Digital Dispute Resolution Rules - a new approach to resolving disputes arising out of novel digital technologies?

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management
• Financial services
• Technology, Media and Telecoms

25-02-2021

Last week the UK Jurisdiction Taskforce (the “UKJT”) published its draft Digital Dispute Resolution Rules for a new arbitration procedure aimed at facilitating the rapid and cost-effective resolution of disputes arising out of novel technologies, including digital assets, smart contracts, blockchain and fintech. 

The UKJT has now opened a public consultation on the draft rules and is seeking views on the following questions:

1.   is there a need for or advantage in a new arbitral process to facilitate the resolution of disputes arising out of novel digital technologies?

2.   does the process as described in the draft rules meet that need?

3.   if not, why?

The draft rules – a summary 

Incorporating the rules

Parties must agree either before or after a dispute has arisen that the rules will apply.  If the rules are agreed prior to a dispute, they must be properly incorporated into the legal relationship. 

Parties will be able to incorporate the rules into a contract, digital asset or digital asset system by including the following text in either electronic or encoded form: “Any dispute shall be resolved in accordance with the UKJT Digital Dispute Resolution Rules”.  Parties will also be able to incorporate preferences as to: the person(s) to be appointed as arbitrator or expert, including the number, identity or qualifications they should have; the procedure to be adopted, and whether the dispute should be resolved by arbitration or expert determination.

Commencing arbitration proceedings

One of the key objectives of the draft rules is to provide a framework for dispute resolution on a timetable much shorter than in formal Court proceedings or under existing arbitration rules.  The draft rules on commencement of proceedings aim to facilitate this goal. 

To begin proceedings, one party must give notice of a claim to every other party and to the appointment body.  That notice must include the information prescribed by Rule, being generally a brief summary of the claim, and other ancillary details.

Parties can also include other material relevant to the claim, such as supporting documents and witness statements.  Effectively, the Claimant should put forward its entire case (including its evidence and legal arguments) at the outset of proceedings. 

Each respondent must then send an initial response within three days (whether business days or not, is not specified in the current draft) of receipt of a notice of claim. The response must include identity details and electronic contact details, and it may also include any comments on or other material relevant to the claim.  

Procedure

After the initial responses have been received, the appointment body shall appoint a tribunal.  The appointment body will have regard to, but not be bound by, the parties’ specified or agreed preferences. The UKJT has indicated that it intends to draft a separate set of rules for the appointment body. 

Once appointed, the arbitration tribunal will have complete discretion over the procedure to be adopted.  The rules deliberately avoid prescribing detailed procedural steps.  The intention is that arbitrators maintain discretion to set a procedure which is appropriate for the particular dispute including, where applicable, making use of available technologies. However, the tribunal is required to act fairly and impartially as between the parties, ensuring they each have an opportunity to put forward their case.   

The tribunal will also consult with the parties regarding the evidence and argument required and will permit the electronic submission of documents as far as practicable.  No party shall have the right to an oral hearing and if the tribunal considers it appropriate, it will have the discretion to determine the dispute on the basis of written submissions only.  This could be a key factor in the UKJT’s desire to produce a swift procedure as setting a hearing date suitable for all parties and the arbitrators often causes substantial delays to the resolution of disputes by arbitration. 

Absent any agreement to the contrary, rule 12 provides that the tribunal shall use its best endeavours to determine the dispute within 30 days from its appointment. The decision of the tribunal will be final. There will be no right to appeal on a point of law, and there will be no other right of appeal or challenge except as permitted under the English Arbitration Act 1996.

The technology-specific rules

The draft rules recognise that digital asset systems may have automatic dispute resolution processes built into them. By incorporating the rules, the outcome of automatic dispute resolution will be recognised as legally binding upon the parties.

Where the dispute involves digital assets, the arbitral tribunal shall have additional powers such that its decision can be implemented directly into the system.  Rule 11 allows the tribunal to operate, modify, sign or cancel any digital asset to the dispute using any digital signature, cryptographic key, password or other digital access/control mechanism available to it.  Alternatively, the tribunal may direct the parties to take these actions. 

Subject to the exceptions in rule 13, the parties may choose to protect their anonymity from each other. Whilst the claimant and each respondent must provide details of their identity to the satisfaction of the tribunal, this information can be provided to the tribunal confidentially. 

Comment

The UKJT’s proposals are an ambitious attempt to reflect in arbitration procedures the complexities involved in emerging digital disputes, and to use that same digital technology to assist in resolving at an early stage those disputes. The tech sector and the increasing population of firms for which digital technology is ever more important will no doubt wish to feed in to the consultation, and await its outcome keenly.

The consultation will close on 5 March 2021 and contributions can be sent by email to UKJT@justice.gov.uk.  Interested parties can also register here for a webinar which is being hosted by the drafting team on 26 February 2021 at 3:30pm.  The UKJT intends to publish the Digital Dispute Resolution Rules in Spring 2021, which will take into account the responses received to the consultation.