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Online Dispute Resolution in E-commerce

Author: Noreen Mugisia

24/02/2022
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E-commerce and Online Dispute Resolution: Drawing from Vietnam.

Abstract

Online Dispute Resolution is the change required for e-commerce disputes. This work

articulates on the concept of Online Dispute Resolution vis-à-vis Alternative Dispute Resolution.

Acknowledging such mechanisms provides an understanding of the relevance of Online Dispute

Resolution with the revolving global economy. Focusing on technological advancement in cross-

border transactions, the use of Online Dispute Resolution offers a platform where parties seek

recourse without in-person interactions. In the digital economy on the increase, there is an

increased number of disputes that rely on Online Dispute Resolution. This allows for the

investigation of the feasibility of such mechanisms. As a result, articulating on the legal

framework available determines how feasible Online Dispute Resolution gets as well as its

implementation. Regardless, smart contract solutions are discussed in-depth in blockchain in

connection to Online Dispute Resolution. Looking into the benefits of applying Online Dispute

Resolution, mitigation and redress for the harm inflicted on parties is covered. However,

compliance continues to be a challenge hindering the successful integration and implementation

of Online Dispute Resolution.

Introduction

The advent of technology exemplifies the increased use of online platforms in trading.

The concept of e-commerce diversifies due to the increased use of the internet and globalization.

The increased online platforms create a competitive trade market that is circumvented by online

disputes. This lies within the nature of business transactions in the e-commerce platforms that
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attract uncertainties. This paper focuses on the online dispute resolutions mechanisms available

for traders within the e-commerce platform. Therefore, with the digital economy, trust is broken

due to the nature of online transactions hence disputes emanate. In addition, this paper looks into

the implementation of the online dispute resolution mechanisms through its legal framework.

This is because online transactions are an unregulated area that requires laws to offer guidance

and tame any fraudulent transactions. As a result, this paper major on the role of online dispute

resolution in e-commerce and draws examples from Vietnam.

Background

Ecommerce supports a wide market segment due to its potential to attract large numbers

of consumers and businesses. Hence, Vietnam is analyzed due to its acceptance of Online

Dispute Resolution in terms of implementation within the Asian Pacific. Furthermore, such

trading exists due to the internet which brings both the consumers and businesses together. This

is because, the market segments available through the digital presence, there are minimal laws of

consumer protection, competition law as well as those governing online financial transactions.

As a result in market segments like business to consumer, consumer to consumer, and business

to business differences are bound to occur in the course of the transactions. Therefore, the digital

economy faces uncertainties from internet-facilitated transactions and requires a modern

solution. For instance, online fraud, being sold for low-quality products, unregistered businesses

among others. As a result, online dispute resolution creates an avenue to resolve disputes that

don't require face-to-face presence for them to be conducted. Also, due to the diversified nature

of financial transactions and markets, such online disputes injure customer relationships.
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The Online Dispute Resolution concept vis-à-vis Alternative Dispute Resolution.

Online Dispute Resolution evolved from the traditional Alternative Dispute Resolution.

The integration of ADR (Arbitration, mediation, and negotiation) into technology brought about

Online Dispute Resolution that deals with online disputes (Nhung, 2017). This is because of the

nature that uses the online platform as opposed to the traditional in-person arbitration

mechanisms. In addition, Online Dispute Resolution focuses on the information brought to the

attention of the arbitrator unlike in the traditional perspective where the attitudes of the

conflicting parties highly influenced the ADR process. Therefore, when disputes spike, unfair

advantage against the complainant ought to be addressed to combat future conflicts. The

existence of conflicts arises from contracts undertaken during a transaction where parties fail to

meet the obligations as stipulated. In most contracts, ADR is provided as a mechanism for

solving the differences between the parties. However, with the increased trading at e-commerce

platforms, consumers seem not protected from unscrupulous traders hence the need to invoke the

use of Online Dispute Resolution.

