The Use of Alternative Dispute Resolution Methods in Blockchain Technology

Examining Arbitration and Dispute Resolution in Blockchain Technology and the Types of Potential Disputes in the Blockchain Domain

With the growth of blockchain technology and its applications in financial, commercial, and legal fields, resolving disputes arising from this technology has become a significant challenge. Due to blockchain’s inherent characteristics—such as transparency, decentralization, and immutability—it challenges traditional dispute resolution mechanisms and necessitates the adoption of innovative methods. In this article, we will examine and analyze arbitration and mediation as alternative tools for resolving blockchain-related disputes. Additionally, we will critique and review Iran’s legal framework and private international law to explore questions that may engage our minds.

Since ancient times, humans have sought to resolve their disputes in the simplest manner possible. However, as humanity has progressed and societies have expanded, this task has become increasingly complex, time-consuming, and costly. In the following discussion, we aim to take a precise and in-depth look at Alternative Dispute Resolution (ADR) through non-judicial methods.

It is evident that with the advancement of technology and the emergence of new technologies—along with the legal and judicial issues surrounding them—we must utilize existing laws and regulations while also taking steps toward drafting and implementing appropriate legal frameworks.

The Concept of Dispute Resolution Through Innovative Methods

The first step in understanding this subject is to grasp the exact meaning and definition of modern dispute resolution methods. This concept is a focal point in both domestic legal systems and international law. Given the complexity of today’s world and the intricate nature of legal and economic relationships, alternative dispute resolution (ADR) methods are regarded as fast, accessible, cost-effective, and highly specialized alternatives to traditional judicial systems. These qualities have contributed to the growing popularity of such methods. ADR methods include arbitration, mediation, conciliation, and novel approaches such as online negotiation and electronic arbitration.

In Iran’s legal system, these methods are utilized based on various regulations, including the Civil Procedure Code, the International Commercial Arbitration Law, and e-commerce regulations. On an international level, legal frameworks such as the 1958 New York Convention, UNCITRAL rules, and the Singapore Convention on Mediation provide multiple guidelines for implementing these approaches. The primary focus of this article is a detailed and in-depth examination of arbitration and mediation, two widely used and highly practical dispute resolution mechanisms.

What is Arbitration?

To define and explain arbitration, it can be stated that arbitration is an alternative dispute resolution method in which the disputing parties, instead of turning to judicial courts, entrust the resolution of their issues to an independent and impartial arbitrator (or arbitrators). This method has gained popularity due to its higher speed, lower costs, and specialized nature compared to traditional court litigation. Arbitration is a consensual process, meaning that parties willingly choose this method and typically outline the conditions and procedures of arbitration within their contracts. There are various types of arbitration, which we will briefly outline for a better understanding of this process:

Domestic Arbitration:

This type of arbitration takes place within a single country, governed by its national laws. In Iran, it is regulated under statutes like the Civil Procedure Code and the Domestic Commercial Arbitration Law.

International Arbitration:

This occurs when disputes involve parties from different countries or when the contract and dispute have a transnational nature. International regulations, such as UNCITRAL rules or the rules of arbitration centers like ICC (International Chamber of Commerce), apply in this context.

Institutional Arbitration:

Here, an arbitration institution (e.g., an international arbitration center) oversees and manages the arbitration process. Such institutions have pre-established rules and supervisory mechanisms to ensure the process is conducted properly.

Ad Hoc (Special) Arbitration:

This form of arbitration is not managed by an institution; instead, the disputing parties themselves select the arbitrator(s) and define the procedural rules.

Mandatory Arbitration:

In certain cases, laws require arbitration as the compulsory dispute resolution method (e.g., in some labor and family law disputes).

Commercial Arbitration:

This type of arbitration applies to business disputes, contractual disagreements, and financial transactions. It is often conducted under specialized arbitration institutions.

Specialized Arbitration:

This approach involves arbitrators with specific expertise in the field of dispute (e.g., in engineering, technology, or intellectual property cases).

