Innovation In Dispute Resolution: A Look At UK’s Cutting-Edge Arbitration Rules For Novel Technologies – Litigation, Mediation & Arbitration – Worldwide


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In a ground-breaking transfer, the UK has launched new
arbitration guidelines designed to resolve business disputes involving
novel applied sciences like good contracts, cryptoassets and
distributed ledger expertise. In this piece, we talk about a few of
the innovative options of the brand new guidelines and the significance of a
dispute decision mechanism for digital
applied sciences. 

In a pioneering transfer, the UK has launched the brand new Digital
Dispute Resolution Rules (UK Rules) to resolve
digital disputes involving novel applied sciences like
cryptoassets, good contracts and distributed ledger
expertise.
1
 At a time when people and companies are
more and more capitalizing on blockchain-based options, a dispute
decision mechanism to handle blockchain associated disputes is the
want of the hour. The guidelines supply a forward-looking and
progressive method to resolving digital disputes that
is fast, versatile and cost-effective. These guidelines have been
launched within the wake of the (government-backed) UK
Jurisdiction Taskforce’s recognition of cryptoassets as
property below English Law and good contracts as legitimate and
enforceable,
2
 – a view subsequently endorsed by the High
Court of England and Wales.
3
 We talk about a number of the key options of the foundations
under: 

Scope

The UK Rules apply solely to digital asset methods. The
guidelines outline a digital asset as a cryptoasset, digital token,
good contract or different digital or coded illustration of an asset
or transaction.
4
 A digital asset system is the digital surroundings
through which such digital asset exists.
5
 However, the UK Rules don’t apply
routinely to any digital asset system. To take impact, they
must be expressly integrated by the events, right into a
contract, digital asset or a digital system, earlier than a dispute
has arisen or afterwards by settlement.
6

Automatic dispute decision

The UK Rules introduce a singular idea known as ‘computerized
dispute decision’ or ‘on-chain’ decision which
permits an arbitrated end result to be applied instantly by the
arbitrator on a blockchain utilizing a non-public key.
7
 For occasion, the arbitral tribunal may require
an computerized fee of compensation by the shedding occasion into the
profitable occasion’s digital pockets inside a blockchain.
8
 The tribunal additionally has the facility to
function, modify, signal or cancel any digital asset related to the
dispute utilizing any digital signature, cryptographic key, password or
different digital entry made accessible to it.
9
 The tribunal can even direct any occasion to
undertake such an motion. Any dispute resolved by means of
computerized dispute decision is binding on events. However,
software of computerized dispute decision to digital belongings is
not necessary below the UK Rules. The events can modify the
applicability of the foundations to their dispute and select to implement
an award by means of common channels. 

Arbitration process

The UK Rules purpose to introduce a speedy arbitration process to
keep away from delays and procedural bottlenecks. While the relevant regulation
is the regulation of England and Wales – the English Arbitration
Act, 1996, events and the arbitral tribunal have the flexibleness
to undertake any process that fits the dispute. Prior to the
graduation of the arbitration, events can agree upon the quantity
of arbitrators, their technical {qualifications}, professional
dedication of any challenge as an alternative of arbitration, process to be
adopted together with the timeline for resolving the dispute and any
modifications to the UK Rules.
10
  

For the arbitration proceedings to start, the claimant offers
discover to the occasion in opposition to whom the declare is made (the
respondent).
11
 The respondent(s) has three days to ship an
preliminary response to the claimant’s discover.
12
Thereafter, the appointment physique will appoint
specialised arbitrators with the required technical experience to
resolve the digital dispute at hand.
13
 The arbitral tribunal, comprising of a panel of
specialised arbitrators, has to resolve the dispute inside 30 days,
until a separate timeline has been agreed upon by the events.
14
 In conducting the arbitration, the tribunal has
full discretion to undertake any process it deems match, whereas
performing pretty and impartially, and after consulting the events.
15
 While the tribunal has to present every occasion a
cheap alternative of being heard, no occasion has a proper to an
oral listening to. The tribunal can decide any dispute solely on the
foundation of written submissions.
16
   