Infusing Online Dispute Resolution to business culture is paramount. This is because it

promotes cohesion and business relations in cross-border transactions. According to Habuka and

Rule (2017) history of Online Dispute Resolution dates back to the 1990s and since then,

businesses use the online platform to attract traffic and customers to their businesses. As a result,

the legal frameworks need to promote cross-border business transactions by catering for

obligations as well as redresses of the parties. In doing so, the business culture thrives on the

Rule of Law that guarantees fair competition within its digital economy. Also, the rising demand

for the use of cryptocurrencies in online transactions calls for a regulated arena to curb fraud.
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Therefore, it is paramount that Online Dispute Resolution secures the interests in cross-border

transactions as jurisdictional issues tend to occur in such cases. The acknowledgment of the

existence of different laws in governing online transactions initiates a crisis. This lacuna is

caused by the lack of appropriate legal frameworks to govern online transactions at the cross-

border level. It is for this reason that proposing the use of Online Dispute Resolution saves on

such legal loopholes posed by legal framework becomes that deems it insufficient.

The feasibility of Online dispute resolution.

The digital economy calls for the integration of smart solutions to meet the Fourth

industrial revolution. This is because economies are revolving and the Fourth industrial

revolution conceptualizes the integration of technology at its core. This then is vital for

economic growth. As a result, the use of Online Dispute Resolution ought to reflect through its

application by "cyber-courts" in determining such matters. In as much as globalization facilitated

online transactions, in Vietnam, this is a new concept. This is because ADR was the norm in

solving commercial transaction disputes hence its commonality within the court systems. For

instance, Online Dispute Resolution in Vietnam is feasible as there is evidence of its use. This

allows the parties to seek recourse upon breach of either party's obligation or failure to exercise

their duties as expected. Therefore, with the ongoing online exposure and technological

advancement, businesses need to embrace the Online Dispute Resolution as a tool in fostering

business-to-business relationships as well as their consumers. This is because the majority of the

Vietnamese use online transactions in their day-to-day business. Also, online shopping is a trend

embraced by the majority, and consumer protection is important. Therefore, in case of

complaints, it is easier to address the same via Online Dispute Resolution due to its amicability
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nature. In addition, since online sellers and buyers lack a viable mechanism, Online Dispute

Resolution is the appropriate tool to settle such disputes. Therefore, due to the increased

urgency, it is important to implement the use of Online Dispute Resolution in resolving online

issues.

The legal framework governing Online Dispute Resolutions: Vietnam's case

The increased global online transactions boost the economy and improve the national

GDP. According to Kim and Samuel (2021), Vietnam is yet to fully develop a legal framework

that reflects its flourishing in global e-commerce trends. Therefore, this makes Vietnam prone to

the challenges and constraints from continued exposure within online trading. In addition, both

buyers and sellers in a dynamic business environment need protection from the available legal

parameters in securing the interests of both buyers and sellers. The economic revolution through

digitalization requires legal systems to meet the dynamic changes of the digital economy. It is for

this reason that Vietnam's legal system ought to lay the basic tenets that will govern such online

transactions for a viable digital economy. Therefore, parties to online transactions must be

protected to yield from thriving e-commerce ventures.

The appropriate legal framework for Vietnam ought to focus on consumer protection.

According to Article 7 of the Law on Enterprises 2020 (59/2020/QH14), enterprises have a right

to apply technological advancement in compliance with Intellectual property laws in advancing

their businesses. This provision allows businesses to tap into the global economy via e-

commerce thereby relying on technology to boost the income. Vietnam faces a challenge in

facilitating intellectual property rights as there are no guidelines to support and determine the

value of the intellectual property (Nam et al. 2022). However, due to the barbaric commercial
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practices that often manipulate users, the law protects consumers. This is to curb unscrupulous

deals that breach consumer confidence in the return. As a result, the Law of Consumer Protection

is in place to protect vulnerable consumers from unwanted business practices that might inflict

harm. This is because; e-commerce exists in a high-risk environment. In addition due to the lack

of contracts between online buyers and sellers, the uncertainty of seeking redress upon a breach

is minimal. According to Kim and Samuel (2021), the Law on Protection of the Consumer

recognizes online transactions by defining distance communication through electronic means to

conduct contracts between a consumer and the supplier. Therefore, the use of Online Dispute

Resolution in such a scenario provides a mechanism by which the affected party seeks recourse

for the harm inflicted.

