Lawyers Be DAMNed: Andreas Antonopoulos Takes Aim at Arbitration With DAO Proposal

FEATURE
Michael del Castillo
May 26, 2016 at 23:57 UTC  |  Updated  May 27, 2016 at 22:05 UTC

Andreas Antonopoulos

Currently under review at The DAO, the distributed autonomous organization that has raised over $150m worth of the cryptocurrency ether to date, is a proposal for comment by one of the most recognizable people in bitcoin that would fund a project aimed at encoding a decades-old international legal structure into smart contracts.

Submitted by "Mastering Bitcoin" author Andreas Antonopoulos on 23rd May, the proposal entails a decentralized arbitration and mediation network, or DAMN, that would be built on top of the New York Convention legal structure.

Passed by the UN in 1958, the New York Convention is an agreement between more than 65 countries establishing that any decision made by a recognized arbitrator will not only be recognized by the courts of those nations, but enforced by them.

The resulting legal structure lets businesses and individuals alike resolve their problems in a legally enforceable way that, instead of being recognized in just one jurisdiction, is enforced across borders in some of the largest countries in the world, including the US.

If successful, DAMN would give its users access to a new form of dispute resolution that is not only more affordable, but almost borderless, according to Antonopoulos.

Antonopoulos told CoinDesk:

"We're going to create software that anyone can use and build on. We're not going to be running DAMN. There's not going to be one system than runs this. The important thing is the 'D', decentralized."

According to the proposal submitted to The DAO for funding, DAMN will be a sort of "opt-in justice system for commercial transactions".

Through a network of smart contracts built on the public Ethereum blockchain, the benefits offered by the New York Convention and other alternative dispute resolution services will be made available more widely.

Still in its development phase, Antonopoulos and his co-creator, Pamela Morgan, CEO of Third Key Solutions, intend for the DAMN to provide users with layers of choices regarding whether a dispute will be resolved by a person, an algorithm, pools of random jurors, pools of experts, through collaboration of the parties involved or even another DAO specially set up for mediation.

Those who opt into the system will also be given a choice if the decision will be made public or not.

Cutting costs

Because the legal infrastructure set in place by the New York Convention is enforceable across borders in nations that also include China, the UK, Russia, Iran and Israel, the idea is that smart contracts that are compliant might also be enforceable.

In conversation with CoinDesk, Morgan, an attorney with a background in commercial arbitration, explained what she viewed as the true power behind the encoding of alternative dispute resolution services into the Ethereum blockchain.

Morgan said:

"While this idea is relatively new to our community, these practices are well established in commercial transactions. This is not new. All we're doing is bringing something that until now has been reserved for the elite, the well-connected, the wealthy, and we're bringing it to every day people by way of smart contracts."

According to the non-profit democracy research organization Public Citizen, the cost of initiating arbitration is "almost always higher" than the cost of a dispute resolution within a court controlled lawsuit.

In two examples provided on its website, the fee for a $60,000 claim was $221 compared to an arbitration fee of $10,925, an increase of 4,943%. Further, an $80,000 claim would cost $221, compared to $11,625 at an arbitrator, or a 5,260% difference.

In a statement published to The DAO Hub forum, Morgan writes that the proposal does not promise any return on investment to the DAO itself for the work. Instead, revenue will be generated through charging fees that undercut the traditional fee schedule published by the American Arbitration Association, which range from $750 for a filling fee and up to $65,000 for a claim fee of $10m or more.

Building with The DAO

Antonopoulos and Morgan break up the early phases of their work into two milestones, the first of which is a research report conducted over a three-month period during which they have applied to The DAO for a $30,000 investment, including fees for legal expert consulting, technical consulting and training expenses.

If they are successful, the second milestone will be the implementation of an actual dispute resolution contract, the details of which will be determined through the research period.

The Third Key team envisions its work as a series of rolling milestones that, once achieved, will be left online for others to build on.

The idea, according to Antonopoulos, is that every step they take will be incrementally deliverable to the open-source community, so that anyone can build other smart contracts that tap into alternative forms of dispute resolution.

Antonopoulos said:

"There will not be one DAMN and we will not be running it. We're building software, the software can be run to have hundreds and hundreds of dispute resolution systems of different levels of complexity catering to different needs run by anyone who wants to run them."

Image of Andreas Antonopoulos via WikiMedia

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LawAndreas AntonopoulosThe DAOThird Key