Online Dispute Resolution and new technologies: a panacea for cross-border e-commerce disputes

Abstract

With each passing year, cross-border e-commerce transactions are increasing. Effective dispute-resolution procedures are an essential element of successful operations for any company involved in e-commerce. Effective dispute resolution is one method for increasing consumer confidence in cross-border online purchases. Nevertheless, a recent study reveals that 41% of consumers who filed a formal complaint about international purchases were dissatisfied with the way their complaint was handled. These issues relate primarily to the business-to-consumer (B2C) market, and going to court may prove detrimental.

The needs of the parties in such disagreements are significantly better served by alternative dispute resolution (ADR). Using ADR online is the most rational way to resolve e-commerce conflicts. As a result, all the major participants in e-commerce at this time are increasingly paying more attention to online dispute resolution (ODR). This paper discusses how ODR, in conjunction with other current technologies such as artificial intelligence and blockchain technology, can help resolve cross-border e-commerce disputes more efficiently, effectively, and within time limits, ultimately leading to increased trade and development.

Introduction

The introduction of the Internet inaugurated a new era of knowledge about the environment in which we live and fundamentally altered how people view interpersonal relationships. People can now conduct business in a global marketplace, communicate ideas across continents, and get their news from several sources at once. However, disagreements can occur during the course of online interactions just as they might in the course of interaction in the real world.

The Internet and electronic trade present entirely unexpected prospects. Businesses can now reach enormous e-consumer populations with their services because of the Internet’s tremendous growth in popularity. Online transactions can result in issues and disagreements, just like offline transactions do. In other words, e-disputes may occasionally follow e-commerce transactions. It is crucial that e-disputes are adequately resolved in order to ensure that all parties feel secure participating in e-commerce transactions.

This is because uncertainty regarding the legal landscape may deter both consumers from making online purchases of goods or services and businesses from entering the electronic market. The issues get even more complicated if the e-dispute is international. With every passing day, there are more cross-border e-commerce transactions between different countries and continents, which could lead to an increase in e-disputes.

Discussion

The basic feature of a well-functioning dispute redress system is its ability to solve disputes within a definite and reasonable time period and also its easy and inexpensive accessibility for all. Traditionally, courts have been the location where disputes are resolved. This conventional idea of conflict resolution is now under scrutiny because of the overwhelming backlog of cases. This idea has been somewhat modified by the emergence of ADR. Alternative Dispute Resolution (ADR) has been acknowledged as a valuable tool for resolving the increasing number of e-disputes. ADR will frequently be much more effective than traditional conflict resolution techniques, which frequently involve drawn-out and expensive legal proceedings. Both nationally and globally, this problem has been discussed.

OECD Guidelines for Consumer Protection

The OECD released “Guidelines for Consumer Protection in the Context of Electronic Commerce” in 1999. These principles encourage collaboration between businesses, consumer advocates, and governments in order to give customers real access to prompt, fair, and affordable alternative dispute resolution and restitution. Cross-border transactions are given special consideration. However, the parties’ physical presence is still necessary for verbal and nonverbal communication during these conflict resolution methods. Technology has become a predictor of change and a condition-neutralizer. Technology is proving very handy here by bringing more inclusiveness, affordability, and efficiency to the system. With the exponential growth in technology, legal scholars and policymakers have recognized the opportunity to harness the potential of new technology in creating new pathways to improve access to justice.

Evolution of Online Dispute Resolution

Online disputes were seen as social concerns prior to the Internet’s growth and did not call for a specific procedure or technology platform. Online disputes became more significant with the emergence of the commercial Internet in the middle of the 1990s. These new online settings were met with considerable skepticism from users, and it rapidly became apparent that widespread adoption would be challenging if consumers were not given confidence that any issues they encountered would be promptly fixed. Due to this, ODR had emerged as a priority for both enterprises and governments by the turn of the century, and ODR service providers appeared to handle the situation.

Online Dispute Resolution (ODR) – Origin & Background

Online dispute resolution or ODR can be simply defined as resolving a dispute through various mediums of Information and Communication Technology (ICT) without any physical presence. It includes a wide range of forms and approaches like arbitration, mediation, and conciliation among others. Parties meet online and solve their differences in a fast, simple, secure, and flexible manner. It can even comprise a hybrid process involving both online and offline methods.

