New Approaches to Dispute Resolution

Finding blockchain solutions

New Approaches to Dispute Resolution

Life is very short, and there’s no time
For fussing and fighting, my friend…
We can work it out
We can work it out...

Music, lyrics by P. McCartney and
J. Lennon; recorded by The Beatles
.

W hen lawyers think about alternative methods to settle disputes, using the power of the blockchain probably does not spring immediately to mind. However, there are a host of entities, such as: Mattereum Protocol (mattereum.com) whose first customer was William Shatner’s company Third Millenia; Kleros (kleros.io/en) that uses the blockchain’s resolution layer to build decentralized courts; and others who are pushing the virtual resolution envelope in new directions.

Before we dive deeper, a little background is in order. What is the blockchain? According to IBM, the blockchain is “a shared, immutable ledger for recording transactions, tracking assets and building trust.” There are three guiding principles of the blockchain:

  • Participants have access to the distributed ledger and its record of transactions that comprise the blockchain.
  • Records are immutable; no one can change or tamper with a transaction after it’s been recorded to the distributed ledger.
  • Transactions take place on the blockchain via smart contracts. A smart contract is a self-executing contract containing the terms of the agreement between buyer and seller. The smart contract is itself an immutable record written into lines of code that are incorporated into the blockchain.

What are the ways the blockchain is used? Sean Williams in “20 Real World Uses for Blockchain Technology” lists such activities as: Payment Processing and Money Transfers; Retail Loyalty Programs; Real Estate, Land and Auto Transfers; Medical Records and Weapons Tracking, among others.

So how does the blockchain work in terms of dispute resolution? Kleros’ system is a peer-to-peer system that utilizes crowdsourcing with the blockchain. Kleros has established online courts, is recruiting online jurors and has started handling disputes. Kleros can be designated the resolution system in a smart contract. In the event of a dispute, the smart contract contains code that is triggered by one of the parties. The party initiating the dispute then must deposit a designated amount of cryptocurrency as earnest money to initiate the process (as must the other party to respond). Jurors are then selected from a pool of individuals who have indicated that they have the required expertise to decide the dispute by depositing cryptocurrency to evidence their assertion that they are duly qualified in a designated area. For example, say there are three jurors hearing a dispute. If two of the jurors reach a consensus on the evidence, then the dissenting juror loses his or her deposit to the other two jurors. The theory is that the two jurors who formed the majority decided “correctly and honestly.” None of the jurors knows or has any method of communicating with each other. An appeal or “challenge” of the decision is possible before twice the number of original jurors plus one. Of course, the amount of money being deposited by all parties as well as the jurors steadily increases as the level of challenge increases.

The fact that disputes arise is as old as contract law. Using the blockchain and the power of the Internet to quickly settle disputes that arise in the context of commerce over the Internet is a creative and innovative way of settling those disputes, for as we all know, life is very short and there is no time for fussing and fighting my friend.