Digital Dispute Resolution

Abstract

This essay identifies and analyses key developments and regulatory challenges of “Digital Dispute Resolution”. We discuss digital enforcement and smart contracts, internal complaint handling mechanisms, external online dispute resolution and courts in a digital world. Dispute resolution innovations originate primarily in the private sector. New service providers have high-powered incentives and face fewer institutional restrictions than the courts. We demonstrate that with smart contracts, digital enforcement and internal complaint handling, a new era of dispute resolution by contract without a neutral third party dawns. This development takes the idea of a “privatization of dispute resolution” to its extreme. It promises huge efficiency gains for the disputing parties. At the same time, risks of an extremely unequal distribution of these gains, to the detriment of less vigilant parties, and of undermining the rule of law loom large. The key regulatory challenge will be to control the enormous power of large, sophisticated commercial actors, especially platforms. We suggest regulatory tools to address this problem.