The Intersection of Blockchain Technology with Arbitration

Author: Shweta Pandey

Student LLM (Corporate and Commercial Laws)

National University of Study and Research in Law, Ranchi


Introduction

With the deviation observed in the few months from the conventional methods to modern day alternatives, it would be correct to state that the human civilisation is adaptable to novel means. The legal field is no different from these advancements being accepted in practice. We have been able to witness the transition from Courts to E-Courts. An otherwise available option which was seldom used before this pandemic.

This divergence has been helpful in these unprecedented times and has helped the judicial system from coming at standstill. There have been court operations virtually, which has helped save resources as well as keeping a health check. Another flourishing mode of dispute resolution which was otherwise subservient. Courts reinstated the importance of alternative dispute resolution system and directed the public to utilise these modes before coming to a Court. Litigation wars have proven to have gotten bitter and often lead to bitterness in relationships, be it commercial or matters of family dispute.

Another evolving and upscaled mode of dispute resolution is Online Dispute Resolution (ODR). This precinct of the dispute resolution apparatus has allowed to resolve small value disputes and has helped in maintaining commercial relationships. The stats have portrayed a higher success rate and also displayed quicker resolution with lesser funds involved. There have been various platforms that offer services such as documents only arbitration, online mediation, online arbitration and many more blooming areas. With the intrusion of technology in the field of dispute resolution, its scope has broadened. The entire face of arbitration is set to change as it has been growing in leaps and bounds from what it was when first introduced.


What is ODR?

Online Dispute Resolution is a perfect example of the blend of Law and Technology. It has shown us how promising tech-law is as an individual method of conflict resolution. Online Dispute Resolution is an upgraded form of Alternate Dispute Resolution aided with the help of technology.

ODR essentially means, an online resolution of disputes between parties. All of these communications are carried out virtually and are confidential. A common virtual platform is provided for the parties to communicate and discuss their problems with the each other in the presence of a third party. This communication is a privileged communication and all measures and precautions are adopted to keep it so. Many a times disputes, if discussed in the public eye is prone to seep out commercially sensitive information. In order to maintain secrecy between the parties, it is advisable to adapt an alternative process of conflict resolution. Keeping these pointers in mind, corporates have devolved their legal approaches and have adopted the ADR methodology.

ODR enables parties to discuss their problems with an impartial, trained third-party who has neutral stand to the issue at hand. This third-party facilitates a communication between the disputing parties and helps them explore possible solutions for their dispute in a which is favourable to both the parties.


What is a Blockchain?

Blockchain technology has evolved much lately, and has been brought to practice in the legal field in order to culminate a speedy justice redressal mechanism. Blockchain is defined as an "open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way[1]“. The blockchain system essentially offers the user to store and track down relevant data whenever necessary. This technology collects information in large computers, taking into account the accessibility and security of confidential information.

A technology such as blockchain which enables secure transmission of data and allows the original data to be reserved in secure conditions spares the need of an intermediary in turn solving the problems that may arise from the fact that parties in arbitration proceedings usually operating in different jurisdictions with different data protection legislations.

Security is a major contributor to utilise the blockchain technology. For an intruder to access private files stored on the computers would require hacking all the computers at the same time, which makes hacking of the blockchain platform nearly impossible. Another benefit of blockchain system is that it is a decentralized system thereby eliminating the need of an intermediary. All transactions are end to end encrypted creating transparency and are carried out directly.


Blockchain and Arbitration

As an alternative to traditional dispute resolution process, arbitration aims to be a concise, well-discussed and specialised proceedings. Considering this utility aspect of ADR methods, the introduction of the blockchain technology seems promising and visions to be an ideal structure for the trial process due to the facts that there is no mandate for an approval or control to carry out functions, and the other institutions are not included in the process. For e.g.: - Banking institutes, engage as an intermediary party in fiscal transactions, wherein they help in money transfers from one bank account to another. With the use of blockchain technology, the idea is to eliminate the involvement of intermediary institutions and carry out transactions free from intervention which would be faster, transparent and secure.

The digitisation of the arbitration process paves way for creating an arbitration friendly environment, cutting down costs involved in dispute resolution giving more room to advantages of adopting the process. [2]


Conclusion

The infusion of blockchain technology with ODR has been able to create an environment wherein the disputes could be resolved with ease keeping in mind the importance of data privacy. This tributary of ADR is newly developing and is sure to be instrumental in the dispute resolution process. Helping in maintaining privacy and speedy resolution through this upgraded mode of dispute resolution holds a growing path for new-age disputes. These methods are sure to be a helping hand to the Indian judicial system in upholding speedy justice redressal at large. However, what is still to be configured is how to take this forward and bring its practical application to the real-world. A more robust mechanism dealing with digitisation of dispute resolution methods would be a prerequisite in order open avenues for blockchain arbitration and ODR to operate in consonance with the legislative provisions.


[1] Iansiti, Marco; Lakhani, Karim R., "The Truth About Blockchain." Harvard Business Review. Harvard University. January, 2017. [2]https://www.mondaq.com/turkey/fin-tech/967452/blockchain-smart-contracts-and-arbitration#_ednref1




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