The United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention) has an important role to play in international disputes involving distributed ledger technology (DLT) and smart contracts.
DLTs (commonly referred to as blockchain technology) may have the potential to revolutionize business operations by improving things such as security, speed and reliability, but what happens when there is a dispute? Because of the decentralized nature of smart contracts and DLTs, both the users and the servers on which the technology is housed can be located anywhere in the world.
This leads to a number of complex legal questions around how disputes involving this technology can be resolved using existing regulatory frameworks – both international and domestic. The legal jurisdictional issues include the following:
Which law applies to agreements between the parties using a blockchain?
What forum can be used to address any disputes arising from transactions using novel digital technologies?
How can any dispute agreement reached between the parties involving a DLT or smart contract be enforced internationally?
Which legal system applies to a smart contract or blockchain transaction?
Many jurisdictions are turning to arbitration to address these questions – particularly relying on the New York Convention as a means of ensuring that any awards can be enforced in signatory countries. Also, arbitration provides an opportunity for subject-matter experts to be appointed as arbitrators. See, for example, the Digital Dispute Resolution Rules published by the UK Jurisdiction Taskforce that deal specifically with the status of cryptoassets and smart contract disputes.
The Singapore Convention now means that mediation can also play a significant role in the resolution of international disputes involving novel digital technology and its fintech applications.
In compliance with the idea of self-governing decentralized commercial transactions, mediation can be used by the parties to reach a consensual commercial resolution for disputes, and in doing so address the 4 jurisdictional issues identified above. Provided the dispute is considered international in accordance with the terms of the Convention and the parties are resident in countries that are signatories, then mediation can and should play a significant role in the resolution of blockchain disputes. Advantages include flexibility of process, confidentiality, speed and use of technology (online mediation). The Singapore Convention also addresses two other key issues that arise in all international disputes: recognition and enforceability.
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