Alternative Dispute Resolution (ADR) is the use of mechanisms to resolve disputes such as conciliation, mediation, arbitration and even negotiation without the involvement of the state and its judiciary. While ADR methods have returned to the spotlight over the last 20 years, the truth is that they precede the emergence of our society).
In fact, although there is no precise record indicating the exact moment these methods arose in the history of humanity, there are indications that their use precedes the emergence of the democratic state of law and its institutions. The reason for this is simple: since, among the ancient peoples, there was no organized state with a formal judicial structure, alternative forms of settlement were used to resolve conflicts between people.
Throughout history, mercantilist policies have rendered ADR methods either obsolete or complementary to the judicial complex, since the intervening state needed to maintain the jurisdictional monopoly. Given that the sovereign state as we know it today has not always existed, it is possible that ADR methods are in fact the traditional methods of dispute resolution.
The arrival of the internet age has posed many new challenges as a larger part of the economy has started to operate online and transnationally with a new framework emerging. The internet is not a technology per se, but a network that unites several pillars of innovation. The first of these pillars was built by engineers and scientists from the Advanced Research Projects Agency (ARPA), which, in the late 1970s, created the first peer-to-peer (p2p) connection between computers.
After the spread of the global computer network and the rise of online business activities and operations, it became necessary that disputes between contracting parties be resolved online – cheaply, quickly and efficiently – thereby culminating in ODR’s development.
The precursors of ODR were Professors Ethan Katsh and Janet Rifkin, who, in 1997, founded the National Center for Technology and Dispute Resolution (NCDR), linked to the University of Massachusetts, with the goal of fostering information technology and conflict management, and who wrote the first book on the subject in 2001. After this, several renowned institutions began to explore ODR, such as the United States Department of Commerce, the World Intellectual Property Organization (WIPO), and the Hague Conference on Private International Law.
ODR (Online Dispute Resolution) has been gaining wider acceptance in conflict resolution, especially in the e-commerce context. However, while old disputes are vanishing from society (e.g., which neighbor owns the fruit from a tree on the boundary of their properties) new disputes are exponentially being created by the interconnection of the world and the inclusion of more individuals on the world wide web. One cannot deny that innovation is boosting conflicts across the globe.
Bearing in mind this frenzy of disputes, the International Chamber of Commerce (ICC) organized in June 2017 a conference titled “Equal access to information and justice, online dispute resolution” in which stakeholders from more than 30 countries discussed the progress of ODR. Due to the new requirements of operations and contracts established on the internet, understanding ODR and its techniques becomes, above all, the new dispute resolution lawyer’s duty.
This trend has four pillars, which can be summarized as (i) the virtualization of the courts, (ii) the use of decision-making algorithms, (iii) the use of big data for dispute prevention and (iv) free access to legal information.
To clarify how this new method works, SquareTrade is a successful and practical example used by the giant eBay, an electronic commerce company that enables an enrolled user to advertise, to sell and to acquire goods.
The Ebay Resolution Center resolves an incredible amout of over 60 million disputes per year, making it one of the biggest ODR systems in the world. How does it work? As an Ebay seller you must refer costumers to its ODR’s platform. The buyer needs to file a complaint by following these two steps: (i) creating a SquareTrader User ID and password and (ii) entering complaint details. After that, SquareTrade will send a notification email to the other party so it can respond the customer.
The complaint and the response will appear in a secure area on the SquareTrade website’s and only the parties and the mediator (if they choose to involve one) will be granted access. The mediator costs about USD 15 and the whole process generally takes 10 days.
Alibaba also has an ODR tool for settling disputes between sellers and buyers who use that marketplace. The buyer can open a dispute after making payment and before confirming delivery of its order in two cases: (i) the goods are not received before the shipping deadline or (ii) the goods are not received with fulfillment of the conditions predicted. If the parties cannot resolve a complaint within 10 days, a panel of Alibaba’s ODR team settles it by imposing penalties on the defaulting party.
