An Emerging Model forGlobal eCommerce ODR

June 2nd 2010Colin RuleDirector of Online Dispute Resolution, PayPal

eCommerce Continues to Expand

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e-Commerce has exploded over the last decade

U.S. B2B e-commerce generated $3.1 trillion in sales revenue in 2008, accounting for 27% of B2B transactions

U.S. B2C e-commerce generated $225.2 billion in sales in 2008, up 5% from 2007

Consumers are becoming a major part of international commercial transactions for first time

Cross border e-commerce trade is flat-lining

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: European Committee for Standardization releases recommended best practices for ODR

International Consensus

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Rome I Regulation – EU Parliament Recital on special conflict of law rule for consumer contracts calls for ODR

European Parliament has cited the need to promote ADR in the field of electronic commerce

Several nations (e.g. US, Mexico, Chile) have already launched and evolved alternate dispute resolution (ADR) mechanisms for business to consumer disputes

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

OAS

Case

DB

Central Clearinghouse

National

Administrator

National

Administrator

ODR

Providers

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

CONFIDENTIAL AND PROPRIETARY 8

43rd Session of the United Nations Commission on International Trade Law21 June - 9 July 2010, New York

Note by Secretariat: Possible future work on online dispute resolution in cross-border electronic commerce transactions (A/CN.9/706)

“The goal of any work undertaken by UNCITRAL in this field should be to design generic rules which, consistent with the approach adopted in UNCITRAL instruments (such as the Model Law on Electronic Commerce), could apply in both business-to-business and business-to-consumer environments”

• Note by Secretariat: Provisional agenda, annotations thereto and scheduling of meetings of the forty-third session (A/CN.9/683)

“The Commission will also have before it a note by the Secretariat on the issue of online dispute resolution and, in particular, will inform on the outcome of the colloquium “A fresh look at online dispute resolution (ODR) and global e-commerce”, organized in Vienna on 29-30 March 2010 jointly with the Institute of International Commercial Law (A/CN.9/706).”

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 before

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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