Who Are Arbitrators, and What Qualities Should They Possess?

A question that comes to mind is: under what conditions and with what characteristics can arbitrators be qualified to adjudicate and resolve disputes? In response to this question, it can be briefly stated that arbitrators are independent and impartial individuals chosen by the involved parties or the arbitration institution to resolve disputes. These arbitrators may be lawyers, retired judges, university professors, or specialists in specific fields. It is not necessary for the selected arbitrators to have legal or judicial education; rather, they can be experts or specialists in the relevant areas of dispute, which is one of the features that enhances the appeal of this method.

In general, the main characteristics of arbitrators can be listed as follows:

Impartiality and Independence: An arbitrator should not have any affiliation or interest in the outcome of the dispute.

Expertise and Experience: An arbitrator must have sufficient knowledge in the subject matter of the dispute.

Managerial Skills: An arbitrator must be able to effectively manage the arbitration process.

The selection of arbitrators may be based on the conditions of the arbitration agreement or the mutual agreement of the involved parties. Additionally, in institutional or organizational arbitration, the relevant institution or organization provides a list of accredited arbitrators for the parties to choose from. Therefore, arbitration, as an efficient and flexible method, serves as an effective tool for resolving complex disputes, and due to its unique features, it has gained a special place, especially in the realm of international trade and contracts.

In the substantive laws of the Islamic Republic of Iran, Articles 454 to 501 of the Civil Procedure Code define the framework of domestic arbitration, while the International Commercial Arbitration Law provides specific rules and regulations for transnational and international cases. Due to the possibility of selecting expert arbitrators, the speed of proceedings, and lower costs compared to court trials, arbitration has attracted considerable attention in Iran as well. In international arbitration, UNCITRAL regulations and the New York Convention play a significant role in recognizing and enforcing arbitration awards. Meanwhile, technology-based methods, such as online arbitration, are growing and allowing disputing parties to resolve their conflicts through digital platforms.

Another method is mediation, which is one of the modern approaches that has gained significant standing globally, particularly in international law. Mediation is a process in which a neutral mediator facilitates communication and negotiation between the disputing parties to help them reach an agreement. In Iran, mediation has not been widely incorporated into formal legal frameworks, but in some cases, such as family disputes or commercial conflicts, it is used as an informal resolution method. Internationally, the Singapore Convention on Mediation (2019) plays an essential role in strengthening this approach by granting formal recognition to agreements resulting from mediation. A fundamental difference between mediation and arbitration lies in the issuance of a decision. In arbitration, the arbitrator or panel of arbitrators must issue a ruling at the end, and the disputing parties are obligated to comply with it. In contrast, in mediation, the mediator solely facilitates negotiations without issuing a decision.

Conciliation is another traditional yet effective method of resolving disputes. The key difference between conciliation and mediation is that a mediator may propose solutions for resolving the dispute, whereas in conciliation, the focus is on the direct agreement of the disputing parties. This method is also informally used in Iran’s legal system alongside other alternative dispute resolution methods.

Newer methods, such as online negotiation and electronic arbitration, are gradually replacing traditional approaches. In Iran, with the expansion of information technology and the enactment of laws such as the E-Commerce Law, suitable conditions have been created for the development of these methods. Internationally, organizations like UNCITRAL have provided legal tools for utilizing technology in dispute resolution. Online arbitration and digital platforms play a vital role in international trade and disputes concerning emerging technologies.

Ultimately, the use of modern dispute resolution methods in Iran and globally reflects a shift toward greater flexibility, speed, and efficiency. These methods, supported by domestic laws and international frameworks, provide a suitable foundation to meet the needs of today’s complex societies. At the same time, leveraging technology and digital tools continues to drive transformation and improvement in this field.

