Ground-breaking Digital Dispute Resolution Rules published

7th May 2021

Newly published Digital Dispute Resolution Rules offer a bespoke, streamlined arbitration procedure aimed at facilitating the rapid and cost-effective resolution of commercial disputes, particularly those involving novel digital technologies such as cryptoassets, cryptocurrency, smart contracts, distributed ledger technology, and fintech applications. Luke Jackson and Louise Norbury-Robinson from our Technology & Digital Group summarise the key features of these ground-breaking, innovative rules.

WM Comment

This is not the first time the UK Jurisdiction Taskforce [1] has broken the mould when it comes to recognising the importance of the successful development and use of new technologies. In November 2019, it published the first statement on the legal status of cryptoassets and smart contracts. That statement, and these new rules, underline the suitability and attractiveness of English law and jurisdiction for the resolution of commercial disputes involving digital technologies. It will be interesting to see how the rules are received as new technologies continue to evolve and their application increases and diversifies.

How do the rules work?

• Parties must agree to them in writing, either before a dispute has arisen or afterwards. The rules provide suggested wording for incorporation into a contract, digital asset (such as a cryptoasset, digital token, smart contract or other digital or coded representation of an asset or transaction) or digital asset system.
• Maximum flexibility is key. Parties can specify:
  • whether any particular issue or type of dispute should be resolved by expert determination instead of arbitration (arbitration is the default and note that parties who use these rules are not litigating under the court system) [2];
  • any preferences as to number, identity or qualifications of appointed arbitrators or experts;
  • any preferences as to procedure, including form and timing of any decision or arbitral award, recoverable costs and anonymity;
  • any modifications to the application or operation of the rules.
• The tribunal (the arbitrator or expert, or panel of arbitrators or experts) is appointed by the Society for Computers and Law.
• Unless the parties specify otherwise, the tribunal will use its best endeavours to determine the dispute within 30 days. This is quicker than some of the expedited procedures available at arbitral institutions.
• No party has the right to an oral hearing, and the tribunal may determine the dispute on the basis of written submissions only.
• A party can rely on on-chain evidence and the tribunal decides how much weight to place on it.
• The tribunal’s decision or award is final and binding, and rights of appeal or challenge are limited.
• Decisions can be implemented directly on-chain using a private key.
• Unless agreed otherwise, disputes will be resolved in accordance with English law.
• The rules can be applied to any dispute subject matter.
• The outcome of any “automatic dispute resolution process” is legally binding on the parties [3]. This means a process associated with a digital asset that is intended to resolve a dispute by the automatic selection of a person or panel or artificial intelligence agent whose vote or decision is implemented directly within the digital asset system (e.g. peer to peer systems/voting by a community).

How we can help

Our Technology & Digital Group is a multi-disciplinary group which acts for suppliers and customers throughout the sector, and we have a large team of specialists experienced in all aspects of commercial dispute resolution. Please get in touch with Luke or Louise if you need any assistance or advice on drafting, dispute resolution options or strategy, including the possibility of using the new rules.

Click here to watch our recent webinar on avoiding and managing disputes in tech contracts.

[1] One of six taskforces of the Lawtech Delivery Panel (now the Lawtech UK Panel), launched in 2018 to support and accelerate the development and adoption of innovative new legal technologies.

[2] Arbitration generally can be an attractive alternative to court litigation as a formal method of resolving commercial disputes and is the method of choice for resolving cross-border disputes. It is also unaffected by Brexit. Arbitration is an inherently flexible process and parties choose to arbitrate in England for a variety of reasons, including confidence in English law developed through the common law; the renowned arbitration-friendly approach of the English courts (including a proven track record of enforcing arbitral awards); a supportive national arbitration law (the Arbitration Act 1996); and the availability of high-quality professionals.

[3] Including, in relation to a digital asset, a person who has digitally signed that asset or who claims to own or control it through possession or knowledge of a digital key.