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The Impact of the ADR Directive and ODR Regulation on Mediators

The Impact of the ADR Directive and ODR Regulation on Mediators

EU efforts to harmonise the rules on Alternative Dispute Resolution and Online Dispute Resolution have culminated in two very important pieces of legislation for mediators: The ADR Directive 2013 and the ODR Regulation 2013.

Pablo Cortes is an expert in the subject. In this interview, he takes us through the implications of these regulations for mediators in the EU.

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Transcript

Full Transcript

Aled Davies:       Hi, everyone. My name is Aled Davies, founder of MediatorAcademy.com, home of the passionate mediator. This is the place where mediators, new and accomplished, come and learn from experienced mediators and thought leaders from around the world.

We hope that you learn something from these interviews that will help you sharpen your skills and grow your mediation business.

Now, what I know about ODR, online dispute resolution, and online mediation, you could probably fit onto the back of a postage stamp. I don’t know whether I need to be excited. I don’t know whether I need to be apprehensive about it. I don’t even know whether I need to be concerned about being left behind.

Now, there are rumblings coming out of Europe, and I want to get a better understanding of the development in EU regulatory framework, and what that means for me as a traditional “getting people round the table, in the same room” kind of mediator.

So I’ve invited someone who knows all about that sort of thing to come and open my eyes. My guest today is a lecturer in law at the University of Leicester and a qualified attorney, albeit non-practicing, in Spain. His research interests lie in the intersection of ADR, ODR, consumer protection, and civil procedure. He’s a fellow of the National Centre for Technology and Dispute Resolution. And in 2012, he was a Gould Research Fellow at Stanford University.

The Civil Justice Council has just set up a new advisory panel, chaired by Professor Richard Suskind, to explore the role that online dispute resolution can play in resolving civil disputes. My guest today is a member of this panel. As far as I’m concerned, he is the go-to guy for this kind of thing.

I’m delighted to welcome Pablo Cortes onto Mediator Academy. Pablo, welcome.

Pablo Cortes:     Thank you very much. It’s great to be here with you.

Aled:      Thank you, Pablo. If you need to do some lunges in the background, I know you’ve got a bit of a dodgy nerve in the back of your neck.

Pablo:   That’s right.

Aled:      That’s quite all right. Now, let’s start with the basics. What is ODR, online mediation?

Pablo:   Okay. Online dispute resolution is just the use of technology to accomplish or [sounds like 00:02:21] facilitate the use of communicating between the parties. The best example is online mediation, where parties communicate through the Internet, normally through online platform, but it could also be through Skype. It’s just avoiding parties to meet in person, and sometimes that is the most convenient way of resolving disputes.

Aled:      So I’ve heard online mediation, online dispute resolution, being referred as the fourth party.

Pablo:   That’s correct. There are different levels of how much technology you can incorporate to the way disputes are resolved.

Aled:      Yeah.

Pablo:   The “fourth party’ is a metaphor that refers to the power that technology can add to the dispute resolution process. It could be very, very influential. In addition to the two parties in dispute, the third neutral party, like a mediator, the technology can also assist the parties in disputes to get the conflict settled, resolved. So that’s why it’s referred as the fourth party.

The fourth party, the technology, the platform, could sometimes improve the ways parties communicate by for instance, sometimes suggesting solutions to the parties or identifying issues and basically helping the parties to reach amicable settlement in the terms of the online mediation.

Aled:      Okay. So it’s not necessarily designed to replace the role of mediator. It’s to enhance the role of mediator.

Pablo:   That’s right. Sometimes the fourth party can replace the third party, but not in the context of online mediation. It’s normally in the context of, for instance, assisted negotiation. Where parties communicate directly amongst themselves, using technology. The technology, again, can help parties, for instance, when they use blind bidding, that parties submit confidential bids when they have a monetary dispute only about the amount of money.

Some parties place confidential bids or offers to settle, and if these meet, the technology cannot mix the automatic settlement. They say . . . Well, both parties have to agree at the midpoint of those bids or offers.

But in the context of traditional mediation, you still need the third neutral party, the mediator, who is using the fourth party, or the technology, to assist in the communications with each parties in dispute.

Aled:      Okay. So this concept of blind bidding, you and I now, let’s say you and I are mediating. You’re in another part of the world. We’ve also got a mediator helping us with our discussion, with our conversation. We may reach a stage where we want to make some offers, but we don’t want to reveal . . .

Pablo:   That’s correct.

Aled:      . . . necessarily reveal what our offers are. So we enter them into a black box.

Pablo:   Yeah, in the platform. Sure.

Aled:      Not even the mediator knows what the offers are, and an algorithm then determines whether the offers are, in some way, compatible.

Pablo:   Exactly, whether they match or not. They are normally used only when there is a monetary issue. The typical example of where they have been very successful is in the context of complaints with insurance companies. Where it is clear that you have a car accident. Someone hits you at the back of your car. We know who’s paying. He’s paying, the person who hits the back of your car. What is not clear sometimes is the amount that the other party will be paying. That’s where the disputes often lie, on one single monetary issue.