Arbitration: Principles and Frameworks

Arbitration is a process in which disputing parties, by mutual agreement, select an impartial arbitrator to render a decision. This method is popular due to its speed, lower costs compared to judicial proceedings, and confidentiality. In the blockchain sector, arbitration enables the use of specialized arbitrators in technology-related matters, leading to more precise decision-making. However, a disadvantage of arbitration in this domain is the challenge of enforcing arbitration awards in countries that lack comprehensive laws on emerging technologies. Additionally, the technical complexities of blockchain may increase arbitration costs in certain cases. The fundamental principles of arbitration include impartiality, expedited proceedings, and the enforceability of issued rulings. Due to its private nature and the ability to select governing laws, arbitration has gained popularity in resolving technological disputes.

Principles of Arbitration Procedure in Iran’s Legal System

Given that arbitration is one of the alternative dispute resolution methods, it holds a significant position in Iranian law, as the history of arbitration in Iran aligns with the country’s ancient civilization. This institution aims to expedite dispute resolution, reduce litigation costs, and leverage expert opinions, making it a suitable alternative to formal court proceedings in many cases. In Iranian law, arbitration is based on principles outlined by legislation. One of the most important governing principles is the freedom of the parties’ will. According to this principle, disputing parties can mutually select an arbitrator or arbitrators and determine the conditions and governing rules of the proceedings. This autonomy is the cornerstone of arbitration, allowing parties to tailor dispute resolution methods to their needs and preferences. Article 454 of the Civil Procedure Code explicitly grants this authority to the disputing parties, and in international commercial arbitration, the freedom to choose governing laws and arbitration venues is fully recognized.

Arbitration in Iran operates independently from the official judiciary; however, this independence is not absolute. Courts have limited supervisory roles, such as appointing arbitrators in cases where the parties fail to agree or confirm and enforce arbitration awards. Arbitration rulings are legally binding and carry the same enforceability as court judgments, but they must be confirmed by a court for execution, as stipulated in Article 488 of the Civil Procedure Code. Furthermore, the principles of arbitrators’ impartiality and respect for the parties’ rights are of utmost importance. Arbitrators must adjudicate disputes fairly and without bias. If impartiality is compromised or conflicts of interest arise, disputing parties may request the court to disqualify the arbitrator.

Another critical point is that arbitration in Iran has certain limitations, as some matters, due to their nature or significance, cannot be referred to arbitration. For example, disputes involving public and state-owned assets can only be arbitrated with the approval of the Council of Ministers. Additionally, some family or legal matters are excluded from arbitration. Nevertheless, in many commercial and civil disputes, arbitration is recognized as an effective method due to its high speed, procedural flexibility, and lower costs. Moreover, in international commercial arbitration, conducted under Iran’s International Commercial Arbitration Law or the New York Convention, principles such as the independence of arbitration clauses from the main contract and the parties’ right to choose applicable laws have granted arbitration a global status.

From a broader perspective, arbitration in Iran is structured around principles such as party autonomy, the binding nature of arbitration rulings, relative independence from courts, and limited judicial oversight. These principles provide a framework that enables disputing parties to resolve conflicts efficiently, without the complexities of judicial litigation, while benefiting from specialized and impartial arbitration. As a result, arbitration is widely recognized as a primary dispute resolution tool, especially in domestic and international commercial sectors.

How to Identify and Enforce Domestic and International Arbitration Awards

After the arbitrator or arbitrators have examined the dispute, the next step is enforcing the issued award. The enforcement of arbitration awards in Iranian law and private international law follows a precise and step-by-step process based on legal principles and international regulations. In Iranian law, an arbitration award is recognized as a binding judgment, but its enforcement requires court approval. Article 488 of the Iranian Civil Procedure Code stipulates that any party involved can request the competent court to enforce the arbitration award. The court, after reviewing the award, will order its enforcement if it does not conflict with legal standards and public order. This review includes assessing the validity of the arbitration agreement, the arbitrator’s jurisdiction, and compliance with procedural rules. Furthermore, if one of the parties claims the award is invalid, they may request its annulment under Article 489 of the Civil Procedure Code. Reasons such as issuing an award beyond the arbitrator’s jurisdiction or conflicts with mandatory legal provisions can lead to annulment.

