This page is aimed at showing the advantages of Alternative Dispute Resolution (ADR) in Cyberspace over both traditional litigation and traditional alternative dispute resolution.
One of the main advantages of ADR in Cyberspace is that it avoids complicated jurisdiction issues. The following section gives you an overview over jurisdiction from both an US as well as an international perspective and shows why the jurisdictional problem can be a significant deterrent from using traditional dispute resolution for cyberspace disputes.
In light of the fact that offline ADR mechanisms are usually located (have a physical location), the issues of finding a provider in the vicinity of both parties may be additionally cumbersome. Online ADR, or short Online Dispute Resolution (ODR), offers a solution to this problem.
Public International law, governing the relations between states, underlies all national jurisdiction law. Even though states make their own national laws regarding jurisdiction, they are generally bound to the principles enunciated in public international law.
The basic rules were set up in the so called SS Lotus case. read more about SS Lotus and Jurisdiction principles
The doctrine is largely known as the so called “objective territorial principle” and can has been stated by the ICJ in SS Lotus as follows: “offences, the authors of which at the moment of commission are in the territory of another State, are nevertheless to be regarded as having been committed in the national territory, if one of the constituent elements of the offence, and more especially its effects, have taken place there.” That means that a state can exercise jurisdiction as long as one constituent element of a crime took place in the state.
This rule has long been the limit to jurisdiction in public international law, limiting at least the exercise of jurisdiction in criminal cases. However, recent developments specifically in antitrust law have given rise to the so-called “effects-doctrine”. This rule, developed first by US courts, allows jurisdiction if the conduct in question “was meant to produce and did in fact produce some substantial effects in the United States” (Hartford Fire Insurance Co. v. California, 113 S. Ct. 2891 (1993)). The rule has been used by several national courts of European states in regard to antitrust violations by big corporations conducting business in a European state. read more about extra-territorial Jurisdiction
It is clear that jurisdiction in international cyberspace cases could only be based on the effects doctrine. Given the broad range of the possible disputes, it is at least questionable whether the current state of customary international law allows for such a broad application of international jurisdiction.
Where only civil disputes are concerned (as is the case with all conflicts which could be subject to alternative dispute resolution), the limits of international jurisdiction have not yet been tested. Public international law only clearly refers to criminal cases, as here the sovereignty of the country seeking to subject a foreign citizen to it’s criminal law system most clearly clashes with the personal sovereignty that persons home country has over him. read more about Public International Law and Civil Jurisdiction
In Practice, most courts are not concerned with international law, and to date there have been no diplomatic protests based on exercise of civil jurisdiction. Whether the issue will come up at all, and how it will be resolved, therefore remains open. However, even if we assume that there is a legal basis to exercise jurisdiction under international law, enforceability poses an additional problem:
The rule for enforcing judgements and other court decisions under international law is clear: A state may only enforce his laws on his own territory.
The problem for cyberspace is apparent. Even if a court is allowed to render judgment, enforcement will be difficult at best. Civil judgments are generally not enforced across borders, making it almost impossible to retrieve damages from a company that has no capital in the state issuing the judgment.
Unless the home state of the company is willing to cooperate, a customer could not enforce American law against a company that merely has its website available to American customers. Consequently, the only way to retrieve damages etc. would be suing in the companies’ home state.
While this may be possible for some, most customers won’t have the time, resources or knowledge to lodge a claim in a foreign country. Furthermore, many businesses engaging in dubious techniques might base themselves in a country with especially lenient laws to evade any lawsuits.
Another problem is caused by consumer-to-consumer platforms like Ebay or the Amazon marketplace, where goods are sold by private persons or small businesses. Many countries have special protections in place for dealings by private persons, and enforcing a judgment may be especially difficult.
The international law on enforcement of judgments therefore often precludes effective resolutions of cyberspace disputes.
Personal jurisdiction is the main requirement to exercise jurisdiction over any individual or corporation in a US court. With the increase of commerce, grounds for personal jurisdiction have evolved from a strict requirement of presence in a state over jurisdiction over property towards jurisdiction based on minimum contacts. For a short summary of minimum contacts, click here
The Landmark case for jurisdiction in cyberspace is Zippo Manufacturing. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 [Zippo manufacturing]. The case involved a domain name dispute about the domain zippo.com. The case is remarkable for a number of issues. First of all, the court in Zippo Manufacturing conducted and extensive study of internet cases, each with a short summary of the case in order to determine the outcome (this also makes the case a very good resource to read).
Secondly, the court established three categories of websites:
The court did not decide where the border is for “interactive” websites, concluding that the case at hand concerned an active commercial page.
Indeed, decisions on the issue have been divided. Interactivity in the form of exchange of information with site visitors by email or a chatroom has been held insufficient, however giving away booking information or reservations might be enough to warrant jurisdiction, compare this Article
Another issue in Jurisdiction is of course the proper forum or venue. This does not, however, lead to any new problems not yet discussed by courts. Venue usually follows personal jurisdiction, and does not lead to any distinct issues.
The costs for a traditional litigation are very high. Attorney’s fees range between $100 and several $1000 per hour. Read more about the numbers here.
Generally, as reports for example from the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System (the report is available here) indicate, the civil law system is widely regarded as broken due to its high costs. Most cases do not withstand a simple costs-benefit analysis, and cases are settled because litigation would prove too expensive. A big part of the Problem is caused by discovery rules. As a result, more than 80% of lawyers asked in the survey believed that disputes today are settled on the costs, not on the merits (for a Summary of the results, see: here and here).
