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Notes on the Main Issues of Cloud Computing Contracts (prepared by the UNCITRAL secretariat, 2019)

Part two. Drafting a contract

N. Dispute resolution

Methods of dispute settlement

The parties may agree on the method to settle their contractual disputes. Dispute settlement methods include negotiation, mediation, online dispute resolution (ODR), arbitration and judicial proceedings. Different types of dispute may justify different dispute resolution procedures. Disputes over financial and technical issues, for example, may be referred to a binding decision by a third-party expert (individual or body), while some other types of disputes may be more effectively dealt with through direct negotiations between the parties. In case of smaller claims, ODR-assisted negotiations or mediation may offer fast and cost-effective methods for the parties to reach consensual agreement online. For higher-level claims, cloud sector-specific ODR may offer a competent specialized forum and be helpful for judicial processes. The law of some jurisdictions may prescribe certain alternative dispute resolution mechanisms that the parties would need to exhaust before being able to refer a dispute to a court.

Arbitral proceedings

Disputes that are not amicably settled may be referred to arbitral proceedings if the parties opted for it. Not all issues may, however, be referred to arbitration; some may be reserved by law for adjudication by a court. The parties may therefore wish to verify the arbitrability of their disputes before opting for arbitration. An arbitration clause in a contract would usually refer to a set of arbitration rules to govern arbitral proceedings. A contract can include a standard dispute resolution clause referring to the use of internationally recognized rules for the conduct of dispute resolution proceedings (e.g., the UNCITRAL Arbitration Rules). In the absence of such specification, the arbitral proceedings will normally be governed by the procedural law of the State where the proceedings take place or, if an arbitration institution is chosen by the parties, by the rules of that institution.

Online dispute resolution

The parties may opt for an ODR mechanism for some or all categories of disputes arising from their contract subject to limitations imposed by law. The contract may specify the scope of issues subject to ODR and the ODR platform and rules to be used in the proceedings. In some cases, ODR could be embedded in the cloud service package offered by the provider with an opt-out possibility.

The ODR process usually consists of: (a) negotiation conducted between the parties via the ODR platform; (b) facilitated settlement, where a neutral is appointed and communicates with the parties to try to achieve a settlement; and (c) a final stage, in which the ODR administrator or a neutral informs the parties of the nature of the final stage, and of its form. The result of ODR may be non-binding on the parties unless the contract or the applicable law states otherwise.

Judicial proceedings

If judicial proceedings are to take place, due to the nature of cloud computing services, several States might claim jurisdiction. Where possible, parties may agree on a jurisdiction clause under which they are obligated to submit disputes to a specific court (read more).

Retention of data

During the dispute resolution phase, continued access by the customer to its data, including metadata and other cloud service-derived data, may be vital, apart from for business continuity, for the customer's participation in dispute resolution proceedings (e.g., to substantiate a claim or counterclaim). The contract may specifically provide that, in case of disputes between the parties, the customer's data will be retained by the provider and the customer will have access to its data for a reasonable period of time, regardless of the nature of the dispute. The parties may also agree on an escrow arrangement (see above under M. End-of-service commitments,Customer access to the content subject to export).

Limitation period for complaints

The parties may specify in the contract the limitation period within which claims may be brought. Limitation periods stipulated in the law may be applicable and will override non-compliant terms of the contract.

Relevant Glossary terms

Cloud computing services: online services characterized by:

  1.       Broad network access, meaning that services can be accessed over the network from any place where the network is available (e.g., through the Internet), using a wide variety of devices, such as mobile phones, tablets and laptops;
  2.       Metered delivery, allowing usage of the resources to be monitored and charged by reference to level of usage (on a pay-as-you-go basis);
  3.       Multi-tenancy, meaning that physical and virtual resources are allocated to multiple users whose data are isolated and inaccessible to one another;
  4.       On-demand self-service, meaning that services are used by the customer as needed, automatically or with minimal interaction with the provider;
  5.       Elasticity and scalability,meaning the capability for rapidly scaling up or down the consumption of servicesaccording to the customer's needs, including large-scale trends in resource usage (e.g., seasonal effects);
  6.       Resource pooling,meaning that physical or virtual resources can be aggregated by the provider in order to serve one or more customers without their control or knowledge over the processes involved;
  7.       A wide range of services from the provision and use of simple connectivity and basic computing services (such as storage, emails and office applications) to the provision and use of the whole range of physical information technology infrastructure (such as servers and data centres) and virtual resources needed for the customer to build its own information technology platforms, or deploy, manage and run customer-created or customer-acquired applications or software. Infrastructure as a service(IaaS), platform as a service (PaaS) or software as a service (SaaS) are types of cloud computing services.

Metadata: Basic information about data (such as author, when the data were created, when they were modified and file size). It makes finding and using the data easier and may be required to ensure the authenticity of the record. It can be generated by the customer or the provider.

Cloud service-derived data: Data under the control of the provider that are derived as a result of the use by the customer of the cloud computing services of that provider. It includes metadata and any other log data generated by the provider containing records of who used the services, at what times, which functions and which types of data are involved. It can also include information about authorized users, their identifiers and any configuration, customization and modification.