ODR Process and Communication

• Parties may use various information and communication technologies like chat, email, or videoconferencing.
• ODR can be wholly online or hybrid (“online” and “offline”).
• ODR mechanisms can utilize both synchronous (real-time) and asynchronous (delayed) communication.
• Synchronous: Videoconferencing and live chat.
• Asynchronous: Email exchanges or recorded messages.

Technological Integration in ODR

ODR, in its simplest form, is the practice of using technology to resolve conflicts. It is not only mere integration of technology (like booking a meeting online) but rather using it actively to assist in resolving the conflict. Despite being evolved from ADR, ODR’s advantages go beyond e-ADR or ADR that is technologically supported. ODR can utilize AI/ML-powered technology tools in the form of automated dispute resolution, script-based solutions, and curated platforms that address particular conflict types. ODR is a very new concept and is still in the infancy stage, with time it is going to prove as a savior to the justice redressal system by getting equipped with the latest technologies. In cross-border e-commerce transactions, ODR has already added a new chapter by becoming the most preferential dispute redressal mechanism.

Development Phases of ODR

The advancement of the Internet in the 1990s, which led to a growth in online transactions and, consequently, disputes over those transactions, is the source of ODR. ODR development can be broadly classified into three phases, with every phase gaining from ensuing advancements in information, communication, and technology (ICT).

Discussed Below Are The Three Phases

First Phase: eBay’s Experiment Leads the Way

In 1996, the University of Maryland and the University of Massachusetts began the first ODR project endeavours. With the development of e-commerce and the proliferation of the internet in the late 1990s, a strong system was needed to handle disputes resulting from online business transactions. ODR provided an answer to this issue.

ODR was introduced at about the same time in a few early e-commerce companies. eBay launched a pilot programme in 1999 to offer online dispute resolution services for disagreements between buyers and sellers using its platform. The experimental project resolved 200 conflicts in under two weeks, by far the most online disputes ever resolved. It pushed eBay to provide buyers and sellers the option of using dispute resolution if a transaction didn’t work out.

Prior to being taken over by eBay several years later, Square Trade, an online start-up, had been hired to handle eBay’s dispute settlement procedure on a contract basis. Over the following ten years, eBay handled an increasing amount of disputes, and by 2010, through its ODR Platform, it was handling more than 60 million claims annually.

Second Phase: Boom of ODR Start-ups

The popularity of this concept and the quick development of the internet sparked the development of ODR and the explosion of ODR platforms. In 1999, up to 21 new ODR programs were introduced, compared to only 9 the year before. The amount increased to 115 by 2004. Even the Internet Corporation for Assigned Names and Numbers (ICANN) established a Domain Name Dispute Resolution Policy, which first followed an offline procedure but later moved more and more online.

But the majority of these start-ups didn’t last. Only a few very effective platforms, including:

• Cybersettle
• Smartsettle
• The Mediation Room

These platforms were able to significantly alter the dispute resolution ecosystem. The technological advancements that occurred during this phase also weren’t copies of those that eBay started. For eBay, its online mediation approach was the most notable innovation.

The functionality of Cybersettle, in contrast, was developed through a network of specialized internet apps that allowed for various forms of communication. The method made it possible to conduct negotiations utilizing an Internet platform and a blind-bidding procedure. The technique was designed to allow parties to reach a settlement without indicating to the opposing side how much they were willing to settle for. As a result, innovation developed and grew during this time, while those who did not offer new ideas vanished.

Third Phase: Adoption by the Government and Judiciary

The governments were interested in this new component of the dispute resolution ecosystem as a result of the success of some of these private ODR Platforms. When the City of New York used an ODR system created by Cybersettle in 2004 to reduce its backlog and speed up the settlement of personal injury claims, it was one of the first steps toward this adoption.

As a result, ODR programs have been embraced by governments worldwide for effective dispute resolution. These projects have been fuelled by ICT advancements and the larger expansion of the internet. Examples of steps being done to resolve consumer complaints using ODR include:

• “Consumidor.gov” in Brazil
• “European Online Dispute Resolution Platform” in the European Union

ODR has been successfully incorporated and adopted all over the world, which has ultimately resulted in the construction of a few versions of ODR that have all been operating concurrently around the world.

ODR Platforms

The ODR industry has grown exponentially during the past 20 years. ODR organizations and platforms have developed all over the world to offer effective conflict resolution for a range of issues. These ODR platforms have been successful in settling traditional issues like labour disputes, tenancy disputes, etc., in addition to conflicts emerging from online transactions. This section researches well-known ODR efforts from around the globe to evaluate their services and efficacy.

