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Online arbitration: A vehicle for dispute resolution in Electronic commerce

Posted by M. Saleh Jaberi on March 06, 2011

In recent years, the importance of electronic trade in digital content has becomeevident. However, this new phenomenon has brought new challenges with itself invarious areas, which demands fast and efficient responses. While litigation has lotsof limitations and deficiencies, alternative means have been suggested andformulated to complement the dispute resolution system. Among (ADR) systems, Arbitration is the most widely used (ADR) mechanism for resolving disputes inelectronic commercial matters. Online arbitration is fully admissible and effectiveunder the current legal framework of many countries, provided that certainrequirements are met. This paper examines the advantages of online arbitration andmethods of its performance in cyberspace. It concludes that online arbitration is avalid and effective method of dispute resolution and the arbitral awards given byonline arbitration are enforceable under the rules of New York Convention.

Introduction: In recent years, the importance of electronic trade has become evident1. It is notexactly clear when the electronic systems entered the commercial world. We mayconsider the commercial usage of the internet as an onset point for this industry.However, electronic commerce does not change the basic purpose of businesstransactions, which is to gain profits; the difference lies in the new mode of communication. When it comes to making profits, different parties have divergentobjectives, which can easily lead to disputes.

Nowadays, there are varying kinds of dispute resolution. Although Litigation is themost common and widely used method which exists in many legal regimes, a fewproblems of litigation and courts such as: the length of time needed for the wholeprocess of litigation which does not suit the present pace of business, the high costof litigation, the issues of jurisdiction and choice of laws which becomeparticularly complicated at an international level, and the atmosphere of litigationwhich could be destructive to the future relationship of transacting parties, havemade merchants and jurists to explore for alternative methods.

Even though some experts have cited a long history for extra-judicial methods4, themethods which we know today as alternative dispute resolution methods aredeclared by anAmerican lawyer named “Eric Green” in 1978. Theory of resolution of cyberspace disputes doesn’t have a long history.While thelitigation has lots of problems, the experts of this context have attempted to applyalternative methods in the internet and called this: “online dispute resolution”. Thefirst experiments in ODR were made during 1996 and 1997 in the US and Canada.

Based on a recent survey, the numbers of institutes which have this service havereached 115 by 20045. Among the alternative methods, arbitration has a special place. The power of electing arbitrators and governing law, and binding awards which can enforceeasily in many countries, give a particular importance to this method in electronicdisputes as well. Electronic arbitration has a similar notion with other arbitration,except using specific communication tools such as: email and online conferences6.In this paper, different aspects of online arbitration such as: conclusion of arbitration contracts in the cyberspace, procedure of arbitration, seat of arbitration,applicable law, establishment of awards, and enforcement of awards, will beexplored.

Chapter I:conclusion of arbitration contracts in the cyberspaceAny kind of arbitration roots in the arbitration contract which is concludedbetween parties. The arbitration agreement can be formed in separate contract or inthe form of a clause in another contract. In most Arbitration Acts around the world,the method which is cited in the UNCITRAL Modal Law (reference method) is recognized.

A: Various kinds of arbitration contract in the cyberspace and their validity Although opposite parties can compromise out of cyberspace and settle theirdisputes in written form in the cyberspace, the main argument is about where thearbitration contract forms in the cyberspace. The arbitration agreement can beconcluded in three forms in the cyberspace:

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