Both Ebay and Alibaba solve their conflicts in an impersonal, objective and predictable way at a rate of approximately 90% of settlements. An important point in this regard is that the more conflicts they resolve, the more their algorithms collect data that serves to provide more precise responses, improving the settlements and arbitrations, when necessary. The low cost is also an important online dispute resolution incentive since the costs in the Brazilian justice system would be minimally lower or the same.
In the public sector, ODR has also been growing. Fifteen years ago, the Money Claim Online program was set up by the Ministry of Justice of England and Wales in order to allow users to open protocols equivalent to collection actions in the amount of up to GBP 100,000.
The Money Claim Program is an online charge model that starts with the elaboration of an online form by the lender. After that, the debtor receives a subpoena, which, if not responded to, leads to an enforceable title. Virtual court statistics are extremely positive: they are able to resolve more than 60,000 cases a year. In the Canadian province of British Columbia, the first online tribunal, the Civil Resolution Tribunal (CRT), has been operating since 2016, accepting claims of up to CAD 5,000, aside from condominium disputes, which have no pre-specified amount.
The procedure requires different steps. The first is called solution explorer, when the algorithm analyses the complaint and offer information and solutions for the problem. After that is the dispute resolution tool in which an online negotiation tool comes into action. By this point, the users already have much more legal information and the capability of problem framing than when litigating in the judicial system.
If the parties cannot reach an agreement, there is a third step called facilitation, where human intervention is necessary to attempt to reach an agreement. And, if the dispute still unresolved, the case will be decided by a third impartial party.
The whole process takes 60 to 90 days, and it’s designed just like the systems used by Ebay and Alibaba, where the algorithm captures data, improving the solutions offered.
It is important to note that, although ODR is expanding, its methods are still restricted to simpler controversies that can be adapted to pre-defined parameters. Its use so far is not viable for complex cases with large values at stake, which require extensive evidence production. On the contrary, simple litigation cases involving consumer law, for example, which can overwhelm the judiciary and could easily be resolved, are good candidates for resolution by ODR. Conventional litigation for these cases can be quite costly, time consuming and inefficient, proving ODR to be the most efficient solution.
Scholars Brian Garth and Mauro Cappelletti identified three key obstacles to access to justice: cost, organizational problems and a lack of adequate procedures. Unlike most modern jurisdictions, the costs incurred by plaintiffs are not an obstacle in Brazil, but organizational problems and adequate procedures are.
To property understand that, it is important to distinguish “access to justice” from “access to courts”. “Access to justice” involves not only access to the judiciary branch (“access to courts”), but also broad public access to legal information and the protection of individual rights, which lies in the utilization of other means of social peace and conflict resolution. Within the inevitable problems involving a court case anywhere in the world, i.e. bureaucratic delays and asymmetric information, the reach of the access to justice goal must take place outside of the courts and through a realistic and efficient method of dispute resolution.
The promulgation of the Brazilian Constitution established “access to justice” as a fundamental right that should be available to by every stakeholder of democracy. In light of that, well structured Public Defender Offices have been created to ensure that all citizens regardless their financial situation can be represented in a lawsuit for free, provided that they can prove they cannot afford to litigate before a court without compromising their livelihood.
In addition, the Small Claims Court Act (Brazilian Federal Law No. 9,099 from 1995) established a new type of court for lawsuits where the amounts in dispute are lower than 40 times the minimum wage in Brazil ( approximately USD 15,000.00). Parties who wish to see their disputes settled before a Small Claim Court do not have to pay court fees, and, if the amount claimed is lower than 20 times the minimum wage, they do not need a lead lawyer to file the lawsuit.
These apparently optimistic scenarios worsened the crisis of the Brazilian Judiciary Branch by absurdly increasing the number of ongoing proceedings. Legitimate claims often have to wait for years to go to trial, while the courts are buried with sham litigation and groundless pleadings. The Justice Luis Felipe Salomão from the Brazilian Superior Court of Justice once affirmed during an interview that companies took this unfair advantage and turned the courts into their call centers.