Implementing Online Dispute Resolution and its application in Vietnam

The application of Online Dispute resolution in Vietnam falls back on Commercial

Dispute Resolution. This later was provided for in the Commercial Arbitration Ordinance (2003)

that addressed arbitration challenges facing foreigners. In Vietnam, foreigners were limited in

engaging in arbitration before the above Ordinance. Vietnam was more receptive and the

Vietnam International Arbitration Centre allowed more foreigners in arbitration. In as much as

this mechanism was in place, arbitrating commercial disputes suffered policy challenges in its

implementation due to procedural technicalities as well as interference by the courts. However,

in 2018, the courts began enforcing arbitral awards. Regardless of the above mishaps, Online

Dispute Resolution thrives from the set procedures. This is because, as e-commerce flourishes,

businesses or consumers who are dissatisfied rely on the arbitration procedures set to resolve

their differences on an online platform.

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Disputes in e-commerce in Vietnam are embracing the use of Online Dispute Resolution.

This is due to the projection of increased e-commerce activities by 2025 to an estimate of $52

Billion. As anticipated, disputes arising from e-commerce are on the increase as reported by

Chanh and Thung (2021). The disputes that require Online Dispute resolution arise from the

following. Earlier on, the courts focused on commercial mediations in the event of a dispute in

the course of a commercial transaction. This focused on the ADR mechanisms in resolving

disputes and the International Finance Corporation urged businesses to use commercial

mediations, especially in Vietnam. However, the Fourth industrial revolution as well as the

digital economy requires smart solutions to cut costs and rely on technology. Therefore, the

existence of agencies like Vietnam Effective Mediation Centre offers a platform for Online

Dispute Resolution where parties raise their complaints and the same is resolved with the

interests of parties in mind. Therefore, this reflects the implementation of the use of Online

Dispute Resolution in Vietnam as a trend in solving e-commerce disputes. In as much as

Vietnam lacks the appropriate legislation and model for the effectiveness of Online Dispute

Resolution, introducing solutions that cut the hedge and assure results is paramount.

Benefits of Online Dispute Resolution.

First, it is cost-effective. This is because, Online Dispute Resolution relies on technology

thereby, and in-person interactions are limited. Fact that online transactions involve cross-border

transactions, Online Dispute Resolution saves the parties the cost of traveling as well as

litigation in courts. Imploring video conferencing and the use of technology, distance reduces;

litigation is also prevented hence saving costs. Therefore, the value of conducting Online

Dispute Resolution is economical to the stakeholders involved. Second, efficiency. This means
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that employing Online Dispute Resolution makes access to justice for the parties involved

readily available. As a result, this provides accessible redress or recourse for the breach of the

obligation by either party. In addition, the access to justice is on an equal basis as the Online

Dispute Resolution eliminates any form of biases and discrimination. This is because the

enforceability of this mechanism adapts the flexibility of the parties considering their claims

hence the decision made is binding to all.

Smart Contracts solutions

The dynamic technological advancement revolutionized e-commerce. This has seen the

advent of cryptocurrencies which exist in various forms and are used in a majority of online

commercial transactions. In the ordinary course of business, parties transacting on various online

platforms are highly likely to fall for scams since cryptocurrencies are untraceable. This is

because the transaction follows the form of blockchains which are untraceable throughout

various networks. Since the cryptocurrency takes a decentralized system as a block chain,

potential disputes like scams, theft, and breach of trust. The immutable nature of smart contracts

does not guarantee immunity. This is because, just like any online platform, compliance as a

legal issue arises. The immutable perception acknowledges the rigidity as smart contracts cannot

be changed. This becomes difficult since as humans, the code created can contain errors and

because the same cannot be amended, then the process is irreversible. In the event such occurs,

parties can seek Online Dispute Resolution.