In intellectual Property disputes, which can frequently arise out of Cyberspace conduct, rates are especially high. Patent litigations have an average cost of 3 to 10 Million Dollars. Read more on IP-Litigation costs.
While contingency fee arrangements enable the Plaintiff to spread the costs risk between him and his lawyers, such agreements are not available for defendants and have encouraged investors to pursue more patent claims regardless of whether they actually use the patent in any product.
A Significant amount of these costs is caused by Discovery and Production of Documents. As a report of the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System (The ACTL Report) indicates, Discovery costs are one of the main deterrents from filing a civil suit. Discovery is frequently abused, extremely costly and poses significant “traps for the unwary” (ACTL-Report). In the extremely cost-intensive field of Intellectual Property litigation and especially patent disputes, Discovery costs can make up 60% of the total litigation costs (see WIPO Report). The Impact of Discovery costs is especially visible in comparison with countries that do not have discovery procedures, like Germany. German patent litigation costs are less than 10% those of US litigation costs. While discovery is not responsible for all of this discrepancy, it is likely to make up a big chunk of it.
ADR in Cyberspace can help lower the costs especially in regard to Discovery costs. In Arbitration proceedings, discovery can be adjusted for the needs of the case and negotiation and meditation proceedings need no discovery at all, cutting down the costs significantly. Even if discovery is needed Electronic filing of documents and access to documents via Cyberspace can significantly cut costs.
First of all, when Communication takes place by email and documents can be filed electronically, the costly production and mailing of documents is avoided. Moreover, a better knowledge of cyberspace issues helps prevent costly and unnecessary discovery requests by parties. A bad understanding of the needs and quirks of electronic discovery has been identified as a major cost factor in discovery (see ACTL-Report). Cyberspace can also help speed up discovery, by allowing small requests or single questions to be answered quickly via E-mail, chat, or making available documents online for view.
Another cost factor that can be omitted is travel. Dispute Resolution in Cyberspace does not require the parties to actually meet at a certain point. All negotiations can take place by electronic communication while still having real-time communication through chatrooms and even voice and image chat. Getting rid of the travelling costs is especially important in disputes arising out of Cyberspace, where the parties might be located in distant countries. The high costs for travelling to a country to engage in a legal proceeding might well preclude many private persons or small businesses from asserting their rights in Cyberspace. ADR in Cyberspace offers resolution without any travel. Eliminating the requirement of physically meeting in one location also has other implications that will be discussed below.
The ACTL Report also notes that 55% of lawyers like it when judges require ADR and more than half thought that Arbitration was faster and less expensive than traditional litigation.
Another major advantage of Alternative dispute Resolution in general, and ADR in Cyberspace in specific, is a speedy resolution. Traditional litigation is time consuming, and the use of Cyberspace in Dispute resolution can shorten the short times involved in traditional ADR even further.
Again, an average number for civil suits is hard to contrive, but in the experience of lawyers, even simple civil proceedings can take months, if not years to resolve. The same is true for almost all legal systems. Cases in German courts usually take at least half a year to conclude. In Italy, where there have been some studies about the average duration of proceedings, an average proceeding in front of a civil court lasts 771 days!
In regard to intellectual property disputes, the WIPO has reported that US patent cases take about 24 months, with an additional 12 months or more for appeals to resolve, German cases take 12 months with 15-18 months for appeal. In France, patent cases can take up to 2 years in the first instance, with another 2 years for appeals.
WIPO reports that, in contrast, 73% of all cases submitted to the WIPO for Meditation have settled within 7 months. WIPO also offers Arbitration and expedited Arbitration. With the use of electronic document filing, expedited Arbitration can be completed in 3 months. The average length of arbitration by the WIPO is between 3 and 14 months.
Offline ADR can already settle disputes in days or months, but Online ADR has the potential to solve disputes in hours:
It is also argued that Online Dispute Resolution will provide parties with a “dispassionate approach to the merits of a case.” David R. Johnson, Screening the Future for Virtual ADR, 51 DISP. RESOL. J. 117, 118 (1996). Some scholars suggest that interposing a screen between the parties, which may not trust each other or feel inferior, takes away the “passion” that can lead to prolonged disputes.
It does indeed seem sensible that in some disputes, keeping the dispute in Cyberspace and not going into the character, manners or economic status of the parties is beneficial. On the other hand, studies suggest that people act more irresponsibly when the human nature of their counterpart is obscured. Studies have for example shown that drivers tend to be more aggressive at other drivers because their faces cannot be seen and the front of the car is instead substituted. The conduct in online discussion forums casts further doubt on the theory that people act more rational when not being confronted with their counterpart.
Anonymous bidding does under some circumstances promote agreement. The completely impersonal, automated process works especially well under circumstances where the dispute itself is completely non-personal, like in insurance cases where no party has something to lose.
As can be seen in the section about jurisdiction, it is often necessary for a Plaintiff to seek redress in the forum where the defendant resides. That may, in some circumstances, lead to a feeling of inferiority on the side of the Plaintiff.
Dispute resolution in Cyberspace offers both parties a neutral forum, in which no party has a “home court advantage.” Richard Michael Victorio, Internet Dispute Resolution (iDR): Bringing ADR into the 21st Century, 1 PEPP. DISP. RESOL. L.J. 279, 292 (2001). While this may be only a psychological factor, a feeling of equality may well promote speedy resolution.