Creative processes that solve disputes without turning to litigation have existed for many years. Candidly called “Alternative Dispute Resolution”, the three general methods that have emerged and developed in the past two decades are negotiations, mediation and arbitration. More recently a fourth approach is being put to the test, which combines one or all of these forms of ADR with the technology revolution, fondly called “Online Dispute Resolution.” Although ADR and ODR are superficially sound ideas, the perceived worth of ADR methods have yet to triumph over traditional litigation. Why is this so? Moreover, moving the ADR process online brings with it not only the same disadvantages, but new ones as well. This paper will address some of the fundamental concerns and problems that may come to undermine the potential of “Online Dispute Resolution” (ODR) however, it will also suggest some very bona fide niches where ODR may excel if properly marketed. By providing a properly marketed ODR program within the proper niche, an argument citing the lack of “critical mass” can be overcome and ODR’s viability may be concretely established.
traditional adr methods Before we investigate the intermingling of ADR and technology, it may be prudent to review some rudimentary principles associated with traditional ADR processes. Negotiation Negotiation is by far the common form of dispute resolution. Negotiations can be entered into at almost any stage of almost any given conflict. And is loosely defined as a communication process that people use to plan transactions and resolve conflict. Through the process of negotiation the individual parties gradually may be able to come together into coordination and collusion and, in the end, to some agreement on the issues between them. Mediation Mediation utilizes the assistance of a neutral party for the exchange of information.
Alternative Dispute Resolution (ADR) also known as additional dispute resolution, is a name given to the various methods employed to resolve disputes that do not involve a courtroom trial. Individuals and organizations recognize the financial cost and divisiveness of courtroom trials and hence resort to alternative dispute resolution as a means of solving disputes. Many times, lawyers discourage ...
Richard Hill, who uses the simple example of an orange, presents a favorite illustration. “Two people both have a legitimate claim to an orange and neither is willing to accept half of the orange. If the claim is resolved in accordance with a judicial paradigm, one person will get some portion (possibility none) and the other will get the remaining portion. But the people call in a mediator, who asks each person what they intend to do with the orange. The first person answers that she intends to use the rind to make perfume, while the second answers that she intends to use the pulp to make orange juice.
The mediation process yields a solution that is fair and that better satisfies the interests of each party. This result is better than any solution ensuing from the adversarial process” Generally mediation is considered relatively informal. The neutral party gives no opinions, takes sides or issues a course of action. Arbitration Arbitration is a word that maintains a fair amount of notoriety. Arbitration clauses are increasingly finding their way into many contracts.
Often in arbitration, a single arbitrator is chosen from a panel of individuals collectively chosen by the parties. The overlap becomes the selected arbitrator. An arbitrator then meets with the parties to establish the facts and the applicable law. Arbitration may be binding or non-binding but a binding agreement is enforceable. Because they are so similar, the potential of “ADR clauses” becoming “ODR clauses” may be a genuine possibility. advantages of adr The rewards of ADR processes are numerous.
However, four main advantages permeate our stated ADR methods. Speed. The exchange of information as well as the court system all lends itself to a litigation process that moves slowly. Often Attorneys have incredible scheduling conflicts if a meeting needs to be scheduled or a follow up needs to be done. ADR helps streamline the process and usually eliminates court related benchmarking. Cost.
The Fifth Amendment to the United States Constitution includes a clause called Due Process Clause and it is stated in the passage “no person… shall be deprived of life, liberty, or property, without due process of law.” The historical background has its origins in the Article 39 of the Magna Carta, which states that “no free man shall be taken or imprisoned or disseized or exiled or in any way ...
Because ADR is more time efficient, it costs less than litigation (This will be a strong point of interest later on).
Costs may vary, but in general are known to be about 1/3 the cost of litigation -often times much less than this. Confidentiality. A major perk for companies using (and getting away with) arbitration clauses is the fact that, disputing parties are whisked away into “ADR land” and out of the public court system. Embarrassing information, settlement negotiations and legal precedent is all held in the confines of ADR.
