Dispute Resolution Reference Guide

Online Dispute Resolution

Dispute Resolution Series
Produced by Dispute Prevention and Resolution Division
 Department of Justice, Canada

August 2012


Table of Contents

I. What is Online Dispute Resolution

Online Dispute Resolution (ODR) “refers to a wide class of alternate dispute resolution processes that take advantage of the availability and increasing development of internet technology.”[1] It is a set of DR processes that allow for the resolution of disputes via online mechanisms such as the Internet or some form of technology that allows for virtual communication without requiring the parties to be in a room together.

Although almost all ODR processes tend to be ones that allow for written submissions only, there is a broad spectrum of ODR services that range from online arbitration to fully automated online ‘blind bidding’ negotiation services[2], and chat based mediation programs[3]. The selection of the appropriate ODR format may depend on the nature of dispute and the parties involved. ODR processes should also be convenient for the users and not cause any undue accessibility concerns.

There are three main types of dispute classifications within the ODR framework:

  1. Business to Business (B2B)

    Business to Business (B2B) disputes revolve around two commercial parties that are seeking to resolve a dispute over a specific transaction. The parties in B2B tend to be sophisticated users, and there is generally less concern over party vulnerability, and a greater emphasis placed on the convenience and expertise of the process.[4] With many B2B disputes resolved with some form of ODR, the use of arbitration is prevalent.[5]

  2. Business to Consumer (B2C)

    Business to Consumer (B2C) disputes are becoming more common, particular with the expansion of e-commerce. B2C disputes tend to be low-cost, but high-volume, and may involve unequal bargaining power between the consumer and the business. An ODR process may meet consumers’ need for redress against businesses and to provide the necessary support for due process rights.[6]

  3. Consumer to Consumer (C2C)

    Consumer to consumer (C2C) disputes involve transactions between two consumers (i.e. the sale of a used item). These types of e-commerce transactions are also becoming more common with websites such as eBay or Craigslist acting as facilitators between two parties, although the website is not an actual party to the dispute.

ODR and the courts

“Cyber-court” processes are slowly being adopted by court systems all over the world. For example, in the United Kingdom, since 2001, parties have been able to issue a Money Claim Online,[7] and since 2006, have been able to make a Possession Claim Online.[8] Australia’s Federal Court also includes an e-Court system which allows, amongst other things, for the parties to testify via videoconference.[9] However, few of the systems adopted by courts or tribunals involve ODR at the negotiation or mediation stage of the process, but rather allow parties to participate electronically in the adjudication process.

In Canada, most courts and tribunals have not yet adopted ODR technology as part of their case management system either as part of the negotiation, mediation,[10] or adjudicative process. An exception is in British Columbia where part of the case management system of the newly created Civil Resolution Tribunal[11] includes it at the negotiation phase of the case management process.[12]

Other tribunals may consider similar approaches. Courts are also being encouraged to investigate ODR by proponents of access to justice.[13]

II. CHARACTERISTICS OF ONLINE DISPUTE RESOLUTION

ODR may be:

Voluntary: Most ODR processes allow the parties to elect to participate in them, or pursue their claim in another forum. Most also allow the parties to withdraw from the process at any given time.

Informal: The proceedings are generally more relaxed and informal than in-person proceedings such as mediation, litigation or arbitration. Depending on the ODR Provider and the rules in place, the process may be conducted in an asynchronous manner and allow the parties time to reflect on their positions before coming to any agreement.

Confidential: ODR is generally a confidential process, unless the parties agree otherwise. Notwithstanding a confidentiality clause or agreement, when the federal government is a party, the Access to Information Act and Privacy Act must be examined to determine the extent to which they restrict disclosure and withholding of information. For further information about the application of these Acts, please refer to the document entitled "Confidentiality: Access to Information Act and Privacy Act" contained in this Reference Guide.

Assisted: The ODR Neutral’s role is that of an impartial third party who helps the parties come to a mutually acceptable settlement. (Note that an ODR Neutral is generally only used if the ODR process contains a mediation or arbitration component.)

III. HOW TO USE ONLINE DISPUTE RESOLUTION

A. OBJECTIVE OF ONLINE DISPUTE RESOLUTION

The primary purpose of ODR is to allow the parties to resolve their dispute with the use of electronic technology. It may occur in “real time” or unroll in an asynchronous manner, depending on the rules of the ODR Provider, as well as the wishes of the parties. Often, this process is more convenient and cost efficient than face to face meetings in order to negotiate, mediate, or otherwise resolve existing disputes.

The actual terms of the agreement that the parties come to can be as broad or as specific as the parties desire, particularly if the matter is concluded at the negotiation or mediation phase. The enforceability of the settlement agreement may depend on the rules and jurisdiction of the ODR Provider, particularly if the dispute is international.