Categories of ODR Platforms

Role of Emerging Technologies in ODR

Artificial Intelligence (AI), Machine Learning (ML), Big Data, and Blockchain are examples of emerging information technology that can be progressively incorporated into legal procedures. The area of blockchain-driven arbitration for smart contracts is one example where the real potential of the technology can be realized and used. Technology can be used to automate enforcement through the exchange of rights and duties in smart contracts written in computer code. Blockchain arbitration might therefore manage settlements based on such smart contracts.

Adoption of new technologies like Artificial Intelligence, Cloud Computing, and Blockchain in ODR makes it more effective and efficient in resolving disputes. For example, the use of Artificial Intelligence as a mediator in a mediation process totally revolutionizes it — there is no need to appoint a mediator, and there is no scope of partiality on behalf of the mediator, thereby making it more reliable, predictable, and fast.

Artificial Intelligence and ODR

Some of the examples of the usage of artificial intelligence in the ODR are as follows:

Blind Bidding

It is a kind of automated tool in which parties to the dispute are invited to submit their accepted settlement proposals with confidentiality. If the proposals of the parties match or come within the predefined range, then the technology automatically settles the dispute at the midpoint of two offers. For example, Smart Settle is a blind bidding tool used by ODReurope company to settle disputes.^[40]

Caseload Manager

Caseload manager is a cloud-based caseload management system that allows ADR practitioners and other professionals to comprehensively manage their caseload from anywhere in the world with web access. It centralizes all the case information into a single interface that includes:

• Case records
• Attorneys and reports
• Billing and documentation
• Administrative tools and analytics

This tool significantly improves accessibility and efficiency for dispute resolution professionals.^[41]

Assisted Negotiation

Assisted negotiation is a technology that assists the negotiation process between the parties. Technology plays a similar role as that of a mediator in a process of mediation. The role of the technology may be to provide a certain process and/or to provide the parties with specific (evaluative) advice.^[42]

Smart Contract and ODR

As the world is turning into a global village, there is an increase in trade between nations, and people across nations are dealing with each other and entering into trade contracts. With the increase in trade, there is also an increase in trade disputes. This has given rise to the issue of cross-border dispute resolution and enforcement. Online Dispute Resolution (ODR) is becoming a mainstream solution for resolving cross-border disputes, especially e-commerce ones.

Whereas ODR is providing a solution for resolving disputes online, the issue of enforcement of ODR awards still remains.^[43] By examining the potential of blockchain technologies, a different method of technologically augmented dispute resolution and enforcement can be devised which could add a new chapter to the ongoing debate on cross-border dispute management.^[44]

Procedural Challenges in ODR

The lack of a uniform code of procedural rules on ODR across the nations makes it very difficult for managing cross-border disputes. The United Nations Commission on International Trade Law (UNCITRAL) attempted to draft a procedural code of rules on ODR that nations could adopt as a model law, but it has not achieved much success.^[45]

Compliance and Enforcement of ODR Decisions

Even after successful ODR resolution, there remains an issue of compliance with the ODR decision.^[46] Parties are dependent on voluntary compliance, and if voluntary compliance is not followed, an effective mechanism is needed to force compliance—which is presently unavailable.

Private enforcement may help in enforcing ODR decisions.^[47] In private enforcement, technological infrastructure is harnessed to allocate responsibility and liability without human intervention, in automated procedures. Private enforcement connects ODR and the potential of blockchain technologies, eliminating the need for an interface with public courts and making enforcement an integral part of the contractual relationship itself.

Blockchain and Smart Contracts

The infusion of blockchain in contracts has given rise to smart contracts. Smart contracts may be defined as the advanced application of blockchain that goes beyond the creation of virtual currency.^[48] This means that blockchain, which is basically an electronic public ledger, can also be used in materializing contractual relationships.

A smart contract is an automated software program created using the blockchain protocol. In essence, general-purpose computation carried out on the blockchain enables smart contracts. When the conditions outlined in the program or contract are met, they can be used to distribute digital currency between two parties. In a nutshell, smart contracts are contracts incorporated in computer code and are programmable contractual tools.

