Dennis by wuxiangyu


									  Building a Practical Legal
Framework for E-Commerce
    Dispute Resolution

Mike Dennis, US Department of State
      UNCITRAL ODR Meeting
         Vienna, Austria
                      B2B and B2C e-Commerce
                          Expanding Rapidly
• e-Commerce has exploded over the last decade

• U.S. B2B e-commerce generated $3.1 trillion in sales revenue
  in 2008, accounting for 27% of B2B transactions

• U.S. B2C e-commerce generated $225.2 billion in sales in
  2008, up 5% from 2007

• Consumers are becoming a major part of international
  commercial transactions for first time.
Available at
      f at para. 8, 10.

    The Challenge: eCommerce Justice

• Traditionally business and consumer issues have found redress
  in courts

• However, eCommerce issues are difficult for courts to handle
  because the issues often cross multiple jurisdictions

• Traditional judicial mechanisms also struggle with eCommerce
  cases because:
   – the transactions are low value
   – litigation is expensive
   – it is difficult to enforce foreign judgments

           The Solution: A Global ODR System
• “A simple and affordable resolution process for inevitable
  disputes is essential.”
   Jean Monty CEO, Bell Canada

• “A global alternative dispute resolution system is necessary to
  encourage cross border electronic commerce.”
   Carly Fiorina, former CEO, Hewlett Packard

• “Probably the best way out of this dilemma and an important
  catalyst for consumer confidence in electronic commerce is
  that Internet merchants offer [ODR] as an alternative to the
  cumbersome and expensive resort to courts.”
   2003 Agreement between Consumers International and the Global Business Dialogue on
   Electronic Commerce
 See C. Rule, Online Dispute Resolution for Business (2002) at 88, 121

 A Decade of Progress/Refinement
• 1999: OECD publishes “Guidelines for Consumer Protection in the Context
  of Electronic Commerce”
• 2000: US FTC and Department of Commerce host “Alternative Dispute
  Resolution for Consumer Transactions in the Borderless Online
  Marketplace” conference
• 2002: The American Bar Association releases recommended standards for
  eCommerce Dispute Resolution
• 2003: GBDe / Consumers International agreement
• 2004: Global Trustmark Alliance Organizing Committee launched at GBDe
  Summit in Malaysia
• 2007: OECD Recommendations call for states to establish mechanisms for
  arbitration of consumer disputes
• 2009: European Committee for Standardization releases recommended
  best practices for ODR
          International Consensus
• Rome I Regulation – EU Parliament Recital on special
  conflict of law rule for consumer contracts calls for
• European Parliament has cited the need to promote
  ADR in the field of electronic commerce
• Several nations (e.g. US, Mexico, Chile) have already
  launched and evolved alternate dispute resolution
  (ADR) mechanisms for business to consumer disputes

Consumer and Business Advocates Agree
• 2003 ADR Guidelines Agreement between Consumers
  International and the GBDe was a key breakthrough:
• “Electronic commerce, especially *cross-border] will grow
  unabatedly only if consumers feel confident that their
  interests are sufficiently protected in the case of disputes…”
• “*I+nternational court proceedings can be expensive, often
  exceeding the value of the goods or services in dispute.”
• “Moreover, for consumers this principle may only provide
  illusory protection, as in many cases the cost and complexity
  of crossborder enforcement stands in the way of effective
New Proposal: The OAS-ODR Initiative
• The ODR Initiative is intended to promote
  consumer confidence in e-Commerce by
  providing quick resolution and enforcement of
  disputes across borders, languages, and
  different legal jurisdictions.

