This blog is the first in a short series between Greenberg Traurig LLP and the London Chamber of Arbitration and Mediation (LCAM), in which we explore emerging technologies and international arbitration.
Harnessing distributed ledger technology, smart legal contracts (“SLCs”) can best be described as a legally binding contract in which some or all of the contractual terms are defined in and/or performed automatically by a computer.
When asked to analyse the current law within England and Wales as it applies to SLCs the Law Commission concluded that no change was needed. This followed the UK Jurisdiction Taskforce’s legal statement that, in principle, smart contracts can give rise to binding legal obligations, enforceable in accordance with their terms. In essence, the underlying law is there to be applied through choice of law and the stage is set for SLCs to become an integral part of the legal system in this jurisdiction and globally in the near future.
However, the adoption of SLCs and rise in their use will inevitably lead to disputes. Whilst many of these disputes will look and feel similar (or may be resolved by virtue of the SLC itself), certain elements are likely to be novel. For example, a distributed network is unlikely to exist in one country and it may not be possible to say with certainty where the platform on which the SLC is created and performed is located. Satellite disputes over such issues will only serve to increase time and costs for the parties involved.
The more acute consideration then, with the increased use of SLCs, is perhaps which institution is best placed to resolve the dispute. Arbitration is well positioned to emerge as the preferred means of resolving SLC disputes. It provides certainty as to jurisdiction, a neutral forum, access to pools of arbitrators with relevant experience and, in most instances, widely enforceable awards.
As arbitral bodies and procedure meet the needs of SLC disputes this will, in turn, drive innovation within arbitration. Arbitration that offers the right balance between flexibility, efficiency and speed will be the dispute resolution forum chosen to resolve the SLC disputes of today and tomorrow.
Leith Ben Ammar is Of Counsel and Johnny Shearman is a Professional Support Lawyer at Greenberg Traurig LLP