Rapid arbitration at heart of new rules for digital disputes

Swallow: Methods of dispute resolution must keep pace with technology

Non-court-based digital dispute resolution rules designed for novel technology such as crypto-assets, smart contracts, and blockchain applications have been published today.

Drafted by the UK Jurisdiction Taskforce of LawtechUK following a consultation, the aim is that their use is incorporated into on-chain digital relationships and smart contracts.

They call for the use of arbitration, and/or expert determination if the parties prefer, in a bid to bring consistency to how legal disputes relating to these types of technologies should be resolved.

The rules are not prescriptive – allowing the tribunal “absolute discretion” as to what procedure is adopted – and say that, in the absence of agreement between the parties, the tribunal should use its best endeavours to determine the dispute within 30 days of its appointment.

Arbitrators and experts will be appointed by the Society for Computers and Law. Arbitrators will be able to implement decisions directly on-chain using a private key.

The rules also provide that an “automatic dispute resolution process” – such as peer-to-peer or community voting –will be legally binding.

The rules are the next step from the taskforce’s Legal Statement on the Status of Cryptoassets and Smart Contracts, published in 2019, which said crypto-assets were property and smart contracts were contracts under English law.

The taskforce is chaired by the Master of the Rolls, Sir Geoffrey Vos. He said he hoped the rules would give businesses “greater confidence” to adopt digital documentation and on-chain smart contracts.

Jenifer Swallow LawtechUK director at Tech Nation, added: “Analogue ways of doing business will be widely restructured and digitised in the coming years, increasing efficiency and transparency. The smart contracts market alone is set to reach $345m by 2026.

“Methods of dispute resolution must keep pace. The digital dispute resolution rules are a step change in that evolution and in enabling wider confidence and adoption of these technologies – underpinning those readily-available today and capable of adapting to those yet to be developed.

“This is an exciting next step in the UK’s leadership at the forefront of business, law and technology, and also demonstrates how simple legal processes can be.”

The rules were drafted by: David Quest QC, 3 Verulam Buildings; Lawrence Akka QC, Twenty Essex; Anne Rose, Mishcon de Reya; Dorothy Livingston, Herbert Smith Freehills; Rory Conway, Linklaters; and David McIlwaine, Pinsent Masons.

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