DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

SESSION 2020-21

SUBJECT: ALTERNATE DISPUTE RESOLUTION

FINAL DRAFT
ON
DEVELOPING A UNIFORM SET OF RULES FOR GOVERNING
OADR

Submitted to: Submitted bSubmitted

y: by:

Dr. Prasenjit Kundu Aayaksh Chadha

Enrolment No. 180101003
Assistant Professor (Law)
 ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during the
completion of this project.

My deepest thanks to Professor Mr. Prasenjit Kundu the guide of the project for guiding and
correcting various documents of mine with attention and care. He has taken pain to go through
the project and make necessary correction as and when needed.

I would like to thank Dr. Ram Manohar Lohiya National Law University for giving me this
opportunity to work on this project. .

Lastly, I thank my friends for their support, for their help in collecting the material and for
critically going through the project and correcting the mistakes, without whom the project would
have been a distant reality.

I also extend my heartfelt thanks to my family for supporting and guiding me.
INTRODUCTION
While determining the substantive set of dynamic rules for the e-business
community, it is imperative to mention that the parties in a global community are
free to select a national law for deciding their rights and obligations under an e-
commerce contract1. This implies that, as the primary initiative is in the hands of
the parties themselves, negotiations may be initiated depending on the situation,
circumstances and negotiation. If such negotiation fails, then from the terms and
conditions of the contract itself, the parties can subject themselves to the
Alternative Dispute Resolution Mechanism (“ADR”)2. The practice, which has
been accepted by the international community by and large, i.e., the applicability
of the national laws by the arbitrators in the absence of the choice of law being
mentioned by the parties, is in pursuance of the conflict of laws method.

A dilemma arises in the modern day world with respect to the application of rules
and laws in the resolution of disputes by online arbitration tribunals. Currently in
the formative stages, there is an urgent need for development of flexible,
transnational legal standards that can be applied by arbitration tribunals in cross-
border e-business disputes. This approach is desirable and convenient from the
consumer’s perspective, as he/she may be located in a jurisdiction different from
that of the seller. The main advantage of the approach necessitating the application
of OADR in e-commerce is that, it not only manifests the dynamic nature of the
system, but also facilitates confidence in the Business to Consumer Model (“B2C”)
and the Business to Business Model (“B2B”) which is in the interest of the global
business community.

1 Bekker C., The Proper Legal Regime for Cyberspace, 55 U PIT L R 993 (2012)
2 K.P.Berger, Law and Borders - The Rise of Law in Cyberspace , 48 STANFORD L R 1367 (2008)
PROMISING FUTURE OF LEX INFORMATICA PRINCIPLE:
PRECEDENTS SETTING THE PATHWAY FOR FUTURE

Lex Informatica principles have assured a promising mechanism for providing

proper adjudication of disputes at transnational level 3. There are certain principles
and rules which have already emerged and have been accepted as fundamental
principles in the international arena, like the functional equivalence of written and
electronic documents. 4 Furthermore, e-signatures are manifested in several e-
business instruments and their importance is widely recognized the world over. On
the same lines, the principle of technological-medium neutrality is reflected in
various instruments and enjoys wide consensus. Development of certain areas,
which are still in dormant stages could prove handy for the application of the
aforesaid OADR mechanism in the adjudication of disputes by online arbitrators.
For instance, e-business custom demonstrates the obligation of professional parties
to use state-of-the-art security technology as a means of protecting the
confidentiality and integrity of their transactions. Another e- business custom may
be the presumption of IT competence of professional parties who engage in e-
business and possess the necessary skills and equipment. Therefore, the parties
may not claim incompetence, asserting a security breach or incapacity to perform a
contractual obligation, in order to defend themselves.

DEVELOPING A UNIFORM SET OF RULES FOR THE

RESOLUTION OF ONLINE DISPUTES
For subjecting any matter to online arbitration, there should be a certain set of
rules or laws for the arbitrator to act upon. Thus, foreseeing the contingencies
which “may” arise in the future, an attempt has been made through this article
to develop a set of rules for governing OADR.