Sometimes they end up in litigation for months, if not years, to determine this single amount. So with these offers, this blind bidding system, is that basically helps parties to relieve the bottom line offers. How much they are willing to pay, how little they are willing to accept. Only if these offers overlap, then the middle range, the middle point, will be considered to be a settlement.

If these offers don’t meet, these confidential offers, parties could still explore other ways of resolving the dispute through mediation. If that fails, litigation, arbitration may be the last option, where a third neutral party will impose and decide the decision.

Aled:      Yeah.

Pablo:   The settlement.

Aled:      When I think about this . . . I mean, the concept, the notion of having a fourth party or the online mediation, ODR, is a fourth party and not a replacement of a third party, to some extent, it’s quite reassuring. On the other hand. I’ve got a good friend of mine now, who’s in his final year at MIT, doing a PhD in robotics and artificial intelligence. He’s been working in hospitals where they’ve built these machines that will go in and administer or monitor patients’ progress. They’re like robots, and patients interact with these robots, as if they are humans. I mean, this is widespread now in hospitals throughout America. You know? They’re trying . . .

So I mean, I know this is a question from out of nowhere. But could you imagine a day when a person, not even a person actually, a program, an algorithm, could take the role, take over the role of a mediator in an online dispute?

Pablo:   Not completely, frankly. I think that technology will be increasingly used by mediators. It is running organically. Even these days, it’s a bit artificial to talk about online mediation and completely offline mediation. Mediators use technology to communicate. They use phones. They use computers, etc. You know? They might not incorporate in the whole process, but this is increasingly being used.

Whether it will be replaced, the third neutral party, the mediator. I don’t see that happening, not in my lifetime. You know? I don’t know in many, many years to go, whether some disputes can be streamlined through artificial intelligence, but I feel we are far away from finding a complete replacement.

Aled:      I mean, it’s interesting you say that. I read a paper last night, Ethan Cash wrote, about, he was referring to the growth of technology or the speed of growth. He made a reference to the exponential growth of technology. Maybe not in your lifetime, maybe in the next ten years . . . Who knows? Anyway . . .

Pablo:   Sure.

Aled:      . . . we’re going off track a little bit, but this is an interesting field. I’m sure mediators out there are going to be wondering what does it mean. What does the development . . . What does the growth of online mediation mean for me, as a mediator, that is only familiar with sitting in a room with parties and mediating?

Pablo:   Sure.

Aled:      So in your little bit at the start, you talk about your interests lie in the intersection of ODR, consumer protection, and civil procedure. Can you say a little bit more about that, what that means?

Pablo:   Sure. Well, I mean, I’m academic. I cannot research in this area. So all this started when I was doing my masters, and I decided to look at how electronic contracts are formed by ways of resolving or enforcing when one party does not comply.

Then I noticed that we enter into online transactions all the time. We know. We book flights. We buy stuff on the Internet. The courts are not a suitable way of resolving these sorts of disputes, particularly if they are of low value, typically, again, consumer disputes. Let alone, if they are cross-border. I mean, then the courts are completely a sort of forum for these disputes.

So I started exploring this area, looking how can we resolve consumer disputes or typically low-value disputes. Courts are not the option, except when maybe you use a small claims process, normally a domestic issue of significant value. That can be medium or . . . But it would not be something for a $100. Nobody goes to courts, naturally.

So I started looking at the small claims process and see what can they offer. So I looked at small claims and the court process. I looked at alternative dispute resolution and how they can be more user-friendly for consumers who bought stuff online, in the e-commerce context. I looked at also what is the substantive law of consumers and how consumers can rely on the [inaudible 00:12:09] rights that they acquire by the law.

So my interest is on enforcing these rights and what are the avenues that consumers have to resolve the problems they face. This is something that has been picked up recently by the European Union and also by the UN, that are creating legislation or, in the case of the UN, a model procedural law to enhance this more informal process that takes place online to assist consumers or sometimes also to businesses who have low-value disputes, to be resolved with assistance of technology and the use of ADR techniques, like mediation and arbitration.

Aled:      So how far are they down the road with this legislation in the EU and the UN then?

Pablo:   Well, at the UN level, negotiations are ongoing. It is the UNCITRAL, the UN Commission for International Trade Law. They basically enact or kind of create model laws to favour international trade. They have, for instance, the New York convention that facilitates enforcement of arbitral awards. They are in the process, since 2010, of developing a model law. They have already a draft, procedural rules, which are quite sophisticated. They are planning to complement it with substantive rules and enforcement protocol and guidelines for third neutral parties.

They will be using mediation, as well as arbitration, for resolving these e-commerce disputes. It is hoped that the next couple of years, they will have already an agreed set of rules that parties, when they enter international transactions, like when they buy something online in the United States. They can rely on those rules to resolve any possible conflict that arise between these parties, through an online process that the UN espouses as a third process to resolve e-commerce disputes.

Aled:      Yeah.

Pablo:   So this is what the UN has on one hand. The European Union has more concrete results because last year, in June 2013, has passed two important legislative instruments. A directive, an ADR directive, as it is called for consumer disputes, and ODR regulation, regulation of online dispute resolution. These two pieces of legislation, they complement each other.

Aled:      Okay.

