Is Virtual Arbitration Here to Stay?

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According to the recent law360.com article, “Cyber Dispute Resolution Could Slash Legal Costs: Attys”, the disputes involve amounts of $65,000 or less. Richard Naimark, senior vice president of the American Arbitration Association in charge of the InternationalCenter for Dispute Resolution, and which designed the GE pilot program, explained the process.

To initiate the process, both parties bid online, blindly, with the aid of a program which decides if the amount one party is willing to pay, and what the other party is willing to accept, match. If a settlement can't be reached in this manner, both parties upload documents which a human then analyzes to reach a resolution.

Naimark was quoted as saying: “It's really quite expedited. It ought to have significant applications beyond GE.”

John Townsend, chair of Hughes Hubbard & Reed LLP's arbitration and alternative dispute resolution practice, was quoted as saying: “The basic principle behind it is that a lot of disputes end up in very expensive arbitration, when all that is needed is to fix a number. It's possible to spend a lot of money and a lot of time when the only thing really at issue is, are you going to pay 'x' or are you going to pay 'y'?”

Reed Smith LLP partner Gautam Bhattacharyya, who practices international arbitration in Reed Smith's London office, explained that clearly, online dispute resolution can save money. Organizations dealing in e-commerce have duked it out, virtually, whereas others involved in disputes over domain names are able to seek virtual resolution via the Internet Corporation for Assigned Names and Numbers, or ICANN.

But while online negotiations might be helpful for small claims, what about larger, more complex, commercial matters? While there are obvious cost savings to be had, what types of cases lend themselves to this type of resolution? As online resolution takes root, the legal profession will adjust, and continue to ask these types of questions as it gains footing with what should be viewed as a new tool.

The American Arbitration Association® (AAA) offers its services to both individuals and organizations seeking conflict resolution outside of court. The AAA's role in the resolution process is to administer cases, from beginning to end. Additional services involve the organization's development of other types of dispute resolution (ADR) systems for corporations, unions, government agencies, law firms, and the courts.

Hughes Hubbard & Reed LLP.

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