"Blockchain." It is a term that is banned in these days as the next big thing that will happen in internet technology. In fact, it is often referred to as "one of the most interesting and intriguing technologies on the market today." ("Blockchain: a new type of Internet, Lovenesh Bansal", "Interconnections" – The Equinox Blog, 5 October 2017). However for many of us, the term remains mostly an enigma. Even if you are aware of the blockchain technology, you may not be aware of its complexity or potential to significantly influence the way global activity is conducted. This article will briefly explain how blockchain technology works and the crucial role of arbitration will be transformed into a deep-rooted world trade.
Let's start with a basic understanding of what is blockchain. Blockchain is the targeted public or private registration of transactions that is distributed to thousands of chain participants worldwide. No person controls the blockchain. Rather, each person in the chain has immediate access to data and computers perform complex algorithms to validate the information that has been distributed. Blockchain has been described as an instant communication between a huge number of parts. As such, it is argued that it is a system that provides transparency, security and financial economics. Blockchains can be public, as used for cryptocurrencies or private, to be used by various companies and companies. Since there is no centralized distribution system and no central server, it is argued that blockchain can provide immediate verification of data free of hacking manipulation and threats.
Blockchain technology started in bitcoin and cryptocurrency accounting. From there, it has spiraled into almost all business sectors, including all types of financial transactions, sales and distribution, shipping, transportation, real estate and healthcare, to name a few.
An excellent example of how blockchain technology works is the creation and use of "smart contracts". Smart contracts are self-executed with the terms of the agreement written in lines of code. That "block" is then distributed through a decentralized "chain" of, potentially, thousands of users. Once registered, the data in the block can not be changed. While anyone can create a "smart contract" in the first instance and add it to the blockchain, once it is there, it will do exactly what it was programmed to do, and no individual or group of individuals can change it. Therefore, it is believed that smart contracts can not be manipulated because, unlike Google and Facebook, the algorithms used are transparent to all users in the chain. If the parties wish to modify the agreement, they must create a completely new "smart contract". The objective of the "intelligent contract" is to have reliable transactions and agreements between different and sometimes anonymous parties. "Smart contracts" are also touted as they eliminate the need for a centralized authority or a legal system.
The words of praise used in the description of blockchain technology in general and "intelligent contracts" in particular are "transparent", "traceable", "verifiable", "" reliable "," invulnerable "and" economic ". a bit like a utopian trade agreement, but as practicing lawyers we know too well that in every human effort, even with the help of computer technology, disputes are bound to arise. is there no corresponding legal system? What is the appropriate jurisdiction for these disputes? Which laws apply? "Smart contracts" are even applicable according to the current legal doctrines? If the "smart contracts" are enforceable, to what extent along the "chain" will be responsible? Even if the application is feasible, how will any judgment be applied? All these questions remain unanswered. he is quite sure how the aspects of the blockchain dispute resolution will work.
Enter the arbitration. Arbitration can be the perfect mechanism for working with blockchain technology in resolving disputes. Firstly, the industries that currently use blockchain technology (finance, sales, real estate, transport, shipments) are the same industries in which arbitration has traditionally played a vital role. The natural progression from arbitraging traditional disputes to arbitration disputes arising in the unexplored world of blockchain technology seems almost intuitive. Secondly, arbitration offers a neutral seat. Arbitration can be ad hoc or through a formal arbitration organization, at the discretion of the parties. The arbitral tribunal can also be established by the will of the parties. In fact, there is no reason why the way and the form in which the parties wish to arbitrate can not be in a "smart contract" in the first place.
Thirdly, with blockchain technology and "smart contracts", the level of technical competence of the referees becomes fundamental. In arbitration, the parties may choose the arbitrators with the appropriate degree of experience. Fourth, arbitration has always provided the parties flexibility. It allows the parties to deviate from traditional legal systems and, to a certain extent, from traditional legal doctrines. Fifth, arbitration offers finality, often in shorter periods of time, and this will be less likely to prevent the speed at which the blockchain is intended to function.
Finally, and perhaps most importantly, there is the New York Arbitration Convention on the Recognition and Execution of Foreign Arbitration Awards. The agreement allows a party to request the execution of the prize in any country that has signed the convention. Currently there are 159 signatories of the convention, including 156 of the 193 member states of the United Nations. Blockchain technology reaches thousands of participants in the chain on computers all over the world. What better resource than the New York Convention to ensure that the resolution of world disputes can be widely and promptly applied?
Blockchain technology is ready to change every aspect of the business as we know it. With the evolution of technology, it is clear that arbitrage will play a fundamental role. As arbiters and lawyers, we need to familiarize ourselves with this new technology; understand the process, the benefits and potential pitfalls; it sharpens our capacities and our ability to adapt to continuous changes and prepare ourselves to become an integral part of this new stimulating frontier.
Louise Ann Kelleher is partner of Weinberg's board Wheeler Hudgins Gunn & Dial. He has experience in complex commercial disputes and arbitrations involving foreign companies, as well as in controversies over the coverage of manuscripts.