Blockchain: the Sword of Damocles for arbitration in finance disputes?

Arbitration in blockchain and finance disputes

Last year, Datarella–a Munich based big data and blockchain solution provider–conducted the first mock arbitration under its proprietary CodeLegit platform, a software that aims to “bridge the gap between technology and law by auditing the compliance of software code” (read here).

In the meantime, while it is said that the “Miami Blockchain Group” will unveil today an application for “smart arbitration and mediation” in the blockchain technology (read here), more than 100 banks, financial institutions, regulators, trade associations, professional services firms and technology companies are working with R3CEV to develop Corda, a distributed ledger platform designed specifically for financial services.

Blockchain technologies are definitely here to stay and to change the way business are conducted dramatically. This will mean that contracts will run without any human input, and one product may well travel from the producer to a buyer’s place without any kind of human interference. Some distributors are already developing drone and other authomated distribution technologies. The same is true in what financial products are concerned.

But arbitration, as any jurisdictional decision-making process, needs human intervention, doesn’t it? The Datarella experiment was eventually finalised by an award rendered by a (mock) physical arbitrator. Decision-making seems to be a safe harbour in the legal sector, isn’t it?

Predictability is not the name of the game here and one cannot forsake the scenario where human intervention is no longer needed, particularly in finance products such as swaps and other derivatives. Disputes related to calculations of dates, payment streams and settlements, or to the occurrence of specific events, to name but a few examples, may well be left to algorithms specifically designed for this industry.

So the questions now are: is blockchain the Sword of Damocles for arbitration? More specifically, what is going to be the impact of blockchain in arbitration related to finance disputes?

Predictions are welcome !



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