In spite of serious efforts, ADR did not change this situation in Brazil either. Arbitration has been present in the Brazilian legal system for almost 200 years in various non-specific legal compilations (e.g article 1603 of the 1824 Brazilian Constitution). However, it was only in 1996 that Brazilian Law No. 9,307/96, also known as Arbitration Act, institutionalized it. Nevertheless, the aforementioned Act was only fully implemented after a controversial battle before the Supreme Court, in which it was argued that section XXXV of article 4 of the 1988 Brazilian Constitution, which states that “the law shall not exclude from the assessment of the Judicial Branch any injury or threat”, was in conflict with arbitration. The constitutionality of arbitration was granted during the trial of the Contested Foreign Award from the Kingdom of Spain nº 5206-8/247.5 Despite this, arbitration in Brazil is still reserved for complex litigation involving large sums of money due to its cost and the prohibition of the procedure for consumer relation disputes.
Mediation also is not a successful patth, at least yet, for the reduction of litigation in Brazil. Despite the promulgation of the Brazilian Mediation Act of 2015, there are few qualified mediators, and they’re involved mainly in big corporate disputes instead of settling small conflicts. In addition, many Brazilian citizens believe wrongfully that mediation is attached to court proceedings, something like a pre-trial hearing.
In addition, the internet age is exponentially increasing the connectivity of society and the number of transactions conducted. If someone once took two hours to buy a book at a bookstore, today he or she can do it online in less than five minutes at a much lower cost. It is also likely that this person would buy many more books. But, Colin Rule stated, where there is commerce, there is conflict.
Therefore, even though “access to courts” was granted by the Brazilian justice system, it failed to grant ”access to justice” to Brazilian citizens.
When we look at the implementation of ODR services, there are two factors that must be taken into account: (1) Information and Communications Technologies (ICTs) and (2) the local digital economy. Both give an indication as to how quickly the ODR infrastructure is developing, especially when considering its use to resolve disputes involving online and offline commerce. In Latin America, for example, the number of new internet users grows daily. By the end of 2010, there were approximately 181 million users, suggesting that the digital economy is booming.
According to the Justice in Numbers 2016 report published by the National Justice Council (CNJ), court litigation represents a cost of 1,3% of the Brazilian GDP. Also, a study published in 2016 by Valor Econômico (a leading business newspaper) anual, entitled “The Costs of Court Litigation to Organizations” states that the Brazilian Justice System has about 100 million cases. If we consider that in 2014 companies spent close to BRL 124,81 billion (approximately USD 35 billion) in litigation, it is not too difficult to understand why the need for changes and improvements has become not only urgent, but also acceptable by nearly all the parties involved to ensure economic growth.
Overall and taking into consideration only the labor and contractual disputes, consumer cases rank in third place amongst those faced by Brazilian companies and, in Rio de Janeiro alone, the second largest Brazilian State, over five hundred thousand new cases are filed every year.
Notwithstanding that, the Brazilian Judiciary Branch is stagnant in the last century. Although the Law No. 11,419/06 (Electronic Procedure Act) was enacted more than ten years ago, little has changed in terms of procedural speed since the electronic procedure merely replicated the steps of an offline lawsuit. Without any cognitive computing apparatus, document automation and data science to facilitate processing and decision, judges are being inundated with new lawsuits in a number that has grown exponentially since the enactment of this law.
Fortunately, in August 2017, during the Conference on Civil Procedural Law organized by the Brazilian Federal Justice Council (CJF), Statement No. 25 was approved, which provides that conciliation or mediation hearings may be held by videoconference, audio, exchange of messages, online conversation, writing, electronic means telephone or other mechanisms that serve the purpose of self-composition. This measure allows more bold approaches by judges to technology be carried out during their court proceedings.