The existence of cryptocurrency transactions in blockchains excludes the use of third

parties or intermediaries like banks in the transactions. Therefore, due to the uncertainties arising

from these transactions breach of trust occurs (Khan et. Al, 2021). This is because after-parties
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transact through blockchains, fraudsters fail to meet their obligations as required thereby

disputes emanate. This is due to issues like false website registrations that use cryptocurrency to

deceive the public. As a result of the lack of a proper legal framework for online transactions,

disputes that arise from so are addressed fully by the Online Dispute Resolution. According to

Express International (2021), in the year 2020, cases that underwent Online Dispute Resolution

were 250 in Vietnam. This is an indication that increases in e-commerce paves way for newer

ways to resolve online conflicts between the transacting parties as opposed to the traditional

way.

Smart contracts exist in digital form but are operational like traditional contracts. This

nature of contract applies to blockchain transactions to foster trust amongst parties involved in

the transaction. Also, solidity programming ensures that smart contracts cannot be interfered

with as this will send a signal to other stakeholders (Khan et. Al, 2021). This is because under

smart contracts willing parties agree and use a desired online platform to create a project whose

funding is also set. Here, the online platform identified holds the money which upon completion

of the project, is released to the creator. Therefore, once the project transfers, so are the funds

thereby making this the most secured method. The reason is, smart contracts are moving away

from the third party perspective.

The integration and use of smart contracts offer the solution to the online disputes

between transacting parties. Essentially, smart contracts are in use in e-commerce and this is a

secure way to protect the interests of the parties involved. If the desired requirements as

anticipated by either party are not met, then the money automatically reverts to the sender.

Therefore, in smart contracts being stored in blockchains is a guarantee that no other person
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takes control of the finances. Consequently, smart contract detects vulnerabilities thereby

detecting untrustworthiness injected in the data (Khan et al. 2021). The fact that smart contracts

work independently without any influence provides a solution. This is because the attempt by a

single person to access the funds becomes invalid. This resolves online disputes on the

performance and execution of obligations as commercial transactions revolve so. Therefore, it

becomes a challenge to tamper with smart contracts.

Challenge in enforcing Online Dispute Resolution

Compliance is a challenge that hinders the implementation of Online Dispute Resolution.

This is because, where technology is involved complying with the award is an uphill task. The

fact that the settlement of the dispute is pursued in an online arena, it becomes difficult to

compel the party that breached the contract to act well on their word to enforce the award

granted under Online Dispute Resolution. As a result, due to cross-border challenges, it becomes

difficult though the award is legally binding on the parties. In addition, Online Dispute

Resolution acts on a virtual platform and the laws must cater for jurisdictional matters and how

the enforceability of the awards in Online Dispute Resolution. This is because e-commerce

experiences a lack of integrity as this compromises any mitigating measures available to resolve

the differences between the parties. Also, every jurisdiction is guided by different laws, and

these differences created make enforceability a challenge.

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Suggestion and Conclusion

Developing regulations and policies that solely focus on Online Dispute Resolution. This

eliminates the uncertainties created by the lack of clear laws and also sets out rules and

procedures. In addition, advocacy by institutional initiatives to create awareness. Settling online

disputes is an unpopular phenomenon. Arbitration institutions must use various forums in

advocating for the use of Online Dispute Resolution. Also, developing software geared towards

promoting ODR by providing for procedures, payments, connecting complainants to mediators,

linking courts to the same to enforce an award. This also involves allowing patents in such. Also,

Vietnam ought to adopt the EU model on ODR. In conclusion, Online Dispute Resolution is a

branch of Alternative Dispute Resolution. The use of negotiations, arbitration, and mediation

defines the scope in the ODR. The ability to sync such a mechanism to an online platform to

settle the matter despite being a cross-border transaction. This is because globalization hastened

the digital economy with the use of the internet. The legal framework must reflect the urgency in

implementing ODR. The use of smart contract solutions in the blockchain is a secure way to

transact as money is transferred upon the completion of the project. However, due to its

immutable nature, the contract is irreversible thus when an error is coded a dispute would ensue

thus calling for the use of Online Dispute Resolution.

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