Pablo:   They are interlinked. The directive that will be implemented by July next year, member states will have to implement legislation in order to put in place the requirements set in the directive. They will be required to set up or to ensure that they have ADR bodies to resolve or ADR schemes to resolve all type of consumer disputes that can arise.

In the U.K., as you may be aware, we have many ombudsman schemes, but they have a [inaudible 00:15:25] companies to deal. For instance, financial ombudsman schemes deals with bank disputes or disputes against insurance companies. You have a legal ombudsman, complaints against lawyers, etc., or other legal providers.

But there are other areas, like complaints against airlines. We don’t have any aviary [sic] scheme where we can go to if we have a complaint against Ryan Air, for instance.

Aled:      Yeah. No. Absolutely.

Pablo:   So it will force member states to . . . If you don’t have one, what they call the legislation or residual aviary [sic] scheme . . . So basically an ADR which could be mediation process or arbitration process or an ombudsman scheme. But any consumer dispute, there must be an ADR entity, besides the courts, that could deal potentially with those type of disputes.

Aled:      Okay.

Pablo:   This could be a catalyst for great change across Europe, and it’s giving a . . . The main purpose of this legislation is also to encourage the use of ADR for resolving consumer disputes. The directive also, besides this requirement, also sets a quality criteria, so basically sets up a number of procedural requirements . . .

Aled:      Yeah.

Pablo:   . . . that all ADR schemes, who want to be qualified as European-certified schemes, they have to comply with.

Aled:      Okay.

Pablo:   For instance, they have to comply with the requirement of transparency. They have to publish how the process works, how many disputes they have or complaints they have received in a year. How many that have been resolved, how many in favour of the, or percentage, in favour of the consumer, etc. Disputes have to be resolved within 90 days, which for mediation is not a very long . . .

Aled:      I mean, that notion of transparency, in a sense, is very interesting because at the moment, no one really knows how many mediations take place in the U.K.

Pablo:   That’s correct. Yeah. The CDR has some sort of estimates, and I think they talk about 8,000 a year, civil and commercial. The telephone mediation that the county courts offer, they talk around 10,000 a year, but these are no more than educated guesses.

Aled:      Yeah.

Pablo:   So this will bring much greater transparency, at least in the consumer sector.

Aled:      But only transparency in terms of number of disputes, number of disputes resolved, in whose favour. But in terms of what goes on within the conversation, that remains confidential.

Pablo:   That’s right. Yeah. The privacy of a mediation and arbitration process is, for instance . . . It will be my intent. But they have to disclose some information about third neutral parties, how ADR schemes are being funded, which in the commercial context is not a big concern because parties normally pay 50/50, the cost of the mediation, for instance.

But in the consumer context, it’s normally the business or the traders who foot the bill. So it is interesting to see that there are some guarantees, some safeguards to ensure that the ADR schemes that are providing services are sufficiently independent and impartial when delivering these services.

Aled:      Indeed. Okay. Let’s say we’ve got plus or minus 10,000 court-related mediations, telephone mediations. You’ve got 8,000 published by CEDR. Let’s say there are another 10,000 or so taking place. So we’ve got 25,000 to 30,000 civil and commercial and smaller claims mediations taking place. What are we talking in terms of volume for consumer disputes? What’s the potential there?

Pablo:   Well, if you think about ombudsman schemes, the financial ombudsman service . . . They say that last year, they received two million queries, out of which a quarter of them, half a million transform into formal complaints. Ombudsman services, as you well know, they are a sort of conciliatory body. You know?

Aled:      Yeah.

Pablo:   So they use mediation techniques. In fact, the majority of these complaints are resolved with this informal methodologies, where the ombudsman or a case handler will speak with both parties, will try to reach . . . They will have sort of caucus meetings, private meetings, often over the phone or by email with each party. Try to find a common ground where a settlement can be reached. They are pretty successful. Granted, the financial ombudsman service is the largest in Europe, probably. It gives you an idea of the high volume of disputes where mediation techniques are used to resolve consumer claims.

Aled:      Yeah. Okay. So by having one central body overseeing this ODR, ADR platform for consumer disputes . . . Is that designed to replace the role of the ombudsman? Or is it to complement? Or how is that going to . . .

Pablo:   Well, in terms of the U.K., I think, also, in terms of the European level, the main objective is not really to provide newer schemes, although in some sectors, there will be a need for that. Also to create pathways to harness the system mechanisms and to facilitate access to these mechanisms.

Aled:      I see.

Pablo:   What Europe wants to do with all the regulation, it is setting an online dispute resolution platform, so basically a European website. When we have a problem with a trader in another country, you were telling me earlier you went to Spain. So many people from the U.K. go to Spain and rent a car. Sometimes people have bad experiences, or they can have an unfortunate event. These sort of complaints or disputes unfortunately arise quite often.

It’s not easy to find the right place to go in another country, which is, incidentally difficult enough in the U.K. because there are so many . . . In the U.K., the government estimated there are around 38 different ADR schemes for consumer disputes. There are so many, which is very difficult to identify sometimes which is the right one.

Aled:      Yeah.

