Draft June 9, 2000
The term “Alternative Dispute Resolution (ADR)” in these recommendations covers all methods of
resolving disputes related to obligations resulting from contracts concluded “electronically”
(primarily over the Internet) between professional sellers of goods or providers of services and final
consumers (B2C), operated by neutral bodies other than public courts, under published rules of
procedure. ADR is also sometimes referred to as “out-of-court settlement”. More specific
distinctions within the ADR concept, such as “arbitration”, “mediation” and “conciliation”, are often
used interchangeably and without much precision in the field of consumer disputes – these
recommendations will avoid their use.
For the purpose of these recommendations, we consider as falling outside the scope of the concept
of ADR those services that are offered by merchants as an after-sale performance and which are
rooted in good commercial sense more than in a spirit of providing an equivalent to court procedures
– these systems are referred to here as “customer satisfaction systems”. Such systems may, however,
become a step in the chain of redress, e. g. if customers, who wish to make use of ADR offered by
the merchant, are invited to firstly submit their complaint to such a service offered by the supplier
(call centers, complaint services, etc.).
The objective difficulty to find a simple answer to the questions of which law applies to international
consumer transactions conducted over the Internet and which authorities have jurisdiction over
disputes arising from such transactions, is bound to undermine consumer confidence in electronic
commerce. Complete international harmonization of applicable laws and international agreements
between all states of this world on competent jurisdictions might be the theoretic solution, but it is
an illusion to believe that this is ever achievable. On the contrary, new legislation in this field is
adopted primarily with the aims to preserve the various and often conflicting national or regional
systems of consumer protection and protect these systems against international competition created
by the Internet.
Whereas business acknowledges that strict application of the country of origin principle may not be
sufficient to boost trust in online transactions, it is convinced that application of the country of
destination principle is not the right answer either. Application of this principle not only represents
an insurmountable obstacle for many potential Internet vendors and hence reduces competition and
consumer choice considerably, it also provides only illusory protection, since the cost and
complexity of cross-border enforcement will stand in the way of proper redress in the vast majority
of cases. From this the GBDe has concluded that a possible solution to this problem could be that
Internet vendors offer their customers sufficiently attractive alternative ways for settling disputes,
which will of necessity become an important catalyst for consumer confidence in electronic
The recommendations in this paper attempt on the one hand, to give guidance to Internet-business
in developing appropriate ADR systems or in proposing their customers to use ADR systems run by
certain third party service providers, and on the other, outline business requirements for government
policy approaches relating to ADR.
However, although ADR can provide appropriate solutions for many disputes, it must be recognized
that even in the most ideal of worlds a certain number of disputes will still end up in court.
Therefore, and also because within some ADR procedures these questions may need to be resolved,
we wish to state upfront that questions of jurisdiction and applicable law in electronic commerce still
need to be dealt with urgently in a manner that encourages both business investment and consumer
trust in electronic commerce (refer to GBDe Paris recommendations of the “jurisdiction” group).
These recommendations deal exclusively with business-to-consumer (B2C) disputes in electronic
commerce, where ADR is still relatively little known and practiced, except in some Asian countries,
in particular Japan, and more recently in North America.
The settlement of disputes resulting from business-to-business (B2B) transactions, both off-line and
on-line, follow their own rules with a very high degree of party autonomy relating to the applicable
law, the choice of forum and the widespread use of ADR, mostly in the form of binding arbitration.
The issues of consumer protection and of consumer confidence are of no relevance in this latter
context. Hence, there is neither a need to develop new recommendations for B2B ADR, nor would
it be appropriate to address any issues related to B2B dispute settlement under the same parameters
as B2C dispute settlement.
Recommendations to Business: Requirements for Appropriate ADR Mechanisms
Independence – Autonomy of the ADR Provider
The ADR provider must be sufficiently independent from either party in order to guarantee the
impartiality of its actions.
