© 2001, 1998, Deeth Williams Wall LLP. All Rights Reserved. By: Amy-Lynne Williams (Presented at the1997 CLA Pacific Rim Conference: Hawaii February 26-28, 1997)

For hundreds of years, commercial entities and individuals have pursued their contractual remedies and resolved their problems by resorting to the court systems available in their jurisdictions. This will continue.

There is, however, an unstoppable movement throughout the world to doing business electronically, relying on computers for ordering, email messages for contracting, and acquiring at the touch of a button, goods and services, which, because of the great distances involved, would have been impossible to acquire just a few years ago.

As this electronic business community increases in its size, influence and demands, it is finding more dissatisfaction with the traditional, adversarial court system and is looking for alternative ways to solve disputes and resolve issues. Alternative Dispute Resolution ("ADR") does not, for the most part, involve the endless motions, voluminous proceedings, procedural wrangling and years of arguing and waiting for a judgment that characterize the "old" litigation system for most modern business people and consumers.

Although the use of ADR has been effective for many years, only in the past few years have businesses actively embraced the concept in the hope of dealing with their disillusionment with the courts and conducting business differently. There is a perception that ADR decreases the time, procedures, costs and posturing involved in trying to resolve a dispute between contracting parties. This can be true. However, the choice of ADR vehicle will also have a strong bearing on the success of these perceptions. The wrong choice can lead to the same headaches and delays that traditional litigation practices have. It depends on what the parties hope to achieve and what they are willing to do to achieve the desired end.

Many governments, including the provincial Ontario government in Canada are considering requiring contracting partners to submit their disputes to some for of ADR prior to, or instead of being permitted, to access the courts.

This paper will look at some of the more common ADR vehicles existing in most jurisdictions today and briefly examine some of the pros and cons of these vehicles

Why ADR for Electronic Commerce?

ADR presents an attractive alternative for many businesses involved in electronic commerce transactions since it is possible to have the dispute resolved by a technical expert in the area instead of a judge or a lawyer and, if the system works as it should, it can take much less time to reach a decision or a settlement.

Cost is also a factor, since businesses that are used to the savings they perceive to be available through electronic commence do not want to waste the management time and money usually required to take a dispute through the usual trial process.

In addition, since many electronic trading relationships are meant to be long term and are based on a certain level of trust, there also seems to be a strong desire to work things out without destroying the relationship.

Confidentiality is also a factor and the thought that the details of an ADR proceeding are not going to be splashed over the front page of the local and financial press is attractive. This is particularly important when the dispute arises out of a failure of security systems to function, or as a result of a technical problem with a major system. Most companies do not want this to be in the next issue of reported cases.

A couple of pilot ADR projects are being started in the world to resolve on-line disputes and many organizations are working on model laws to deal with uniquely electronic issues.

Unique issues and problems can arise in electronic commerce, particularly involving consumers. This paper will examine whether even the ADR vehicles available will be appropriate to handle them, or whether a significant change is needed in the way we resolve worldwide electronic commerce issues.

Types of Disputes

The usual "net" disputes exist and can be expected to continue, including: problems over postings on the Internet; the use of trademarks belonging to third parties; issues with domain names; and infringement.

There will undoubtedly also be issues that are more usually encountered in our "traditional" modes of commerce such as: disputes over the quality of goods purchased on-line; failures to deliver; and errors in order taking and failures to pay.

Although traditionally this latter group of disputes has occurred between trading partners who, even if they do not do business face to face, at least probably know where the other party carries on business, it is just as likely that a party may not even know what continent the other party is really on, let alone be able to get hold of that party to serve them with a writ or enforce a judgment.

So what is to be done?

Some experts involved in the IT industry have opined that electronic commerce will not fulfill its true potential globally unless the participants to a transaction can be assured of remedies and enforcement vehicles to redress purely commercial grievances in a manner that does not require them to appear in a courtroom half-way around the world.

One solution is the development of a form of on-line commercial dispute resolution mechanism that would allow for speedy adjudication of commercial complaints arising from on-line transactions. In the United States, The Virtual Magistrate Project, is in the pilot stage. It deals with Internet related disputes, but its focus is mainly on complaints about postings; messages, infringement, defamation, inappropriate materials or other content issues.

Although this is a valuable and necessary undertaking, the Virtual Magistrate Project, in its present form, is not meant to handle "supply and payment" issues. How will a buyer get redress if it receives faulty materials in an on-line order and the supplier is located half a world away?

