Can the Blockchain Make Traditional Courts Redundant? | HackerNoon

Table of Links

Abstract and I. Introduction

II. Award Form and Content

III. Electronic Signatures, Writing Requirement, and Authentication

IV. Can Multisig Arbitration be Seen as an Autonomous Legal Order?

V. Conclusion

Appendix A: Multisig Transaction on Bitcoin Testnet Example

Appendix B: Breakdown of BTC Stored in 2/3 Multisig Accounts

Abstract: With blockchain technology, information is recorded in a permanent distributed ledger that is maintained by multiple computers in a peer-to-peer network. There is no central authority that can alter records or change network consensus rules. Such technology could be utilized for voting, title transfers, issuance of company shares, document notarization, but currently, the most popular use-case are virtual currencies. An interesting feature that some virtual currencies have is a multisignature (“multisig”) protocol that requires the electronic signatures from more than one private key to initiate a transfer of funds. Raw data of a multisig transaction may be recognized as an arbitral award under the New York Convention, where the law of England is the lex arbitri and parties have opted-out of a reasoned award.

I. INTRODUCTION

Multisig is a trust-less method for conducting electronic transactions that could possibly be used for international trade. For instance, a seller and buyer can set-up a multisig account and nominate a third party. If goods are delivered, funds are released from the multisig account with the signatures of the buyer and seller. In case of a dispute, the third party could adjudicate the dispute and sign the release of funds in favor of the prevailing party. However, the legal effect of the act of releasing funds from a multisig scheme has not been fully explored. It is of vital importance for resolved disputes to be final and binding. Businesses operate across many different jurisdictions and having an innovative method to finally resolve disputes would help decrease transactional costs and bolster certainty in an electronic trading environment. For this to occur, multisig needs to be re-imagined not as a simple transaction, but an arbitration process. The resulting multisig electronic award would have res judicata effect, where parties can rely on multisig to further the development of a case or to stop the reopening of a matter which has already been decided in a previous proceeding[2]. The res judicata effect of awards is an integral part of international commercial arbitration, which is evident in Article III of the New York Convention that requires courts in contracting states to recognize awards as binding[3].

This paper will determine whether a multisig transaction, arising out of an arbitration agreement, can be viewed as an electronic arbitral award that is capable of recognition under international arbitration law. In Part I, the legal framework for the form and content requirements of an arbitral award will be discussed. In Part II, we will touch on the law of electronic signatures and consider the authentication requirement of the New York Convention; and finally, in Part III, we will look at the possibility of characterizing multisig arbitration as an autonomous legal order. It is assumed the reader has a basic understanding of blockchain technology and asymmetric cryptography.

[2] Schaffstein, Silja (2016) The Doctrine of Res Judicata Before International Commercial Arbitral Tribunals, Oxford, Oxford University Press, pg. 210; Trans-Lex.org ‘No. XIII.4.5 – Conclusive and preclusive effect of awards; res judicata’ https://www.trans-lex.org/970070 l.a.d. 04/18/2019.

[3] Id.