While using cyberspace to resolve disputes has many advantages like faster and cheaper resolution, there are a number of drawbacks that need to be considered. The following list gives an overview about the gravest concerns associated with ADR in Cyberspace.
The attributes most commonly associated with ADR and with ADR in Cyberspace in particular are: simple, cheap and fast. However, there is a ramification to the simplicity: Compliance with basic due process requirements. While ADR is not technically bound to follow due porcess requirements, an appearance of fairness is essential for a dispute resolution mechanism to function effectively. Only compliance with basic due-process requirements can give ADR in Cyberspace the trust it needs to function effectively for a wide range of disputes
Judge Henry J. Friendly has, in an article for the Univerity of Pennsilvania Law Review, identified eleven requirements for a fair process. The most basic one is an "unbiased decisionmaker." Henry J. Friendly, Some kind of Hearing, 123 U.PA.L.Rev. 1267, (1975) It seems like this requirement is fullfilled easily enough. However, many of the more efficient dispute resolution mechanisms, like E-Bays Buyer Protection and Credit Card Chargebacks do not have a completely unbiased decisionmaker. While the corporations themselves have no stake in the dispute, they may often be prompted to decide on matters of business policy rather than fairness. A ruling by the Virtual Magistrate has already been challenged because the Arbitrator was deemed affiliated with one of the parties.
As one travels down the list of Judge Friendly, the procedure gets more due process "safeguards". Some elements, like allowing for claim and counterclaim, are easily fulfilled. However, presenting evidence and witnesses might well lead to a complication of the process, thus stripping it of its most cherished benefits: Speed and cost efficiency. The question is therefore whether a proceeding that only allows written submissions, does not allow for the hearing of witnesses, and may not have discovery proceedings, is fair enough to build trust. ADR in Cyberspace struggles with the balance to create a both fair and efficient system of dispute resolution.
Due to the borderless nature of Cyberspace, ADR in Cyberspace faces a variety of enforcement issues in both enforcing the agreement to conduct an ADR proceeding and enforcement of the actual award.
The first hurdle to overcome in order to enforce an ADR proceeding is to enforce the very agreement that includes the ADR provision.
Among the most recent developments in law is not only the law of Cyberspace, but also consumer protection laws. These are a serious hindrance for ADR, especially in e-commerce cases, because they set up strict legal regimes that need to be followed in a dispute with a customer. In order to protect the customer from the superior bargaining power of the merchant, many countries have laws that prohibit abridging the customers right to resort to a court to resolve the dispute.
Laws such as EU-directives that prohibit any agreement “excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions . . . .” effectively render arbitration agreements unenforceable. Indeed, the EU has proposed a clause in the Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters that would effectively prohibit any use of an arbitration agreement in customer contracts.
As a significant part of the importance of ADR in Cyberspace depends on adjudication of small-business-to-consumer claims, these legal provisions prohibit effective binding ADR systems.
When a contract is entered into online, those contracts terms, including the agreement for any form of ADR, is created in electronic from. The major Problem with that fact is that in many jurisdictions, as well as on the international plane, ADR agreements must be "in writing" to be recognized.
For the US, the Federal Arbitration Act requires agreement "in writing", as does the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. That would lead to the fact that, for anyone living in the US, an ADR Agreement inculded in an electronic contract may not be recognized. Although a number of scholars suggest that "in writing" should be interpreted to encompass electronic agreements, there has been no litigation of the issue, thus leaving such agreements in a void.
Even if the requirements above are fulfilled and a decision is rendered, that decision still eventually has to be enforced by the state.
The first problem here is the choice of law. ADR in Cyberspace may avoid jurisdiction issues, but where different legal cultures meet, the choice of law still needs to be resolved. Naturally, the agreement itself may provide for a choice of law rule. But even then, rules for discovery and evidence differ greatly and procedural issues might have to be resolved.
