Will there be a future where legal disputes and conflicts are no longer settled in a physical courtroom? That might be possible if anonymous jurors of a blockchain network can perform that duty. This concept may now appear as just an imaginary phenomenon, but it is already a reality made possible by some forward-thinking projects.
These projects are using the power offered by decentralized smart contracts and participants that are highly incentivized to make rulings as jurors. A blockchain dispute resolution system known as Kleros is already operational. In that context, it has sparked extensive debate around blockchain technology and its probable applications in the legal space.
Next month, Aragon Court will join Kleros in the world of dispute-resolution through a virtual court powered by blockchain. The new decentralized court is categorized under the Aragon Association’s decentralized platform umbrella. This platform lets users create different companies and organizations. The clients can manage multiple aspects of an organization, starting from voting and finance to management.
The purpose and premise of Aragon Court are quite intriguing. It has the capability of becoming a borderless dispute resolution tool that cuts across the jurisdictions of many laws and nations. What is yet to be seen is whether these judgments made by the remote jurors of the platform can be effectively enforced. Also, it remains to be seen if these judgments hold any weight on the eyes of the conventional legal infrastructures and courts.
How Does It Work?
These court platforms can only work under a protocol handling various subjective disputes. They cannot be automatically settled using smart contracts. That protocol uses human jurors who vote on a particular dispute to reach a final viable ruling.
For instance, to be considered as an Aragon Court juror, users must sign up, stake, and activate ANJ. ANJ is the platform’s native token. The probability of getting drafted increases proportionally by the amount of ANJ tokens that a juror enables.
After a juror is called to rule in a dispute, they will enter the voting phase of the protocol’s process. This court uses a game theory method called Schelling Game to offer a subjective outcome to the dispute. The participating jurors are requested to vote on a ruling that other jurors in the disagreement are probably going to vote on as well.
As mentioned earlier, some of the jurors’ ANJ tokens are locked in a pool until a verdict is achieved. The jurors who opt for the minority ruling lose their staked tokens, with the objective being the consensus of an outcome. On the other hand, the jurors who vote with the majority get a share of the staked tokens and ruling fees from the protocol.
All the parties involved in the dispute can appeal the outcome of the ruling by staking more collateral for a continuing round of adjudication. This preliminary process needs new jurors to vote on a new decision. The process can occur many times if the findings are appealed. In the end, the smart contract that initiated the dispute can then get settled according to the final ruling of the voting jurors.
Is It A Practical Alternative To The Traditional Courts?
Aragon Court’s dependence on game theory and consensus raises some interesting questions. Is this platform viable to become an alternative for many disputes to be settled outside the traditional courts?
Aragon Court’s jurors do not possess any lines of communication with each other. That comes in the opposite of the traditional courts where the trial jury will hear the presented evidence and then discuss the outcome of the court case among members. The Aragon Court jurors vote on given results of a particular dispute. They are directly incentivized to vote for the outcome that the other participating jurors are most likely to choose.
According to US-based corporate lawyer Dean Steinbeck, the nature of the game theory has existed for many years. During that time, this theory has been considered for a host of various applications. But, this mechanism may not lead to an outcome that offers justice in a conventional sense. He explained:
“On the one hand, skin in the game ensures that jurors make rational decisions. […] On the other hand, jurors will not vote based on what they think is right, but based on what they think, the majority of jurors will think is right. Hence, there could be a situation where a juror has a strong conviction for something but is afraid to vote for it because he or she might lose money. The safest bet will always be to vote with what you think is the majority decision. In the end, that’s not justice but populism.”
Apart from the voting mechanism, Aragon Courts can provide a significantly cheaper mechanism of reaching an outcome than the traditional legal channels. Taking disputes to the formal courts if quite expensive, and this encourages other viable alternatives to mediation. Steinbeck believes that companies, individuals, and online platforms may use a service that is reasonably affordable from a legal point of view:
“I think Aragon Court looks like an efficient way to settle disputes that would otherwise be too costly to adjudicate in a court of law. However, I guess that if enough money is at stake, a litigant will still want to hire a lawyer to prepare paperwork stating his or her case. So it’s likely that lawyers, or other experts, will still be used.”
