**4. Bespoke dispute resolution rules**

#### **4.1 Introduction**

In a contracting life cycle, an important piece of the jigsaw is how to resolve disputes arising from the contract. The self-execution nature of blockchain technology means that the terms of an agreement can be automatically implemented, and their fulfilment can be automatically executed. In an ideal world, disputes could be avoided altogether. However, in day-to-day commercial transactions, it is common for disputes to occur.

In April 2021, on the premises of the recognition of smart contracts by the legal industry and they are firmly established as part of the English legal system, UKJT published its Digital Dispute Resolution Rules for matters of smart contracts, distributed ledger technology, and other digital assets, ("Rules") [23]. This section examines the key features of this bespoke arbitration procedure for digital disputes like those generated from smart contracts.

### **4.2 The practices of arbitration**

The standard process for resolving disputes between parties is through the national courts by way of litigation. The Rules specify disputes arising from smart legal contracts are to be resolved by arbitration. The use of arbitration as a dispute resolution mechanism alternative to court proceedings can be traced back to the 7th Century and international arbitration has been the preferred method of resolving cross-border disputes for years [24]. The arbitration rules and procedures are well-established.

In a nutshell, arbitration is a consensual process such that parties submit their disputes for settlement by an independent arbitral tribunal that has gone through a judicial process of hearing the evidence and arguments from both parties. The arbitral tribunal is usually made up of one or three arbitrators. Arbitrators are under a strict duty to act fairly and impartially between the parties. The award made by the arbitral tribunal is final and binding with limited grounds for appeal. In England, the basis of the appeal is either for reasons of improper administration of justice under s67 or s68 of the Arbitration Act 1996 or on a point of law under s69. The rate for a successful appeal is very low. Based on the court records between 2015 to 2018, the success rate was 0.02% during that period [25].

Through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), an award made in a signatory country is enforceable in all other participating states. As of December 2021, a total of 169 countries have signed up for the New York Convention [26]. This means an arbitral award made in one contracting state is recognised and enforceable in more than 85% of countries around the world. This is a particularly attractive feature of arbitration given the global nature of blockchain networks.

There are institutions located around the world that offer the administration of arbitration, for example maintaining a panel of arbitrators for the appointment, providing fee scale, and helping with the arrangement of the arbitration process. These institutions have their sets of procedural rules, which are revised from time to time ensuring their efficiency and effectiveness. For example, during the Covid\_19 pandemic, rules were revised to allow ongoing proceedings to continue [27].

The current practice of arbitration with the involvement of technology is limited to using technology to aid procedural matters, like the electronic filing of notices and documents in the arbitration proceedings, and holding virtual and/or hybrid hearings.

### **4.3 The new rules**

A distinct advantage of arbitration over litigation is its procedural flexibility which allows tailored modification for digital disputes matter. In this way, radical reform of the national court's civil procedural rules can be avoided. The Rules aim to fill the gaps in the current practices of arbitration for resolving commercial disputes that involve novel digital technology like smart contracts. The unique features of the Rules include:

### *4.3.1 A rapid process*

The default timeframe for the entire arbitration process is 30 days from the initiation of the arbitration proceedings to the issue of a binding decision. The procedure is designed to be short for efficiency, although the tribunal has the absolute power to modify it. The parties are not entitled to any oral hearings. The entire process can be completed on-chain, including the enforcement of the award.