Most importantly, a state may, as a matter of public policy, refuse to enforce awards that are rendered in a jurisdiction which has procedures which conflict with that state's own legal system. For example, various EU-directives may prevent a European court from giving effect to a judgment rendered against a customer unless there were adequate procedural protections.
Even if the agreement is binding and the award can be enforced, such enforcement might still be impracticable. First, the other party may be in a distant country, or may not be located at all.
Secondly, if the party does not comply, suit has to be brought, possibly in a distant country. This would eliminate all the benefits derived from the ADR in the first place and effectively render it useless. Unless parties can be sure that awards can be enforced easily and without further costs, for example by directly granting the award from a pre-established fund or escrow account, ADR in Cyberspace may not earn the confidence of users.
One of the often overlooked flipsides of cheap dispute resolution is funding. If ADR is to be viable for consumers and small claims, it has to be cheap. On the other hand, significant resources have to be used to build the online systems as well as paying staff and unbiased arbitrators.
The funding issue may be one reason why many of the current methods of ADR in Cyberspace are either government mandated (like chargebacks) or connected to a major company, like the E-bay system. Independent systems like the WIPO have to charge fees. While these fees are small for the disputes that are currently handled, like IP and domain name disputes, they would scarcely be viable for consumer disputes.
While ADR providers could enter into agreements with e-merchants and other parties to help spread the costs, such agreements may raise doubts as to the neutrality of the system. The Amercian Bar Association's Task Force on electronic commerce and alternative dispute resolution has, in its final report, indicated that investing in customer relations and better complaint handling may be better than investing in a new system of ADR.
Among the ever-present issues in Cyberspace is security. Safe and reliable communication between counsel and client, between the court and a party, or even in between the parties is necessary for ADR in Cyberspace to work.
The security of communications issue is a big concern in Cyberspace. Even though new encryption technologies are constantly invented, every encryption can eventually be broken. The internet poses a lot more threats to confidential communication than a face to face communication in an office.
A related problem is Authenticity: current e-mail and other communication technologies lack a safe method of authenticating the sender of the message on the one hand, and proving receipt by the recipient on the other.
Without a safe authentication method, it would be possible for a third party to intervene and misrepresent one of the parties. This is especially true where the system allows the parties to access documents electronically, which included the possibility that third parties might gain access.
Alternative Dispute Resolution is in "a tension between transparency and confidentiality" Anita Ramasastry, Government-to-Citizen Online Dispute Resolution: A Preliminary Inquiry, 79 WASH. L. REV.159, 167 (2004). This means that on the one hand, litigants in an ADR proceeding want their private information and often also the information about the nature of the dispute private.
But in order to build up trust, it would be best for an ADR provider to make its rulings transparent, allowing parties to anticipate the outcome of a dispute.
This problem is exacerbated by the fact that even if parts of the information are kept confidential, if the information is in some way accessible online, a third party might gain access to it. This may well preclude ADR in Cyberspace for disputes that involve sensible information, be it private finances or business secrets.
One very practical drawback of ADR in Cyberspace is that, in order to be costs effective, small claims proceedings should be initiated by customers themselves. This, however, raises the concern of user sophistictaion.
The first issue here is that the user needs to be technically apt to use the facilities needed for ADR in Cyberspace. While knowledge of the internet is more or less common nowadays, using these ways effectively may be beyond some users capabilities.
Secondly, the user will have to file the relevant papers himself. That means he has to discern between the relevant and the irrelevant facts. This is a task that even trained lawyers find difficult at times. Having to deal with complaints and papers written by laymen might prove to be a significant workload for ADR systems.
Lastly, The user needs basic knowledge about the system itself. That means the system has to be sufficiently common or advertised to be in the minds of potential disputants. Many past projects have failed because no disputes were submitted, simply because no-one knew about them. Knowledgeable lawyers are also crucial here, since a disputant might first seek basic legal advice before deciding what to do with a claim. If there are only a few lawyers that are familiar with the concept of ADR in Cyberspace, disputants will unlikely be referred to it.