Because information is confidential, companies wishing or needing to maintain their relationships can do so without the typical “posturing” that public scrutiny facilitates. Flexibility. ADR processes enjoy procedural and result-oriented flexibility. ADR facilitators can “custom build” procedures that match the comfort level of each of the parties. Additional neutral parties can be introduced, and the parties may often have the ability to decide whether the decision will be binding or non-binding. Lastly and significantly, ADR facilitators may not be bound to follow the Stare Dec isis principle and unlike common law judges, can easily make a decision based on a new or expanded interpretation of the law.
disadvantages of adr The foremost disadvantage ADR processes continue to experience is the lack of familiarity of ADR in general. People relate and feel comfortable (without taking into account the serious disadvantages) of litigation and trial resolution. This is easily accomplished by the plethora of TV programs and movies, which center on the court system and a zealous adversarial process. Even though an individual may have never been in a courtroom, they have an ideas based on external marketing forces, which creates a feeling of familiarity. Needless to say, ADR processes are not glamorized or exploited and therefore, are not so well known. Furthermore, the public as a whole is subjected to media horror stories of “mandatory arbitration clauses” and the idea that individuals are not getting “their day in court”-all because their companies have pulled a “fast one” with these arbitration clauses.
Dispute Resolution Processes Wherever there is a human-interaction, conflict is virtually unpreventable. For-instance, some conflict may well erupt a dispute in any structure of relationships, and other perhaps resulting in extremely compound international confrontation and hostility. It isn't that they can't see the solution. It is that they can't see the problem (G. K. Chesterton). Consequently, ...
It is not to say that positive exposure alone proposes to solve all of ADR’s disadvantages. Those who are familiar with ADR, voice concerns such as the unenforceability of the arbitration agreement if a party does not abide, ad hoc decisions and the general lack of oversight stemming from unregulated procedures. enter the explosion of the internet The growth rate of the new E-marketplace has been phenomenal and is expected to continue as a principal catalyst of E-commerce in the 21 st century. Almost every large corporation within the U.
S. and internationally (and a great many small and medium-sized enterprises) currently conduct some part if not all of their business over the Internet. “There are two trends in cyberspace that have given rise to the need for more diverse option with dealing with online disputes: the rapid increase of users and the diversification of activities and interactions that take place on the web.” Online Dispute Resolution is desperately trying to find their role in this province. Are the expectations unrealistic? Let us first describe what advantages and disadvantages ODR can proffer and then turn to what ODR has come to mean and what it hopes for in terms of its future. Advantages ODR shares almost all of ADR’s advantages but brings forth new depth to many of them. Three significant rewards of ODR are cost effectiveness, convenience and anonymity.
Although traditional ADR gushes cost-saving processes, it nowhere near touches what an ODR program can provide. A dispute that may be resolved online drastically reduce traveling costs; facility or meeting room costs and surpasses the snail’s pace coordination of individuals. (Often, Attorneys need to schedule out a month in advance; this usually means that between ADR steps there is often a lengthy time span. ) Because time is efficiently used and there are fewer tangible costs manifested, ODR can provide tremendous savings to clients. (Query whether an Attorney would want this… ) A second benefit that ODR exclusively enjoys is anonymity.
SWOT Analysis This type of analysis is designed to help identify several areas of a business that may need improvement and other areas where the company may be able to improve upon. SWOT is an acronym for; Strength, Weakness, Opportunities and Threats. A company should consider this analysis to be one of the most important steps to becoming one of the leading stores and schools of this nature in ...
Confidentiality is important and certainly ADR can evoke a confidentiality clause or gag order, but in ADR there is usually no way around some sort of face-to-face meeting (unless there is a premature settlement) -however cordial it may be. With ODR, individuals never have to meet face to face. This can be extremely helpful if business relationships need to be maintained or when there are heated emotional feelings that may surface and cause damage. It is humorously noted that Bill Gates severely hurt his case by appearing “live” in a video taped deposition. Lastly, the very act of physically meeting and arbitrating somehow has the psychological effect of concreting the problem.
This occurs in ADR not just because there are face-to-face meetings but usually some sort of timeframe that the parties have had to endure during their dispute. ODR at its best happens quickly, efficiently and confidentially. It is a reality that “most business men want to do business not argue about it.” In a transaction heavy industry, industries cannot afford to put their business on hold-or their feelings for that matter. Lastly, the convenience of ODR is prodigious. Both disputing individuals as well as a third party can all operate from their individual computers and in a customized time-frame suited to their needs. This convenience lends itself to the numerous benefits associated with eliminating travel costs and coordination.
Disadvantage of ODR Many will say that ODR processes have no major disadvantages. However, those intimate or experienced with ODR programs raise some legitimate concerns. On the other hand, the main arguments can spin both directions. One area of concern seems to be the possible imbalance of power associated with technological resources.
A superior system and perhaps superior typing all can lend itself to perhaps an inferior ODR position. This argument seems weak as it can be detected and corrected with a few initial inquiries. Customized solutions are welcomed and encouraged by ODR programs. The lack of human interaction also seems to be a sticking point for many. For some, not being able to perceive nonverbal or visual cues leaves out a major negotiating tool they have come to rely on.
