Alternative dispute resolution (ADR) proceedings are a popular means of resolving conflicts between parties outside of the traditional justice system. Traditional litigation, which is time-consuming and complex, very often is not a practical solution for disputes. ADR proceedings such as mediation and arbitration, offer less procedural overhead, may provide faster resolution to the dispute, and have a higher degree of confidentiality than litigation. They also allow the parties to choose arbitrators that are specialized and better suited to deal with the issues at hand. Moreover, the decision-making process encourages open participation (under the guidance of the arbitrators) by all the parties to achieve a more equitable result. Thus, both arbitration and mediation are widely employed to resolve disputes and negotiate matters.
While ADR has made it easier for companies to resolve issues between them, ADR is still expensive, time-consuming, and often inefficient – issues that some believe may be solved through the implementation of blockchains. This article will discuss how three companies – Mattereum, JuryOnline, and JUR – are developing platforms that harness the benefits of blockchains to improve ADR proceedings.
The transfer of goods or property today requires an extensive paper-trail, making the process complex, and error-prone. Such a system often results in conflicts or disputes. Many purchase agreements contain an arbitration or mediation clause, outlining the procedure for resolving contract disputes. Mattereum is a smart contract platform attempting to reduce contract disputes related to the legal transfer of property.
The platform seeks to simplify the transfer of property by producing “a set of affordable natural language contracts and corresponding smart contracts to facilitate common legal tasks like buying, auctioning and renting physical property, licensing and assigning intellectual property, and contracting for professional services.”
Traditional contract formation is a long process that generates multiple different versions of a document. This becomes a problem when an error is made and the parties don’t know which document is correct. Mattereum aims to solve that problem with the Ricardian contract, which is a natural language legal contract that is hashed and saved permanently on a blockchain. This system eliminates the problem of losing track of digital documents and makes the resolution of contractual disputes easier to accomplish.
When an error does occur and a dispute ensues, the platform has a legal framework to handle such issues. When a Ricardian contract is created on the Mattereum platform, there is an arbitration-based dispute resolution system defined within the contract. If a dispute arises, the platform specifically delegates legal authority to two external systems; the smart contract on the blockchain and an arbitration-based dispute system for handling any differences that might arise between the parties outside of the smart contract. If an issue like non-performance within a specific time occurs, the smart contract automatically executes itself according to the terms agreed to by the parties. If an issue outside of the smart contract occurs, the contract delegates authority to the Mattereum platform’s arbitration-based dispute resolution system. The system allows parties to agree on a panel of arbitrators who will consider evidence presented by both parties and make a decision.
Arbitration decisions are given full legal weight under the natural language contracts, thereby folding smart contract edge cases into established off-chain legally binding dispute resolution.
Mattereum utilizes blockchain technology to reduce errors caused by paper trails and by establishing a dispute resolution system powered by smart contracts on the Ethereum blockchain, allowing for a more effective and just resolution of disputes.
Jury.Online considers the current execution and regulation of deals to be completely outdated. They want to change this by implementing a protocol for interactions between judges and the parties of a deal. This promises to create a transparent, secure and convenient platform for making deals using blockchains and modern cryptographic systems.
Jury.Online will allow for the creation of deals on the platform’s website or mobile application using a template based on the type of contract the user wants to create. The contract is finalized and added to the blockchain as a smart contract. Once this is accomplished, the contract becomes immutable and cannot be deleted or changed by anyone. The deal is then assigned a link, leading counterparties to a webpage displaying the terms of the contract and the sum of money that will be involved in the transaction. The money the deal initiator is willing to pay for the transaction is converted to cryptocurrency and deposited in the balance of the smart contract. The initiator sends the link to the counterparties or it is made accessible to those who want to become counterparties. Once the counterparties accept the terms and complete their side of the deal, the money is transferred via smart contract.
If any of the parties are dissatisfied with a deal, they can get their issues resolved on the Jury.Online platform. When a dispute is initiated by one of the parties, a panel of jurors is randomly selected from the Jury.Online network. The jurors can also be picked according to their expertise in certain fields. Such a system allows for a more effective resolution of disputes and also gives potential jurors the opportunity to use their experience and knowledge for paid dispute resolution.
By using blockchain technology, Jury.Online aims to facilitate the creation of legally binding deals and increase transparency and security as well. It also intends to provide an effective dispute resolution procedure to resolve issues arising out of such contracts, reducing the time, cost, and inconvenience of traditional ADR or court processes.
According to JUR, the current legal structure and dispute resolution solutions are plagued by inefficiencies, high costs, and delays. While smart contracts might be an efficient way to improve agreements, they don’t include a mechanism to resolve disputes when they arise.
Jur proposes a new dispute resolution system that uses blockchain technology to instill transparency and immutability in the legal industry. Jur utilizes a series of smart contracts to provide an incorruptible decentralized oracle that delivers fair and fast dispute resolution at near zero cost. The on-chain architecture is composed of various connected platforms. The base layer of JUR allows users to create their own contracts and escrow funds for payment, agreeing via a smart contract to use the decentralized oracle if a dispute arises. This base layer is connected to the dispute resolution system.
The platform functions on the principles of game theory. When a legally binding smart contract, called “Smart Legal Agreements,” is created and a dispute arises, Jur relies on the judgment of its decentralized community for settling the matter. The platform provides economic incentives as a motivation for voters to deliver reliably fair decisions; a system which functions according to game theory. In other words, the system uses a series of smart contracts to create an incorruptible decentralized oracle, allowing for the resolution of an issue in as little as 24 hours at near zero cost.
ADR improved the way businesses and individuals settle disputes by offering an alternative that has proved to be more effective and efficient than litigation. According to the United States Department of Justice (DOJ), in 2017, ADR proceedings saved $15,521,275 in litigation and discovery expenses and 1,967 months of attorney/staff time.However, ADR has its own inefficiencies and inconveniences. Mattereum, Jury.Online and JUR are identifying problems within the current ADR process and are utilizing blockchain technology to resolve these issues, with the hope of creating better and more effective alternatives for the resolution of disputes.
About the author
Liz is a third-year law student at the University of Houston Law Center focusing on the legal implications of disruptive technologies, specifically blockchain and its different applications across many industries. She is also the founder and president of the Blockchain and Cryptocurrency Law Association at the University of Houston, established to educate law students about blockchain technology and the opportunities its implementation will create for attorneys.