The following questions could be important to consider in determining whether ODR is an appropriate manner to settle the existing dispute:

  1. Are there really only a few issues at stake?
    • ODR is best-suited to deal with a small number of issues, and is often best when the issue at stake is an amount of money rather than issues pertaining to liability.
  2. Are there only a few parties?
    • ODR works best when there are only a few parties.
  3. Can the factual and/or legal issues be concisely presented?
    • Given that most of ODR involves electronic communication, often in writing, it works best where the issues can be clearly stated.
  4. Are the factual issues dependent on the parties' differing opinions or on their credibility?
    • ODR is more effective where factual issues are not dependant on credibility.
  5. Are witnesses required to give testimony in order to resolve the dispute?
    • Some ODR processes may not easily allow for witnesses to testify, particularly if the ODR process focuses on the negotiation or mediation phase of a dispute.
  6. Are the parties being unrealistic regarding the outcome of the case?
    • Where the parties are unrealistic about outcomes, ODR may not be successful, particularly if the process is focused on the negotiation or mediation phase of the dispute.
  7. Is the issue of law relatively settled or in flux?
    • If there are issues of law that are unsettled, the matter may not be appropriate for ODR.

B. THE PROCESS

  1. Choosing an ODR Provider

    In some situations, the ODR Provider is chosen for the parties depending on the nature of their dispute (i.e. C2C disputants regarding an E-bay transaction are encouraged to use the E-bay ODR Process; parties to a dispute to a claim under the jurisdiction of the Civil Resolution Tribunal will proceed with the Tribunal’s ODR Provider and process).

    Where the parties have not identified an ODR Provider in a contract, or where it is not clear which ODR Provider should be used, the parties can choose an ODR Provider. Parties should take care to select an ODR Provider that is both competent and independent, possibly by selecting someone who has a TrustMark or Webseal that demonstrates their membership in a recognized ODR Provider association.[14] While there is no overarching ODR regulatory body, parties may still want to seek out ODR Providers who are independently certified.[15]

    Any ODR Provider should be clear of conflicts of interest with any of the disputants. This includes, but is not limited to, being a ‘captive’ ODR Provider to either disputant: if an ODR Provider is overly reliant on a party for its financial well-being, serious concerns over impartiality may be raised. It is unadvisable to have an ODR Provider resolve a dispute in which one of the parties is its client for another unrelated matter. As with other professional codes of conduct, the ODR Provider should seek to appear independent and impartial through strict avoidance of all real and potential conflicts of interest.

  2. Preparation for ODR

    There is no rigid format to be followed for ODR as the rules of the process depend on the ODR Provider. In preparing for ODR, it is important that the parties are aware of the rules that they will need to follow, and have gathered the necessary facts and/or documents to support their position.

  3. The ODR Process

    Much depends on the rules of the ODR Provider, and whether or not the ODR component will take place at the negotiation, mediation or adjudication phase. Generally, the ODR process will begin with contacting the other party to resolve the dispute, either directly or through the ODR Neutral. As with other dispute resolution processes, parties should consider the following:

    • What are the parties’ interests, not just their positions. Is there a solution that will create a win-win outcome or that mutually benefits both parties? (i.e. in an E-bay transaction, if the vendor refunds the purchaser’s money, the purchaser will remove negative feedback from the vendor’s profile.)
    • Effective communication is important. As much, although not necessarily all,[16] of the communication between the parties is in writing, carefully consider the choice of words and the tone of any written submissions.
    • Take your time to evaluate submissions and proposals for solutions. Ensure you properly understand what the other party is trying to convey. Look for underlying interests, not just positions.
    • Be aware that language difficulties may arise, particularly if you are dealing with an unsophisticated party unused to making written submissions, or someone whose first language is not the language of the ODR process. Where necessary, draw the attention to the ODR Provider or ODR Neutral to perceived communication difficulties.
    • Evaluate any proposals in light of your BATNA (Best Alternative To a Negotiated Agreement). The BATNA is “the standard against which any proposed agreement should be measured.”[17] It is the best of all possible alternatives to the ODR process should the latter fail. Any solution should be superior to your BATNA.
    • Know the next step: if this portion of the ODR process is not successful, what is the next step to resolving the dispute? ODR mediation or arbitration? Or taking the matter to an in-person forum? Consider the cost-benefit analysis of continuing in the ODR forum.

C. THE ROLE OF ODR NEUTRAL

Depending on the nature of the ODR process, the Neutral may:

  • Permit the parties with or without counsel to present their positions regarding the dispute;
  • Help and direct parties to search for common ground and narrow the scope of the dispute;
  • Assess the relative strengths and weaknesses of the parties' positions, explaining the reasons of his or her assessment and estimate, where possible, the likelihood of liability and the verdict range of damages;
  • Suggest and help the parties explore the possibility of a settlement.

D. THE ROLE OF THE COUNSEL

Lawyers may or may not be involved in an ODR process, depending on the nature of the dispute and the issues involved. The presence of lawyers may be advisable if the matter involved is proceeding with a more formal type of ODR process that contains an adjudication phase and involves complex legal issues.

However, for many types of ODR that are more informal, flexible, and deal with low-cost transactions or issues, it may not be necessary to have a lawyer as the one to summarize the factual issues and legal arguments supporting his or her client's case.

