The UK Jurisdiction Taskforce (UKJT) has publicly consulted on draft new Digital Dispute Resolution Rules that can be incorporated into on-chain digital relationships and smart contracts.

The draft rules follow on from the UKJT’s 2019 Legal Statement on Cryptoassets and Smart Contracts, which addressed the legal status of these technologies under English law and marked an important step forward in building a framework to support the development and use of new technologies (see our blog post on the legal statement).

The draft rules are the next step in the UKJT’s quest to develop the legal foundations for, and foster the industry’s confidence in, the use of new technologies.

Described as “ground-breaking” by Sir Geoffrey Vos (UKJT Chair and Master of the Rolls), the draft rules aim to facilitate “the rapid, informal and cost-effective resolution of disputes arising out of novel digital technologies” such as digital assets, smart contracts and blockchain applications. The draft rules provide for:

  • Expedited arbitration or expert dispute resolution (if parties choose it), with decisions generally expected within one month
  • Arbitrators to implement decisions directly on-chain using a private key
  • Optional anonymity of the parties, such as in situations where parties might have transacted anonymously on a blockchain (but parties will need to disclose their identities to the arbitrators)
  • Recognition of built-in automatic dispute resolution processes (or ‘on-chain resolution’), such as where a party can trigger a decision the outcome of which is automatically reflected in the system
  • The appointment of arbitrators and experts to be managed by the Society for Computers and Law who will maintain a list of high quality and experienced arbitrators (legally and/or technologically) available at short notice
  • English-seated arbitration under the English Arbitration Act 1996, which gives parties and arbitrators a wide degree of autonomy in how their disputes are resolved. English law applies to the draft rules and, unless the parties agree otherwise, disputes will be resolved in accordance with English law.

The UKJT aims to publish the final form new rules within the next few weeks.

Whilst it may be some time before we see the extent of take-up of the rules (once published) by the market, it is hoped that the rules alongside the UKJT’s legal statement will give legal security to investors and traders and emphasise the UK’s commitment to being a global leader in fostering the development of new technologies.