A. General Principles of Law and the Relevance of Lex Mercatoria

3 This use of the term should be distinguished from the use that refers to a set of rules for information flows imposed by technology and
communication networks. Such technological rules constitute a useful extra-legal instrument of policymaking that may achieve objectives that
otherwise challenge conventional laws and governmental attempts for regulation across jurisdictions. See Joel R. Reidenberg, Lex Informatica:
The Formulation of Information Policy Rules through Technology, 76 TEX. L. REV. 553 (1998) [hereinafter Joel].
4 G.A. Res. 60/21, Art. 8(1) and Art.9(2), U.N. Doc.A/RES/60/21 (Nov. 23, 2005).
 Principles:

Principles of Lex Mercatoria, laying down general principles of law, are

identical to Lex Informatica, which again help in developing definite
code for the adjudication of matters by online ADR.5 It is pertinent to
note that the connotation attached to ‘General Principles of Law’ might
sometimes be deceptive, as the subjectivity in its application might
create a hindrance in it being accepted as a general principle of law.6 For
instance, general principles like good faith and fair dealing may assume
a specific meaning in cross-border e-business, requiring clarification or
specific justification from an e-business perspective.7 The point here is
that market cultures vary across the globe in accordance with the
cultures of the land. Thus, formulating a general principle of law for the
application of OADR in settling e-commerce disputes is a troublesome
task for which an objective test has to be defined and a uniform opinion
has to be generated amongst the masses of the world.

International Instruments in shaping the Uniform Laws:

The United Nations Commission on International Trade Law

("UNCITRAL") initiatives have aided in the development of rules at a
global level which are of immense importance in developing Lex
Informatica principles and rules. The principles governing e-commerce8
and e-signatures9 have undergone significant development due to the
codification and framing of Model Laws by UNCITRAL on these
subjects. It thus becomes implicit to explain the instant terminology
before going ahead. It is defined as follows:

Model laws are examples of instruments that demonstrate international

consensus stemming from their legislative history and the numerous

5 V. J. J. M. BEKKERS & SJAAK NOUWT, EMERGING ELECTRONIC HIGHWAYS: NEW CHALLENGES FOR POLITICS AND LAW
153 (1996).
6 Liber Amicorum Karl-Heinz Böckstiegelet et al., Law of International Business and Dispute Settlement in the 21st Century, ICCA 267-276

(2001).

7Antonis Patrikios, Resolution of Cross Border E-Business Disputes by Arbitration Tribunals on the Basis of Transnational Substantive Rules
of Law and E-Business Usages: The Emergence of the LexInformatica, 38 U. TOL. L. REV. 271 (2006).

8United Nations Commission on International Trade Law, Model Law on Electronic Commerce with Guide to Enactment, U.N. Sales
No.E.99.V.4 (Nov. 20 th, 1996) [hereinafter “UNCITRAL 1996”].

9United Nations Commission on International Trade Law, Model Law on Electronic Signatures with Guide to Enactment, U.N. Sales
No.E.02.V.8 (2001).
 jurisdictions that have adapted their legislation based on their
provisions.

The Model Law on Electronic Commerce demonstrates international

consensus on issues such as the legal recognition of data messages, 10
incorporation by reference, 11 admissibility and evidential weight of data
messages, 12 formation and validity of contracts, and attribution of data
messages. The Model Law on Electronic Signatures includes provisions on
issues such as equal treatment of signature technologies, compliance with a
requirement for a signature, conduct of the signatory and conduct of the
relying party.

The United Nations Convention on the Use of Electronic Communication in

International Contracts reflects broad consensus despite the fact that it was
opened for signature only two years ago. It includes provisions on issues such
as legal recognition of electronic communications, form requirements, the
principle of “functional equivalence of electronic documents” and electronic
signatures, time and place of dispatch and receipt of data messages, use of
automated systems for contract formation, availability of contract terms, and
error in electronic communications. Depending on its adoption by a significant
number of States, and most importantly, the acceptance of its rules by the
international e- business community, the e-Contracting Convention may
develop an instrument directly applicable to online arbitrators in e-business
disputes pursuant to Lex Informatica analysis.