In private international law, the enforcement of arbitration awards is influenced by international treaties such as the 1958 New York Convention, which facilitates the recognition and enforcement of foreign arbitration awards in member countries. Under this convention, arbitration awards issued in one member country must be recognized and enforced in other member states, except in exceptional circumstances. These exceptions include violations of public order in the enforcing country, non-compliance with procedural rules, or one of the involved parties not being informed of the arbitration proceedings. According to the New York Convention, the party seeking enforcement must submit a certified copy of the arbitration award and the arbitration agreement to the court, which will then determine whether the award complies with legal conditions and international treaties.

A key difference between Iranian domestic law and private international law in enforcing arbitration awards is the nature of judicial oversight. In Iranian law, court oversight of arbitration awards is more limited within the framework of domestic laws and is mainly focused on confirming or annulling the award. However, in private international law, this oversight is influenced by international treaties, and the recognition and enforcement of foreign arbitration awards depend more on intergovernmental cooperation and specific convention rules. In Iran, the 1997 International Commercial Arbitration Law provides a framework similar to the New York Convention for recognizing and enforcing foreign arbitration awards.

The enforcement process in both domestic and international systems also requires adherence to fundamental principles such as arbitrator impartiality, respect for the parties’ rights, and compliance with the arbitration agreement. If an arbitration award violates these principles, its enforcement may face challenges. In Iran, courts may refuse to enforce an award due to conflicts with public order or mandatory laws. In private international law, courts in the enforcing jurisdiction are required to conduct a limited review of foreign awards and may only refuse enforcement in exceptional cases.

Ultimately, the enforcement of arbitration awards requires a balance between respecting the parties’ autonomy and upholding legal and judicial principles. This process, whether in Iranian domestic law or private international law, reflects an effort to maintain confidence in arbitration institutions and ensure justice while minimizing judicial intervention. However, challenges such as differences in legal systems, varying interpretations of public order, and conflicts between national and international laws continue to affect the enforcement of arbitration awards.

Arbitration in Private International Law and International Regulations

Arbitration cannot be viewed solely from the perspective of domestic law; it must also be analyzed through international legal frameworks. Arbitration in private international law is one of the key mechanisms for resolving commercial and legal disputes between individuals and entities from different countries. This alternative to traditional courts has gained a special status in the international legal system due to its flexibility, impartiality, and specialized nature. As previously mentioned, international arbitration principles are often based on party autonomy, the independence of arbitration clauses, and the binding nature of arbitration awards. These principles are codified in treaties, model laws, and international arbitration rules, enabling parties to resolve their disputes more efficiently and effectively.

One of the most important regulations in this area is the UNCITRAL Arbitration Rules, developed by the United Nations Commission on International Trade Law. These rules provide international standards for arbitration proceedings and serve as a neutral and practical framework, particularly when the parties come from different legal systems. The UNCITRAL Rules are widely used in international arbitration, and many prominent arbitration institutions, such as the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA), rely on them.

Another crucial regulation is the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. As one of the most successful international treaties in arbitration, it ensures that arbitration awards issued in one member country are recognized and enforced in other member states. Over 170 countries have joined this convention, which mandates the recognition and enforcement of arbitration awards unless there are grounds such as public order violations or non-compliance with the arbitration agreement. This convention has played a fundamental role in strengthening confidence in international arbitration and facilitating global trade.

Additionally, the UNCITRAL Model Law on International Commercial Arbitration (1985, amended in 2006) has served as a template for drafting domestic arbitration laws. This model law addresses topics such as the independence of arbitration clauses, arbitrators’ jurisdiction, and the enforcement of arbitration awards. Many countries have adopted legislation based on this model law to align with international standards.