Alternative Methods of Dispute Resolution


  • flexible
  • informal
  • voluntary submission through agreement
  • may use pre-defined rules or set your own


  • use mediator with the particular technical expertise - need not necessarily legal
  • allows parties to deal with issues with mediator, keeping conflict level down
  • control of the process
  • likelihood of keeping healthy business relationship higher since negotiated settlement

Potential Problems

  • depends on skill and knowledge of the mediator and skill at negotiation
  • mediator must guide the parties to solution, not impose it
  • mediator must not take over the process
  • may not be effective if parties are acrimonious and not willing to work together

Private Court

  • in some jurisdictions and numbers increasing
  • written agreement to use
  • court has rules of procedure and also relies on provisions of various arbitration statutes
  • adjudicators usually lawyers or retired judges but do not need to be
  • powers of adjudicator may be similar to judicial powers, depending on jurisdiction
  • in Canada, can transfer disputes from "public" court system to Private Court
  • usually involves a Settlement Conference similar to pretrial
  • adjudicator prepares report on status and settlement possibilities
  • adjudicator has active role
  • may also arrange for procedural conference to deal with discovery and other issues
  • may proceed to a hearing which is similar to trial
  • award within 30 days
  • decision can be appealed depending on jurisdiction
  • order or award is usually enforceable in court


  • faster than usual court system
  • flexible
  • speedy resolution
  • emphasis on negotiation
  • expertise can be varied


  • still adversarial
  • cost
  • may get tied up with legal issues
  • skill of adjudicator may not be what is needed

Commercial Arbitration

  • available in most countries
  • New York Convention
  • UNCITRAL Model Law of International Commercial Arbitration
  • by agreement - can be for specific disputes or all
  • agreement to submit to arbitration can be enforced

Various rules can be chosen to govern procedure

  • International Chamber of Commerce (ICC)
  • American Arbitration Association (AAA) International Arbitration Rules

Various Forums:

  • International Court of Arbitration of the International Chamber of Commerce
  • confirms or appoints arbitrators
  • does not itself settle disputes
  • International Chamber of Commerce conducts arbitration
  • American Arbitration Association

Various International Arbitration Centres, including:

  • London
  • Milan
  • Paris
  • Rotterdam
  • Seoul
  • Stockholm
  • Tokyo
  • Vancouver
  • Vienna

Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") - New York, June 10, 1958

  • International treaty for recognition and enforcement of arbitral awards made in one state other than the state where recognition is sought
  • problem in international trade first, gaining recognition and enforcement of the arbitration clause; second, gaining enforcement of an award in a foreign jurisdiction
  • since 1958, 108 countries have become parties

UNCITRAL Model Law On International Commercial Arbitration

  • Canadian courts have taken broad view of what constitutes a "commercial" dispute to private disputes not involving commercial entities.
  • Courts have enforced arbitration agreements and awards.
  • Many countries are implementing domestic arbitration acts to encourage arbitration over litigation.

The Virtual Magistrate Project

  • To resolve disputes on worldwide networks about
  • on-line messages
  • postings
  • infringement
  • misappropriation of trade secrets
  • defamation
  • deceptive trade practices
  • inappropriate materials
  • invasion of privacy


  • users
  • those harmed by wrongful messages postings or files
  • system operators (Sysop’s)


  • to establish the feasibility of on-line dispute resolution for disputes that originate on-line
  • rapid, low cost and accessible remedies
  • explore possibility of using VM Project to resolve other disputes
  • Single magistrate or panel of three
  • Selected by American Arbitration Association and committee of Cyberlaw Institute Fellows
  • Filings
  • by email

Will not automatically apply law of a particular jurisdiction – will look at what is appropriate

  • Decisions
  • within 72 hours after all parties participate
  • whether should mask, delete or restrict access to message, file or posting
  • whether disclosure of identity of an individual
  • denial of access to on-line system

Agreement to use VM

  • can be insisted on by Sysop
  • users agree to comply
  • Sysop’s expected to support and enforce decisions
  • third parties (copyright owners) will be asked to comply with decision in return for use of VM
  • Decisions not subject to appeal – just reconsideration
  • Users and Sysop waive claims against VM

Online Ombuds Office

  • independent individuals who receive complaints, investigate and make recommendations

Council of Registrars

  • proposed association of registrars for registration of domain names
  • International Ad Hoc Committee (IAHC)
  • result of efforts of an international group
  • indication of what can be done on an international basis
  • to be established under Swiss law to create and enforce requirements for registrar operations
  • includes a regulatory framework in form of Memorandum of Understanding that public and private sectors can sign
  • MOU will provide mechanism for signatories to advise on future policy for domain name system
  • shows how the international community can act together on electronic issues
  • new domain name challenge procedure will be conducted on-line and panel of experts will decide question
  • settlement procedures will be under WIPO Arbitration and Mediation Centre in Geneva