The aforesaid provision has been cited to put forth certain rules which already
exist and could be of immense importance for arbitrators while resolving an e-
dispute. Beyond providing specific rules for the issues of their respective area
of application, they may also be employed as sources of general principles of
e- business, such as the functional equivalence of written and electronic
documents and signatures or technological-medium neutrality. The same view
is also accepted worldwide that:

“In the context of applying Lex Informatica, the UNCITRAL

instruments can be used by online arbitrators as instruments directly

10 G.A. Res. 51/162, Art. 5, U.N. Doc.A/RES/51/162 (Jan. 30, 1997) [hereinafter G.A. Res. 51/162].
11 UNCITRAL 1996, supra note 8 at Art. 5.
12 G.A. Res. 51/162, supra note 11, at Art. 9.
 applicable in online arbitration, as benchmarks in the context of
comparative law analysis for the establishment of the broad acceptance
of a given transnational rule, as means of identification of e-business
usages, or as means of interpretation.”

B. National and Supranational Sources of Law:

It is submitted that after analyzing the provisions enshrined under
national statutes, their application is completely contingent upon the
extent of acceptance of a given rule by the international community.
Thus, the jurisdiction of the online arbitrator is limited to the extent of
acceptance of such a rule by the international community. The instant
rule is equally effective for supranational instruments, such as the
European Union ("EU") directives on e-commerce and e-signatures.
Their importance lies in the fact that:

“These directives are important because they demonstrate

transnational recognition of electronic contracts and signatures and
contain a consensus model for their regulation, which is applicable to
both common and civil law systems. Hence they provide a clear cut
model for the online arbitrators in resolving the disputes pertaining to
e-commerce.”13

Another important rule that the online arbitrators should focus upon while
determining the “trans-nationality” of a given rule is,

“Not only on the wide acceptance of the rule in comparative law, but
also on the current practice in the particular sector of e-business. If a
recent rule reflects current practice, but is not supported by the results
of comparative law analysis, its "trans-nationality" could be founded on
usage.”14

C. E-Business Custom and Usages:

13A. F. M. Maniruzzaman, The Lex Mercatoria and International Contracts: A Challenge for International Commercial Arbitration?,14 A. U.
INTL. L. R. 657 – 660 et seq. (1999).

14 UNCITRAL 1996, supra note 8.

 The phenomenal increase in the volume of international e-business
transactions is resulting in growth and development of new usages in
cross-border e-business. It is submitted that while tracing the roots of
usages, it is not always convenient to identify the usages and if they are
identified, then the principle of wider acceptance creates an impeding
factor in their application. Besides, it is practically difficult for the
online arbitrators to call any practice a usage, or as a part of customary
international law in e-business, because the strings are still very soft and
the laws are in a transitional phase which might result in a disputable
situation in the future. Given the high volume of e-commerce
transactions, elements of customary practices are already identifiable or
are even being formulated by international agencies such as the Internet
Chamber of Commerce ("ICC"). 15 Therefore, the development of
customs in international e-business is likely to be faster than it is in
international trade. In this regard, it is submitted for online arbitrators
that:
They should consider this in determining which given set of rules are
applicable to a particular economic relationship. For that purpose the kind of
milieu from which parties belong to and the nature of business relationships
which they share are of utmost importance.16
Finally, it can be argued that elements of non-codified customs are also
observable. For example, in important interactions over the internet, there
exists an obligation to use appropriate security technology to protect the
confidentiality, integrity, and attribution of communications. The decision
regarding confidentiality is left to the discretion of the parties. Confidentiality
is desirable for business houses as reports of disputes might adversely affect
their goodwill. For example, non-compliance by a bank or a professional end-
user in the context of online banking may trigger liability for compensation.
Similarly, non-compliance by an online arbitral institution may lead to liability
if the confidentiality of the proceedings is compromised.

