Commercial Electronic Arbitration

  • Category:
    Law
  • Document type:
    Essay
  • Level:
    Undergraduate
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    5
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    3382

14Commercial Electronic Arbitration

Contents

Introduction 1

Efficiency 2

Transparency 3

Security 4

Commercial Certainty 5

Conclusion 6

Bibliography 8

Articles 8

Introduction

The internet has made it possible for businesses to sell their services and goods beyond the confines of their geographical borders. Large and small businesses are competing for the global market and the concept of ecommerce is spreading and expanding at an incredible momentum. Consequently, disputes arising from ecommerce transactions are also on the increase as more and more businesses engage in ecommerce. There have been a number of ways through which the legal fraternity has tried to apt their game in the face of this new phenomenon of increasing business transactions across borders. This is aimed at ensuring that, the disputes arising between businesses and clients, businesses to businesses and businesses and consumers both in online transactions and offline transactions (offline disputes can also be solved through electronic commerce arbitration) are effectively solved. One of the ways in which this is done is through the electronic commerce arbitration, also known commonly as the online, cyber, cyberspace, cybitration, virtual arbitration and arbitration online techniques among others1. Cybitration is an Online Dispute Resolution (ODR) technique where a third party, otherwise a qualified arbitrator is in control of the process of arbitration. Conclusively, Commercial Electronic Arbitration (CEA) is defined as the application of technology in information in commercial arbitrations from any locality of the world2. Other ways through which e-disputes are solved is through online negotiation and cyber meditation among others with the only striking difference between this methods and cybitration being that; cybitration is legally enforceable by law.

With the above discussion in consideration, this paper therefore sets to examine the effectiveness of commercial electronic arbitration. This will be done keeping in mind that effectiveness in this case, the attainment of objectives relative to efficiency of commercial electronic arbitration, transparency of the process, security and the commercial certainty of cybitration. In presenting the arguments in favor for the Commercial Electronic Arbitration, various case laws are to be used to act as precedents or to cement the argument that online arbitration is possible especially in cases where there arises questions as to the validity of contracts formed online and which are a majority of the online transactions. This serves to reassure parties concerned in trading over the internet, that is, businesses, consumers, manufacturers and retails, that they are safe for the disputes arising from such business transactions are imperatively solved. Also of importance to note is that, parties to online transactions are assured of the certainties in the legal frameworks in solving e – disputes.

Efficiency

Developments in technology have made it possible to change the traditional practices which were involved during arbitration to modern practices for instance, electronic witnesses. The ease created with which online arbitration makes it possible for many witnesses to testify in a case which they would otherwise have failed to do so were they required to be present in person during the proceedings. This also brings into the scenario the ease with which parties can access the arbitrator easily. Online arbitration process makes it possible for 24 hour service accessibility between the parties and the arbitrator. According to3, the International Criminal Court (ICC) uses online arbitration by having web based systems which are used in conducting proceedings which are related to arbitration. Others institutions that offer online dispute resolution services also includes, American Arbitration Association and the World Intellectual Property among others. Yuksel 20074 further argues that, institutions which have been ingrained in providing the traditional methods of dispute resolution are now shifting to proving online dispute resolution methods signifying a shift in the modus of operandi of offering arbitration services

Commercial electronic arbitration also reduces costs which are associated with traditional disputes resolution methods like the meeting of face to face by the parties involved in a case. The reduction in the costs involved in commercial electronic arbitration is one of the desirable effects of the use of technology in arbitration. Parties no longer have to spend time travelling neither the costs that are involved in travelling to go to courts to resolve the disputes5. Efficiency as defined to be the use of minimal inputs in attaining maximum output is attained in commercial electronic arbitration when costs are reduced. In this regard, most of the disputes which need commercial electronic arbitration are disputes which arise online. As a result, one may find that the parties to the dispute come from different countries and travelling to solve a dispute in a traditional court may not make business sense. Businesses wants to cut down on their spending and therefore commercial electronic arbitration inherently saves costs that may have been incurred through traditional methods of dispute resolution to attain the same results. In addition, businessmen also save time to carry on their day to day activities without too much interruption of their work schedules and this means that their business activities are not paralyzed by court proceedings. Rabinovich – Einy & Katsh, assert that e – disputes are handled more effectively and more satisfactorily through online arbitration6.

