General Electric Company believes that computers can solve legal disputes. GE is presently testing an online dispute resolution process which it believes will reduce the time and money that the company might otherwise spend on lawyers. The GE Oil and Gas Division that provides equipment and services to oil companies and construction firms is requiring that thousands of its suppliers and contractors agree to “cyber settlements” in relatively straight forward disputes.
The experiment is taking place in Italy with disagreements that involve approximately $65,000 (“small” disputes according to GE). GE stated that the cost to pursue a $13,000 claim through typical arbitration could ultimately cost each side at least $13,000 making the dispute process cost-ineffective. The GE process begins with an automated, online double-blind bidding. After a claimant pays a $500 fee, the supplier/contractor and GE upload relevant documents, which each side can then review. The parties enter three settlement figures into the computer – in ascending or descending order, depending on whether the party is seeking payment or paying. The three figures are not disclosed to the opposing party. If an offer and demand in any round overlap, a settlement is reached. The $500 fee is then split equally between GE and the claimant.
If no settlement is reached through the automated bidding processed, the dispute gets bumped into online arbitration for an additional $1,000 paid by the claimant. For online arbitrations, GE engaged the International Centre for Dispute Resolution, a division of the not-for-profit American Arbitration Association to design an overall online process. Once an online arbitration has been commenced, the Centre then finds engineers to arbitrate the cases. The engineer reviews the documents that were uploaded, determines an award, and informs the Centre, which communicates the award to both sides online – no lawyers, depositions, witnesses or hearing dates.
GE is closely monitoring the results of this new program and says that it is too soon to tell whether cyber settlements will catch on or the amount of money GE or its suppliers/contractors will save. GE indicated that disputes have been settled in fewer than 80 days.
New York City for many years used a similar cyber settlement process to resolve small personal-injury and property-damage claims. Last year, the City concluded that the work that was being done by the computer could be done less expensively with an in-house staff of adjusters who negotiate by phone. The City claims to be now saving $600,000 a year that it paid to cyber settle its disputes.