D. Codes of Conduct and Guidelines:

Innumerable guidelines and codes of conduct addressing issues of

consumer protection provide which set a norm to be followed and thus

15 UNCITRAL 1996, supra note 8.

16K.P.Berger, Do the UNIDROIT Principles of International Commercial Contracts Form a New LexMercatoria?, 15(2) ARB INTL. L. R. 115
(1999).
 aid in the development of a uniform set of rules for resolving e-
commerce disputes. For example, the validity and enforceability of
electronic contracting, the time and place of dispatch and receipt of
electronic communications, or attribution of communications, have
started to emerge and may be evidenced by the provisions of existing
international instruments like UNCITRAL and UNIDROIT principles.

E. Role of Online Tribunals and Arbitral Case Laws:

Online tribunals and their case laws are of paramount importance in the
formulation of a uniform code for aiding the arbitrators in resolving e-
disputes. The awards given by the arbitrators/arbitral tribunals define or
clarify transnational rules and usages. One major step needed instantly is
the publication of the arbitral awards for the interpretation of the
uniform codes which is currently not materialized. The publication of
awards is likely to raise awareness, increase predictability and facilitate
development, acceptance and application of the uniform code by the
online arbitrators. Therefore, a solution that permits the publication of e-
business awards while preserving the confidentiality of the arbitration is
essential.

RULE OF INTERPRETATION APPLIED IN ONLINE

ALTERNATIVE DISPUTES RESOLUTION

On the basis of the three UNCITRAL initiatives, a basic framework of

fundamental transnational principles and rules for the conduct of cross-border
e- business can be articulated. Beyond providing specific rules for the issues of
their respective area of application, they may also be employed as sources of
general principles of e-business such as functional equivalence of written and
electronic documents, functional equivalence of written and electronic
signatures, or technological/medium neutrality. In the context of application of
the Lex Informatica, the UNCITRAL instruments can be used by online
arbitrators as instruments directly applicable in online arbitration, as
benchmarks in the context of comparative law analysis for the establishment of
the broad acceptance of a given transnational rule, as means of identification of
e-business usages, or as means of interpretation.
First, the tribunal will carefully consider the intent of the parties, as expressed
in the ‘choice of law’ clause, and in particular examine whether the parties
themselves have given any methodological instructions.
However, where inconclusive terminology is used, online arbitrators should
attempt to interpret it in the light of the circumstances of the particular case. If
necessary, the tribunal may request clarification of submissions. In any case,
the objective is the identification of the intent of the parties and this is the
guiding principle directing arbitrators in adjudicating any matter.
Secondly, the arbitrator will examine, on the basis of functional comparative
law analysis, whether the submissions of the parties are supported by a rule
with wide acceptance which constitutes a transnational rule of law or an
established e- business usage. In performing the comparative analysis to
determine the acceptance of a specific rule, the arbitrator should consider:
i. Compilation of the lex mercatoria principles including codifications
and lists;
ii. Pertinent international instrument reflecting consensus;
iii. Relevant published Awards;
iv. Comparative law resources such as specialized publications. If the
rule is merely idiosyncratic of a particular system, it should be
rejected. However, a rule can be elevated to the status of a
transnational rule of law or established e-business usage even if
there is no universal or unanimous acceptance of the rule.
Finally, in case of a conflict between the custom and current usage, preference
should be given to current usage over custom. Also, the ICC General Usage
for International Digitally Ensured Commerce II (GUIDEC II) including the
Principles of Fair Electronic Contracting (POFEC), aim to serve as an
indicator of terms and contain definitions and best practices. GUIDEC II aims
to balance different legal traditions and cover both the civil and common-law
treatment of the subject, as well as pertinent international principles and
provided a comprehensive statement of best practices for a global
infrastructure.

Discretion of the Arbitrators:

In the absence of choice of law on the part of the parties, the arbitrators are
vested with the discretion to apply national laws indirectly. The application of
law shall be made pursuant to conflict of law method, i.e., by checking that the
national law to be applied is not in conflict with the international law on that
particular subject. The national law however, can be applied directly if the
arbitrators think it fit for the concerned dispute.

