Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Given potential complications of jurisdiction and enforcement in the case of an Internet dispute, e-commerce parties should look to arbitration as an effective method of dispute resolution. This is not a new idea in international settings. Where binding protections are sought involving less established or less reliable judicial systems, countries favor bilateral investment treaties, often with arbitration through the International Centre for the Settlement of Investment Disputes. The Internet, without an established or reliable judicial system, should also foster contractual agreements and processes to provide for effective accountability. Private, multinational e-trade consortia have already formed, requiring members to assume binding obligations, including the use of alternative dispute resolution. In click-wrap agreements, where courts have generally recognized reasonable forum selection clauses, parties may similarly mandate the use of arbitration. In fact, under the Internet Corporation for Assigned Names and Numbers, all holders of domain names ending in “.com,” “.net” and “.org” are required to resolve their bad-faith, domain-name disputes through a rigidly simplified but inexpensive arbitration process that still results in a decisive resolution regime that is less contentious than litigation. The first step in using arbitration to resolve an Internet dispute is drafting an effective arbitration clause. The scope and range of disputes to be decided by arbitration should be defined both precisely, to avoid contest, and broadly, to embrace the unforeseeable future events of the still-new electronic medium. This stipulation is crucial. For example, U.S. federal law generally favors arbitration but where there is no clear and unmistakable evidence, as by a contract, that the parties agreed to submit an issue to arbitration, the courts must determine whether the matter may be arbitrated. DECIDING ON THE FORUM The next step is to decide on the precise forum of arbitration, either with or without an arbitral institution. For many e-commerce parties inexperienced in resolving disputes under international law, arbitral institutions offer established rules that address fully the details of a general arbitration, ensuring adherence to certain standards. Recognized institutions, such as the World Intellectual Property Organization (WIPO), the American Arbitration Association (AAA), the International Chamber of Commerce (ICC) and the London Court of International Arbitration, also foster confidence and legitimacy in the arbitration results. Given the novel technology that may be involved in an Internet dispute, the parties should choose an arbitral institution with flexible rules that can accommodate their circumstances. The parties have the most influence on the outcome of a case by choosing the arbitrator(s) who will decide the case. A party may want an arbitrator with technical expertise who will approach the case with an understanding of Internet reality and fundamental principles of justice. Another party may want a more legally based arbitrator who will rely more on the application of physical world law to the electronic circumstances. Most arbitration proceedings are conducted by one or three arbitrators. While three arbitrators could bring a variety of backgrounds to the decision-making process, for simple transactions or where expediency is important, one arbitrator may be preferred. In the absence of an agreement, the WIPO, AAA and ICC each provides for one arbitrator, unless an administrator determines that three are more appropriate. Similarly, the AAA provides that the parties shall “mutually agree upon any procedure for appointing arbitrators and shall inform the [AAA] administrator as to such procedure.” When the parties cannot agree after a 45-day period, the administrator appoints the arbitrator(s) in consultation with the parties. The ICC’s Court of Arbitration has similar rules but explicitly reserves the right to confirm or reject any prospective arbitrator without explanation but based on the arbitrator’s “nationality, residence, and other relationships” with the countries of the parties and those of the other arbitrators, as well as the arbitrator’s availability and ability to conduct the arbitration according to the ICC’s rules. Parties who would feel constrained by the imposition of procedural rules may prefer arbitration outside of an established arbitral institution. The difficulty with the ad hoc forum is that it requires the parties to specify all the procedural rules necessary to realize a successful arbitration. One way to approach the ad hoc method is to mimic the arbitral institutions themselves. First, the parties should specify as many criteria, procedures, standards, options and limitations as they desire, including the nature and weight of factors, such as technology, to be used in the decision-making process. Second, the parties should explicitly supplement their own rules by adopting the rules of an established institution to fill any gaps. Another alternative is to use a private arbitration company. Some are even online, conducting arbitration entirely through the Internet. Many offer an abbreviated arbitration process with minimal input from the parties and a quick decision turnaround time at a cut-rate cost. This is the Internet arbitration equivalent to a small claims court. Selecting an arbitration company and the type of arbitration process to be used requires the same careful examination of the particular arbitration rules of the company, including, in these instances, any gap fillers adopted from the recognized rules of an established institution. Some arbitration parameters that parties often overlook may carry significant costs. Consider a web site that may be viewed in multiple languages. Specifying — or not specifying — the language to be used for arbitration in connection with that web site may affect the amount of translation costs and possibly the quality of available arbitrators. Similarly, the currency to be used for an arbitral award, as well as the inclusion or exclusion of attorneys’ fees therein, may affect the realized value of a dispute resolution. ESOTERIC CONSIDERATIONS Other considerations are more esoteric. For example, traditionally only another state or international organization enjoys any claimant rights against a sovereign state. Thus, to impose or enforce an arbitral award against a sovereign government-contract party, the arbitration agreement must include a waiver of sovereign immunity. At the same time, state parties to the North American Free Trade Agreement (NAFTA) consent to the submission of a claim to arbitration by a citizen investor under NAFTA Chapter 11 (Subchapter B). The result is that a NAFTA citizen may submit an investment dispute against a NAFTA state for arbitration before an ICSID tribunal without an arbitration agreement between that citizen and that state. The disputing parties’ choice of law and place of arbitration are thus critical factors because arbitrations must take place in some jurisdiction and the laws of the forum state will usually dictate whether a dispute may be arbitrated, as consistent with the forum state’s laws and public policy. If a forum state does not recognize a type of dispute as one that may be arbitrated, it will not enforce arbitral awards in such cases despite being a party to the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“New York Convention”). Consider that a dispute for damages involving the proprietary rights of software licensed through a click-wrap agreement via a web site may not be arbitrated in Brazil, India, Israel, South Korea and South Africa, which consider intellectual property disputes as noncommercial and, therefore, not subject to arbitration. Alternatively, China, which traditionally did not have an intellectual property law, does generally enforce arbitral awards of an intellectual property dispute unless such enforcement violates their public policy in a particular case. (Meanwhile, France, Italy, Spain, and Sweden all have Western intellectual property traditions and apply the same public policy limitation on intellectual property arbitral awards.) Still the New York Convention requires the courts of more than 120 signatory states to recognize arbitration agreements, to refer cases to arbitration pursuant to such agreements, and to generally enforce arbitral awards made within any party state. By this and other arbitration-supporting treaties, international arbitral awards are today both more easily pursued and enforced compared with international court rulings. By contrast, under the recently proposed Rome II Green Paper, e-commerce suppliers in the European Union, without an arbitration agreement or other contract specifying jurisdiction in case of dispute, will find themselves under the jurisdiction of every EU country in which resides an e-consumer with whom they have a dispute. While legal uncertainty may persist on the Internet, arbitration may help foster e-consumer confidence and e-commerce development. Arbitration is an established practice we can reasonably and successfully apply to Internet disputes. Raymond Joe is an associate in the New York office of Brown Raysman Millstein Felder & Steiner LLP. Julian S. Millstein is a named partner at the firm and co-editor-in-chief of the E-Commerce Law and Strategy newsletter.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.