Pablo:   So what European Union wants to do is through this online dispute resolution platform, is to facilitate consumers to submit a complaint and to identify the relevant ADR scheme operating in the country where the trader is based.

Aled:      Right.

Pablo:   At the national level, the government is thinking to . . . It is evaluating and studying how to create what they call a “help desk”. That, again, will be a website with also telephone support that will help a consumer [inaudible 00:23:32] identify the relevant ADR scheme when they have a complaint against a trader. Also, they will inform traders who are interested to . . . or who have complaints with consumers, which are those schemes they could join in to get these disputes settled. Because this obviously costs money to traders to have these disputes.

Aled:      Yeah.

Pablo:   Having negative feedback on TripAdvisor, you have a bad experience in Spain with a hotel or with a car rental company, it could be also very damaging. So it’s in the interest of traders also to resolve these disputes.

Aled:      Okay. So I’m trying to get my head around this now. So you’ve got all these different consumer disputes taking place in the U.K. The purpose of the EU . . . Is it the ADR directive or the ODR regulation? Which one are we talking about now?

Pablo:   Well, they are completely interlinked.

Aled:      Okay.

Pablo:   Yeah, the regulation sets up this platform or this website that will help parties to submit a complaint, the consumer, and to identify the ADR entity. The directive requires countries to have these ADR bodies and these ADR bodies to comply with a minimum criteria, minimum standards or safeguards.

Aled:      Is it like an eBay for disputes?

Pablo:   The platform will be sort of . . . eBay has really a very effective platform, as you know, to resolve disputes between buyers and sellers.

Aled:      Yeah.

Pablo:   eBay is a third neutral party that provides the technology that helps buyers and sellers to resolve these disputes. Actually they are a very interesting example of how . . . what is the power that technology can offer in settling disputes.

Aled:      Yes.

Pablo:   I don’t know if you heard that they resolve a huge amount of disputes. I think it’s around 60 million a year.

Aled:      60 million. Just on that one platform alone, 60 million disputes. That’s incredible.

Pablo:   It is. It is huge, but also you have to bear in mind that eBay is also quite a big business. In terms of transactions . . . They are often of low value. But in terms of transactions, if it was a country, it would be the 50th [sounds like 00:25:59] largest country . . .

Aled:      Yes.

Pablo:   . . . in the world, which goes to show the volume of transactions they have.

Aled:      Yeah.

Pablo:   Always a small percentage of those transactions generate disputes, unfortunately.

Aled:      Yeah.

Pablo:   eBay provides a very useful technology to resolve these disputes. The beauty of eBay is that disputes are always about the same issues.

Aled:      Yeah.

Pablo:   You know? As you can imagine, you buy something online. It arrives late. It’s not as it was described. It is a different colour. It is lower quality, or you’re wanting to return it. So the buyer has an interest of getting some sort of redress. While the seller, like with the TripAdvisor reference I made earlier, was to have a positive feedback because that has a very important impact on how they trade on eBay.

Aled:      Yeah.

Pablo:   So that brings the parties both to have an interest in having that dispute resolved.

Aled:      It’s quite interesting because, if you think about transparency, you’ve got transparency on eBay because . . . Okay. Imagine there are buyers and sellers that shut down their account if they’ve got bad feedback and open up under another guise. I mean, it is very interesting how ODR, online mediation, could really challenge some of the core values of what I would call sort of conventional, traditional mediation.

Pablo:   Sure. Sure. I think also in the consumer context, it’s completely . . . It also changes. Normally mediators are expected to be a bit more interventionist or to act as a bit more a conciliatory role. That is what is expected, particularly also because you have some sort of imbalance of power. You have traders who get these disputes all the time, who are “repeat players” as the Internet should call them, and then you have the “why should-ers” [sounds like 00:28:31], the consumers who go to the mediation for the first time.

So the mediator has also to ensure that there is some sort of level playing field between parties who have very different knowledge and expertise. So it changes, a bit, the paradigm of traditional mediation processes in the consumer context. Then if you incorporate technology, it even changes it further because parties communicate through different means.

There are different challenges and opportunities for communication, and those have to be addressed in order to harness the potential that technology can offer to resolve disputes where parties prefer to be resolved at a distance.

Aled:      Yeah.

Pablo:   The funny thing is I remember hearing. It was the eBay CEO that said that one of the reasons why they purchased Skype was that when they offer dispute resolution services, they could use Skype also. You know? Because they’re buyers and sellers. But it turned out that nobody wanted to use Skype. You know? You buy something from somebody who you never met.

You have a problem with that person. The last thing you want to see is to see them face-to-face on Skype. You know? Parties prefer to communicate in writing. You know? They would never take the option, even though it was given, to communicate face-to-face.

Aled:      Fascinating. How fascinating. So the vast majority of all the disputes on eBay, the 60 million, get resolved through text.

Pablo:   Yes. I mean, it is. You have to fill in a form. They have different processes, depending on what you buy. If you buy a car of high value, it’s a different process. They have different providers outside eBay. Also, the main provider, sort of, within eBay is PayPal. The big thing is that PayPal can move the money from one account to another. Often, they impose the decision. They may adjudicate a decision. But what is clear is that nobody wants to meet over Skype. They prefer to resolve the issue by exchanging messages, reading text.

