Did you know that a court decision in France technically holds no bearing in most other countries?
If you think about it, the concept makes sense. France is a sovereign nation and other sovereign nations are not necessarily obligated to respect its laws (and vice versa). While this is the foundation of statehood, it begs the question of what legal system digital nomads can follow?
In a Plumia talk, international arbitrator and co-founder of ArbTech Sophie Nappert explained more about the concept of borderless dispute resolution via arbitration and how technology plays a critical role.
The history and purpose of arbitration
While sovereign courts are the highest authority in each respective country, there’s a second type of legal dispute that Nappert believes can be more effective for borderless living—arbitration.
Within arbitration, all parties agree to the terms they will be bound by. An arbitrator’s job is to listen to all evidence and render a decision along the terms everyone agreed to.
The history of arbitration started in commercial matters, such as someone not paying for goods or services. It evolved over time to become a useful tool for two reasons:
- To avoid a costly and lengthy court motion.
- To work with subject matter experts on complex topics or protect intellectual property from becoming public record.
Arbitration is also global, with over 100 countries signing the Convention of New York in 1958 and agreeing to respect an arbitrator’s from any signatory country. This means, for example, that an arbitrator’s decision in New York would be respected in a London or Paris court.
The primary difference between arbitration and court is consent. Arbitration cannot happen without all parties consenting to enter into arbitration and consenting to the terms of the discussion. If any party doesn’t consent, they cannot be compelled into it the way they can in a court of law.
The benefits and drawbacks of arbitration
As a form of dispute resolution, arbitration has a lot of benefits and drawbacks.
Portability of decisions: Because of the Convention of New York, arbitration decisions are respected globally in ways that sovereign court rulings are not.
Flexibility: Arbitration can take whatever form - and contain whatever rules of discussion - that the parties agree to.
Speed: Arbitrators are available globally and can respond to requests very quickly.
Costs: Nappert said the costs of arbitration are so high that it’s not worth it unless the decision is worth at least $100,000 to the parties.
Applicability: Arbitration’s complexity means it’s not a good route for simple cases because the negotiations would outweigh the value of the case.
Access: Due to the costs and complexity of entering arbitration, Nappert said it isn’t accessible for many people who might benefit from its speed and globally-binding decisions.
How technology impacts dispute resolution
Nappert is excited about the possibility of technology, but remains cautious. She spoke about three different technology-backed ways of making arbitration more accessible.
1. Online Dispute Resolution (ODR): Within ODR, there is no conversation or trial. Parties agree to the terms and conditions set ahead of time (by a vendor like eBay), submit all their evidence, and an online arbitrator reads the information and renders a binding decision.
Nappert said ODR is impactful because it’s quick and easy to access, but there is no opportunity for appeal and no opportunity to explain your case verbally, so it isn’t a perfect solution.
2. Smart contracts: Nappert is excited by smart contracts because she sees them as a way to “eliminate a lot of people that right now make a lot of money off the back of people who transact.”
However, she also clearly stated that she doesn’t view smart contracts as a form of arbitration or justice. Instead, it’s a way to be more efficient in the delivery of goods and services. Since the terms of a smart contract are automatically executed, Nappert feels they could be a great way to make arbitration less necessary overall.
3. Blockchain-based arbitration: New projects are coming about that decentralize arbitration. In these instances, multiple people stake crypto on a blockchain to act as arbitrators, theoretically removing any bias that might exist in a single arbitrator.
Nappert expressed concerns with blockchain-based systems, though, owing to incentive structures. Current projects put bounties on specific outcomes, meaning that individuals are paid out more or less depending on the outcome of the case. To Nappert, this is equivalent to putting money at the heart of justice, which necessarily opens opportunities for corruption.
Making justice more accessible
Existing justice systems are set up with national sovereignty in mind, which makes the concept of borderless dispute resolution a little challenging. However, the arbitration model provides inspiration that technology can enhance. The key to building effective technology in this space is to continually prioritize accessibility of services and fairness in outcomes, which requires in-depth discussions of embedded incentives.
While the road ahead has bumps and challenges, it’s still a worthy path to take. What’s even better is that technology is already showing great promise and making strides, giving further hope for the future.
The Plumia Talks is an ongoing series of public talks about creating a borderless world through technology. The sessions feature expert guests such as academics, authors, technologists, policymakers, founders, and activists. Register for our next event.
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