Potential problems for any mechanism

  • Enforcement and remedial power - should it be set out ahead of time?
  • Possible remedies
    • injunctions
    • damages - remedial and punitive
    • terminating access
    • publication of improper conduct
    • Does any privilege attach to decisions of on-line arbitrator if it publishes results, particularly a ruling on improper conduct defamation;
    • antitrust action if publication leads to others avoiding service?
  • Jurisdiction
    • personal and subject matter
    • usually over person while in jurisdiction or over property of that person in the jurisdiction
    • how do you know where person is on-line?
    • need to decide whether the ADR method chosen is meant to be coercive both in terms of jurisdiction and enforcement e.g. mediation is voluntary in most instances while arbitration is supposed to result in a judgment that can be enforced and registered in the appropriate court
    • How is arbitration agreement entered into
    • by notice and click and consent method? Suppliers make it mandatory before you can buy?
  • Governing law
  • Problem with Virtual Magistrate system may be concentration of U.S. law and U.S. issues. Electronic commerce will only be truly valuable when it is global and U.S. law is too narrow – one party may be in the U.K. and one in Africa
  • International law is more appropriate – but which type. U.N. Convention on International Sale of Goods? or something else?

Sample of Legal Issues in Electronic Commerce

  • Governing Law
  • Rules of evidence
  • Documentation may be nonexistent
  • What is original
  • Whose records govern
  • Hearsay
  • Authentication

UNCITRAL Model Law on Electronic Commerce

  • provides for legal recognition of data messages
  • can be national or international, but not to override laws for consumers
  • covers many commercial transactions contractual or not, including:
    • supply of goods or services
    • distribution agreement
    • agency
    • factoring
    • leasing
    • consulting
    • licensing
    • banking
    • carriage of goods
  • Data Message defined as "information generated, sent, released or stored by electronic, optical or similar means including, but not limited to EDI, electronic mail, telegram, telex or telecopy"
  • international in origin


  • information not to be deprived of legal effect solely because it is in the form of a "data message"
  • if information required by law to be in writing, this is met if information in message accessible for later reference
  • if signature of person required by law, that is met by a data message, if a method is used to identify the person and indicate their approval of the message and that method is reliable
  • if information must be in original form, that is met by data message, if there is reliable assurance as to integrity of information from generation and information is capable of being displayed
  • rules of evidence will not apply to deny admissibility on the sole ground that it is a data message, or if is the best evidence, that it is not in its original form
  • when assessing weight, should look at reliability of manner in which data message was generated, stored or communicated and reliability of manner in which integrity maintained, and how originator identified
  • offer and acceptance may be expressed by data messages
  • procedures in Model Law to deem messages as that of the originator
  • procedure in Model Law to determine when data message is dispatched and received

What about an on-line international arbitration mechanism, more like the ICC – call it the World Wide Court ("WWC")?

  • adjudicators and mediators that would be on-line and would have representatives from many countries
  • would handle commercial disputes from businesses and consumers alike
  • like the Virtual Magistrate project, complaints and "pleadings" would be handled on-line
  • would not matter where in the world the parties were
  • adjudicators would apply whatever local law was reasonable in the circumstances
  • adjudicators could be lawyers but would be preferable to have a significant involvement from business and technical community
  • legal issues with respect to evidence, formation and acceptance as well as other "contract" issues, where appropriate, would be settled by reference to Model Law on Electronic Commerce
  • decisions to be rendered promptly
  • could, at the simplest level, involve requiring supplier to provide replacement product. In many cases, the amounts involved may not be large, but in order to have large volumes of transactions that electronic suppliers dream of, there will have to be a mechanism to handle all types of problems
  • condition of access to Net would be the consent of both parties to submit disputes to ADR
  • this might solve jurisdiction problem
  • click and consent?
  • once the system is well enough known, suppliers would have to post warning notice if they were not part of the WWC
  • perhaps have a certification system that suppliers would post. This would advise consumers and contracting partners that the supplier was a member of the WWC and therefore willing to submit any disputes to adjudication by the on-line mediator or arbitrator. Would instill confidence in on-line contractors that this company would be subject to a third party procedure to resolve problems.
  • Consumers and other parties would be asked to post a reasonable bond to cover the cost of the adjudication - credit card could be used
  • agreement on governing law and legal principles - ICC and Model Law on Electronic Commerce?
  • on-line forum and arbitrators familiar with the issues and willing to respond quickly
  • internationally recognized and agreed method of enforcing decisions
Contact Amy-Lynne Williams or any other members of our Information Technology Group for more information on Dispute Resolution and Arbitration for Electronic Commerce.

Disclaimer: This Newsletter is intended to provide readers with general information on legal developments in the areas of e-commerce, information technology and intellectual property. It is not intended to be a complete statement of the law, nor is it intended to provide legal advice. No person should act or rely upon the information contained in this newsletter without seeking legal advice.

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