Anonymity

In conditions the place events might have transacted anonymously on a
blockchain and intend to maintain their identities hidden with every
different,
17
 events can anonymously resolve their dispute.
18
 This  should, nevertheless, be agreed by the
events within the textual content incorporating the UK Rules. In case of an
nameless dispute decision, events have to offer the small print
of their identification confidentially to the tribunal however needn’t
embody them within the discover of declare or the preliminary response.
19
However, the tribunal can disclose the identification of the
events whether it is obligatory for honest decision of the dispute, for
enforcement of any determination or award, for defense of the
tribunal’s personal pursuits, or if required by any regulation or
regulation or courtroom order.
20

Expert dedication as an alternative of arbitration

When questions of reality are concerned in a dispute, which may solely
be resolved with the assistance of consultants, events can submit such
questions for professional dedication as an alternative of arbitration.
21
 However, the UK Rules do not specify any
process for professional dedication and neither are they ruled by
the legal guidelines of arbitration. Instead, events have to find out how and
when an professional dedication ought to be used.
22
 For occasion, if there is a matter concerning a
blockchain oracle figuring out a valuation,
23
 events can name for an professional dedication.
24
 In the contract between the events, they will
agree on the kind of points to be decided by professional
dedication and the process to be
adopted.      

Enforcement of the arbitral award

Any enforcement of the arbitration award needs to be within the courts
of England and Wales in accordance with the English Arbitration
Act, 1996. For cross-border disputes, enforcement of the award has
to comply with the worldwide enforcement regime below the Convention
on the Recognition and Enforcement of
Foreign Arbitral Awards (New York
Convention
) adopted by the English Arbitration Act,
1996.  

Importance of a dispute decision mechanism for digital
applied sciences

While blockchain applied sciences are designed to scale back the chance of
disputes, battle between events can’t completely averted. A
mechanism to resolve disputes involving digital applied sciences is,
due to this fact, crucial for the next causes: 

  • Smart contracts, saved on a blockchain platform, operate on
    the idea of a code to routinely execute components of an settlement
    between events.
    25
     They are mostly used for routinely
    executing fee transactions between events utilizing digital
    currencies. However, since these transactions are irreversible,
    intervention in emergency conditions, by means of a speedy arbitration,
    is important. This can even enable events to hunt emergency
    injunctions, and supply authorized safety to their transactions. For
    occasion, if in an ongoing transaction, a celebration turns into bancrupt
    requiring the transaction to be terminated; or a coding error in a
    good contract ends in a purchaser ordering twice the variety of
    shares than the client meant, ensuing within the purchaser in search of a
    reversal of the transaction.
    26
        

  • A wise contract is just a portion of a bigger settlement
    between events which can include different efficiency obligations.
    27
     Failure to fulfil such obligations might give rise
    to common contractual disputes between events. Such disputes have
    to be resolved quickly as they could have a bearing on the automated
    transaction below the good contract. Conversely, even in an everyday
    arbitration between events involving a bigger contract, a portion
    of the dispute could also be a digital dispute involving a sensible contract.
    Both these conditions require the appliance of strong digital
    dispute decision mechanism just like the UK Rules. 

  • Since digital companies interact in cross-border transactions,
    disputes between events can provide rise to ‘battle of
    legal guidelines’ points such because the regulation that ought to be relevant to the
    dispute between the events. To counter battle of legal guidelines points,
    events can undertake a standard algorithm – the UK Rules to
    resolve their digital disputes, because it supplies the English
    Arbitration Act, 1996 because the relevant regulation and the New York
    Convention because the worldwide enforcement regime. 

Way ahead for India 

With the onset of the pandemic, India has proven a eager curiosity
in shifting in direction of on-line dispute decision (ODR)
for business disputes. In the draft ODR coverage plan launched by
the NITI Aayog, it mentioned the potential of blockchain pushed
arbitration to automate enforceability utilizing good contracts.
28
 This method finds resemblance to the automated
dispute decision below the UK Rules. Although the coverage remains to be
being formulated, adopting guidelines much like the UK Rules for
resolving disputes involving digital applied sciences will complement
India’s curiosity in ODR. Moreover, with an growing use of
blockchain expertise in India, significantly within the banking and
monetary providers sector, Indian companies may benefit from an
environment friendly and versatile digital dispute decision
framework. 

