Taking the Lead on New Technologies – Digital Dispute Resolution Rules Published

On 22 April 2021 the UK Jurisdiction Taskforce published the Digital Dispute Resolution Rules (“the Rules”),aimed at setting out new arbitration rules for disputes arising from novel digital technologies including crypto assets, cryptocurrencies, fintech apps, smart contracts, blockchain and distributed ledger technology. This builds on the Legal Statement of the same Taskforce from November 2019 which laid out that crypto assets were recognised as property under English law, as well as that smart contracts (potentially concluded/executed via blockchain technology) were indeed contracts under that same law.

The new Rules should promote the UK and London as a leading jurisdiction for resolution of these disputes and can also provide the template for other countries. The Rules envisage arbitrators with specialised knowledge resolving the digital disputes speedily and efficiently, and should instil confidence in the sector stakeholders that arbitration is a good choice. Bearing in mind the importance of the IT industry and new technologies for both Serbian and UK economy, it is worth highlighting some key features of these new provisions.

First key feature to bear in mind is that these rules, like the vast majority of arbitral rules, are optional and need to be opted for by the parties. Owing to the specificity of the subject matter, 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”. As usual, this should preclude litigating the dispute in court and guarantee the bindingness of the dispute resolution clause.

The second feature is the speed and flexibility of proceedings. The respondent is required to send an initial response to the notice of claim within 3 days. After the tribunal is constituted, it shall use its best endeavours (meaning it is not an absolute deadline) to decide the dispute within 30 days. The tribunal has a large degree of flexibility in crafting the procedure, in consultation with the parties. Of special note is the rule that 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.

The third key feature is the special consideration for the nature of digital transactions and this sector in general. In that light, if not chosen by the parties, the appointment body allocates a tribunal which has to have appropriate technical expertise for the subject matter. The parties have the option of anonymity, with only the tribunal knowing their identity. Bearing in mind potential anonymity, 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. One last particularity is also that, as the area is new, anonymised decisions will be published (with consent from the parties involved) in order to provide a catalogue of past decisions and potential precedents for the future.

Finally, one important point to bear in mind is that the Rules also rely on the general framework of the Arbitration Act 1996 in force in England, Wales and Northern Ireland. All matters not resolved in the Rules therefore fall back on that regime, bearing also in mind that 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. Reliance on the Arbitration Act should also mean that arbitral decisions can benefit from the powerful enforcement regime of the New York Convention 1958.

As new digital technologies increasingly move into the mainstream, following dispute resolution developments related to them becomes a necessity for entities in transborder activities. As always, AKT Todorovic and Partners remains at your disposal for any questions in these matters.

Velimir Zivkovic