Overview of the Digital Dispute Resolution Rules.
Updated: Jun 1, 2021
In November 2019, a legal statement was published by the UK Jurisdiction Taskforce (UKJT) in recognition of smart contracts and crypto-assets as property under English Law. This was well received by other jurisdictions. Following this legal statement, the UKJT on 22 April 2021 published the legal infrastructure under the new Digital Dispute Resolution Rules to support the continued evolution of technology. The creation of such a legal framework in English law establishes rights in respect of digital technologies which can be enforced.
In this article, we’ll provide a brief overview of why these rules have been developed, what disputes they seek to cover, how they will assist digital dispute resolution, and the use of rapid arbitration to improve time and cost efficiency in digital dispute resolution.
1. Why were the rules developed?
2. What type of disputes are covered?
3. How will the rules assist digital dispute resolution?
4. The use of rapid arbitration?
1. Why were the rules developed?
In recent years there has been rapid development and increase in the use of various technologies such as blockchain, smart contracts, and crypto assets. Although these technologies have changed the way different industries operate by improving efficiency and cybersecurity, there has been limited growth of regulations around them.
The lack of regulation has led to inconsistencies in the settlement of disputes that arise from the use of these technologies hence creating a costly and lengthy dispute resolution process. The introduction of the Digital Dispute Resolution Rules is therefore aimed at improving the efficiency of dispute resolution and increasing confidence in the adoption of these new technologies by businesses. The rules have been constructed widely to also accommodate technologies that are yet to be developed and to enable on-chain implementation of decisions.
2. What type of disputes are covered?
The Digital Dispute Resolution Rules will cover the settlement of commercial disputes with a particular focus on those involving novel digital technology such as crypto-assets, smart contracts, cryptocurrency, distributed ledger technology, and fintech applications.
3. How will the rules assist digital disputes?
The Digital Dispute Resolution Rules can be incorporated into a digital asset, digital asset system, and/or a contract by including a blanket statement stating that ‘Any dispute shall be resolved in accordance with UKJT Digital Dispute Resolution Rules’. You can also specify whether you;
would like for a particular issue or type of dispute to be resolved by an expert Instead of an arbitrator;
have any preferences as to the number, identity, or qualifications of any experts or arbitrators;
have any preference in regards to the procedure to be adopted for the resolution of the dispute including the form and timing of the decision or arbitral award, recoverable costs, and anonymity; and
would prefer any modifications to the application of the rules
The ground-breaking feature of these rules is that they allow interested parties in digital disputes to resolve disputes through arbitration rather than litigation which can be costly and time-consuming.
The rules have been drafted with maximum flexibility which will allow for rapid and cost-effective resolution of digital disputes through the implementation of decisions directly on-chain using a private key. Additionally, parties have the option to keep their identities anonymous which caters to the reputation protection of the parties involved.
4. Rapid Arbitration
The structure of the Digital Dispute Resolution Rules has been designed to foster arbitration over litigation. Court proceedings tend to be lengthy, costly and can greatly damage the reputation of the parties involved. The use of arbitrators with technical expertise will provide for a more efficient resolution process regarding disputes arising from the use of technology.
The rules provide for the resolution of disputes between interested parties through an automatic dispute resolution process where an automatic selection of a person, panel, or artificial intelligence agent whose decision will be implemented directly within the digital asset system. Decisions made through the automatic resolution process are legally binding. Any disputes between interested parties which were not subject to the automatic dispute resolution process will be submitted to arbitration or expert determination.
Arbitration will commence by the interested party (a claimant) serving a notice of claim to the other interested party (the respondent(s)) and the appointment body (the Society for Computers and Law). The notice of claim will include the claimant’s identity and electronic contact details amongst other details for example a statement of the claim and remedies being sought. The respondents will be expected to provide an initial response within 3 days of receiving the notice of claim. The tribunal will arrive at a decision within the time agreed upon by the parties and if none, within 30 days from its appointment.
The tribunal shall have absolute discretion to reach a fair and impartial decision. No party will be entitled to an oral hearing and therefore the tribunal may, if it considers it appropriate, make a decision based on only written submissions. The tribunal shall employ available technologies and adopt suitable procedures to the particular circumstances of the case to avoid unnecessary delays and expenses in reaching a decision.
The evolution and innovation of technology over the last few years has seen an increase in the use of crypto-assets and smart contacts to improve business efficiency and transparency. The UK Jurisdiction Taskforce published the Digital Dispute Resolution Rules in response to the growing use of such technology and to instill confidence in the global business community as they innovate and adapt to use these digital technologies.
These Rules will be particularly focused on the resolution of disputes arising from the use of novel digital technology such as crypto-assets, smart contracts, and cryptocurrency through arbitration. Arbitration has been selected as the ideal forum for dispute resolution because of it offers flexibility, confidentiality and cost-efficiency compared to litigation.
Arbitrators will base the award on written submissions, disposing of oral hearings and therefore eliminate unnecessary delays and expenses associated with the litigation procedure.
Why are Serenity Law LLP?
Serenity Law has an experienced team of commercial law experts who are dedicated to helping clients achieve legal solutions. We support our clients to settle their disputes through ADR procedures such as mediation.
Our co-founding partner, Avinder Laroya, is CEDR accredited and a CMC registered mediator for commercial and workplace disputes. She is passionate about resolving international commercial disputes. As a CEDR accredited mediator, Avinder Laroya can work with you to overcome disputes, minimising the need to go through lengthy, costly, and stressful court proceedings. Click here to book your free 15-minute consultation.