Security

How blockchain 'lawtech' can transform dispute resolution

6th August 2020
Lanna Cooper

The COVID-19 pandemic has brought into sharp focus the urgent need for global connectivity that enables the business community to switch to remote operation at the flick of a switch.

Many organisations and industries have learnt to do more with less during lockdown, but the primary challenge remains how to maintain productivity remotely while keeping business activity consistent and economically sustainable. Many industries are testing their digital capabilities for the first time and are falling short.

Video has become a viable and accepted alternative to face-to-face meetings, but video calling is only part of a minimum digital capability that includes email. The challenge is when different parties are working with different systems in silo: what happens when the office is closed or, as in the case of Slater & Gordon, permanently replaced with remotely working? Digital connectivity is now a critical business enabler.

The role of blockchain in arbitration and mediation

The pandemic has reinforced the point that digitialisation in the legal sector must accelerate. Of course, lawyers can easily jump on a video call but delivering a full service in many cases is still limited. There is currently immense pressure on judiciary and legal processes to solve contractual disputes arising out of COVID-19: in response, the UK government has recommended that companies try to resolve these through mediation rather than going to court in order to avoid damaging lawsuits, particularly as many courts remain closed.

Arbitration and mediation are often chosen for confidentiality reasons and the need to avoid more public court proceedings. This may be particularly important in sensitive commercial disputes that require large volumes of disclosure to be exchanged. Many practitioners still use email to exchange information and it’s easy to lose track, send material to the wrong recipient or - worse still - be hacked. The use of blockchain can mitigate this challenge.

The London Chamber of Arbitration and Mediation (LCAM) has recently implemented Finboot’s enterprise platform, MARCO, to deliver blockchain capability to its dispute resolution process. Since working remotely has become commonplace for many, LCAM recognised the need to have a technological solution in place that would ensure its ongoing operational efficiency and resiliency in this new environment. Manager Farad Asghari said that that “applying blockchain to administer LCAM’s arbitration and mediation cases will give us an edge over other legal services providers that rely on traditional, analogue methods or less advanced software”.

Blockchain is the technology behind a distributed network of computers that can be used to transfer and store data securely but which, uniquely, has a single memory. That means data cannot be freely copied and edited to create an alternative version of the truth, which is why blockchain technologists refer to it as the 'trust platform'.

In the context of arbitration and mediation, the blockchain would be used as a private permissioned framework for a group of stakeholders, such as LCAM, the arbitrators/mediators and the parties in dispute. In this way, blockchain becomes the foundation platform to communicate and securely store documents across multiple geographies, with an auditable time-log that can diarise an end-to-end legal process.

Recently, LCAM completed its first mediation on the new blockchain platform, providing a full service to the parties and a secure environment for the exchange of confidential information. Jane Player, a well-known international mediator and member of LCAM’s Board, who mediated the dispute, said that she 'found the process simple, straightforward and easily explainable to the parties to give them maximum comfort, after which they were able to fully engage and benefit from the secure platform'.

Other potential blockchain applications in the legal sector

Blockchain has many potential applications in the legal sphere because documents now start life in a digital form, and one of these is the enablement of digital due diligence. Due diligence has historically involved a lot of face-to-face meetings, which have been suspended during COVID-19, but, looking forward, the process could very feasibly be enabled on a blockchain framework where each party uploads information that is verified, auditable and accountable. This has the additional benefit of reducing the costs traditionally incurred in the process.

Furthermore, who really still needs the post room in this day and age? How many organisations still go through the process of opening, scanning and digitising letters? COVID-19 has forced the stragglers to accept emails instead of physical letters. Email, while ubiquitous, remains leaky, unsecure and prone to mistakes. We have all rued that time we pressed send by mistake! Blockchain can address the risk of email and other file transfer applications by creating a walled workspace for required parties to operate in securely and safely.

Moving towards a wholly digital ecosystem in this way is also compatible with the green agenda. Having a trusted environment, built on blockchain, in which different parties can communicate in a secure and immutable way, greatly reduces the need for extensive travel, while also significantly decreasing paper usage. ESG is now a board room level priority for all companies, demanded by employees and clients alike, so it is imperative that law firms act sustainably in order to eliminate destructive business practices and reduce their carbon print - something that blockchain can also help to measure!

How to approach the digitalisation journey

It is a widely accepted fact that technology can reduce costs and improve productivity. Lawtech - the term coined by the Law Society - is timely. A number of regulators, including the Solicitors Regulation Authority, have commented that technology should be used to deliver affordable, easy and quick access to justice. Therefore, technology adoption must accelerate. 

Digitalisation is a journey and it is best to take an agile approach, especially with blockchain. We recommend that firms start with one implementation, prove the business value and then expand functionality across to other business processes. This has the benefit of ensuring that you take your stakeholders, including employees and clients, with you on the digitalisation journey. LCAM was able to implement our blockchain solution in less than ten days and is already looking at new use cases, such as the management and storage of the certification of panel members.

COVID-19 has highlighted the need for reliable and resilient digital infrastructure with businesses. A recent survey by Deloitte saw a strong trend in the positive attitude towards usage of blockchain based applications amongst enterprises and clients will soon be demanding the same of their law firms. Today, blockchain is a digital tool that can help firms survive in these difficult times but, in the future, it will prove to be a competitive advantage that helps them thrive

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