The Courts of the Future: Closing the Gap Between Innovation and the Law
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The past few years have witnessed the emergence of disruptive technologies, such as blockchain, that promise to revolutionize the way business is conducted across many industries. As these technologies continue to evolve and seep into our daily lives, people, companies, and societies quickly adapt and assimilate to them. The law, however, does not.

Today, technology is developing at an even faster pace. However, there are innovative projects that are aware the law lags behind innovation, know the problems that can arise from the laws inability to adapt quickly, and are working toward making a change. One such project is Dubai’s Courts of the Future (COF).

This post will explain how the COF project attempts to close the gap between new technologies and the law. The first part will give a short background on the relationship between the law and technology, in an attempt to shed light on the innovative nature of the COF. The second part will then delve into the COF initiative and how it might be a solution for some of the problems that arise from the fast-paced development of new technologies and the inability of the law to catch-up to innovation.   

Background

Throughout history, the law has been slow to adapt to technology. For example, the creation of the printing press in the 15th century disrupted government and social structures by allowing information, ideas, and ideologies to spread quickly. As information disseminated throughout Europe, shifting power between rulers and the ruled, questions about safeguarding intellectual property rights led to heated debates that culminated in the development of copyright laws about 300 years later.

The law and legal systems, however, are not entirely hostile to innovation. The past decade, for example, has seen a migration of commercial disputes from national courts to private international arbitration tribunals. Such dispute resolution methods, created to avoid the inefficiencies, the risk of political interference, and the length of national justice systems, were a response to increasingly fast-paced industries that no longer see as appropriate the traditional legal methods to resolve disputes.

While legal systems and the law slowly adapt to innovation, for the most part, they are always years behind technological advancements and often cannot afford the legal protections they are supposed to provide – increasing the risk of implementing new technologies and hampering their development. Moreover, the speed at which technological innovations develop has increased significantly; a phenomenon predicted by Gordon E. Moore in an article published in 1965, known today as Moore’s Law. In his article, Moore describes a future with home computers, mobile phones, and automatic control systems for cars that resulted from the doubling in the number of circuit components that could be packed on an integrated chip. Moore’s law became a self-fulfilling prophecy, and the exponential growth in computing power led to enormous economic and social changes to which the law still has not been able to adapt. Unlike the printing press, which took decades to have a widespread social impact, new technologies today have direct disruptive power and immediate legal implications, and such fast-paced growth further widens the gaps between technology and the law.

Because the gap continues to expand, courts and the law need to adapt to changes brought about by technology. “Courts have not been disruptive. We need a disruptive court,” stated Mark Beer, Chief Executive and Registrar General of the Dubai International Financial Center (DIFC) courts. “We’ve got to break free from the atmosphere that we live in thinking that what we designed 200 years ago is right for today or right for tomorrow.”

 

The Courts of the Future

The view expressed by Mark Beer is beginning to take shape as Dubai’s Courts of the Future (COF) project. Seeing how enthusiastically the United Arab Emirates and the city of Dubai have embraced innovations like blockchain technology, aiming to have 50% of government transactions on the federal level conducted on the blockchain by 2021, it is not surprising that they are spearheading such a project. The initiative seems to be an evolution of their already successful DIFC court system but this time for new digital technologies.

The COF aims to close the growing gap between technological innovation and law by providing new technologies with the protection necessary to continue their development. The objective of the project, as stated in the COF website, is to “create rules through a cross-functional group of subject matter talent from around the world, bringing practitioners and those in the industry together to identify the challenges of the future, and to agree how Courts should best address them.”

The DIFC is currently working with industry experts and lawyers across the world, to develop a specialized division of its already existing court system designed to “support companies developing new technologies, sectors and applications – from blockchain to 3-D printing” by utilizing technology to resolve commercial disputes arising from the implementation of new and often untested technologies.

According to Section 3 of the “General Rules” of the COF, the claims that may be brought before the COF involve issues or questions of technical complexity, issues that have no single physical geographical nexus, and proceedings that are likely to involve multiple parties from different jurisdictions. The section also lists a few examples of the types of claims that are appropriate to bring to the COF, which includes issues of cyber security in respect of data and/or assets stored online; claims relating to competition and/or anti-trust issues in respect of online assets or currency; claims involving online intermediaries and/or online platforms or marketplaces; and/or claims relating to online peer to peer transactions; and claims relating to online blockchain transactions.

Essentially, the COF is a private method of dispute resolution similar to international arbitration. However, unlike arbitration tribunals, the COF proceedings are not only tailored to the type of technology in dispute, but they also incorporate innovative technologies into the adjudication process aimed to achieve justice more effectively.

One example of how the COF implements innovative technology in its adjudication process is the implementation of smart contracts in the enforcement of judgments. Article 21 of the enforcement section of the Rules states that “The COF Division will own and operate a Decentralized Autonomous Organization on the Ethereum platform, known as The Universal Vault.” The purpose of the Universal Vault is to execute judgments instantaneously online via smart contracts utilizing the blockchain account details provided at the point of a party joining or commencing the COF proceeding. Furthermore, a successful COF litigant can chose any award in its favor made in fiat money, cryptocurrency, or online assets. In other words, the parties give the Universal Vault access to their virtual accounts. Once a verdict is reached, it automatically triggers the execution of the award in whatever type of currency the parties chose, via the smart contract.

Adding the smart contract mechanism to an adjudication process might be a practical and effective solution to one of the most pressing issues alternate dispute resolution courts face – enforcement of judgments through the intervention of national courts, in particular, when a losing party tries to avoid compliance. The COF courts, on the other hand, begin to embody elements of private adjudication systems but do not require the aid of national courts to enforce rulings because the judgments are executed instantaneously via smart contract.

By adding such mechanisms to adjudication processes and tailoring legal systems to better address the issues and disputes that affect particular technologies, the COF is modeling the legal systems according to the needs of technological innovations, instead of fitting technology within the current legal framework. Such modeling provides a legal adjudication platform that better protects the rights and encourages the development of the technologies that are changing the way the world functions.

The Courts of the Future project is still in the works, and many legal issues need addressing. According to Professor Julian Cardenas, Research Professor of Transnational Law at the University of Houston Law Center, “the COF General Rules are still a work in progress. It requires more developments in their procedural due process rules, in particular, on issues such as the rules of consent to the COF jurisdiction, and the rules for the appointment of the COF judges. Also, more information about the administrative structure of the COF will contribute to understanding the new approach. Solving these issues will provide the foundations to attract parties to submit claims before the COF, and take advantage of their global legal services potential.”

There is much work to be done before the COF can afford the legal services and protections its developers envision. However, the project is taking the necessary steps towards ensuring that adjudication systems are equipped to protect the development of new technologies, lead to greater legal certainty, and close the widening gap between the law and technological innovation.