by Andrew Flake
It’s been a rocky few weeks for Bitcoin and other cryptocurrencies, and a nervous time for their holders. But investing aside, the blockchain, which underpins Bitcoin, is a real and transformative technology, one with implications all the way from authorship and art (think NFT) to authentication and, yes, even arbitration.
There are great primers on the blockchain, so I won’t offer one here, but at a really high-level, the blockchain, in theory, can reduce or eliminate the need for elaborate systems of verifying ownership or trust, replacing a central authority like a bank with thousands and thousands of separate, or distributed, records.
Fair enough–but where is the connection to arbitration?
For starters, in thinking about trust and verification, consider a business contract, and some of the basic disputes that still arise over authority to sign. Was the agreement itself signed? By whom? Did that person have authority, and was it limited in some fashion? Or consider questions of just *what* is included in the contract. What is it the parties understood and approved?
For the most important terms, things like price and performance, the wording may be more or less clear, but to have a contract at all, those terms must at least be present. But that is not always true when it comes to procedures for handling disputes — things like where a case is to be handled or who is going to pay legal expenses or, when it comes to arbitration, the procedures and logistics of the process.
The best contracting practice, of course, is to use well-established set of arbitration rules, like those of the AAA or internationally, ICDR, ICC, UNCITRAL and others. Over time, and based on a great deal of practitioner and arbitrator input and institutional expertise, those rules have come to address the most important procedural issues. When parties specify those rules in their contract, they incorporate that clarity and certainty.
In a surprising number of cases, however, this does not happen. For whatever reason, the contract fails to include those kind of terms, leaving a judge or arbitrator, before event getting to the real issues in the case, to determine what it was the parties meant. Litigating or arbitrating those preliminary issues can be tremendously expensive. In fact, in one recent Second Circuit case I just reviewed, not having clear and verifiable rules included cost the parties to a dispute over iron-mine ownership seven years of arbitration time!
Eventually, I can imagine that a blockchain-enabled process could be used by two contracting parties to walk through sets of standard terms and establish, with more precision, what is intended, reducing uncertainty and keeping down these kind of later litigation expenses.
All of us need to be thinking along these lines, with an eye to the horizon.
What do you think? How might blockchain be used to improve dispute-resolution and access? E-mail me at firstname.lastname@example.org. I’ll give the most interesting idea a coveted mention in our blog–and a Starbucks gift card. Nothing like a good contest!
You can then enjoy that coffee while you read the next blog. Until then, be well![The iron-mining case I mentioned is Beijing Shougang Mining Inv. Co., Ltd. v. Mongolia, 11 F.4th 144, 163 (2d Cir. 2021).]