In private international law, the principle of the independence of arbitration clauses is also of great importance. This principle means that an arbitration clause remains valid even if the main contract is voided or terminated. This rule, recognized in Article 16 of the UNCITRAL Rules and many national legal systems, helps maintain the integrity of arbitration proceedings and prevents unnecessary judicial intervention.

Furthermore, international arbitration tribunals play a crucial role in enforcing arbitration principles and laws. Institutions such as the ICC International Court of Arbitration, the Singapore International Arbitration Centre (SIAC), and the International Centre for Settlement of Investment Disputes (ICSID) provide specialized and efficient infrastructures for resolving commercial, investment, and other legal disputes. These institutions follow their own procedural rules while ensuring alignment with UNCITRAL rules and international conventions.

Ultimately, arbitration in private international law, by utilizing international laws and regulations, offers an effective and flexible solution for resolving cross-border disputes. This system, while ensuring impartiality and respecting the parties’ autonomy, provides a suitable platform for fostering international cooperation and facilitating global trade. However, challenges such as differences in legal interpretations, interactions between domestic and international laws, and enforcement difficulties in some countries persist. Nonetheless, legal advancements and international treaties have significantly reduced these obstacles.

Types of Disputes in Blockchain Technology

Having gained a basic understanding of arbitration and mediation, a natural question arises: What types of disputes can occur in emerging technologies like blockchain? Another question follows: How should these disputes be resolved? Generally, blockchain-related disputes can be categorized into several main types. However, given our evolving understanding of blockchain, we must acknowledge that the nature and forms of these disputes will change over time, introducing new types of conflicts. Some key categories include:

Disputes related to smart contracts: Smart contracts, due to their automated and code-based nature, may encounter issues in interpretation or execution. For example, if a smart contract executes incorrectly or misinterprets certain conditions, disputes may arise between the involved parties. In Iranian law, issues such as improper execution of contractual terms or misinterpretation of contract clauses can lead to disputes, especially if one party claims the contract contradicts Iranian laws.

Ownership disputes over digital assets: Theft, loss, or conflicting claims over digital assets like cryptocurrencies are common challenges in this field. In Iran, cases such as claims of ownership over digital wallets or lost cryptocurrencies on local exchanges may be brought before courts.

Disputes arising from cyberattacks: Hacking incidents targeting exchanges or blockchain networks can lead to legal disputes. For instance, if a local exchange is hacked and customers’ assets are stolen, affected users may claim that the exchange is liable for compensation.

Intellectual property disputes: Blockchain is increasingly used to register intellectual property rights such as patents, copyrights, and trademarks. Disputes may arise over the authenticity or ownership of such registrations, including cases of patent infringement or intellectual property violations in Iran.

Disputes related to cryptocurrency mining: Cryptocurrency mining can lead to legal disputes due to its high energy consumption and environmental impact. For example, under Iranian law, disputes may arise regarding the unauthorized use of industrial or residential electricity for cryptocurrency mining.

Disputes related to tokens and ICOs: Initial Coin Offerings (ICOs) and tokens, due to their investment nature and fundraising mechanisms, can lead to disputes concerning transparency, fraud, or unfulfilled promises. In Iran, such disputes may be examined under fraud laws or investment regulations.

Disputes related to privacy and data: Blockchain, due to its transparency and immutability, may result in privacy violations. In Iran, disputes may arise regarding the disclosure of sensitive user information or the storage of data without consent.

Of course, there can be many more examples of disputes, but given the emerging nature of this field and the difficulty in predicting these conflicts, only a few can be highlighted. As this technology becomes more widespread, additional disputes may arise.

Utilizing Arbitration for Dispute Resolution in the Blockchain Domain

Arbitration, as an alternative dispute resolution method, can play a significant role in the blockchain domain. Given the decentralized and international nature of blockchain technology, disputes related to it often involve complexities in determining the jurisdiction of courts and enforcing judicial rulings. Therefore, arbitration, as a private and flexible method that allows parties to choose governing laws and the place of arbitration, is considered a suitable option for resolving such disputes. In the blockchain domain, arbitration can be used in cases such as disputes arising from smart contracts, breaches of obligations in blockchain-based projects, and issues related to the ownership of digital assets.

