Digital dispute resolution rules to facilitate rapid and cost-effective resolution of disputes involving novel digital technologies

Although some commentators optimistically saw products developed using blockchain technology as a way to avoid disputes entirely, the reality is that new developments inevitably generate disputes as is increasingly being seen in the field of digital technology. The Digital Dispute Resolution Rules (the “Rules”) recently published by LawtechUK’s UK Jurisdiction Taskforce (“UKJT”), chaired by the Master of the Rolls, Sir Geoffrey Vos, are designed to be used for and incorporated into on-chain digital relationships and smart contracts.

The Rules acknowledge that “automatic dispute resolution processes” are relied upon in digital transactions from time to time, with disputes being resolved by peer-to-peer or community voting systems. However, where a dispute is not resolved in this way, the Rules are intended to provide a flexible and efficient means of achieving a resolution.

Key features of the Rules and the advantages of their use include:

Submission to arbitration: Disputes not the subject of automatic dispute resolution processes are to be submitted to arbitration although the Rules also allow for the parties to agree that expert determination can be used for the determination of particular issues. Like most Internet-based technologies, the blockchain lends itself to cross-border usage and in some cases the geographic location of a counterparty may not be known. The wide recognition of arbitration awards under the New York Convention (currently 168 countries have signed the Convention) makes enforcement of arbitration awards much more straightforward than the enforcement of judgments of national courts.

Appointment of tribunal: The Society for Computers and Law is the body designated under the Rules to appoint the tribunal and it must have regard to (but is not bound by) any preferences of the parties. The tribunal can therefore be appointed with specific expertise in the relevant technologies.

Short flexible procedure: The tribunal is to have absolute discretion as to the procedure to be adopted although it must act fairly and impartially and allow each party a reasonable opportunity to put its case. The tribunal must do its best to decide the dispute within any time period agreed by the parties or, if none is agreed, within 30 days from its appointment.

Power in relation to digital assets: Where the architecture of the system supports it, the rules allow for the tribunal to be given direct access to “operate, modify, sign or cancel any relevant digital asset”. This means that, once the tribunal makes an award, there can be on-chain enforcement of the decision, rather than relying on compliance by a losing party.

Anonymity: Unlike a court judgment, arbitral awards are typically confidential. The Rules take this one step further by enabling the parties to remain anonymous during the dispute, subject to the confidential provision of details and evidence of their identity to the tribunal. Given that anonymity is seen as a major benefit of cryptoassets and smart contracts, this provision will be an attractive option to users of these technologies.

For the Rules to apply they must be agreed to in writing by the parties. Whilst written with existing cryptoassets and smart contracts in mind, the Rules are drafted with the intention of covering future uses of the technology as well, and so may be incorporated into any contract, digital asset or digital asset system.

The UKJT will monitor the use of the Rules closely with a view to determining whether any revisions may be necessary based on uptake and implementation.

For further disputes related content click here to access Disputes+, Bird & Bird’s dispute resolution knowledge portal.

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