• Model law/cooperative framework and rules
  govern OAS-ODR Initiative

    OAS-ODR Initiative: How It Works
• Consumer initiates process on the Central Clearinghouse
  website by completing Initiation Form
• First phase: Parties given 20 days to negotiate settlement
• Second phase: If no settlement, case may escalate to 3rd
  party resolution
• National Administrator selects ODR provider from list of
  approved ODR providers
• ODR provider achieves resolution
   – via online facilitated settlement (mutual agreement)
   – via online arbitration (evaluation)
• Administrator or state designated authority or payment
  processors enforce outcome where Vendor located

                    OAS-ODR Overall System Design
                                        Central Clearinghouse
Sellers each      Seller
 opt-in to
the system
                 Seller                         OAS                 ODR providers apply
                                                Case                 and are approved
                               Seller            DB

                                               Key Components:
                                                   A Central
                                              Clearinghouse, who
                                              maintains the case
                                              database; National
                 National                     Administrators; and     National
                                                 ODR providers      Administrator
                                                approved by the

          Jurisdiction & Enforcement
• Each National Administrator opted into the system selects an
  online ODR provider
• Buyers file with a local ODR provider in their home country
• The seat of arbitration for the process is the Vendor’s State
• The National Administrator in a vendor’s home country is
  responsible for pursuing Vendor’s compliance by
   – taking direct enforcement action,
   – requesting assistance from payment networks, or
   – referring cases to collection agencies

• This design avoids complex issues around forum selection
  Can OAS-ODR expand to UNCITRAL?
• Perhaps UNCITRAL could establish similar model
  rules for ODR utilizing fast-track procedures which
  comply with due process requirements
• A cross-border enforcement protocol like that
  outlined in the OAS-ODR Initiative might be drafted
• Perhaps these decisions could be enforceable under:
   – the Convention on the Recognition and Enforcement of Foreign
     Arbitral Awards (New York, 1958);
   – the Inter-American Convention on International Commercial
     Arbitration (Panama, 1975); and
   – the European Convention on International Commercial
     Arbitration (Geneva, 1961).

• E-commerce cross border disputes:
  – will form a significant proportion of complaints in
    coming years;
  – require tailored mechanisms that do not impose
    cost, delay and burdens that are disproportionate to
    the economic value at stake.
• The time is now to build a global ODR system to
  address these challenges, and extend justice to
  issues that are not served by existing systems

  Building a Practical Legal
Framework for E-Commerce
    Dispute Resolution


    Rome I Regulation – EU Parliament Recital on special
         conflict of law rule for consumer contracts

• “With reference to consumer contracts, recourse to the courts must be
  regarded as the last resort.”
• “Legal proceedings, especially where foreign law has to be applied, are
  expensive and slow. . . .”
• “The protection afforded to consumers by conflict-of-laws provisions is
  largely illusory in view of the small value of most consumer claims and the
  cost and time consumed by bringing court proceedings.”
• “As regards electronic commerce, the conflicts rule should be backed up by
  easier and more widespread availability of appropriate online alternative
  dispute resolution (ADR) systems. . . ”
•    Available at

                Rome I Regulation -- Review Clause

• Article 27 of Rome I Regulations requires that by 2013 the EC
  provide special report to the European Parliament on
  application of the special Rome I rule for consumer contracts.
• European Parliament cites need to promote inter alia “ADR in
  the field of electronic commerce and . . . to review to what
  extent on-line ADR schemes might be used . . . to increase
  consumer confidence in electronic commerce and obviate the
  need for court proceedings”
• Special report may be accompanied by proposals to amend
  the special Rome I rule for consumer contracts.
   –   EU Parliament Final Compromise Amendment 104 Article 23(b) (new), available at

                               State ODR Models
• In some OAS member states, state-run alternate dispute
  resolution (ADR) mechanisms for business to consumer
  disputes are very well developed, offering dispute resolution
  services for a wide range of consumer disputes.
• In Mexico, Concilianet, has been established to provide a
  government run online dispute resolution platform. The
  Federal Consumer Protection Law promotes and protects the
  rights of consumers without distinction based on nationality
  or other considerations.
  Available at:

• In Chile, a similar online platform has been established.