Self-Enforcement and Conflict Prevention

As a result, a smart contract may govern the criteria that must be met before the contract’s obligations may be fulfilled as well as the contract’s actual execution. The ability of smart contracts to self-enforce is one of its most intriguing features. Self-execution plays the role of conflict prevention by limiting the potential scope of issues resulting from the transaction.^[49]

Smart contracts are self-enforceable when the software carries out the terms of the agreement—such as allocating digital assets—without the need for trust between the parties. The ability to receive payment for products supplied is then no longer contingent on the debtor’s willingness to do so or impacted by bankruptcy procedures that start after the contract is signed.^[50]

The contract executes its content independently in accordance with embedded contract requirements. For example, the software allows the digital assets provided within the contract, and no external oversight of contractual responsibilities or enforcement is required. Self-enforcement is not limited to smart contracts; we can also imagine self-enforcing ODR decisions to solve the dilemma of accessing the enforcement mechanism of the nation-state.^[51]

Blockchain Technology and ODR

Integrity is one of the reasons which keeps people out of ODR. Electronic records can be easily tampered with, thereby making them less reliable. With the help of blockchain, a cryptographic hash is created and stored which serves as a security check or data reference check against a record. If any tampering or alteration is done after that, the cryptographic hash will no longer match. Blockchain makes electronic records more reliable and secure than physical records.

Privacy and Security in ODR

In the ODR process, parties need to share their documents online which leaves scope for third-party intervention through unauthorized access. Hacking makes people reluctant to use ODR and share their information. This issue can also be solved with the help of blockchain.

A key aspect of privacy in blockchain is the use of private and public keys, also known as “asymmetric cryptography.” In this technology:

• A document can be encrypted and decrypted only with a public key and a private key.
• A sender uses the receiver’s public key to encrypt information.
• Only the receiver can decrypt it with their private key.

Thus, there remains no scope for third-party intervention or hacking.

Global ODR System

To increase efficiency, predictability, and reduce transaction costs in international business, the United Nations Commission on International Trade Law (UNCITRAL), established by the UN General Assembly in 1966, promotes the harmonization and unification of international trade law. It has created various conventions, model laws, legislative guides, and other instruments governing transnational trade.

UNCITRAL Structure and Function

The Commission of UNCITRAL decides on the organization’s projects, activities, and agenda during plenary sessions. Working groups are formed to conduct research and development projects, supported by the Commission’s Secretariat, which also drafts suggested instruments and facilitates meetings.

UNCITRAL and ODR

At its forty-third session, UNCITRAL decided to work in the area of online dispute resolution after observing the rise in cross-border online transactions. At its 49th session in 2016, it approved the Technical Notes on Online Dispute Resolution, which are descriptive but not legally binding.

Representatives from over 60 member states and several international organizations participated in discussions. The Secretariat engaged experts from different legal systems, national and global bodies, and professional organizations to prepare the technical notes.

Structure of a Global ODR System

The structure of a global ODR system implies a standardized framework for international e-commerce disputes:

• Participants must meet uniform standards and be accredited by national regulators.
• Consumer centers help users and connect with domestic internet vendors.
• Universal ODR procedural terminology and communication standards promote consistency.
• Systems operate through online platforms with standardized ODR language.

Future cross-border ODR systems should incorporate the UNCITRAL Technical Notes on ODR as minimum common norms and rules. They must also provide a framework for interoperability and interconnection between national and regional ODR platforms.

Conclusion

Modern ODR systems and coordination initiatives demonstrate the progress toward a globally unified dispute resolution framework. However, current systems remain largely fragmented. A larger, coordinated ODR system is necessary for global redress and consumer protection, enabling standardized procedures and enforceable outcomes across borders.

The future ODR landscape will likely expand to include more providers, consumer centers, and dispute types. Depending on regional needs, various models may emerge—either decentralized systems or an internationally coordinated central framework.

Technology and the Rule of Law

Modern technologies are seen as tools to enhance democracy and improve citizen services. Governments worldwide are adopting online solutions to improve transparency and fairness in public service delivery.

Using technology to promote equitable access to justice and uphold the rule of law involves:

• Ensuring fair access to justice and eliminating discrimination.
• Increasing transparency and accountability.
• Balancing innovation with ethical and legal safeguards.

For instance, while computer algorithms can streamline bail or sentencing decisions, misuse may lead to discrimination. Likewise, data protection remains essential to preserving individual privacy rights.

Bridging the Digital Divide

As technology becomes integral to justice systems, ensuring fair access becomes a rule of law requirement. Bridging the digital divide between and within countries ensures that advancements in ODR and legal technology benefit everyone, not just a privileged few.