Aled:      I mean, that’s really interesting. If I think about the slow take-up of mediation in the U.K., I mean, lots of assumptions that people make about why mediation hasn’t taken off as they thought it would. I wonder, to what extent, it is people’s lack of desire to want to sit across the table from somebody that they’ve fallen out with. Would they prefer to shuttle diplomacy?

Pablo:   Sure. Sure.

Aled:      Sit in one room and pass messages across?

Pablo:   Yeah. I mean, you got to be sure that the telephone mediation that the county courts offer . . . It is over 90% of it or 95% of it is over the phone, but over the phone, not on a conference call.

Aled:      Yeah.

Pablo:   You know? It’s shuttle mediation or with caucus discussions between the mediator or the so-called mediator and the complainant or the claimant and the defendant. Obviously the beauty of the court and next mediation is that, well, look, if we don’t resolve the matter, you have to have a hearing . . .

Aled:      Yeah.

Pablo:   . . . and obviously pay for it.

Aled:      Yeah.

Pablo:   So you have important incentive to push the parties to reach some sort of settlement that will avoid them from further distress, costs, delays, etc., all that is involved with the court process. So yeah, I mean, even in the U.K., telephone mediation seems the way to go, for many disputes.

Aled:      Yeah. So if we’re thinking about online mediation then, particularly for consumer disputes, are we likely . . . I’m just thinking about the impact on a mediator like myself or any other mediator watching this.

Is there a chance that I’m going to be doing less face-to-face mediations, even in a virtual context, and more interactions via email or not even conferencing calls, just sort of shuttle diplomacy over the phone?

Pablo:   Sure. Sure. That looks to be the direction that it’s taking. That is what parties also prefer often. They don’t want to meet face-to-face when they have certain type of disputes. They want to get it settled, as early as possible, as less painful as possible.

Aled:      Yeah.

Pablo:   Sometimes meeting face-to-face, it can be very uncomfortable for the parties. Technology offers us new ways of communicating with parties. This sort of shuttle or caucus meetings, I think, are much more natural to be used through technology than to be in separate rooms and running.

Aled:      Yeah.

Pablo:   So I think technology offers those opportunities, and that’s the direction it is taking.

Aled:      Yeah. But just for consumer, small-value consumer disputes we’re talking about. We’re not talking about family disputes.

Pablo:   Well, I think it varies. I mean, I’m most familiar and always have in the background thinking about these consumer disputes, but I think other type of civil and commercial disputes . . . Online communications and shuttle mediation seems to be what parties want. So I don’t think many parties are particularly keen on traveling to London or somewhere else and meeting their opponent face-to-face.

We know that for other type of complaints or issues, like in the family context, it seems that mediation or transformative mediation offers an additional benefit. It sometimes seems the most eloquent way. But I think we have to change our mentality of the traditional mediation for present and future disputes, because many of them will be resolved through the use of technology and talking to the parties separately, as opposed to meeting them in a room around a table.

Aled:      Yeah. Is there any data on the duration, the length of time, a typical consumer dispute takes to be resolved?

Pablo:   It varies. It varies a lot, depending on the type of disputes. Normally, if we’re talking about low-value disputes, I expect it to be resolved fairly quickly. We’re talking about something from 20 minutes to one hour. A classic telephone mediation of the county courts generally is one hour, and then parties can agree to have a second hour if they pay for it. But it is expected to be resolved within a very tight time framework.

Aled:      Yeah. I mean, I’ve been through one online mediation process on a platform called eLance, which is a freelance platform. You want to find somebody that can build a website for you or design some logo for you or do anything actually. You can go onto these platforms. I had a dispute with a company out in India. It was about $300, I think, was the value of the dispute.

I think I wrote maybe one or two sort of email, short emails, with my version of the events. I didn’t see what the other company had written. But it wasn’t a very transparent process. I was just given the decision, and then I had quite a toxic email from the loser. You put the money in escrow.

Pablo:   Sure.

Aled:      When you reach certain milestones, you release proportions of the money, but we never reached even first base. So it was a lot more straightforward. But yeah, it wasn’t a particularly length-, I mean, I think if I’m imagining a mediator sitting on the other side, receiving these emails, I think it was more of maybe an adjudication actually. Where somebody decided, “Hold on a second. That doesn’t seem fair.”

Somebody clearly made a judgment and imposed that judgment on the outcome. So I wouldn’t really call that online mediation, but it didn’t take long, to be honest.

Pablo:   That’s very interesting. I do remember the general counsel for eLance talking at the last ODR forum at Stanford and said that for them, what is key is that these disputes are resolved as early as possible. So tackling and resolving these issues quickly is essential for them. It’s essential for their business survival. How long did you take the process, from your initial complaint to getting completely resolved? Was it a matter of days? Weeks?

Aled:      I think it was about a week or so, because you had certain periods of time to submit your . . .

Pablo:   Sure.

Aled:      What was really interesting . . . I read Colin Rule’s paper on reputation and when someone gets a dispute resolved quickly, it increases their spend. Well, after that experience with eLance, I didn’t use eLance again. I switched to oDesk.