Footnotes


1
. Digital Dispute Resolution Rules, https://35z8e83m1ih83drye280o9d1-wpengine.netdna-ssl.com/wp-content/uploads/2021/04/Lawtech_DDRR_Final.pdf.


2
. UK Jurisdiction Taskforce, CryptoAssets and
Smart Contracts
, accessible at,  https://35z8e83m1ih83drye280o9d1-wpengine.netdna-ssl.com/wp-content/uploads/2019/11/6.6056_JO_Cryptocurrencies_Statement_FINAL_WEB_111119-1.pdf.


3
. AA v Persons Unknown [2019] EWHC 3556 (Comm), https://www.bailii.org/ew/cases/EWHC/Comm/2019/3556.html; Ion
Science Ltd v Persons Unknown and others (unreported) 21 December
2020 (Commercial Court),  https://www.linklaters.com/en/insights/blogs/fintechlinks/2021/march/the-english-courts-take-a-traditional-approach-to-determining-governing-law-and-jurisdiction


4
. Rule 2(a), Digital Dispute Resolution
Rules.


5
. Rule 2(a), Digital Dispute Resolution
Rules.


6
. Background, Digital Dispute Resolution
Rules.   


7
. Rules 2(c), Digital Dispute Resolution
Rules.


8
. Freshfields, UK Jurisdiction Taskforce publishes
groundbreaking Digital Dispute Resolution Rules,
23rd April, 2021, accessible at,  https://digital.freshfields.com/post/102gwcd/uk-jurisdiction-taskforce-publishes-groundbreaking-digital-dispute-resolution-rul


9
. Rule 11, Digital Dispute Resolution Rules.


10
. Rule 3, Digital Dispute Resolution Rules.


11
. Rule 6, Digital Dispute Resolution Rules.


12
. Rule 7, Digital Dispute Resolution Rules.


13
. Rule 2(e), Digital Dispute Resolution
Rules.


14
. Rule 12, Digital Dispute Resolution Rules.


15
. Rule 9, Digital Dispute Resolution Rules.


16
. Rule 10, Digital Dispute Resolution Rules.


17
. Further Guidance, Digital Dispute Resolution
Rules, supra  word 1, at 13.


18
. Rule 13, Digital Dispute Resolution Rules.


19
. Rule 13, Digital Dispute Resolution Rules.


20
. Rule 13, Digital Dispute Resolution Rules.


21
. Rule 5, Digital Dispute Resolution Rules.


22
. Further Guidance, Digital Dispute Resolution
Rules, supra  word 1, at 11.


23
. Blockchain oracle is a third-party information feed service
which supplies blockchains and good contracts with exterior
information. 


24
. Further Guidance, Digital Dispute Resolution
Rules, supra  word 1, at 11


25
. Stuart D. Levi and Alex B. Lipton, ‘An
Introduction to Smart Contracts and Their Potential and Inherent
Limitations’ Harvard Law School Forum on Corporate Governance
(26 May 2018), accessible at, https://corpgov.law.harvard.edu/2018/05/26/an-introduction-to-smart-contracts-and-their-potential-and-inherent-limitations/#:~:text=How%20Smart%20Contracts%20Function,on%20a%20blockchain%2Dbased%20platform.


26
. World Economic Forum, Bridging the Governance
Gap: Dispute Resolution for Blockchain-based Transactions
,
White Paper, December, 2020, at 6, accessible at, http://www3.weforum.org/docs/WEF_WP_Dispute_Resolution_for_Blockchain_2020.pdf (hereafter,
World Economic Forum, Bridging the Governance Gap: Dispute
Resolution for Blockchain-based
Transactions
). 


27
. Pietro Ortolani, The impression of blockchain
applied sciences and good contracts on dispute decision: arbitration
and courtroom litigation on the crossroads
, Vol 24(2) Uniform L.
Rev. 430 (2019), accessible at, https://academic.oup.com/ulr/article/24/2/430/5490658.


28
. NITI Aayog, titled Designing the Future
of Dispute Resolution: The ODR Policy Plan for India
, at 8,
accessible at, https://niti.gov.in/sites/default/files/2020-10/Draft-ODR-Report-NITI-Aayog-Committee.pdf

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