In the same sense, in order to try to decrease such a high demand of pending and new cases, the CNJ (National Justice Council) enacted the Resolution No. 125/2010, which regulates the Judicial Policy for the Treatment of Conflicts, which was recently updated. On its Amendment number 2, as well as several other important adjustments, the Digital Mediation System was introduced for allowing pre-procedural resolution of conflicts and for consensual action in ongoing legal proceedings in the interest of each court.
However, there is a strong resistance to ODR methods so the legal market demand for negotiating platform agreements is only 2% according to recent research carried out by the Brazilian Association of Lawtechs & Legaltechs (AB2L). This happens not only because of a lack of knowledge about the method itself and the benefits inherent in this type of dispute settlement, but also because of the traditional and old school mindset of lawyers. As stated in the beginning of this article, not much has changed in the dispute resolution framework in the last millennia; if you stop for a minute and think, you will notice that we still attend a hearing in-person at a pre-set location at an appointed time and submit hard, copy documents before a panel of elderly people.
There is an ocean of opportunities for improvement of dispute resolution through technology that we need to embrace. Nevertheless, if you cannot believe that digitalization of justice is a relentless reality for the near future, do not feel guilty. Due to the cognitive bias of human reasoning known as the availability heuristic, we tend to doubt something until we have experienced it since our switch to reality is what we have available at the time.
Over the last several years, each technology improvement in the Brazilian Judicial Justice System was received with riots and outcries generated by the lawyers. It happened when the Electronic Procedure Act was enacted and it happened recently with the attempt of the implementation of an Online Court in the State Court of Rio de Janeiro. People tend to maintain old-fashioned yet updated practices even though there are more efficient ways of doing it (status quo bias). However, it did not happen only in Brazil. Professor Richard Susskind once said that he was almost disbarred from the Law Society of England and Wales for defending the during the 1990s that e-mails would be the main form of communication between clients and attorneys. His peers alleged that he was disrespecting the legal community by waiving the attorney-client privilege. The greatest challenge is not technological, however, it relies on the lawyers’ mindset.
If we increasingly use the internet and all its functions, which, by the way, are becoming closer and closer at an astonishing speed – in a short time, ODR will occupy a relevant space in dispute settlement. In Brazil, arbitration took approximately fifteen years to go mainstream; mediation is still crawling. ODR cannot afford not to evolve and not to be popularized at the same pace as innovation, otherwise the Brazilian Justice System will simply stop working, while its citizens will be isolated from one of the most fundamental rights of modern societies: access to justice.
Technology has come to the legal field to stay, and if the court proceedings are the civilized form that mankind has found to make war and ADR is a way to rationalize it, digitalization of dispute resolution is in its advanced form. ODR methods will undoubtedly serve to improve access to justice since these methods are capable of reducing the judicialization of ordinary conflicts of a simpler nature. From a social perspective, it is necessary to question whether investing a large part of our limited public resources in the Judiciary is, in fact, appropriate when there are faster and less expensive alternatives available.
 Andrea Maia is a partner at FindResolution, chair of the International Bar Association Mediation Committee – IBA and columnist at Kluwer Mediation Blog
 Daniel Becker is an associate in the Rio de Janeiro office of Tauil & Chequer Advogados in Association with Mayer Brown LPP’s Litigation and Arbitration practices. He holds a degree in Law from the Federal University of Rio de Janeiro (UFRJ) and is currently pursuing his LL.M in public law at FGV School of Law. He participated in the XIX and XX Willem C. Vis International Commercial Arbitration Moot as a team member representing his university. Daniel Becker is the Director of New Technologies in the Brazilian Center of Mediation and Arbitration (CBMA), a member of the Silicon Valley Arbitration and Mediation Center (SVAMC), and a former Vice-President of the Brazilian Association of Arbitration Students (ABEArb) and the Young Arbitrators Committee of CBMA (CJA/CBMA).
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