In most cases, commercial electronic arbitration is used to solve disputes which arise between B2B as opposed to B2C disputes which are mostly solved through channels of online meditation and conciliation. The claimant in this case, B2B disputes incurs less litigations costs as in commercial electronic arbitration cases, costs are not equally shared like in the traditional dispute resolution through state courts. Here, the claimant benefits from accessing the judicial services. This is because, if the being claimed against is associated with a quality brand programme, the business claiming will pay nothing in the commercial electronic arbitration. In addition, in some cases, the arbitration costs are charged to the business.

The speed with which information is circulated online in commercial electronic arbitration also saves time and the cost of transferring evidence needed for the arbitration7. For instance, if a claimant is in country X and wants to file evidence in form of a file to an arbitrator in country Y. The speed with which the evidence in the file will reach the arbitrator is what makes the whole procedure very fast. Efficiency in this case is attained through fast procedural dispute resolution and ultimately a solution to the dispute is also attained at a fast rate. Also, associated to the speed of the online arbitration procedure is flexibility of scheduling of the arbitration process which can be done to suit the parties and the arbitrator.

An advantage to the arbitrators is that when the documents presented as evidence for the case are large and are electronically submitted, the arbitrators can use the keywords to identify the most crucial evidence in the large files without having to go through the entire document or files8. This ultimately serves the advantage of speeding up the process of reaching at a solution for parties involved in the e – dispute.

Transparency

One of the principles that are widely practiced in commercial electronic arbitration is procedural sovereignty. The litigants are given the autonomy to organize the procedure that is going to be followed and also choose the arbitrator. This gives room for transparency for no party can claim to be short changed by the other party. In addition, in CEA, contractual free will is taken into consideration in that; equal opportunities and circumstances under which the electronic arbitration will take place are also taken into consideration9. For instance, parties must have access to the arbitration institution so as not to undermine equality of the disputants.

The due process of law, otherwise commonly referred to as the principle of contradiction in CEA dictates that parties to the arbitration are treated on equal terms to ensure that justice is equally served. Therefore, arguments which are presented by the parties must equally be presented and the same case applies to the evidence shared between the parties and the arbitrator. This is in such a way that, when either of the party sends documents to the arbitrator, the same documents must be shared by the other party. This ensures that the whole process is transparent and that there is no party that is being favored by the arbitrator or the arbitral institution for all the documents are shared openly between the parties and the arbitrator/arbitral institution.

The fact that in CEA, the arbitrator cannot decide on a case using evidence from one of the parties ensures that there is transparency in the electronic arbitration process. This means that, no party to the arbitration process has the right to constitute evidence on their own to aid the arbitrator in deciding the case. This ensures that, experts in IT do not manipulate the data to lure the arbitrator into thinking that there are the ones on the right. For instance, if it is a contract, the arbitrator must receive the contractual agreement from the buyer and the seller in the form of electronic date messages showing the time the contract was entered into (formation of a contract) and also messages showing that the contract was executed (contract execution)10. The fact that the internet surpasses national borders in online arbitration is an advantage that brings transparency. The internet offers that neutral point where the parties or the disputants meet with their chosen arbitrator to resolve the dispute11. This means that, judicial barriers that lean towards the different nations where the disputants are from are also surpassed which enhances transparency for there is no allegiance to judicial laws of a certain country.

Security

The inevitability of technology in our modern lives makes it evolve on a day to day basis and provide new advancements that better our lives. In the cases of commercial electronic arbitration, advancements in technology like the secure electronic signature technology serves the purposes of ascertaining the authenticity that documents and emails sent to the arbitrator are sent by the persons who are supposed to send them, for instance, the parties to the dispute. Therefore, businesses engaging in e commerce can be certain that commercial electronic arbitration is not subject to interference by other parties, other than the parties to the dispute and the arbitration institution. Subsequently, gain the confidence12 of doing businesses online knowing too well that e disputes are thoroughly solved among parties.

Documents presented by parties electronically are confidential and therefore, it is imperative that they are protected by ensuring that adequate security measures are put in place. In addition to the secure electronic signature technology, other measures which are adopted mostly by the arbitrary institutions to ensure that there is confidentiality in the whole process of CEA includes; the use of SSL protocols, use of encoding techniques, protection of the arbitral institutions databases from cyberspace attacks among others.

