New rules aim for “rapid resolution” of digital disputes

Vos: Ground-breaking rules

Sir Geoffrey Vos, the Master of the Rolls, has launched a consultation on draft arbitration rules which aim to ensure “rapid, informal and cost-effective resolution of disputes arising out of novel digital technologies” such as smart contracts and blockchains.

The rules, drafted by the UK jurisdiction taskforce of Lawtech UK, allow for decisions to be implemented directly on a blockchain using a private key and for optional anonymity of the parties.

For these reasons and because they provide for “arbitral or expert dispute resolution in very short periods”, Sir Geoffrey, who chairs the taskforce, described them as “ground-breaking”.

He said the taskforce hoped to publish the final version of the rules this spring.

Sir Geoffrey said the Legal Statement on the Status of Cryptoassets and Smart Contracts published by the taskforce in November 2019, which expressed the view that cryptoassets were property under English law and smart contracts were contracts, had been “very well received in many jurisdictions”.

The taskforce said a key objective of the rules was to allow those involved to take “full advantage of the flexibility offered by UK arbitration to tailor dispute resolution procedures to the distinctive features” of digital assets, blockchains, smart contracts and fintech.

The rules provide for arbitration under the Arbitration Act 1996, which the taskforce said gave parties and arbitrators “a great deal of autonomy” in how their disputes were resolved.

“The rules should be as brief and simple as possible, setting out only what is reasonably necessary.

“They should be sufficiently flexible to accommodate a wide range of technological disputes, including both ‘traditional’ disputes arising out of conventional written contracts and ‘novel’ disputes arising out of the use of digital assets and smart contracts, where the parties might be unknown to each other and might have transacted anonymously on a blockchain.”

The taskforce said disputes should be resolved on a timetable “very much shorter than those contemplated in court rules or existing institutional arbitration rules”.

Claimants may, when starting a claim, “put forward the entire case”, including evidence and argument, and respondents must put in “some form of response” within days. A decision is “generally expected” within a month.

“It will be open to parties to request a longer timetable, which may well be required in a complex dispute, but that will be a matter for the arbitrator.

“The general aim is that the arbitrator will take control of the case at a very early stage and, in consultation with the parties, fashion a procedure appropriate to the case.”

The rules should recognise “automatic dispute resolution processes” built into digital asset systems, and arbitrators should be able to “implement decisions directly on a blockchain or within the system, using any private key or control mechanism made available to them”.

The taskforce said that in an appropriate case, it may be possible for the parties to remain anonymous to each other, but they must disclose their identities to the arbitrators.

The efficiency of the process was dependent on the availability of high-quality and experienced arbitrators and the taskforce said their appointment would be managed by a designated body, possibly the Society for Computers and the Law, which would keep a list of people prepared to be appointed at short notice.

The appointment body would have its own rules and “exercise discretion itself” in making a suitable appointment.

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