May 4, 2012

A public meeting of the Study Group on Online Dispute Resolution was held under the auspices of the Advisory Committee on Private International Law on May 4, 2012. The meeting was chaired by Keith Loken, the Assistant Legal Adviser for Private International Law.

The meeting was convened to discuss the continuing work in UNCITRAL on the development of online dispute resolution (ODR) legal instruments for resolving both business to business (B2B) and business to consumer (B2C) cross-border e-commerce disputes, in anticipation of a fourth meeting of the UNCITRAL working group on online dispute resolution scheduled to take place in New York, May 21-25. The working group was established by the Commission in July 2010 pursuant to a U.S. proposal. The UNCITRAL working group is preparing generic ODR procedural rules applicable to low- value, high-volume cross-border e-commerce transactions as well as separate annexes on guidelines and minimum requirements for ODR providers and arbitrators, substantive legal principles for resolving disputes, and a cross-border enforcement mechanism.

The Study Group reviewed the current draft of the proposed UNCITRAL generic ODR procedural rules (WP 112) and the addendum thereto (WP112, add1), including the comments to both documents generated through the informal intersessional discussions with other delegations regarding the draft rules. The discussion focused first on the proposal that a new provision should be added to Article 1 (Scope) of the draft generic rules stating: "These Rules shall govern the arbitration except that where any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail." As explained in the comment, the provision is modeled on Article 1(3) of the UNCITRAL 2010 Arbitration Rules. Several participants in the Study Group concurred that the new provision states a fundamental tenet of law -- that the rules which will be incorporated as part of private contracts cannot modify applicable mandatory law. There were no further substantive comments on WP 112.

Regarding WP 112, add 1, the Study Group discussed the proposed addition of a provision stating that decisions would be made on "equitable principles" and whether that term has the same meaning as the terms "amiable compositeur" or "ex aequo et bono" as they are used in Article 35(2) of the UNCITRAL 2010 Arbitration Rules. The view was expressed that, from a U.S. perspective, "equitable principles" refers to principles within the law, but the "amiable compositeur" and "ex aequo et bono" refer to decisions based on principles outside the law and, thus, the terms are not equivalent. However, other views were expressed that from a functional perspective decisions based on "equitable perspectives" in the U.S. can, in fact be based on principles outside of the law (certain FINRA decisions were given as an example) and, thus, there may not be much practical distinction. It was suggested that the term "equitable principles" is best thought of as having three elements, "amiable compositeur", "ex aequo et bono", and fairness.

A question was raised regarding whether the U.S. delegation has a view of what enforcement would look like under the system. It was pointed out that it has been generally agreed in the Working Group that ODR arbitral decisions should be final and binding, with no appeals on the substance of the dispute, and carried out within a short time period after being rendered. There was also a general consensus in the Working Group that it could be assumed the New York Convention would be applicable to enforcement of arbitral awards under ODR cases in B2B and B2C cross-border disputes, but that reliance on that mechanism alone was insufficient.

It was noted that a range of additional approaches is anticipated, including name and shame, private payment mechanisms, or requiring deposits by vendors who want to use the ODR system.

The Study Group concluded with some observations and favorable comments regarding the ODR pilot project for the UNCITRAL generic rules sponsored by the Czech Republic.