Alternative dispute resolution is the resolution of issues between multiple parties without subjecting each other to costly litigation. Online dispute resolution is a branch of alternative dispute resolution that conducts the dispute resolution services through the Internet. Online dispute resolution typically involves conducting negotiation, mediation, or arbitration through the Internet rather than in person as they are typically conducted. These processes may be binding or non-binding — that is, the parties may agree at the outset of the dispute resolution whether or not the parties want to be bound to the result reached at the end of the process.
In order to understand online dispute resolution, one must understand the different methods of resolving conflict employed in these systems. Arbitration can be likened to an informal court proceeding. The parties each are to present his or her argument to the neutral third-party arbitrator and he or she comes to a conclusion based on those arguments. Mediation is simply a discussion facilitated by a neutral third-party mediator whose purpose is to facilitate the two sides coming to an agreement. Mediation is typically even more informal than arbitration.
Online dispute resolution also employs new techniques through the use of technology such as automated negotiation. Automated negotiation is a method of alternative dispute resolution whereby two parties disagreeing over a dollar amount may, without the knowledge of what the other party is bidding, enter bids as to what he or she would consider a fair amount to pay in order to resolve the conflict. If the parties come within a certain range of each other — specified prior to entering automatic negotiation — then the program will automatically settle the issue for them by giving a figure that it deems fair.
More traditional forms of alternative dispute resolution such as arbitration and mediation are also enhanced through the use of technology. For instance, mediation may be conducted online where the mediation software identifies the problem and proposes a list of solutions that are typical for that issue. The parties each select the ones he or she would agree to and if there is a match, then that is the prescribed solution. Even if the process remains the same, online dispute resolution can make the traditional methods of alternative dispute resolution easier and more efficient by allowing the parties to go through the resolution process without having to leave home.
Online dispute resolution may be binding on the parties, or merely a suggestion. For the result to be binding upon the parties, both must agree prior to starting the process that he or she will be bound to follow the result. This creates a contractual agreement that gives full force of the law to the result of the online dispute resolution.