This should not preclude individual Internet vendors or groups of Internet vendors from establishing
ADR systems and offering them to their customers. However, in such cases impartiality must be
guaranteed by adequate arrangements, which may include the establishment of supervisory bodies
composed of personalities whose independence is beyond any doubt or who represent consumer
In any case, ADR providers should seek to establish governing structures with equal representation
of consumers and business. Names of dispute resolution officers should be made publicly available,
and parties should have the right to challenge a dispute resolution officer for cause. When decisions
are taken by individuals, these persons (the “dispute resolution officers”) should have adequate
training to carry out their functions. Dispute resolution officers shall not be liable to be relieved of
their duties without just cause.
The ADR service should be provided to the consumer free of charge or at a moderate cost, while
taking into account the need to avoid frivolous claims.
ADR mechanisms should function according to published rules of procedure that describe
unambiguously all relevant elements necessary to enable customers seeking redress to take fully
informed decisions on whether they wish to use the ADR offered or address themselves to a
Such information should include
The ADR provider should publish an annual report enabling a meaningful evaluation of decisions
taken, while respecting the confidential nature of specific case information and specific case data.
The procedure to be followed should provide a reasonable opportunity, whether on-line or off-line,
for all parties concerned to present their viewpoints before the competent body and to hear the
arguments and facts put forward by the other party, and any experts’ statements.
Principle of representation
The ADR procedure should not deprive the parties of the right to be represented or assisted by a
third party at all stages of the procedure.
One of the principal reasons why business, consumers and governments consider the development
of ADR mechanisms to be of such strategic importance for the enhancement of consumer trust in
electronic commerce is that such mechanisms can settle disputes in an adequate fashion without
necessarily engaging into a cumbersome, costly, and difficult research on the detailed legal rules that
would have to be applied in an official court procedure.
ADR dispute resolution officers may decide in equity and/or on the basis of codes of conduct,
provided that this has been made sufficiently transparent. Business contends that this flexibility as
regards the grounds for ADR decisions provides an opportunity for the development of high
standards of consumer protection worldwide.
The decision taken by the dispute resolution officer(s) may be binding on the parties only if they
were informed of its binding nature in advance and specifically accepted this. Equally, the
consumer’s commitment to use an ADR mechanism instead of bringing an action before a competent
court, may not be the result of an engagement prior to the materialization of the dispute, where such
commitment has the effect of depriving the consumer of his right to bring an action before the courts
for the settlement of the dispute.
Recommendations to Governments
ADR mechanisms must meet the requirements of transparency, low-cost and independence and must
comply with the adversarial principle and the principles of legality and liberty as detailed in these
A policy approach that allows to develop optimum ADR mechanisms meeting these criteria must:
Recognize that the dynamics of the e-commerce marketplace will strongly increase commercial
incentives for the deployment of company-run customer satisfaction systems and for the creation
of the possibility to seek redress through ADR mechanisms. Policies should therefore encourage
consumers to make use of customer satisfaction systems before starting either ADR or court
proceedings against a merchant. Likewise, policies should encourage consumers to use available
ADR mechanisms before seeking recourse to courts.
Permit and encourage the private sector to develop ADR mechanisms. If similar public mechanisms
are already in existence or are planned to be created, they must not enjoy privileges, which
would give them unfair advantages over ADR mechanisms run by the private sector. Allow for
and promote a sustainable level of competition among ADR providers based on such a
framework of self-regulatory rules;
Not discriminate between ADR mechanisms that are offered by third party services providers and
those offered by merchants or groups of merchants as long as they meet the requirements set
forth in this paper.
Refrain from imposing national or regional accreditation criteria or systems for ADR mechanisms,
but rather encourage the development of international self-regulatory principles and rules that
could be the basis for self-declarations of compliance. Critical reviews by consumer
organizations will without any doubt function as an efficient mechanism for the creation of
transparency and for assessing the value of the individual mechanisms for consumers.
Not create, and if there are, eliminate obstacles for ADR mechanisms to function on the basis of
equity, codes of conduct, or applicable law convened by the parties, rather than on the basis of
those legal provisions which courts would have to apply and which would impose the very
severe burden on dispute resolution officers to identify and research the “applicable law”
according to the rules of international conventions or international private law.
Not create obstacles for – and, indeed, encourage – the development of globally applicable ADR
mechanisms, and take an international perspective on ADR by working with and through the
appropriate international organizations.
Not create obstacles for the innovative use of technology to settle consumer disputes.
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