Trust may be factor without some of these comfort devices. Revolving Roles of ODR Originally, ODR surfaced as a resolution mechanism in one major online conflict category, domain names. Domain names initially were wholly unregulated and “cyber squatting” was out of control. In 1999 the ICANN (Internet Corporation of Assigned Names and Numbers) was set up to issue rules and standards about the registrations of domain names. This has proven to be a very successful ODR system, however as the disputes got settled with the acceptance of the regulations, so has the “critical mass.” With this success under its belt, advocates of ODR started branching out, believing and hoping that perhaps ODR may one day become PDR (Primary Dispute Resolution).
With the growing number of corporations taking over small businesses, and the belief that becoming a proprietor is associated with being wealthy, one must decide which type of business to become involved with. There are several differences between these two types of business. A corporation is a business organization having a continuous existence independent of its members (owners) and power and ...
Unfortunately what has happened has been a series of good intentions followed by only marginal success.
Failed ODR businesses such as “eResolution” continue to jeopardize the already weak statistics. Because the idea of ODR is sound, entrepreneurs have been jumping on the bandwagon spouting the praises of this “new” system. However, there are two huge issues that have been largely ignored or completely misapplied — these are 1) the issue of consent and 2) the proper format in which ODR should perform. ODR companies have been tackling the issue of consent for the most part, retroactively. For example, we can examine the company SquareTrade that has been handling disputes from the well-known auction site, Ebay. The process is as follows; a dispute arises, a complaint is filled out, SquareTrade solicits an agreement from the other party to negotiate, mediate or arbitrate, and the process ensues from there.
Gathering from the available numbers, there are approximately 400, 000 transactions on Ebay transactions each week. Naturally, a percentage of disputes arise from this voluminous number (ranging from 5-12% depending on the source).
First it should be noted that Ebay has a unique safeguard measure. Due largely to the “blind buying” that a customer must do, each seller has a “feedback form.” Negative feedback regarding a seller should idyllically stifle his ability to get more customers. Although there are many underhanded ways to get around or dismiss this feedback problem, SquareTrade steps in before any of this negative feedback even occurs. Therefore, consent can be obtained if a seller is conscientious of their feedback status.
Ethics Ethics is a branch of philosophy which seeks to find answers about the moral concepts like bad, good, evil, right, wrong, etc. According to OEC (2011) ethic is defined as “a moral philosophy which is concerned with what is right or wrong, good or bad, fair or unfair, responsible or irresponsible, obligatory or permissible, praiseworthy or blameworthy”. Many scholars have associated it with ...
Needless to say, there is great incentive for the seller to “solve” the problem. The combination of detrimental and immediate negative feedback has led SquareTrade’s ODR program to gain the necessary consent from the majority of its users. However, it is important to note that Ebay’s system is unique. The majority of businesses doing business online have no mechanism for showing any kind of track record with their company. In turn, buyers also have no standard of accountability.
One of the main reasons that ODR systems are failing is because there is no incentive to retroactively consent! Please consider this example. A small time buyer, living in Wisconsin, orders a select case of red wine from the Napa valley. She finds the website with all the beautiful and alluring graphics and picks the perfect case of Pinot Noir. Her purchase is modest -probably under $300. 00 if she is lucky. However, when it arrives, the wine tastes rotten, and there is a foul smell.
If the winery is completely unreceptive to her complaints, what could this poor Wisconsin women do? What would she be willing to do? First off, she is thousands of miles away. She can’t go picket the winery. A scathing letter may help, but to whom would you send it? Unlike the Ebay site, there is no “billboard” enabling you to post your dissatisfaction. Here is the good news. People such as our Wisconsin wine buyer have inundated the ODR companies. In fact, it is easy to get caught up in ODR fever by the startling number of complaints begging to be addressed.
What cools this fever rapidly is the rejection of ODR by the company / person complained about. Without a laudable, visual or monetary chastising, the purveyors of substandard products and services have no incentive to agree to ODR. In the past, our Wisconsin buyer probably would not have flown to California to sue in small claims court, nor would she have hired an attorney to take any action. Unethical businesses (and there are many) have reaped the benefit of this for years -even before the Internet revolution. They know, chances are, no action will be taken against them. It goes without saying that if there is egregious conduct, the government may get involved or a group of individuals may form some sort of class action, but it is the anomalistic transaction that can be most meaningful to the buyer.
