(C) General Characteristics of adr

322 ADR is private and, in principle, based on the agreement of the parties involved. The parties’ consent is the basis for the legitimacy of the proceedings. The private and consensual basis of ADR is the reason for its flexibility: the parties decide whether and how to resolve their disputes, there is no predetermined number of ADR mechanisms, and, thus, no limit to parties’ ability to tailor the proceedings to their needs and circumstances.

323 The underlying consent is often part of a contractual relationship between the parties and is expressed in a contract clause determining the procedures to resolve disputes arising out of, or relating to, the parties’ contractual relationship. Such “pre-dispute” clauses are not always individually negotiated, but can also be part of a standard agreement or an adhesion contract offered on a “take it or leave it basis.” As a general matter pre-dispute clauses provide the parties with a high degree of certainty as to how their disputes will be resolved, a fact that will serve to expedite the actual proceedings. The dispute resolution process can, however, also be determined in a submission agreement concluded after a dispute has arisen, particularly if the parties’ relationship is such that an agreement on the process can be achieved without significant delay, expense or acrimony. Examples of (pre‑dispute) contract clauses and (post‑dispute) submission agreements are the recommended contract clauses and submission agreements provided in the WIPO Mediation Rules, the WIPO Arbitration Rules and the WIPO Expedited Arbitration Rules.⁴⁴⁶

324 A dispute resolution process may be conducted ad hoc, i.e., the parties determine, possibly with the help of a neutral, the procedures according to which the dispute will be resolved. The process may also be conducted under procedures offered by an experienced institutional service provider, such as the WIPO Arbitration and Mediation Center, that has made available comprehensive and proven Mediation Rules, Arbitration Rules and Expedited Arbitration Rules and provides procedural and administrative support to parties and neutrals. In administering procedures, the Center assists the parties in selecting qualified neutrals (i.e., arbitrators or mediators), determines the neutral’s fees in consultation with both the parties and the neutral, provides guidance as to the application of the relevant procedural rules, administers all financial aspects of the proceeding, organizes any support services that may be needed, and ensures the overall neutrality and efficiency of the procedure.⁴⁴⁷

(D) adr in e-Commerce

325 Disputes in e-commerce are at least as recurrent and varied as disputes occurring in more traditional commercial relationships. Many of the classic advantages of ADR are therefore equally valid in an e‑commerce context. However, in the experience of the WIPO Arbitration and Mediation Center, the Internet has influenced dispute resolution procedures in at least two respects:

(1) It has posed new challenges that make the need for efficient dispute resolution mechanisms both more pressing and more complex. Some of these challenges will be addressed later in this section; and

(2) In addition to creating new challenges, the Internet has also influenced the way disputes are resolved. Online methods can render procedures more efficient and are increasingly being used in the context of ADR as well as by courts. ADR procedures using electronic means of communication and case management are often referred to as “Online Dispute Resolution” (ODR) without, however, implying a conceptual difference to ADR in general.

326 In certain situations, parties might still prefer to refer their disputes to court litigation because of its public nature. This is the case, for example, if a party is interested in a public precedent to clarify the legal situation, if the other party is totally uncooperative or has been acting in bad faith, as is often the case in an extra-contractual infringement dispute, or if parties expect a public institution, such as a patent or trademark office, to undertake a certain activity as a result of the procedure, such as the registration, cancellation or invalidation of a registered industrial property right. Alternative means of resolving disputes are, however, becoming increasingly important in the various types of e‑commerce transactions. The following paragraphs highlight some of the most important dispute resolution needs in various types of e‑commerce transactions, and examine how these needs can be served by ADR proceedings such as those offered by the WIPO Arbitration and Mediation Center.

327 A Single International Forum. Disputes in e-commerce can be, and increasingly are, as global as the Internet. This is mainly due to two factors:

(1) The Internet facilitates direct commercial relationships between parties in different areas of the world, such that in many cases, a party cannot even determine with a reasonable degree of certainty where its contracting partner is located; and

(2) Because the Internet offers an instantaneous global presence, any act on the Internet can have legal consequences anywhere in the world;⁴⁴⁸ displaying a sign on the Internet might be considered to infringe registered or unregistered rights in potentially any jurisdiction of the world,⁴⁴⁹ likewise, commercial practices that are legitimate in one country, might be considered unfair or illegal in others. It is increasingly difficult for anyone involved in

e-commerce to determine with a reasonable degree of certainty in which country its activities might be legally relevant.

328 As a result of these factors, there is a tension between the largely national and territorial character of court litigation and the international – or “a-national” character of e-commerce disputes. Parties might have to protect their rights, or be held liable, in potentially any jurisdiction, and under the law of potentially any country, that is connected to the Internet. In addition, since national laws and practices differ widely, multi-jurisdictional litigation always carries the risk of producing inconsistent results. While it is true that international elements have always been present in (international) trade, such elements now affect potentially every e‑commerce transaction and are far more difficult to control.

