Online arbitration: A vehicle for dispute resolution in Electronic commerce

Posted by M. Saleh Jaberi on March 06, 2011

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Article 20 (1) of UNCITRAL Modal Law, article 15 of the Uniform Arbitration Act, article 14 (1) of ICC arbitration rules and many other arbitration codes have accepted this approach. As a result, the admissibility of the free choice of the seat of arbitration by the parties or arbitrators results in the conclusion that the physical place, or perhaps – more accurately – lack of the physical place, of arbitral hearings and otherprocedural acts, is irrelevant.

Chapter IV: applicable law The issue of applicable law is posed in the main parts of the arbitration proceeding. (i) The law of the submission agreement or arbitration clause. (ii) The law which provides the procedural framework for the arbitration; and (iii) the law applicable to the substantive issues between the parties. We will survey these three stages as far as possible.

A: the law of the submission agreement or arbitration clause Nowadays, dependence of the law of arbitration agreement or an arbitration clause on the consensus of the parties is a clear and non controversial issue. Based on international practice, in the absence of party autonomy, arbitrator or arbitrators are responsible to choose appropriate law. Nevertheless, article 5 (1) (a) of New York Convention implied that arbitration agreement depends on the law which parties have indicated it, otherwise, it is depend on the law of the country where award was made. As a result, lots of national courts, in their decisions, prefer law of the country where the award was made.

As what we have cited in the chapter one, arbitration agreements can be formed bysending email,selecting “I agree” button or by referring to a document containingan arbitration clause. The common approach in these kinds of contracts is selecting the applicable law by one party and adoption of another. And also we should pay attention that, in the online arbitration, seat of arbitration is selective; therefore, if parties want to follow New York Convention method, choosing of arbitration place has the same meaning as choosing the law of their arbitration contract.

B:The law which provides the procedural framework for the arbitration Like the law of arbitration contract, party autonomy is preferred in this part aswell. In the absence of parties’ selection, two main approaches have been cited. The first approach is choosing the law of arbitration place and the second one is delocalized arbitral procedure. In the online arbitration, due to some special conditions and use of special devices, determination of the law of arbitral procedure is very important.

According to article 5 (1) (d) of New York Convention, in the absence of parties’selection, the law of arbitration place will be governed on procedure. In this circumstance, for instance, if the law of arbitration place has made the physical presence of the parties necessary in arbitration or if it has not recognized digital signatures, online arbitration will be faced lots of difficulties. Therefore, parties should be careful in their selection and choose codes which are more flexible,especially when some of these issues are related to public policy of countries and not eliminable.

C:the law applicable to the substantive issues. The traditional view in the determination of the law applicable to the substantive issues, is selecting the law of arbitration seat which is set aside in many countries and replaced by the principle of party autonomy.In the absence of parties’indication, the national law of most countries provide for the arbitrator to choose. In the United States’law, a few states impose limits on the enforceability of private choice-of-law agreements. These states usually avoid exercising of parties’ selection in two situations. Firstly when the chosen law lacks a reasonable relationship to the parties’ transaction; or secondly when the chosen law is contrary to some fundamental public policy of the forum, or, less clearly, another state. However, neither the NYC nor the FAA expressly permits non-recognition of anarbitral award because parties or arbitrators erred in their choice of law analysis.

In the online arbitration, two opposite views have been cited about applicable law especially about the law applicable to substantive issues. One group advocates the application of traditional rules. They claim that nature of the transactions and possible disputes resulting there from do not differ in purpose from real transactions and disputes. On the other hand, there is a group of those who propose a creation of separate set of rules adapted to the specifics of e-commerce. This group believes that traditional rules which are intensive and slow cannot keep track with new and fast developments, especially in the online segment.

Generally, Party autonomy should be more strongly encouraged in the case of electronic commerce because of these two key factors: the possibility of doing business on the Internet without knowing the other party’s physical location;and the simultaneous presentation of information on the Internet to all jurisdictions.

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