Pablo:   Okay.

Aled:      Which is a similar platform, a competitor. They just recently merged.

Pablo:   Okay.

Aled:      eLance bought oDesk.

Pablo:   That’s interesting.

Aled:      Yeah. So I didn’t use eLance after that. I lost faith in the quality of providers on there.

Pablo:   That’s very interesting. The paper you were referring about, I think written by Colin Rule, it was a very interesting experiment. Because I remember that he looked at a sample of disputes that arose on eBay, during a period of a few months, and compared with other transactions that had disputes. The findings are very, very interesting because with the exception of those disputes that took longer to be resolved. Those who resolved the disputes quickly, then they spent more money on eBay than those who had never had a dispute.

But the most interesting part, I think, for this context of mediation is that the people who seem to spend more money were those who resolved the problem amicably. So they reached a settlement.

Aled:      Yeah.

Pablo:   They spent more money in the subsequent period of time than those who won the case, but a third party decided who wins the case. So even if the winners spend less money than those who have settled amicably. So it seems that . . . We’re talking about millions of transactions that are being compared during a period of time.

Aled:      Yes. Yeah.

Pablo:   So it seems that people have greater faith in the process, the dispute resolution process, when they construe their own settlement, their own decision, even more than when they win the case where a third party decides on that. In this case, on eBay, most of the time it’s PayPal.

Aled:      Yeah.

Pablo:   So equivalent to the escrow account that you were talking about with eLance. So these are very interesting findings. I remember Colin mentioned that an executive said, “Well, it is that easy. Let’s give everyone a dispute.” This works with the first type of dispute.

The argument that Colin Rule was making is that it you get the loyalty of consumers, whilst you have to resolve a problem. Once you have a problem, if you help them with that problem, then you trust that provider.

It happens often with . . . Amazon has a different angle to face. Amazon doesn’t resolve disputes. You don’t receive something. They send you a new item. You trust them as a result, but you remember a particular provider. No one [inaudible 00:42:31] because you expect the things to go well.

Aled:      Yeah.

Pablo:   But how things are dealt when things go bad . . . So if they help you to resolve the issue, then you can . . . Well, this is the argument that Colin Rule was making.

Aled:      Yeah.

Pablo:   Then you have loyalty to that company or to that provider.

Aled:      Yeah. I think that makes perfect sense. If I’m in a dispute with somebody, and I feel that the dispute was resolved fairly and amicably, I think my . . . I’ll feel good about it. I’ll feel, I don’t know, that there was some sort of justice, fairness involved. I imagine my trust levels would be restored, at the very least.

Pablo:   Well, when you reach a settlement, sometimes you have to reach some sort of compromise. So you might not get all you were asking for, but you might feel empowered about getting your own decision.

Aled:      Yeah.

Pablo:   The funny thing is . . . I mean, this finding on eBay was quite interesting because the expectation was that winning was more important than winning your own settlement or finding a compromise, but they found out that was not the case.

Aled:      Yeah.

Pablo:   At least in the eBay context. We’re talking about a huge number of cases that have been compared.

Aled:      Yeah.

Pablo:   So yeah, enable parties to reach a settlement to construe what they think is fair and just. It seems to be more powerful than just telling them who wins and who loses.

Aled:      Yeah.

Pablo:   Even for the winner party.

Aled:      But that’s been the argument for years about mediation. You know? If you can take charge of your own outcome, then that’s got to be surely better than a third party imposing an outcome that either is in your favour or against you.

Pablo:   Sure. Although, in the consumer context, because of this imbalance of power, there are some concerns, that the consumer could be bullied into a settlement that does not respect their entitlement or their rights. Also, in a family context, some research has shown that when you go to mediation, often women get less money than when they end up in trial, when the judge decides how much compensation or ancillary relief a woman or ex-wife with kids is entitled to have.

So I think there are also other sets of concerns that need to be addressed. The good thing of technology is that it can be very useful also as a tool to informing parties about what are their rights. Then it’s up to the parties to construe what they think is fair as a workable solution for them.

Aled:      I mean, I get the impression that the advent of ODR and online mediation could actually expedite the process of regulating the mediation market in the U.K. You know? Because for so long now, we’ve been just sort of blowing in the wind. No one wants to come down and say, “Okay. This is the accredited body. This is the accreditation process. These are the standards.”

Pablo:   Sure.

Aled:      You know? Anyone can mediate at the moment.

Pablo:   Sure. Well, the government has hinted that the next regulation will be accreditation and probably will be obviously the council, the Civil Mediation Council, who would be at the forefront of these changes. But I think the concern in the U.K. is that they already have a very expensive and formalistic court system. The last thing they want to do is to create another formalistic mediation process. So it’s very . . .

I mean, I was looking at how things . . . what prompted legislation in Spain and Italy to promote the use of mediation. The motivations are very different. If you see . . . If you look at Italy, they have a sclerotic, extremely slow court process. They want to incentivise mediation to relieve courts from disputes that take ages to be resolved.

Aled:      Yeah.

Pablo:   In Spain, they have a court system that is also fairly slow, not as slow as Italian counterpart, but it’s a bit more formalistic. Parties are required to have legal representation, even for particularly low-value disputes. In the U.K., the issue is the formality and the costs.

