrust inherent in most conflict situations. They are also hindered by challenges to trust between parties and trust between parties and their neutral, which are triggered by the nature of online communication and of the online environment. Individuals undertake negotiation to derive better outcomes than would otherwise occur either through abandoning the engagement with the other, or through engaging in other modes of conflict. Negotiation processes can be classified as distributive or integrative.
In distributive approaches, the problems seen as zero sum and resources are imagined as fixed.
In integrative approaches, problems seen as having more potential solutions than are immediately obvious, and the goal is to expand the pie before dividing it. Parties attempt to accommodate as many interests of each of the parties as possible, leading to the so-called “win- win” or “all gain” approach. Traditional negotiation decision support has focused upon providing users with decision support on how they might best obtain their goals.
Both of the approaches to negotiation might be understood to include commonly expressed notions of ‘fairness’. As an example, is in integrative negotiation, one might consider that meeting the interests of all parties involves meeting these equally. One might also encounter parties who, while negotiating integrative express an interest in “being treated fairly” or relying on an objective and criteria of the fairness to assess any potential agreement. In distributive negotiation, one party might frame her offer to split things down the middle as being fair however, one notion of fairness which is not focused on in either of these approaches is the notion of an objective legal measure of fairness that is, legal justness.
Expanding on the notion of an integrative or interest-based negotiation, scholars developed the notion of principled negotiation. Principled negotiation promotes deciding issues on their merits rather than through a haggling process focused on what each side says it will and will not do or the notion of bargaining in the shadow of the trial or law. The role of fairness and justice in negotiation and other ADR processes is complex. Fairness includes several different aspects, with the foremost divide being that between distributive or outcome fairness, and
procedural fairness. In the environment created by the Internet, these complexities are compounded.
4. Conclusion
For most Asian countries, not all concepts and models taken from Western countries are effective when implemented in their own countries even though in the West, they are widely popular. Therefore, it is important for every relevant party to understand the complex relationship between the formal laws and the informal ones in dispute resolution. The understanding of the development of formal litigation as well as the ADR and ODR mechanisms is closely related to the societal situation that is becoming more complex and modernized. The community too shared the effects of both and is slowly transitioning from formal litigation to a less formal system which is the dispute resolution mechanism or ADR and ODR according to the time and need of the dispute. Settlement of disputes outside the court is part of the right to access the justice. It depends to the parties involved whether to resolve the disputes through the court process or by using alternative methods. Online Dispute Resolution (ODR) offers a wide range of implementation methods, confirmed by its fastest growing branches, the consumers and family law. However, even ODR can prove to be successful, it will however could not completely replace litigation and somehow rather both compliments each other.
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