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The new frontier

Legal Report: ADR
|Written By Robert Todd
The new frontier

The Université de Montréal law faculty’s Centre de recherche en droit public drew the ire of lawyers across the globe in 1996 when it launched the CyberTribunal project. The groundbreaking venture was the first to offer consumers an exclusively online mediation and arbitration platform to settle disputes with online vendors. Many lawyers were appalled by the brazen experiment in managing disputes between parties that would never come face to face and, perhaps more to the point, not pay counsel to help generate a settlement.

Yet the project proved successful, helping solve a number of disputes before wrapping up in 1999. Internet-based dispute resolution continued to gain steam in 2000 when the Internet Corporation for Assigned Names and Numbers (ICANN) certified ODR provider eResolution to hear domain-name disputes. In an initial two-year period, that system helped settle over 500 conflicts involving parties from dozens of countries. At the same time, the mammoth online auction site eBay turned to another ODR provider, SquareTrade, to help sort out disputes involving its customers. It went on to help resolve over a million disputes in five years.

Companies soon popped up in Canada to cash in on the ODR boom. To the dismay of this country’s online dispute resolution faithful, however, each one eventually flamed out. Experts say the failure was due in part to the high startup costs at that time for an ODR system (hundreds of thousands of dollars, versus about $20,000 now) and overly complex systems that kept users away. At the same time, while governments and companies across the globe have streamlined high-volume, minor disputes with ODR, not a single Canadian jurisdiction has embraced it.


That could soon change. It appears online dispute resolution is headed for a comeback in 2010, with one provincial government hoping to roll out a pilot project for its Small Claims Court, and at least one new online negotiation system was set to be released this past summer.

There is plenty of reason to believe Canadians can solve many of their disputes solely — or primarily — on the Internet. It has certainly worked elsewhere.

CyberSettle Inc., an ODR company based in Old Greenwich, Conn., is perhaps the most prominent provider in the world. It holds patent rights to what it describes as an “automated, online, double-blind bid dispute resolution system.” The system helps users quickly match offers with demands, around the clock. If parties fail to come to a mutually agreed settlement, CyberSettle makes available a telephone facilitator to mediate.

The company says it has managed over 200,000 transactions and facilitated more than $1.6 billion in settlements in the past 10 years for insurance companies, third-party administrators, self-insured entities, and municipalities. More than 150,000 U.S. lawyers have also registered with the system, with 30,000 having used it to settle cases. Large Canadian municipalities should take note of New York City’s experience with CyberSettle. It started using the system in 2004, and by 2009 had used it to settle over 4,000 personal injury and property damage claims, valued at nearly $47 million. The city estimated the online system saved it about $70 million in litigation costs over that period.


San Jose, Calif., e-commerce giant eBay, and its subsidiary PayPal, have also taken to ODR over the past decade. The company now manages over 60 million disputes each year, many of which require no human mediator whatsoever, says PayPal’s ODR director Colin Rule. Since its initial experiment with the now-defunct SquareTrade, eBay has brought its system in-house. With Rule leading the way, it has developed software programs to replace tasks previously handled by arbitrators and mediators, allowing it to provide ODR in 16 different languages for its various properties around the world. Rule now considers eBay’s ODR system the largest in the world by volume. That users pay about $20 to use it has surely played a role in that achievement.


These are just two of the worldwide success stories for Internet-based dispute resolution. ICANN continues to use ODR to manage the high volume of domain-name disputes it manages; all European Union member nations have signed onto a small claims court project; Michigan dabbled with an e-trial and cyber court system before the economic recession took hold and squeezed the budget; and Mexico has undertaken an ambitious online system to manage consumer disputes with large corporations.


A few Canadian projects could soon be added to this list of ODR triumphs. Smartsettle, a company based in Abbotsford, B.C., planned to have its own small-claims style ODR system up and running by the end of the summer, says president, CEO, and inventor Ernest Thiessen. The Smartsettle One system features a proprietary “visual blind bidding” system that will display proposals and suggestions to all parties in a single-issue dispute. The system will permit asynchronous progress of disputes, allowing parties to work toward a resolution despite conflicting schedules. Thiessen says the cost has yet to be worked out, but is likely to run around $200 per user.


On the government side, British Columbia’s Ministry of the Attorney General hopes to soon roll out Canada’s first public-sector ODR pilot project for its Small Claims Court. The program would largely focus on quantifiable disputes, such as debt claims, perhaps valued up to $10,000. The ministry’s motivation to move online stems partially from a problem familiar to many employers: the impending mass retirement of baby boomers is expected to leave a big hole in its workforce. The shift also makes sense in light of the younger generation’s familiarity with online transactions, whether it be paying credit card bills or buying a new pair of shoes.


The ministry is in talks with a number of service providers and believes technology similar to that used by eBay will translate to court services. It hopes to have the pilot project up and running sometime this year or next. Long-term adoption of ODR will depend on client satisfaction, savings to the public treasury, and settlement rates demonstrated by the pilot project, says the ministry.


Others within Canada’s legal industry are using the web to facilitate what might be called hybrid-style ODR systems. Colm Brannigan is a Brampton, Ont., mediator and arbitrator who wrote his LLM thesis at Osgoode Hall Law School in the late 1990s on ODR. He hopes to transform his mediate.ca web site into the home of a secure chat room where he would mediate commercial law, family law, and estates law disputes between individuals via webcam. He is in talks with a U.S. company to provide the technology to make that dream happen. He hopes to have the system online sometime this year.


Allan Stitt, the Toronto-based president of ADR Chambers and the Stitt Feld Handy Group, has long been a proponent of Internet-based dispute resolution. The past president of the ADR Institute of Canada Inc. has helped ADR Chambers develop its eVideo mediation system that was rolled out this year. For $250 per user, it allows parties to participate in a traditional mediation using the Internet and telephone to conference remotely. It also allows parties to share secure documents and meet in a private, online meeting room after talks break.


Stitt has previously been linked with efforts to bring a system similar to CyberSettle to Canada, but says he is not currently involved in any such efforts. Yet he is convinced Canadians looking for a quick, cheap, and Internet-based tool to resolve their minor disputes will soon have plenty of options. “I would predict that if we have this discussion a year from now, this will be a very different discussion, and I think a lot of people will have come up with a lot of new ODR initiatives that will be really interesting and that the market will think are great,” he says.


Time will tell if this second generation of ODR initiatives gains traction in Canada. There remains a large contingent of naysayers who believe the Internet is too impersonal a forum to resolve disputes, and hasten to point out that private settlements on sites like CyberSettle are unenforceable. But if the words of late U.S. Supreme Court chief justice Warren Burger hold true, ODR could well usher in a new era of dispute resolution. Said Burger: “The notion that most people want black-robed judges, well-dressed lawyers, and fine-panelled courtrooms as the setting to resolve their dispute is not correct. People with problems, like people with pains, want relief, and they want it as quickly and as inexpensively as possible.” 

  • RE: The new frontier

    Pascal
    Hi Robert

    Did BC's ever roll out their Small Claims Court test pilot since your article in 2010. I went on their web site and could not find anything.

    What about that new online negotiation system which was supposed to be released during the summer of 2010.

    I am very interested in learning more about this field and would appreciate if you could let me know of any recent developments in ODR that you're aware of.

    Thanks for your reply
    Pascal

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