Following the publication of the Digital Dispute Resolution Rules (“the Rules”) in April 2021, disputes arising from novel digital technologies including cryptoassets, cryptocurrancies, fintech applications, smart contracts, blockchain and distributed ledger technology will have a specialised arbitration process which can be used to resolve disputes.
In November 2019 the UK Jurisdiction Taskforce published its ‘Legal Statement on the Status of Cryptoassets and Smart Contracts’ which expressed the view that cryptoassets were property and smart contracts were contracts under English law. Subsequently, extensive consultations have been underway in order to devise a new set of Rules by which to arbitrate these technological disputes.
The resulting Rules work on the basis that arbitrators with specialised knowledge will enable disputes to be dealt with in a timely and proportionate manner. It is hoped that the reach and clarity of these rules as well as the flexibility they provide in relation to procedure should give confidence to those facing disputes within this sector.
What are the key elements of the rules?
Speed of proceedings – once a claimant has issued a notice of claim, the respondent is required to send an initial response within 3 days. This paves the way for expeditious proceedings and a quick resolution. Moreover, once a tribunal has been appointed, in the absence of other agreement by the parties, it shall use its best endeavours to decide a dispute within 30 days.
Arbitrators - once the time for receipt of initial responses has passed, the appointment body will allocate a tribunal with appropriate technical expertise to the claim.
Costs – the parties must bear the cost of the arbitration. Reasonable arrangements should be made to pay or secure the tribunals fees by the time of their appointment. The arbitrator can decide how to apportion the costs between the parties, including their legal expenses.
Procedure - the tribunal has discretion as to the procedure it adopts as well as the form of the evidence and arguments it receives. One of the aims of the Rules is to provide flexibility to adjust the procedure to suit the parties and the dispute. The tribunal will consult the parties when determining the procedure. No party has the right to an oral hearing and the tribunal has the power to determine the dispute based solely on written submissions if it considers it appropriate to do so.
Decision – In common with most other forms of arbitration, the Rules state: “The decision or award of the tribunal is final and binding. There is no right to appeal any award on a point of law, and there is no other right of appeal or challenge to such award except as permitted under the Arbitration Act 1996.”
Power to implement – the Rules provide for automatic “on-chain” dispute resolution, meaning that, if there is a technical power to do so, arbitrators can directly implement their decisions within a digital asset system (including by operating, modifying, cancelling, creating or transferring digital assets.
Anonymity – the parties have the option of anonymity, with only the tribunal knowing their identity.
Owing to the desire to progress claims quickly, anyone who receives a notice of claim against them must be aware of the three day limit in which they must provide an initial response. This leaves limited time to take advice or seek to rectify the issue directly.
These rules do not apply automatically. They may be incorporated into a contract, digital asset or digital asset system by including the text (which may be in electronic or encoded form) “Any dispute shall be resolved in accordance with UKJT Digital Dispute Resolution Rules”. Crucially, if the parties have agreed that the dispute should be resolved under the Rules, they will not generally be able to choose to go to Court instead. Alternatively the parties can agree to refer their dispute to arbitration pursuant to the Rules once it has arisen.
The Rules should be read against the background of the Arbitration Act 1996, which amongst other things sets out defaults for circumstances not expressly dealt with by the Rules themselves.
One of the benefits of the Rules is that an arbitration award may be easier to enforce overseas than a court judgment because over 165 countries have signed up to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This, along with the arbitrator’s power to directly implement their decision in appropriate circumstances may give parties additional confidence that an award will be enforced, particularly where there is an international context to the dispute.
Those who wish to see how the Rules are utilised in practice should keep a close eye on the anonymised decisions which will be published (with consent from the parties involved) in order to provide a catalogue of past decisions and potential precedents for the future. This is unlike the usual position where an arbitration award is entirely confidential.
Following a recent speech by Sir Geoffrey Vos at the London International Disputes Week it is clear that he envisions the future of dispute resolution becoming increasingly reliant on technology and online dispute services. Therefore, should the Digital Dispute Resolution Rules prove a success, it wouldn’t be a surprise to see increased use of similar procedures in other areas in the future.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.