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Online Dispute Resolution: Prospects

28 Feb 2022 Europe

Will the Internet and artificial intelligence relieve clogged Russian courts?

Overcrowded court dockets are a worldwide problem. In Russia, however, the backlog of cases awaiting resolution grows, despite all efforts, exponentially by 2m (10%) every year. The latest attempt at reform of the judicature by administrative tools — through expanding summary and writ proceedings — only impaired, in the views of many, the quality of administration of justice. The latter is especially true of small claims failing to command full judicial attention to detail and often tried half-heartedly almost everywhere, even in Germany, with its Europe's busiest courts.

The attempt at relief through wider use of arbitration and mediation in the mid-2010 spectacularly failed: the reputation of arbitration in Russia has been irreparably marred by frequent abuse and bias; only 508 disputes (less than 1 percent) were mediated in 2020.

The disproportionately high financial, temporal and/or and psychological costs of prosecuting even small claims are prohibitive for too many non-lawyers, especially self- or misrepresented. Although public authorities (and sometimes even lawyers) tend to see society as a bunch of legally aware and competent citizens, the reality is different — the very existence of public authority with its courts and enforcement and huge legal professions prove the opposite.

Globalization exacerbated the problem. First of all, there are questions of proper forum and jurisdiction. Where does the average Russian subscriber of Netfilx or a PayPal user contest a wrong charge or an erroneous transaction? True, the consumer rights law permits bringing lawsuits in home jurisdictions, but, apart from the fact that national civil procedures are nowhere in the world well adapted for cross-border litigation over small claims, the next steps will be authentication, recognition and enforcement of the national judgment abroad. Will the claimed amount justify so much inevitable hassle?

The solution seems to be coming from the same source as the problem: globalization, digitization and Internet. Established trade platforms with global outreach and colossal worldwide sales, such as Amazon, AliExpress, eBay and others, were the first to feel the need to heed complaints from their customers and users whom they would otherwise lose. Their approaches have differed from the beginning. eBay refers users' complaints for resolution to a board of randomly selected established users. AliExpress and PayPal ask the parties to try and settle the matter first by correspondence using the platform's facility and following preprogrammed settlement algorithms on the dashboard. If this fails, the platform's arbitrator is called in.

This eventual "humanual" resolution online may be fairly fast, but leaves a wide margin for the parties' suspicion and dissatisfaction. The question is that of authority (who judges?). And yet another, jurisdiction: each method is confined to one platform.

Finally, resolution is not based on any rules of law.

As long as digital transactions are fairly simple (as they so far are), such resolution pays off. Further development of e-commerce and predictable complication of disputes will inevitably call for more than an a disinterested arbitrator; a qualified judge will be needed.

The European Union's single European digital dispute resolution platform, launched in 2013, was an improvement on AliExpress' and PayPal' pattern: failing attempts at DIY resolution online, disputes are sent to professionals at ombudsmen's offices in the countries selected under the Brussels I Regulation.

Deep neural networks and big data led to Modria as the next step combining ODR and AI, albeit down basically the same path: the system questions the parties, diagnoses the problem, and, again, ask the parties to negotiate first, using an intellectual assistant which explains to the parties consequences of their behavior and decisions. Failing the parties' consent, Modria schedules online mediation and suggests mediators. If the parties refuse or fail to mediate, Modria initiates arbitration by an independent third party or AI, depending on the matter, or as the parties elect. Modria's learning AI becomes shrewder with every resolution (including tracked humanly resolved disputes), which makes it hopefully possible both to automate and improve resolution of at least same-nature disputes in the near future.

Modria has thus integrated all steps toward Internet arbitration, adding mediation and AI, resulting in a streamlined flowchart from diagnosing to negotiation to mediation to arbitration. Moreover, Modria reaches out beyond consumer disputes: Danish courts use its modification in divorce and patent suits; the American Arbitration Association chose the program to resolve all types of its cases.

Modria and its none the less successful Dutch counterpart Uitelkaar both save the parties' time and money offering ODR instead of the "real" litigation. Admittedly, arbitrable as cross-border cases may be, such programs are not fully versatile or universal; the parties must be connected to the systems; ODR is not backed up by official enforcement. Meanwhile, they do work resolving consumers' complaints against large multinationals, IP disputes and even such emotional and discomfortable matters as divorce. Ever better astuteness of digital systems in all earnestness suggests automating resolution of small claims in courts of law without loss of quality. Mediation, in the context of COVID-19, increasingly tends to be contactless too, generating new projects combining ADR and, increasingly, ODR. The Courts and Tribunals Service in the UK operates online platforms for divorce and probate applications, small money claims, and traffic penalty appeals, among others, saving the English substantial amounts of time and money on discovery and replacing about 100 closed courts across England and Wales alone. The small digiterate Estonia is implementing an AI-based ODR system to deal with claims up to EUR7,000. In the United States, AI's "computational dialectics" helps automate evaluation of evidence and drafting judgments on small-value and typical recurrent cases.

It is already clear that most of commerce — if not the economy — will eventually move online, primarily and precisely because of transparency and controllability by regulators (and not the other way around, as skeptics warn). Justice will simply follow. In the meantime, the outreach and convenience of the Internet, coupled with the capabilities of AI, make it already possible to steer quite a few disputes from courts to the Web: after all, people have much more experience with online services than with courts. Web-ADR and ODR can significantly relieve courts thus helping them keep up the quality of justice; the more the Russian market digitizes, the likelier there will be more online resolution facilities equipped with tools to shoulder small claims.

Interestingly, already existing consumer services (e.g. selling ticket online) can incorporate digital algorithms with automatic execution of contracts once the program registers fulfillment of certain conditions. This can help prevent the very emergence of conflicts. In Germany, the possibility is already being discussed of using digital technologies in instant resolution of disputes between passengers and Deutsche Bahn: if a train is late, a program algorithm will automatically refund the user a portion of the fare in proportion to the waiting time. 

Given the right approach, digital technology may well help Russian courts to solve the problem of congestion. Whether we can take advantage of them depends not only on the state, but also on our willingness to develop, support and use such tools.