IV. ADVANTAGES OF ODR

  • ODR is a generally informal, flexible and creative tool of dispute resolution which is not governed by strict rules of procedure and evidence. This may allow the parties to design or participate in a process which can be moulded to suit their needs and encourages a consensual rather than an adversarial approach.
  • ODR may reduce litigation costs: this is of importance both to corporate parties who wish to keep costs down and to parties who otherwise might not be able to afford the cost of litigation. The costs of the process or compensation given to the neutral evaluator are generally borne equally by all parties, providing all parties with an equal stake in the outcome and an equal sense of ownership.
  • ODR may be the appropriate option particularly for low-cost, high-volume transaction as it often allows for a timely, cost-efficient and efficient resolution to problems where the amounts in dispute may not be sufficiently high to justify the cost of a meeting-based mediation (e.g. consumer disputes).
  • ODR also allows for a more cost-efficient resolution of disputes where there is significant geographic distance between the parties and the amount in dispute may preclude the cost of travel.
  • ODR may be appropriate where there are sensitivities between the parties that may be exacerbated by being in the same room (e.g. matrimonial disputes).
  • ODR may allow for the participation of parties who could not otherwise attend an in-person meeting due to a severe disability.
  • ODR is confidential (unless agreed otherwise by the parties), subject to the application of the Access to Information Act and of the Privacy Act when the federal government is a party. The process is appropriate when confidentiality is considered important or necessary to the parties, which is often the case: parties utilizing DR mechanisms usually do so on the basis that they can discuss matters freely in the expectation that they will be disclosed, neither publicly, nor to a court.[18]

V. DISADVANTAGES OF ONLINE DISPUTE RESOLUTION

  • All parties would be required to have adequate technology to participate in an ODR Process. Parties without adequate technology may be at a disadvantage or unable to fully participate.
  • ODR is a less personal form of dispute resolution as the parties are not in the same room, and often all of the discussions are in writing.
  • Parties with language and/or difficulties communicating in writing may be at a disadvantage in an ODR process.
  • Where ODR is a non-binding process (i.e. only part of the negotiation/mediation phase), it cannot produce legal precedents. However, if the last step of the ODR Process results in adjudication, a legal precedent may be set.

Footnotes

  • [1] Al Nenstiel, “Online Dispute Resolution: A Canada-United States Initiative” (2006) 32 Can.-U.S. L.J. 313.
  • [2] ‘Blind bidding’ is an ODR negotiation process used to determine the quantum of an economic settlement for cases in which there is no question of liability or fault. Similar to an auction mechanism, it allows for parties to participate in an automated negotiation process in order to achieve a resolution.
  • [3] Robert R. Marquardt, Settling Disputes Online: Just Another Tool, or are Negotiators, Mediators and Arbitrators Approaching Extinction? online: ADR Resources . Sharanya Rao, The Cultural Vacuum in Online Dispute Resolution, online: University of South of Australia .
  • [4] Resolution Dispute Online: Best Practices in Online Dispute Resolution for B2C and C2C Transactions, online: International Chamber of Commerce .
  • [5] Gabrielle Kaufmann-Kohler & Thomas Schultz, Online Dispute Resolution: Challenges for Contemporary Justice (Frederick: Aspen Publishers Inc., 2004) at153.
  • [6]Colin Rule, Online Dispute Resolution for Business (San Francisco: Jossey-Bass, 2002) at 280.
  • [7]See Money Claim Online. Online: Ministry of Justice
  • [8]See Civil Procedure Rules Practice Directive 55B. Online: Ministry of Justice
  • [9]E-Court Strategy. Online: Federal Court of Australia
  • [10]Some tribunals have attempted to better incorporate videoconferencing into the mediation stage of case management. For example, the Public Service Staffing Tribunal’s Telephone Mediation Pilot Project involved videoconferencing wherever possible. See Telephone Mediation. Online: Public Service Staffing Tribunal
  • [11]The Civil Resolution Tribunal, which should begin hearing cases shortly, has jurisdiction over small claims disputes where the parties decide to take the matter to the tribunal instead of the court, up to a maximum value of $25,000, as well as strata disputes between owners of strata properties and strata corporations.
  • [12]The Mediator may contact the parties electronically, but it is anticipated that most mediations will take place face to face.
  • [13]The 2012 interim reports of the Court Processes Simplification Working Group and the Access to Legal Services Working Group, two of the working groups of the National Action Committee on Access to Justice in Civil and Family Matters (Action Committee), recommend further investigation of the use of ODR.
  • [14]Examples include the Better Business Bureau Online and the American Arbitration Association.
  • [15] American Bar Association Task Force on E-Commerce and ADR, “Addressing Disputes in Electronic Commerce,” online: American Bar Association at 27.
  • [16]Some ODR processes allow for face to face online technology, such as Skype, in which case there may be less emphasis on written submissions.
  • [17]Fisher, R., Ury, W. and Patton, B. (1991). Getting to Yes: negotiating Agreement Without Giving In. Second Edition. New York: Penguin Books, at 100.
  • [18]Richard H. McLaren; John P. Sanderson, Innovative Dispute Resolution - The Alternative, Toronto: Carswell (Thomson Canada Ltd.), 1994, p. 3-3.
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