An Overview of The United Kingdom's Digital Dispute Resolution Rules
May, 2020, ERDEMİR&ÖZMEN ATTORNEY PARTNERSHIPAn Overview of The United Kingdom's Digital Dispute Resolution Rules
In late 2019, the UK Jurisdiction Taskforce (“UKJT”) published a legal statement on cryptoassets and smart contracts i.e., “Legal Statement on the Status of Cryptoassets and Smart Contracts”. The Legal Statement expresses the opinion that cryptoassets are of property nature and smart contracts are considered within the context of contracts under English law.
Subsequently, the UKJT has published a document on “Digital Dispute Resolution Rules” involving a number of new rules aiming at the resolution of commercial disputes about cryptocurrency, smart contracts, or fintech applications.
This newsletter provides general information on the Digital Dispute Resolution Rules published by the UK Jurisdiction Taskforce.
Purpose of the Digital Dispute Resolution Rules
The purpose of the Digital Dispute Resolution Rules is to find more rapid and cost-effective resolutions for commercial disputes which involve novel digital technology and particularly are relating to cryptoassets, cryptocurrency, smart contracts, distributed ledger technology, or fintech applications.
In this context, before analyzing the Digital Dispute Resolution Rules, it is useful to touch on how certain concepts mentioned in the published rules are defined.
Under the Digital Dispute Resolution Rules, in general, a “digital asset” refers to a cryptoasset, digital token, smart contract, or digital or coded representation of an asset or transaction.
“Automatic dispute resolution process” refers to a process associated with a digital asset, which is intended to resolve a dispute between interested parties 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 (including by operating, modifying, cancelling, creating or transferring digital assets).
Determination of the Resolution Mechanism for the Dispute by the Parties
Therewithal, it possible to incorporate these rules into a contract, digital asset, or digital asset system by inserting the text “Any dispute shall be resolved in accordance with UKJT Digital Dispute Resolution Rules”.
Or, optionally, it possible to incorporate these rules into a contract, digital asset, or digital asset system by specifying:
· whether any particular issue or type of issue (an expert issue) should be resolved by expert determination instead of arbitration;
· any preferences as to the number, identity, or qualifications of any persons to be appointed as arbitrators or experts;
· any preferences as to the procedure to be adopted for the resolution of a dispute;
· any modifications to the application or operation of the rules.
It should be noted that the outcome of any automatic dispute resolution process to be determined by interested parties shall be legally binding on the parties.
Dispute Arbitration Procedure
Pursuant to the Digital Dispute Resolution Rules, any dispute between interested parties, arising from the related contract or digital asset which was not the subject of an automatic dispute resolution process shall be submitted to arbitration in accordance with the version of the rules which is current at the time of submission. However, any expert issue shall be determined by an appointed expert acting as such, not as an arbitrator.
In essence, the fact that it is not mandatory for the parties to resolve such dispute between each other before a court, which takes a long time and is costly, and that the dispute can be resolved by arbitration if it is so agreed, would be very beneficial with regard to both the procedural economy and catching up with the rapidly developing technology.
Details on the Proceedings
An interested party (a claimant) may initiate the proceedings by delivering a notice of claim to the other interested party against whom a claim made (a respondent) and to the appointment body. In essence, the process subsequent thereto continues with the receipt of the notice by the other party, and the submission by the parties of their statements, assertions, and arguments, and their evidence (if any), to the tribunal, similarly in Turkish law.
While exercising absolute discretion by the tribunal at the proceedings stage, the parties shall be treated fairly and impartially, and each party shall be given a reasonable opportunity to put forward their assertions and arguments.
At this point, the fact involving digital assets at the proceedings stage is that the tribunal has at any time the power to operate, modify, sign or cancel any digital asset related to the dispute, using any digital signature, cryptographic key, password or other digital access or control mechanism available to the tribunal. Furthermore, the tribunal shall also have the power to direct interested parties to do any of them.
Another interesting arrangement which is not regulated in Turkish law, however, is included in the Digital Dispute Regulation Rules is that after the parties share details of their identity to the reasonable satisfaction of the tribunal, they may provide identity details confidentially to the tribunal alone, if the incorporating text allows for anonymous dispute resolution, or upon the parties agree. In addition, such identity details do not have to be in a notice of claim or initial response of the parties. In that case, the tribunal shall not disclose the identity details of the parties.
The decision or award of the tribunal is final and binding on the parties. Furthermore, the parties do not have the right to appeal or challenge to such award.
Conclusion
It is possible for the United Kingdom’s Digital Dispute Resolution Rules to find more rapid and cost-effective resolutions for commercial disputes, particularly those relating to cryptoassets, cryptocurrency, smart contracts, distributed ledger technology, or fintech applications
The most innovative characteristic of these rules is that they enable the parties to settle the dispute through arbitration, if they so agree, without being compelled to resolve it before a court. As a matter of fact, choosing arbitration process instead of court processes that take quite a long time and are costly would also be beneficial with regard to both the procedural economy and catching up with the rapidly developing technology.
Since the new arrangements made by the European Union, USA and the United Kingdom will shed light on the arrangements that will made in Turkish Law, steps to be taken in our Country are eagerly anticipated. This is because, given the conventional judicial processes in our law, many primary legislations should be amended or modified in conformity with the digital transformation.
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