Technology continues to advance and more advancement are being made on a daily basis. As the advancements increase, businesses conducting their activities online can rest assured of the security of online arbitration and the information submitted in resolving the e disputes. Businesses need to have more faith in Commercial Electronic Arbitration as fresh advances will continue to be introduced in CEA. Softwares used for safety in CEA and also in improving its efficiency will continue to be developed13. Other software’s for identification of business authenticity, processing information and also in saving evidences and the procedures in CEA will make the whole process safer14. In addition, businesses which are reluctant to use CEA continues to be persuaded by the benefits realized when e – disputes are solved through CEA and therefore, they will ultimately embrace it making it the only attractive method of solving online disputes arising from international transactions among businesses 2315.

Commercial Certainty

The abolishment of distance in resolving e – disputes creates the confidence to businessmen that justice will ultimately be delivered or realized. Commercial electronic arbitration ensures that justice is served the same way as the circumstances which gave rise to the e – dispute. Consequently, claimants are assured that; if for instance, they are far away from the court that is presiding over the dispute; they are going to be guaranteed justice which would otherwise have been an impossible deal.

Some businesses have been registered with certain trust marks and trademarks in the international business arena which certifies that they comply with decisions that is arrived at through commercial electronic arbitration. In this regard too, businesses may not want to lose the reputation that they have built online with their suppliers and their clients, risk suspension of their site and also the removal of the trust mark that is bestowed on them ultimately discouraging other businesses and clients from doing business with them16. Therefore, through the various modes through which the commercial electronic dispute resolution procedures that are available to ensure that businesses adhere to the decisions arrived at, there is commercial certainty to clients and businesses that disputes are going to be resolved amicably through commercial electronic arbitration. Other methods used to ensure that decisions arrived at through CEA are adhered to include financial guarantees and setting up of escrow accounts all goes a long way in maintaining confidence in businesses and suppliers that online and commercial business transactions are possible17.

Whereas there are many methods through which disputes arising from ecommerce (e-disputes) are solved, commercial electronic arbitration is the only e-dispute resolution method that offers a final decision. This is because; its modus operandi is quasi judicial and therefore is used in the place of judicial decisions18. This in a sense gives businesses transacting internationally the certainty that there are legal ways in which disputes arising from online transactions can be solved legally. That; online contracts are legally enforceable and that they meet all the qualifications that are needed for them to be deemed as enforceable contracts. This is indicated through some examples of cases where courts have used the provision of clickwraps and webwraps to show that the contracts are valid and legally enforceable. In I.Lan systems, Inc. v. Netscout
Service Level Corp., the court held that the software buyer was subject to the agreement by the virtue that he clicked on the clickwrap provision after the purchase of the software. The court ruled that, the buyer was subject to either reject/accept the seller’s license to which the buyer consented to and clicked the clickwrap “I Agree”. In
Forrest v. Verizon Comm., Inc., 805 A.2d 1007, 1014 (D.C. 2002), the court also held that, Forrest had entered into an agreement with Verizon Comm., Inc. irrespective of whether he had read the contents of the agreement or not. This further illustrates the evolving nature in the judicial arena in allowing new provisions to rule the virtual world (Clickwraps and Webwraps)19. As more and more provisions continue to be embraced in online justice, so will businesses feel secure in the commercial international transactions and hence realize more profits.

Businesses transacting online can rest assured of the validity of the Commercial Electronic Arbitration in that, the regulations which govern the process are the same as the traditional arbitration regulations. The fundamental nature of electronic arbitration and the traditional method of arbitration differ only in the procedural phase. Moreover, in CEA20, additional doctrines of clarification of the process of arbitration and the principle of equal access for both parties are emphasized making the process have an edge over traditional method of arbitration and hence better. This should ensure international businesses of certainty in their operations in that, nothing changes from the method of administering justice, just the formality part.

Crucial to note that, disputes may present a growing concern to the online community and the certainty of businesses in international transactions. It is obvious that, there is a growing concern as the number of transactions conducted online and internationally continues to increase. Businesses maybe in a dilemma of how to realize their profits if the e disputes arising online will eat into their profits while they are being solved. Oblivion to the business community is the fact that, the virtual world is made up of informational tools21 tools which are designed and manipulated to be used as it is so desired to attain the maximum benefits that they are to be achieved. The information tools so developed in line with online arbitration opens doors for businesses to ensure that their businesses are not disturbed in the event of e disputes arising from their online transactions. This ensures that there is commercial certainty in businesses.

