OpenCourt: Legally Enforceable Blockchain-Based Arbitration
Administering Justice Online with Decentralized Arbitration.
Since Ethereum’s launch, the blockchain community has explored the problem of how to administer justice online through decentralized arbitration systems. Today, OpenLaw demonstrates the first comprehensive step towards this vision by debuting an end-to-end commercial transaction that incorporates a smart contract powered arbitration system. Thanks to the robust tools provided by OpenLaw a new era of low cost and universally accessible justice is beginning.
Blockchains, in many ways, serve as a conceptual space to explore new forms of commercial and social activity. The technology fundamentally manages assets, and smart contracts enable them to be zipped across the globe in a matter of seconds.
Yet, for the blockchain ecosystem to mature into a pervasive global infrastructure, blockchains will need to support decentralized mechanisms for dispute resolution. Parties that transfer assets via a blockchain or enter into blockchain-compatible agreements will invariably get into disputes, and they will need tools to manage disagreement (particularly in a low-trust environment).
Agreements incorporating smart contracts will not be immune to disputes and legal challenges. Parties will disagree about the terms governing their performance and disagree on how the smart contract was intended to operate. There also could be bugs in the smart contract itself, creating complications or misaligned incentives. The risk of mistake becomes magnified as smart contracts increasingly interact with outside data provided by trusted oracles like ChainLink but also require humans to perform their terms.
That is why the era of decentralized dispute resolution procedures is beginning. In the long run, blockchains hold out hope to power global universally available judicial systems that deliver low cost and high-quality dispute resolution services online. If implemented, the end result would be game-changing — a globally accessible “online court” where people have an equal opportunity to receive low cost, sophisticated, and transparent justice regardless of their location or creed.
To build such a future, the blockchain ecosystem needs several baseline tools:
- Smart contracts to manage an arbitration procedure;
- Agreements that seamlessly interact with smart contract code to ensure the enforceability of any arbitral awards; and
- Solid reputation systems to help the community select arbitrators to resolve disputes.
At OpenLaw, we’ve spent the past year perfecting the first two components. And, today, we’re able to show you a complete end-to-end example of a blockchain based arbitration system — something we call “OpenCourt.”
In the below video we demonstrate how a bill of sale generated via OpenLaw — which relies on the OpenCourt smart contract system — provides parties with the ability to automate a common commercial transaction and rely on a decentralized arbitration system to resolve any dispute related to the sale.
Using our tools, a party can create easily create a marketplace, similar to that provided by OpenBazzar, and sell goods online. The marketplace can rely on our API to automatically generate a legally compliant bill of sale that is managed and digitally signed via a blockchain.
Unlike other bills of sale, our bill of sale is structured using our markup language and incorporates the OpenCourt arbitration system, comprised of a series of smart contracts. Using OpenCourt, once the agreement is signed, any funds deposited by the buyer are placed into a virtual escrow account. The smart contract manages the sales process and contains functionality that enables either the buyer or seller to trigger an online arbitration proceeding in the case of a dispute.
Through this approach, the OpenLaw protocol is able to increase the speed with which the transaction is documented and executes, while simultaneously providing contracting parties with an agreement containing a dispute resolution provision (approved by the well-known arbitration association JAMS) to ensure the enforceability of the arbitrator’s decision in the real world.
This initial version of the OpenCourt system is implemented in Solidity and works through a lightweight programmatic interface. Any smart contract can rely on the OpenCourt system to easily incorporate a dispute resolution procedure by using Solidity’s ability to implement an interface that the OpenCourt library will provide and then “registering” itself with the OpenCourt dispute resolution smart contract on the blockchain.
Once configured, OpenCourt will send the smart contract notice of a confirmed dispute once invoked. The smart contract will then transfer any identified digital assets to a virtual escrow account, thus locking these assets until an arbitral decision is reached.
The dispute resolution procedure can be accessed via parties to the contract and arbitrators through a basic user interface. Using this interface, each party can notify OpenCourt that they wish to dispute the smart contract, provide a statement of facts, and agree on the blockchain address of who they select as an arbitrator. At that time, the arbitrator can access the interface, review the statement of facts, render a decision, and have the arbitration award automatically transferred from the assets maintained in escrow.
We are in the early stages of OpenCourt. Disputes can be very complex and resolving them in a legally enforceable way requires flexibility to adapt to different jurisdictional requirements. In the weeks and months to come, we plan to release future versions and make it increasingly easy to incorporate OpenCourt into your smart contracts.
If you’re interested in learning more about OpenLaw or want to help us explore decentralized arbitration, drop us a note at hello@openlaw.io. Stay tuned. We’ll be releasing more about OpenCourt, our API, and other product enhancements (including our mainnet launch) shortly.
— The OpenLaw Team
Disclaimer: The views expressed by the author above do not necessarily represent the views of Consensys AG. ConsenSys is a decentralized community with ConsenSys Media being a platform for members to freely express their diverse ideas and perspectives. To learn more about ConsenSys and Ethereum, please visit our website.
