The Kleros Case for Dispute Resolution and Regulatory Compliance

 

The growing increase in activities through technological platforms has undoubtedly marked the possibility of migrating processes that were previously carried out in person to a virtual environment. In the blockchain world, there is a field (still little explored), which proposes the decentralized resolution of disputes through intelligent contracts. This article raises the idea of the use of blockchain for the resolution of disputes and for this, I conducted an interview with Federico Ast, who is a Doctor of Business Administration at IAE Business School, and also Co-Founder of the Kleros platform.

With a background in Economics and Philosophy at the University of Buenos Aires, he spent a long time writing about digital business and innovation for one of the most important Argentinean newspapers and, later on, in his PhD studies, he devoted himself to analyze how people coordinate to make decisions:

„As an Argentinean, I know the problems of my country, especially with the currency, which were caused by high levels of corruption. At that time, I began to investigate and I met Bitcoin, which is understood as a technology that does not depend on governments, that was what caught my attention.

About the underlying technology, which is blockchain, what I saw at that time was that it had applications that went beyond cryptosystems. At that time there were already people working on the use of Bitcoin Evolution as a voting system so that there would be no fraud in elections. And what interested me on the other side of governance, was the justice system. I am not a lawyer, but I realized that conflict resolution was a branch that was not well served, very expensive, very slow and above all, not adapted to the world of the future in which people from different countries contract providers from other countries.

Online Dispute Resolution

Online dispute resolutions are not a very common case, in fact, the ones with more time are the ones generated by the domain name registration. When a user wants to file a complaint, what he or she must do is initiate a statement of claim indicating the relevant facts through an Online ODR (ODR) platform, this can be found through the WIPO Arbitration and Mediation Center, internet ARBitration (net-ARB) and eQuibbly. In this space, an arbitrator is selected from an existing list and will interact with the participants. The tools in which it is carried out can be through e-mail for the presentation of evidence and also videoconference. Under the U.S. regulation, in the New York Convention, Article II, Clause 1, indicates that an arbitral award is recognized, there must be a written form of agreement on the instance of a dispute for international trade.

Simultaneously, we find Kleros, a platform that emerges in 2017 as a mechanism of justice that combines 3 aspects: the blockchain, game theory and crowdsourcing technologies. The platform is built on the Ethereum blockchain and the operation consists of resolving a dispute where Kleros randomly assigns a jury of self-selected experts and collective participation, which will analyze the evidence and vote for a verdict. The voting system requires the use of a token by the participants which is transferred to the winning party through a smart contract. Some characteristics that stand out are: independence, since cases are awarded in a neutral and anonymous manner; the judges‘ experience in dispute resolution and law; and impartiality and transparency, since all procedures are documented and the community decides.

Federico points out that other online ODR systems could be those used by companies such as Facebook; however, he notes that, for certain cases, the model used by such companies may not be applicable:

„What would look more like Kleros, is the Facebook or eBay customer service system with internal disputes that their platforms have. Without a doubt, Kleros will do that and much more. I think there are cases that cannot be solved with 18th century technology, which are the traditional legal systems. Blockchain is going to replace some activities, but not lawyers. That is, there are cases that lawyers do not solve and that could be addressed with technology. So the lawyers, will

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