ODR companies have continually turned a blind eye to the consent issue. It is amazing how ODR business set forth a dynamic and comprehensive business plan, but gloss over the difficult task of obtaining consent before any of the wonderful ODR tools may be used. Unfortunately, when crunching of the numbers, “lost” customers have deeply affected ODR business. When visiting the now defunct “eResolution”, one can scroll down the list of “Decisions” and discover that out of 239 complaints, only 145 actually went through the ODR process and 94 complaints were rejected. The lack of critical mass destroyed this company.
The second issue that troubles the future of ODR is the insufficient or impractical application of ODR. Specifically, there is only one area fondly nicknamed “blind bidding.” Mostly insurance companies and worker’s compensation programs have utilized blind-bidding, but it remains only a trickle of their business. The process works predominantly in the negotiations arena where only the settlement amount has not been agreed to. Companies such as Cyber settle have sophisticated computer software that receives private monetary offers from each side, calculates whether they are in an acceptable range and based on the percentage proposes an “agreed upon” settlement figure. If the two offers are not close enough, the negotiation fails. Costs vary from this form of ODR ranging from free, up to a certain percentage of the settlement fee.
Although, this process has boasted marginal success, ODR companies have yet to appropriately respond to the market fallout stemming from this blind-bidding system. It is this author’s contention that a good ODR agenda would use blind-bidding as an “aspect” of its program. When critical mass is at issue, offering a method (albeit a mere calculation) of “running the numbers” is analogous to horseradish accompanying prime rib. Help in calculating a settlement agreement should be a compliment to an overall powerful ODR structure. Furthermore, parties are just as savvy online as off when setting forth their offers.
Therefore, using blind-bidding, the numbers are often already exaggerated one way or the other. This creates a “failed negotiation” and is completely unproductive to the ODR process. Now that we have a general understanding of how ODR has worked in the past and some of the general advantages and disadvantages it grapples with, it may be prudent to look at whether there is a future for ODR. In the title of this paper, ODR is called the “golden clause.” As the “arbitration clause” is developed and perfected, it is with great anticipation that one day an ODR clause may be implemented and or substituted. However, without the strength of critical mass, ODR companies may meet the same fate as “eResolution.” Many professionals have already dismissed ODR as a fleeting interest, a “good idea gone nowhere.” However, there is a very real possibility that an incredible future for ODR may develop, if some changes are implemented. In addressing the consent issue.
However savoir-faire an ODR salesman may be, a company’s in house counsel will probably not agree to retroactive consent. Barring an external incentives such as the one Ebay delivers; many companies will challenge a party to jump through traditional jurisdictional and filing “hoops” before they would even entertain the idea of ODR. This issue can be turned upside down by gaining consent on a proactive basis versus retroactively. An ODR clause can be rendered in an initial business negotiation as an “after market benefit.” This tool can sweeten the pot of a precariously positioned business deal, or perhaps be used to gain greater market share over a competitor. Gaining consent pre-dispute not only creates another perceived benefit between business parties, but also is automatically streamlined to solve any dispute that develops. An ODR “clause” can soothe worries of potential conflicting law problems, litigation headaches and show the incredible efficiency of the speedy timeframe capable when ODR is at its best.
Secondly, ODR programs needs to offer a full range of ADR processes-not just an online calculator. Relationships with companies need to be courted and custom options need to be available to suit all dispute needs. Critical mass will be obtained and maintained with proactive consent and a worthy and cost effective online dispute system. Lastly, an ideal ODR Company needs to have a sound and dynamic marketing plan, if so, the idea of a “golden” ODR clause will be an incredible addition to their own business and marketing plan. If the ODR “clause” can be put into practice by a logo (much like a Good Housekeeping Seal of Approval) and this can be standardized, businesses will demand the reciprocity of this clause.
The business without it will be the anomaly. In conclusion, ODR clauses are obtainable and should be looked upon as extremely desirable. The time is now for Dispute Resolution companies to adjust and take notice of what is working and what is not. Furthermore, turning the consent issue on its head and actively procuring party assent before disputes arise will secure the critical mass needed to sustain a business. “The notion that most people want black-robed judges, well-dressed lawyers, and fine paneled courtrooms as the setting to resolve their dispute is not correct. People with problems, like people with pains, want relief, and they want it quickly and inexpensively as possible.”As a result, online ADR, employing increasingly sophisticated tools can be expected to be a resource of growing (golden) value.” bibliography Doe, John B.
Conceptual Planning: A Guide to a Better Planet, 3 d ed. Reading, MA: Smith Jones, 1996. Smith, Chris. Theory and the Art of Communications Design. State of the University Press, 1997.
Index Aristotle, 3.