• The US Federal Trade Commission launched to refer consumer cross-border cases to
  ODR providers
            CIDIP VII: Proposals
• States considering 3 proposals on consumer
  legal protection for CIDIP VII:

  – Brazil: Convention on Jurisdiction and Applicable

  – Canada: Model Law on Jurisdiction and Applicable

  – United States: Legislative Guide and Model Laws
    on Dispute Resolution and Redress
     Building A Practical Framework for
            Consumer Protection
                 U.S. Proposal
1.   ODR Initiative
2.   ADR Through Payment Cards
3.   Small Claims Procedures
4.   Collective Complaints
5.   Government Obtained Redress for Deceptive

                Building A Practical Framework
OAS-ODR Initiative Phases

       Consumer/                                       Enforcement

            Negotiation                               Coordinating
                                     ODR                 Agency)
Diagnosis                     Provider/Arbitrator

Each phase acts like filter resolving
      percentage of disputes

         Consumer/                                       Enforcement

                              Mediation                 Administrator
              Negotiation                               Coordinating
                                       ODR                 Agency)
  Diagnosis                     Provider/Arbitrator

  OAS-ODR Initiative -- Applicable Law
• Draft ODR Initiative Rules provide “If a solution is not
  found in the terms of the contract, the Arbitrator shall decide
  such claims and grant such relief on an equitable basis, based
  on an interpretation of these rules and without referencing or
  requiring proof of applicable law.”

• Consistent with
   – ICANN Rules for Uniform Domain Name Dispute
     Resolution Policy
   – AAA-ICDR Online Protocol for Manufacturer/ Supplier

                 List of ODR Providers
• Secretariat might explore whether it would be possible or desirable to
  maintain a single database of certified ODR providers, like that suggested
  in the OAS-ODR Initiative.

• The U.S. FTC and consumer protection agencies in other countries
  contribute to an International ADR directory containing contact
  information of dispute resolution service providers
   – Available at

• The EC maintains a central database of ADR bodies which are considered
  to be in conformity with the Commission's Recommendations on Dispute
   – Available at

                                                   WORLD INTERNET USAGE

                                 Population Internet Users Internet Users Penetration   Growth Users %
   World Regions                 ( 2009 Est.) Dec. 31, 2000 Latest Data (% Population) 2000-2009 of Table

                                    991,002,342                 4,514,400          67,371,700     6.8 %   1,392.4 %     3.9 %

                                  3,808,070,503           114,304,000             738,257,230    19.4 %    545.9 %     42.6 %

                                    803,850,858           105,096,093             418,029,796    52.0 %    297.8 %     24.1 %

Middle East
                                    202,687,005                 3,284,800          57,425,046    28.3 %   1,648.2 %     3.3 %

North America
                                    340,831,831           108,096,800             252,908,000    74.2 %    134.0 %     14.6 %

America/Caribbean                   586,662,468             18,068,919            179,031,479    30.5 %    890.8 %     10.3 %

Oceania / Australia                   34,700,201                7,620,480          20,970,490    60.4 %    175.2 %      1.2 %

WORLD TOTAL                       6,767,805,208           360,985,492            1,733,993,741   25.6 %    380.3 %    100.0 %

       Source:Internet World Stats               26
             Benefit From Cross-Border

• October 2009 European Commission conducted
  11,000 cross border online searches for 100 popular
  products (e.g. CDs, computers, digital cameras,
  books, and clothes)

• Substantial Cost Savings - For over half of product
  searches, consumers found offer in another EU
  country at least 10% cheaper (delivery and other
  costs included).
  •available at

                   Cross-Border Barriers
• Yet, the study found that 61% of cross border online orders were refused
  because traders refused to serve buyers located in another EU country.

• While 51% of the EU27 retailers sell via the internet, only 21% currently
  conduct cross-border transactions, down from 29% in 2006.
• The Commission reported that the main regulatory barrier to operating on
  a pan-EU basis was the application of fragmented national laws, including
  consumer protection laws, through the conflict of laws rules in the Rome I

    – “The effects of the fragmentation are felt by business because of the
      conflict-of law rules, and in particular the Rome I Regulation, which
      obliges traders not to go below the level of protection afforded to
      foreign consumers in consumer’s home country”.


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