Another factor to consider is that jurors may conspire to reach an agreed outcome to secure a share of the rewards of any ruling. Considering how the Aragon Court protocol works, any malicious parties may exploit the game theory mechanics to suit their interests.
Luis Cuende, the Aragon Association Executive Director, said that the voting mechanism is well designed to discourage this type of behaviour by jurors. He added:
“Jurors have to vote with a mechanism called commit-and-reveal — which makes it impossible for them to have certainty of what each other will vote. Therefore they could try to cheat on each other and get fees from the ones on the losing part, so they are incentivized not to do that.”
Is The Process Legally Binding?
Another major issue that surrounds the future of these digital courts is whether the rulings of all disputes presented in these courts have any weight from a legal point of view. Are parties held responsible for upholding the verdict from such a court, legally? If the participating parties contractually agree to have a dispute settled, that ruling becomes lawfully binding:
“Today, third-party arbitration and mediation is a huge business. There is no reason why parties can’t contractually agree to the outcome of an Aragon Court ruling. When parties agree to mediate their disputes via Aragon, those decisions will be binding.”
As a sign of intent, the Aragon Association has achieved that in a contractual document between ongoing development and itself as Cuende says:
“You can also use traditional legal agreements and set Aragon Court as the dispute resolution mechanism — we have done that for one of our grants to the team developing Aragon Chain.”
Although Steinbeck is convinced that the legal contract is binding, Cuende thinks that a ruling by the traditional courts may be what is required to provide credence to the Aragon Court:
“The true test of this would be a case convened in the Aragon Court being taken to a conventional court.”
Any dispute resolution mechanism, including Aragon Court, does not compel the jurors to have any formal legal background and qualifications. These decentralized courts are an interesting phenomenon since the same jurors may be involved in making decisions in various complicated disputes. Their involvement in decision-making is based primarily on the number of tokens they stake in the platform.
Steinbeck thinks that knowledge of legal systems and law could not be imperative for jurors. In that connection, the lawyer believes that enforcing jurors to meet particular criteria might make the system more attractive to prospective users:
“I don’t think jurors need a legal background, but some level of sophistication is desirable. I think imposing certain age, educational and professional qualifications would let users feel more comfortable with the decision making process.”
On the flip side, Cuende says that the incentive of consensus offers the ‘magic’ of these blockchain-powered courts:
“Anonymous Internet miners secure your Bitcoin, and anonymous Internet people secure your legal certainty — all thanks to crypto-economic incentives.”
However, the participating jurors must understand the contractual parameters of the dispute at hand and the evidence provided. The complexity of some cases, and the questions surrounding the validity of the evidence presented for the dispute claims, offers another dimension to the powers of the blockchain-based court systems.
Cuende also conceded that Aragon Courts could not settle various disputed at this stage of its development:
“For some evidence, it’s straightforward. Let’s say you want to claim a reimbursement for a flight — then it’s trivial to check if the flight was delayed. For more subjective things, especially those that may need physical interaction, it gets way harder, and those cases may not be adequate for Aragon Court just yet.”
The Process Is Continuous
Aragon Court started onboarding jurors earlier this January in preparation for its proposed launch in February 2021. But in the short term, it appears like the significant legal disputes will not be settled through the Aragon Court platform. Cuende discourages using the platform for the major disputed until it is running well and smoothly.
Based on a legal point of view, Steinbeck thinks that it will take some time before institutions and businesses consider using platforms like Aragon Court to settle contractual disputes. Additionally, he says that the size of a conflict does not make any difference to the way these platforms operate for now. He finished by saying:
“However, I don’t see parties with millions at stake voluntarily submitting to Aragon Court soon. The system is so novel. It will take decades for enterprises to get comfortable with the idea of decentralized jurisprudence based on sophisticated game theory.”
Will many other platforms follow the lead set by Aragon Courts or will people prefer sticking to the traditional court settings?