Loopholes:

i. Parties having exposure to different States are unaware of the laws

applicable in those States. The resulting lack of confidence between
parties might be detrimental to resolution of the dispute through
arbitration.
ii. As the application of OADR is still in the formative stages, it confuses
the arbitrators as to which rules are to be applied by them while
adjudicating a dispute, as there are no settled rules on OADR. This
enhances the possibilities of the discretion of the arbitrator being
exercised in an unreasonable manner.

The possibility of a transnational approach to the determination of these rules

of law appears to be acceptable to the stakeholders in international consumer
protection. For instance, the 2003 New York Recommendations of the Global
Business Dialogue on Electronic Commerce (“GBDe”) incorporates an
agreement reached between GBDe and Consumers International on Alternative
Dispute Resolution guidelines applicable to international B2C e-Commerce.
The guidelines state that ADR is advantageous, as opposed to the difficult,
cumbersome, and costly research on detailed legal rules regarding court
procedures because “ADR dispute resolution officers may decide in equity and
on the basis of codes of conduct. This flexibility regarding the grounds for ADR
decisions provides an opportunity for the development of high standards of
consumer protection worldwide.”
As a measure of security while adjudicating any dispute, the fundamental
principle of contra proferentum must be applied. In basic terms it suggests
that:
‘While adjudicating any dispute between two parties, equity demands the
verdict to be in favor of the weaker party.’
Thus, the aforesaid principle is of utmost significance while resolving any
dispute categorized under B2C category. If the arbitrator has to exercise his
discretion pertaining to the granting of the award, then the elementary
principle which is supposed to be followed is:
 ‘The award should be granted in the favor of the weaker party i.e., consumer in
the B2C Model cases, after applying the principle of contra proferentum.’

RECOMMENDATIONS
1. If a comprehensive study is carried out and a vent is allowed for those
customs comprising a blend of e-commerce and arbitration, provided
that the custom is not in contravention with International norms, then
customs must be applied instead of the international norms.
2. The articulation of a body of transnational rules for cross-border e-
business is needed for facilitating online alternative dispute resolution
mechanism. It is time an initiative is taken by the legislators and
international organizations like UNCITRAL, UNIDROIT etc. This is
necessitated for comprehensive and ongoing research in order to clarify
the exact content of the existing transnational principles, rules, customs
and usages of e-business. In addition, further research is needed to
monitor the constant development of the Lex Informatica.
It is submitted that the culture of markets varies across the globe in
accordance with the culture of the land. Thus, formulating a general
principle of law for the application of OADR in settling e-commerce
disputes is a herculean task for which an objective test has to be defined
and a uniform opinion has to be generated amongst the masses of the
world.
3. The awards granted by the arbitral tribunal should be published so that
it may facilitate the formulation of the uniform code for adjudicating e-
commerce disputes by online arbitrators.
4. It is submitted, regarding the application of customs and usages in
resolving e-commerce disputes by the online arbitrators, that while
tracing the roots of usages it is not always convenient to identify it and
if it is identified, then the principle of ‘wider acceptance’ creates an
impeding factor in its application. To alleviate the instant problem, it is
suggested that the expert opinion should be sought.
5. It is highly asserted that during the time of the formation of the
arbitration agreement, the parties themselves should decide the laws
applicable in case of disputes till no uniform law comes into force for
OADR in e-Commerce.
6. In the absence of such provisions demonstrating the application of the
law in cases of dispute, the arbitrator should be given discretion.
However, the details of such law should be provided to the parties and
 only after the consent of both the parties should the arbitration
proceedings begin.

CONCLUSION

It is submitted that after realizing the different factors influencing the

formulation of the uniform code for ascertaining and resolving e-commerce
disputes by online arbitrators, the most important factor is that the intention of
the parties for an amicable solution must be given within a reasonable time.
The work to formulate a uniform code for OADR should be carried out
extensively and the different governments of the world should strive forth and
establish an international body/organization, which would in turn co-ordinate
with its member countries and the concerned forum of the United Nations.
This will definitely aid in the creation of a set of transnational rules
manifesting the interest and the will of the different sovereigns.