Aled:      Yeah.

Pablo:   So I mean, there are different motivations that are informing the use or the promotion of mediation. I think because of formality, the high cost is one of them in the courts in England and Wales. I think that also pushes the government to be cautious about legislating too early and to make it formalistic, the process.

Aled:      Yeah.

Pablo:   But I think accreditation will be maybe the first step that, in time, will come.

Aled:      But you talked about July 2015 not being a milestone, in terms of member states implementing the ODR regulations. Is that right?

Pablo:   The ADR directive. Yeah, that will. The regulation will come six months later, and it will be implemented, but it will be on commission. The regulation only requires the commission to have this platform or this website. So it’s the commission who’s going to do that. But the directive, you are right. It’s the member states in July who will have to implement it through primary or secondary legislation.

Aled:      Yeah.

Pablo:   I think there are two separate issues. One, it is that the government has said that they will look at accrediting mediators, as well as setting up regulation for the accreditation of mediators. That’s one thing.

A separate thing is the implementation of the ADR directive. The ADR directive will be implemented by next summer. The main changes will be that there will be a number of so-called competent public authorities that will assess whether ADR schemes or mediation schemes that deal with consumer disputes, whether they meet with the criteria set in the directive and get this European certification to deal with domestic, as well as cross-border, disputes.

Aled:      Right.

Pablo:   Then they can also be channeled through the European platform.

Aled:      Okay.

Pablo:   One of the requirements for this accreditation for mediators or ombudsman schemes is that they deal with disputes online. They don’t have to be all of them.

Aled:      Yeah.

Pablo:   But if parties want to have the dispute resolved online, they must be able to do so. The ODR platform will offer the technology for mediators, for instance, to resolve consumer disputes online. This is obviously because if you have a consumer dispute with somebody in another country, you cannot expect them to travel for a low-value, typical consumer dispute.

Aled:      Yes.

Pablo:   Low-value could be thousands.

Aled:      Yes.

Pablo:   Few thousands of euros or pounds. You know? Get legal representation without it and meeting . . . Let alone, the people may speak different languages. So the idea is that ADR schemes that resolve consumer disputes must be able to do it not just cross-border, but also domestic disputes, online.

Aled:      Okay. So let’s finish off by thinking about the implications of this for me. So one implication is if I want to train to become a mediator, Let’s say I’m a mediation training provider. Part of my training will have to include how to facilitate online mediation or online disputes.

Pablo:   Absolutely.

Aled:      Okay. If I’m a mediator, and I trained ten years ago, I would need to update my skills, my professional development, with a module on how to resolve disputes in online context and how to use a particular platform.

Pablo:   Absolutely.

Aled:      What about the volume of business? Are we looking at a huge increase in mediations taking place? Therefore, now there will be finally enough work for all the mediators that are just sitting, twiddling their thumbs at the moment?

Pablo:   Sure. It remains to be seen. The directive, per se, does not require traders or consumers. Traders in particular, to be linked or to opt into an ADR scheme or mediation scheme. There is already [inaudible 00:52:32] a specific regulation that they’re required to participate in an ADR scheme, like financial institutions, like energy suppliers or the telecoms, so all these big sectors. They have the obligation to belong to an ombudsman scheme, often.

Aled:      Yeah.

Pablo:   But they could also offer mediation services. But what the ADR directive does, is requires traders, that when they have a complaint from a consumer, and that complaint cannot be resolved, the trader will have to notify the consumer two things. One, what are the ADR entities, including mediation, that are available to resolve this type of dispute?

Aled:      Yeah.

Pablo:   Two, whether or not they opt into this system.

Aled:      Right.

Pablo:   If they have already opted into the system, like they have a legal obligation like [inaudible 00:53:32] or retailers . . . Some retailers . . . I don’t know. They are linked to the furniture ombudsman, for instance.

Aled:      Yeah.

Pablo:   Or they are willing to consider a scheme, like ABTA, members of ABTA, the travel agency association. So these companies, these traders, they will have to notify consumers, again, about the competent ADR scheme. Which can be mediation . . .

Aled:      Yeah.

Pablo:   . . . and that they are members of this ADR system. So the consumer knows that they’ll be able to pursue further, the complaint through an independent institution.

Aled:      Yeah.

Pablo:   So that is one element. The ODR regulation also requires everyone trading online to have a link to the ODR platform. So if the consumer has a problem, the consumer will go to the platform. They will be informed about their rights, and they will be able to submit a complaint.

Aled:      Okay.

Pablo:   That’s not required, necessarily. The trader is obliged, legally required, to participate in an ADR scheme.

Aled:      Okay.

Pablo:   But obviously this will raise awareness.

Aled:      Yeah.

Pablo:   This is hoped that this will push traders to join in ADR schemes, including conciliatory mediation bodies.

Aled:      Yes. Knowing what we know about reputation management and buyer behaviour, based on the data from eBay, it’s in a trader’s best interest if they want to retain customers, keep customers, get new customers, that they endeavour to resolve any disputes amicably.

