Dr. Jur. Ihab Amro
Prince Mohammad Bin Fahd University
The Use of Online Arbitration in the Resolution of International Commercial Disputes
Because of the increasing importance of information technology in the global economy over the last two decades generally and the Internet in particular, a hybrid system that consists of alternative dispute resolution (“ADR”) and information technology has been created. This new system is known as online dispute resolution (“ODR”), which relates directly to online markets.
ODR is basically used in the resolution of cross-border electronic commerce disputes, and it can be used in the resolution of traditional cross-border commercial disputes, if the parties agree in their contract to settle any dispute that may arise through one of the ODR techniques, particularly online arbitration.
This post deals with online arbitration from both theoretical and practical perspectives, especially that online arbitration, also known as e-arbitration, is a major component of ODR in which arbitrators conduct the process by e-mail exchanges and videoconferencing. Arbitrators rely on documentary evidence to be sent via electronic means (e-documents). In this kind of arbitration, arbitrators may or may not find e-hearing to be conducive.
The topic of this post is very important and relevant to the future of online dispute resolution for solving both traditional and e-commerce disputes, including Business to Business (“B2B”) and Business to Consumer (“B2C”) disputes. It also has numerous benefits for those involved in dispute settlement, either academics or practitioners such as negotiators, mediators, arbitrators, practicing lawyers, legal practitioners advising international trading companies, and corporate counsels. Apart from that, it has benefits for businesses or professionals involved in international trade and dispute resolution in both common law and civil law countries who wish to increase their understanding of ODR techniques in general and of online arbitration. Therefore, the topic of this post is one of the heated topics amongst businesses and their legal counsels.
What are the legal and the practical questions pertaining to the use of online arbitration?
In the theory of law, the main question this post aims to address is whether national laws in both common law and civil law countries deal with issues relating to e-contracting, including e-arbitration agreements, liberally. In addition, this post examines the possibility for the resolution of consumer disputes through online arbitration under national laws, comparing relevant U.S. laws and European legislations.
In the practice of law, this post aims to examine first-hand how national courts in both common law and civil law countries deal with disputes pertaining to e-commerce transactions, and whether courts apply the provisions of national law strictly, especially in case of B2C disputes. Also, this post examines whether national courts will enforce online arbitration agreements and online arbitral awards in the same manner and to the same effect as traditional arbitration agreements and awards.
What is the effect of Coronavirus pandemic on online arbitration?
The current Coronavirus pandemic shows, and possibly proves, that the use of online arbitration for solving disputes arising out of cross-border commercial transactions is useful in practice.
The pandemic crisis dictates using online arbitration for facing both the legal and the practical challenges resulting from the absence of the physical meeting between parties, counsels, and arbitrators.
Therefore, online arbitration has become one of the most important mechanisms of ODR Techniques nowadays. On a basic level, online arbitration depends on online dispute resolution providers (“ODRPs”) from different regions of the world, including Saudi Arabia. To give an example of these, the Saudi Centre for Commercial Arbitration, which provides online arbitration services for small disputes through its online arbitration platform that is based on an online dispute resolution protocol. Through online dispute resolution platforms, the arbitrators conduct the arbitral process by e-mail exchanges, chat room discussions, teleconferences and video-conferences without making face-to-face hearings. The arbitrator(s), therefore, may rely only on documentary evidence sent via electronic means (“e-documents”) to decide the dispute. The online platforms also allow arbitrators to make their final award online.
Can online arbitration agreements be enforced in national courts?
In e-arbitration, the arbitration agreement is concluded, and the arbitral process is conducted, online. That is, the form requirement is not a prerequisite for the validity of an arbitration agreement.
As in a conventional arbitration agreement, an online arbitration agreement shall indicate the place of arbitration, the law applicable on the substance and on the procedures, the arbitration rules governing the proceedings, either in case of ad hoc arbitration or in case of institutional arbitration, the appointment, and the number of arbitrators as well as the appointing authority, if any, and the language in which the arbitration is to be conducted. If the parties have not agreed, the arbitral tribunal will determine the place of arbitration and the language(s) in which the arbitration will be conducted.
Online arbitration agreements can be enforced in national courts in the same manner and to the same effect as traditional arbitration agreements, especially that most countries, especially civil law countries, have recognized the validity of online arbitration agreements before national courts, including, but not limited to, Switzerland, France, Germany, Greece, Austria, and Slovenia. In practice, courts of some common law and civil law countries have decided to enforce online arbitration agreements, including in Switzerland.
Can online arbitral awards be recognized and enforced under national laws?
In e-arbitration, an award is made online, either in ad hoc arbitration or in institutional arbitration. However, a very few common law and civil law countries have recognized the validity of online arbitral awards. In these countries, national laws have not stipulated any form requirement for making arbitral awards. This means that online arbitral awards can be recognised and enforced in national courts of these countries as any other traditional arbitral awards. These countries are The UK, The Netherlands, and Switzerland respectively.
Do common law and civil law countries differ in dealing with electronic commerce disputes?
Certainly, countries differ in dealing with e-commerce disputes, both common law and civil law countries. As a rule, in B2C e-commerce contracts, as well as in B2C traditional contracts, the arbitration clause is null and void, especially in the EU jurisdictions, since the consumer could be bound by an agreement whose terms are generally non-negotiable and is just one simple click away. However, parties retain the right to agree after the conclusion of the contract to settle their dispute through arbitration, and the arbitration agreement might be legally valid and enforceable by national courts.
The consumer in some other jurisdictions might be bound by an arbitration clause contained in a B2C e-commerce contract since he has been fully informed about the consequences of that clause. In the USA, for example, arbitration clauses in standardized consumer contracts are not deemed unfair. This approach has been exercised widely by U.S. courts.
In the light of the above differences, I would strongly suggest creating a mandatory international regulation such as a convention to unify the e-commerce dispute resolution system, especially pertaining to B2C e-commerce transactions. In this, it should be mentioned that the United Nations Commission on International Trade Law ‘UNCITRA’ tried to create such a regulation in the last few years. However, the outcome was not satisfactory because of the different views of the member states on consumer protection, namely, the USA and the European Union.
In a thorough review of the above analysis, this post concludes that online arbitration will affect our future for the following reasons. First, online arbitration is mainly related to e-commerce as an integral part of the digital economy, which has been developed during the last two decades rapidly. Second, some studies link online arbitration to artificial intelligence (AI), which will surely affect our future in different ways, including the use of a machine arbitrator as an application of AI. Third, online arbitration might be used as alternative to traditional arbitration to face some unexpected ‘extraordinary’ circumstances such as the current pandemic crisis. Finally, and possibly most importantly, online arbitration is widely used by online dispute resolution providers, which are linked to the business sector.