Building a Global Small Claims System for Cross-Border Transactions

Colin Rule (Director of Online Dispute Resolution, PayPal)Zbynek Loebl (ADR.EU / the Prague Arbitration Center)Vikki Rogers (Institute of International Commercial Law, Pace University)

The Challenge: Creating Justice for eCommerce

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Traditionally business and consumer issues have found redress in courts

However, eCommerce issues are difficult for courts to handle because the issues cross multiple jurisdictions

Traditional judicial mechanisms also struggle with eCommerce cases because:the transactions are low value litigation is expensive it is difficult to enforce foreign judgments

The solution is ODR: global, cross-jurisdiction, low cost

A Decade of Progress

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1999: OECD publishes “Guidelines for Consumer Protection in the Context of Electronic Commerce”

2000: US FTC and Department of Commerce host “Alternative Dispute Resolution for Consumer Transactions in the Borderless Online Marketplace” conference

2002: The American Bar Association releases recommended standards for eCommerce Dispute Resolution

2003: GBDe / Consumers International agreement 2004: Global Trustmark Alliance Organizing Committee launched at GBDe

Summit in Malaysia 2007: OECD Recommendations call for states to establish mechanisms for

arbitration of consumer disputes 2009: OECD meeting to revise ODR recommendations; for the first time

coming out with a report on regulation of Internet intermediaries

New Initiative: The Global eCommerce ODR Proposal

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The ODR Initiative is intended to promote consumer confidence in e-Commerce by providing quick resolution and enforcement of disputes across borders, languages, and different legal jurisdictions.

Modeled on the ICANN system

Model law/cooperative framework and rules developed over 6 months by an extended working group of public, private, academic, and NGO representatives

Advanced as a formal proposal of the US Government to the Organization of American States in January 2010

CentralCaseDB

Central Clearinghouse

National ODR Provider

National ODR Provider

ODRProviders

Key Components:A Central Clearinghouse, who maintains the case database; National Administrators; and ODR providers approved by the National Administrators

Seller

Seller

Seller

Overall System Design

Sellers each opt-in to the system voluntarily

ODR providers apply and are approved individually

CentralCaseDB

Central Clearinghouse

ODRProviders

Buyers and sellers work through their National Administrators to participate in the system. Neutrals are selected from the approved ODR providers.

SellerBuyer

Neutral

Once a decision is rendered, the appropriate National Administrator is informed of the outcome, and works to ensure the seller abides by the decision.

NationalAdministrator

NationalAdministrator

Global Buyer Protection System Design (2)

• Where to place the system?

• Incentives for businesses to join?

• Outreach to consumers?

• Enforcement mechanisms?

• Private or public system – or hybrid?

• Regional vs. Global?

• Payment Intermediaries or Merchants?

• New York Convention?

Questions to Answer

Conclusion

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E-commerce cross-border disputes: will form a significant proportion of complaints in

coming years; require tailored mechanisms that do not impose cost,

delay and burdens that are disproportionate to the economic value at stake.

The time is now to build a global ODR system to address these challenges, and extend justice to issues that are not served by existing systems

We’re closer than ever – we need your help

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Appendix

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Rome I Regulation – EU Parliament Recital

“With reference to consumer contracts, recourse to the courts must be regarded as the last resort.”

“Legal proceedings, especially where foreign law has to be applied, are expensive and slow. . . .”

“The protection afforded to consumers by conflict-of-laws provisions is largely illusory in view of the small value of most consumer claims and the cost and time consumed by bringing court proceedings.”

“As regards electronic commerce, the conflicts rule should be backed up by easier and more widespread availability of appropriate online alternative dispute resolution (ADR) systems. . . ”

Available at http://www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/juri_oj(2007)1119_romei_am_/juri_oj(2007)1119_romei_am_en.pdf

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Rome I Regulation -- Review Clause

Article 27 of Rome I Regulations requires that by 2013 the EC provide special report to the European Parliament on application of the special Rome I rule for consumer contracts.

European Parliament cites need to promote inter alia “ADR in the field of electronic commerce and . . . to review to what extent on-line ADR schemes might be used . . . to increase consumer confidence in electronic commerce and obviate the need for court proceedings”

Special report may be accompanied by proposals to amend the special Rome I rule for consumer contracts. EU Parliament Final Compromise Amendment 104 Article 23(b) (new), available at

http://www.europarl.europa.eu/meetdocs/2004_2009/documents/dv/juri_oj(2007)1119_romei_am_/juri_oj(2007)1119_romei_am_en.pdf

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State ODR Models

In some OAS member states, state-run alternate dispute resolution (ADR) mechanisms for business to consumer disputes are very well developed, offering dispute resolution services for a wide range of consumer disputes.

In Mexico, Concilianet, has been established to provide a government run online dispute resolution platform. The Federal Consumer Protection Law promotes and protects the rights of consumers without distinction based on nationality or other considerations.Available at: http://concilianet.profeco.gob.mx/concilianet/faces/inicio.jsp.

In Chile, a similar online platform has been established. http://www.sernac.cl/tramites/index.php

The US Federal Trade Commission launched www.econsumer.gov to refer consumer cross-border cases to ODR providers