Conclusion

The above discussion illustrates that Commercial Electronic Arbitration is a new issue emerging in the legal arena. It involves various aspects, some of which are still under investigation so as to conclusively state that, it has many advantages than its associated disadvantages. From the argument, there are many benefits that are realized through Commercial Electronic Arbitration, some of which includes; efficiency, transparency, commercial certainty and security. Commercial Electronic Arbitration has attained benefits and speeded up cases which would otherwise brought a lot of inconveniences in the form of time, money spent and long procedural process that may have involved one of the disputants travelling to where the arbitration would take place. Imperative to note is that, there is more to Commercial Electronic Arbitration than meets the eye of businesses. Large businesses transacting online can rest assured that the disputes arising from the online transactions, herein, termed as e – disputes can be solved amicably and are legally enforceable. Moreover, with the technological advancements being adopted in solving disputes, the adoption of CEA in solving e – disputes will be inevitable in the long run.

Bibliography

Articles

Christ, R. E. & Peele, C. A 2008, Virtual World: Personal Jurisdiction and Click – Wrap Licenses. Intellectual Property & Technology Law Journal. Volume, 20, Number 1. 1- 5.

Dr. Al – Adwan, M. K. M 2011, The Legitimacy of Online Alternative Dispute Resolution (ODR). International Journal of Business and Social Science. Vol. 2, No. 19 (Special Issue – October 2011).

Haloush, H. A 2008, Internet Infrastructure and Online Alternative Dispute Resolution, 25 J. Marshall J. Computer & Info. L. 217 (2008). The John Marshall Journal of Information Technology & Privacy Law.

Katsh, E 2004, Bringing Online Dispute Resolution to Virtual World: Creating Processes Through Code. New York Law Journal, Vol. 49, Issue 13: 24. pp. 271 – 291.

Katsh, E., Rifkin, J. & Gaitenby, A 2000, E – Commerce, E – Disputes and E – Dispute Resolution: in the Shadow of “eBay Law” Ohio State Journal on Dispute Resolution. Volume 15:3.

Kohler, K. G 2005, Online Dispute Resolution and its Significance for International Commercial Arbitration. Published in Global Reflections on International Law, 693, ICC Publishing, 437 – 456.

Larson, D. A. “Brother Can You Spare A Dime” Technology Can Reduce Dispute Resolution Costs When Times Are Tough and Improve Outcomes. Nevada Law Journal, Vol. 11: 523.

Mohammadmota, A. & Alirezahasani 2014, Assessment of Electronic Arbitration Regarding Dispute Resolution, Research Journal of Recent Sciences, Vol. 3 (5), 7 – 14.

Petrauskas, F. & Kybartiene, E 2011. Online Dispute Resolution in Consumer Disputes. Jurisprudence, 18 (3), p. 921 – 941.

Rabinovich – Einy, O. & Katsh, E 2012, Technology and the Future of Dispute Systems Design. Technology and the Future of DSD. Spring 2012. pp. 152 – 198.

Shah, A 2004, Using ADR to Resolve Online Disputes. Richmond Journal of Law & Technology, Volume X, Issue 3, 10 RICH. J. L. & TECH. 25 (2004). Available at http://richmond.edu/jolt/v10i3/article25.pdf.

United Nations Conference on Trade and Development 2003, Dispute Settlement: International Commercial Arbitration, Electronic Arbitration. New York & Geneva. 1 – 58.

Yuksel, A. E. B. 2007, Online International Arbitration. Ankara Law Review, Vol. 4. No.1. pp. 83 – 93. Retrieved from, http://dergiler.ankara.edu.tr/dergiler/64/1542/16895.pdf, on 26th August, 2014.

Cases

Forrest v. Verizon Comm., Inc., 805 A.2d 1007, 1014 (D.C. 2002)

I.Lan systems, Inc. v. Netscout
Service Level Corp.

1
Petrauskas & Kybartiene 2011, 928

2
Mohammadadmota & Alirezahasani 2014, 9

3
Yuksel 2007, 84

4 Ibid 3 (84)

5
Rabinovich – Einy & Katsh 2012, 155

6Ibid [5] 2012, 155

7
Shah 2004

8
United Nations Conference on Trade and Development 2003, 42

9
Ibid [8], 40

12
Haloush 220, 2008

13
Katsh, Rifkin & Gaitenby 2000, 722

14
Ibid [2], 10

15
Dr. Al – Adwan 2011, 167

16
Kohler 2005, 454

19
Christ & Peele 2008, 1