When dispute resolution is moved from the real world and placed into cyberspace, this leads to a number of psychological implications. As Phillipe Gillieron put it, it is a transformation "from Face to Face to Screen to Screen" (Philippe Gillieron, From Face to Face to Screen to Screen: Real Hope or True Fallacy?). Two factors are especially important in this regard: The building of trust towards the other party and the lack of nonverbal communication.
In all human relations, trust plays an important rule. This is true for commercial as well as private matters. In the real world, we can evaluate a seller by his appearance, by prior dealings with him, by the name of his company or the appearance of his shop. If we engage in a dispute resolution with a person, our notion of how much we trust that person will directly influence our willingness to enter into an agreement and to allow the other to advance his own proposals of how to resolve the dispute.
In the online world, we are facing strangers that we have never met and probably will never meet. Consequently, the analytical skills we usually use to build trust do not work anymore. We do not know what to expect, and our first response to a big anonymous company like Amazon might be the notion that they will try to overpower us. The same is true for providers of ADR that work completely online. We do not know the personalities of the neutrals, or even what generally to expect from the provider.
When a dispute occurs, missing trust is reinforced, and may carry over to the dispute resolution. First of all, a disputant might no accept the ADR method proposed by the other party because the provider is unknown, and the disputant does not trust the other party enough to follow its judgment. Only a detailed profile of the ADR provider, the procedure, and the neutrals might help to build the needed trust.
Even if a provider is found, lacking trust between the parties might lead to a bad atmosphere for resolving a dispute. A party that does not trust the other party will be less willing to compromise. Without new ways to build trust in the cyberspace environment, this might poison any attempt of an ADR.
It is an occurrence that everyone experiences once: The content of an e-mail, carefully written to convey a specific message is completely misunderstood by the other party. Sometimes that may just lead to a funny anecdote, sometimes it can lead to some serious trouble. In any case, the fact that electronic, non-personal communication is more prone to misunderstandings than a face-to-face conversation is commonplace.
This finding has a scientific underpinning: with the dawn of electronic communication, researchers have discovered that nonverbal cues play a crucial role in any conversation. In fact, more than 90% of the total information conveyed in a conversation is non-verbal.
o When in a face to face communication, we perceive a multitude of nonverbal "cues", from eye contact, to the tone of the speaker’s voice, to body language and appearance. Each of these help us to categorize our speaking partner, and perceive his social standing etc. Matching nonverbal cues and body language lead to a feeling of mutual positive interest which is called "rapport". Rapport builds trust and leads to cooperation, which naturally makes dispute resolution a lot easier.
Usually, humans adjust their behavior during the course of a conversation, leading to some amount of rapport that of course depends on how well the two persons match. The problem in this context is, however, how to build rapport in an online environment.
There are several models that deal with how a "screen to screen" communication affects rapport. The leading model, the Social Information Processing model, suggests that all social cues can be transmitted by electronic communication, but the rate at which they are is much slower. Consequently, it takes longer to build up rapport if the communication partners do not immediately identify each other as part of the same social group.
While this result is positive for ADR in Cyberspace at first glance - rapport is possible - it has some limiting implications: The most obvious consequence is of course that building up trust and a good negotiation atmosphere takes longer, leading to the fact that the dispute resolution takes longer.
The fact that less social information is transmitted at a given time compared to face-to-face negotiation means that parties will adjust their positions slower, and therefore not get an optimal result quickly. Furthermore, at the beginning of a negotiation, the partner might be seen as a rather dehumanized subject. This, together with the absence of an audience, and less influence of social norms, often leads to more aggressive behavior which inhibits agreement.
All in all, the absence of social cues seems to retard agreement to some degree. While having a neutral in between the two parties may sometimes counter these disadvantages, the lack of verbal may also reduce the parties’ trust in the neutral.