329 ADR, being consensual, allows parties to keep disputes under control by determining a single neutral forum as well as the rules, if any, for resolving their disputes, rather than having to litigate in a multitude of jurisdictions and under a multitude of different laws. This is particularly true if the proceeding is administered by an international ADR provider such as the WIPO Arbitration and Mediation Center. Like e‑commerce itself, ADR is not strictly bound by territorial borders and, especially if the procedure is administered online, can take place in the same virtual arena.

330 Accessibility. International trade was traditionally carried out by a limited number of intermediaries that took orders in one country and placed them in another, thus bridging linguistic and cultural differences, and assuming part of the economic and legal risks. This has changed with the advent of the Internet: its low entry barriers enable direct contacts between less sophisticated actors, such as individuals and small entities, and encourage a greater incidence of small and standardized transactions. The value of these transactions will often lie below the threshold justifying court litigation. As a result, the number of disputes, as well as the number of parties involved, tends to be higher, whereas the range of problems is more limited than in traditional international trade. E-commerce needs, therefore, dispute resolution mechanisms that are inexpensive, fast, and easy to access and use while at the same time providing meaningful remedies.

331 While court litigation can provide effective remedies, it is often perceived as cumbersome and expensive. In most cases, litigation requires the assistance of lawyers, parties have to wait for the allocation of court time (which is often scarce), and procedures, as well as the applicable law, are strictly regulated. Court litigation is, therefore, unattractive for the resolution of small and standardized disputes. This is even more apparent if the parties are located in different countries.

332 Because of their essentially private nature, ADR procedures are flexible and can be structured in a way that is both efficient and easy to use, particularly if the range of problems to be addressed is limited and can easily be standardized. Parties can, for example, dispense with hearings, meetings or other face-to-face communications, and decide to conduct the proceeding completely or partly online. They can streamline the procedure by limiting the range of problems to be addressed, as well as the scope and number of written or oral pleadings. Access is, of course, simplified if the dispute resolution procedure has been determined in advance, for example in a contract clause, in an institutional arrangement (such as a certification or “trustmark” scheme), or as part of a regulated infrastructure (such as the UDRP).

333 Preserving Trust and Reputation. E-commerce takes place in an environment that cuts across territorial and cultural boundaries thus creating a risk of cultural or linguistic misunderstandings while at the same time lacking the informal means of developing trust through face-to-face relationships. Potential customers might hesitate to buy if they are uncertain as to how future disputes will be resolved. This concern is particularly relevant for smaller e‑commerce vendors that cannot rely on the reputation of a strong trademark as a means to instill trust.

334 In addition, a good reputation can easily be lost in a dispute. For many companies, it is therefore of vital importance that a dispute with another company or a customer does not become public. Court proceedings are, however, generally public. The negative publicity of a public dispute may have severe consequences for the company’s future funding and other business and marketing activities.

335 ADR can provide means to accommodate both the need to create trust as well as the need to preserve a company’s reputation. Because of the private nature of ADR, the proceedings themselves can be kept confidential thus allowing parties to focus on the merits of the dispute without concern about its public impact.⁴⁵⁰ Offering to engage in inexpensive, accessible and efficient ADR mechanisms operated by an independent third party can be a means of building trust. Such mechanisms are even more effective if they involve a neutral and independent entity that certifies a vendor’s conformity with certain standards and offers to administer ADR proceedings. This is the case, for example, in “trustmark” schemes⁴⁵¹ which have been developed to enhance the credibility of e‑commerce vendors. Similarly, regulated infrastructures requiring submission to ADR as a condition for access can enhance trust in, and preserve the integrity of, the infrastructure as a whole.

336 The concern for creating trust and preserving reputation is often shared by a group of companies or even a whole industry. Some industries have developed codes of conduct that include ADR mechanisms (such as mediation, ombudspersons, dispute review boards or arbitration) allowing outsiders to challenge a particular member’s compliance with the standards. Such mechanisms can serve to enhance the integrity and reputation of the trade or industry group as a whole, and are often used as a means to pre-empt public regulation.

337 Efficiency. One of the driving forces of e-commerce is efficiency, the fact that transactions can take place more efficiently online than off-line. Competition requires e‑commerce companies to be as efficient and cost-effective as possible in their activities. This also applies to the way disputes are resolved. Instead of the highly formalized, but often cumbersome and costly court proceedings, companies increasingly seek business solutions: effective action under their control that takes care of the problem while preserving commercial relationships and reputations. This need is evidenced by the general tendency towards more informal means of ADR, which, like mediation, are interest‑based, rather than rights‑based, and allow parties to find a solution by reference to their business needs, without being strictly bound to legal positions.