Pablo:   Sure. So there is a significant potential for expectation increasing, this sector at least.

Aled:      Yeah.

Pablo:   This also . . . Again, it will require national legislation to be implemented. So again, it will raise awareness. Which is one of the difficulties with the growth of this field.

Aled:      Yeah.

Pablo:   Awareness not just about that it exists, but also what has there to offer. You know? Traders are very simple. They make a very simple cost analysis. Is this worthwhile for me to opt in the system?

Aled:      Yeah.

Pablo:   Do I save money? If yes, I opt in.

Aled:      Yeah.

Pablo:   Do I not? Then I’m out.

Aled:      Yes.

Pablo:   So I think that increasingly, now, the European commission and the U.K. government, for instance, is looking at requiring airlines to opt in an ADR scheme, which may be an ombudsman scheme or maybe a sort of MED-ARB.

Aled:      Yeah.

Pablo:   So I think there is exciting times ahead. There is a potential for growth, a significant growth of the market, of ADR services, to resolve consumer issues, consumer disputes.

Aled:      Pablo, I know you’ve got to get off to a lecture in a few minutes. I’m trying to think. I’m just trying to reflect on how I’m feeling now.

At the beginning of the interview, thinking, “Should I be apprehensive? Excited?” I mean, there’s a part of me that’s excited, in that I think this regulation coming in could definitely raise awareness, promote ADR, promote mediation for consumer disputes, but small business disputes, and do a lot of good for the mediation profession.

I’m a little apprehensive about maybe how long this would take, whether it’s going to be such an effort, or whether the advancement in technology, if it is exponential growth . . . If by the time the regulations are second-nature for traders, that there’ll be a system fully automated with using artificial intelligence. We’ll have banks and servers of mediators, resolving these disputes.

But if they’re consumer disputes, and we know that by the nature of consumer disputes, you can categorise them into, “I didn’t get the product that I thought I was getting. It’s the wrong colour. It’s the wrong size. It arrived late.” You know? It’s got a lot of potential for finding a solution that you could scale. So I don’t know where that leaves a mediator like myself.

Pablo:   I think Richard Suskind has written this book about the idea of lawyers and the future in the field. I mean, it is clear that technology offers opportunities. I think that it will be organically embedded in the way mediation services are delivered. I think that some . . . The people who refuse to use technology for delivering the services, they will be left behind, and they will eventually have to embrace it.

It’s like those who . . . Not that long ago, some people refused to use emails to communicate.

Aled:      Yeah. Yeah.

Pablo:   You know? That’s to their disadvantage. I mean, technology keeps moving forward.

Aled:      Yeah.

Pablo:   You know? That doesn’t mean that it is a panacea. No, technology also, sometimes it’s a bit difficult to use. It has a learning curve. I think it will be a progressive process, where the field of mediation will incorporate technology, but that’s the only direction for growth in this field. Also for expanding the market outside more localised or local disputes.

So I think the earlier the sector embrace technology, I think the more opportunities they will have for expanding their profession.

Aled:      Yes.

Pablo:   The ADR directive and the consumer sector is giving opportunity to certify those who comply with quality criteria. They will perhaps . . . They are expected to be putting a more competitive position, which will be able to approach businesses. I said, “Well, I have been accreditated to comply with European legislation. You know? You can trust us as your providers, as sourcing your complaints and resolving them in a cost-efficient manner.” So I think that is the way to go.

Aled:      Yeah.

Pablo:   It will happen sooner than later.

Aled:      Yes. I think . . . Yeah. Well, let’s wait and see.

Pablo:   Exactly.

Aled:      It’s very, very interesting, very exciting. I love technology. I love mediation. I’m really interested in where this field is going.

Pablo, you’ve been really generous with your time. I really appreciate. It’s been a real eye-opener. I’ve got 101 questions, and now I’m going to go away and think about. Look. If people want to reach out to you, say, “Thank you,” find out a bit more about your work, or get in touch, what’s the best way for them to do that?

Pablo:   Sure. Well, they can reach me through the university website, University of Leicester.

Aled:      Okay.

Pablo:   So I am on the school of law. So they just type my name, Pablo Cortes, and it has a list of my publications. I’m involved now with . . . I found this project by Nuffield to look at how consumer redress works in Europe, particularly in Italy, Spain, and the U.K. I’m also involved in a European project on the use of online mediation for resolving cross-border disputes. So anyone with expertise, with interest in these areas, I’m happy to be reached out. I’m happy to discuss it further. It has been an absolute pleasure, discussing these issues with you. I hope I meet you soon.

Aled:      Absolutely. Definitely.

Pablo:   Maybe face-to-face or online, either way.

Aled:      Definitely. Pablo Cortes, thank you very much.

Pablo:   Thank you.

Aled:      Thank you.

About the mediator

Pablo Cortes Profile Pic

Pablo is a Senior Lecturer and a non-practising Spanish attorney. He conducts research in the field of dispute resolution, civil procedure and consumer law. He was invited to be a keynote speaker in two international conferences, and he has been invited as a speaker at many other conferences in 15 different countries. He was invited to participate in expert meetings by various organisations, including the UN Commission for International Trade Law... View Mediator