As mentioned, in Iranian domestic law, arbitration is provided for within the framework of the Civil Procedure Code (Articles 454 to 501) and the International Commercial Arbitration Act of 1997. These laws allow parties to resolve their disputes through arbitrators of their choosing instead of referring to public courts. However, Iran has not yet established specific regulations for arbitration in disputes related to emerging technologies such as blockchain. As a result, this matter can be examined based on general principles of arbitration and contract law in Iranian legal systems. On the other hand, Iran’s membership in the 1958 New York Convention facilitates the recognition and enforcement of foreign arbitration awards within the country, which is significant for international disputes in the blockchain sector.

Internationally, arbitration in the blockchain domain is conducted within specified frameworks such as UNCITRAL arbitration rules and specialized arbitration centers like the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA). Additionally, some blockchain-based platforms have created decentralized arbitration systems that use smart contracts to enforce arbitration awards. These methods not only reduce costs and time but also enhance trust among involved parties by leveraging the transparency and security of blockchain technology.

A comparison of Iranian domestic laws with international regulations indicates that Iran needs to develop legal and regulatory infrastructures to align with technological advancements in arbitration. It is recommended that Iran reform its existing laws and establish specific frameworks for blockchain-related disputes to facilitate the use of arbitration in this sector. For example, regulations could be developed to utilize smart contracts as an enforcement tool in arbitration processes. Internationally, Iran can benefit from engaging in global standard-setting and cooperating with international institutions to leverage existing capacities.

Overall, arbitration is a highly effective tool for resolving blockchain-related disputes due to its flexibility, speed, and the ability to implement specific agreements among involved parties. However, fully utilizing this capacity requires aligning domestic laws with international developments and creating appropriate legal infrastructures.

The Necessity of Alternative Dispute Resolution Methods in Blockchain Compared to Judicial Courts

With the rapid expansion of blockchain technology and its penetration into various fields, including finance, smart contracts, digital ownership, and even criminal law, the importance of choosing appropriate dispute resolution methods for blockchain-related issues is undoubtedly increasing. In this regard, comparing alternative dispute resolution methods such as arbitration and mediation with judicial courts is of high importance, leading to the interpretation and critique of each of these methods. It must be noted that each method has its own characteristics, advantages, and limitations that manifest in different ways in legal and criminal matters.

Characteristics and Advantages of Alternative Methods in Blockchain

Alternative dispute resolution methods, including arbitration and mediation, are particularly important due to the decentralized and cross-border nature of blockchain. These methods provide faster, cost-effective, and more flexible solutions for dispute resolution.

1. Speed in Dispute Resolution

Judicial courts typically involve lengthy and complex processes due to case overloads and legal formalities, requiring significant time. However, in alternative methods, involved parties can agree on simplified procedures to reach a resolution in a shorter time. This characteristic is particularly important in the blockchain field, where the technology itself is based on speed and efficiency.

2. Flexibility in Choosing Laws and Arbitrators

In arbitration, involved parties can determine governing laws, the language of arbitration, and even the location of sessions. This flexibility is particularly useful in international blockchain disputes, where contracts and transactions often involve parties from different countries. In contrast, judicial courts enforce strict jurisdictional laws, which may be unfamiliar or unfavorable to some parties.

3. Lower Costs

Alternative methods are generally less expensive than formal courts, as they reduce costs related to legal formalities and attorney fees. This is particularly important for small businesses and startups using blockchain technology.

4. Transparency and Security

In some cases, alternative methods can utilize smart contracts and blockchain technology to automatically execute arbitration awards. This not only enhances transparency but also provides greater security, as it minimizes the possibility of manipulation in enforcement processes.

Characteristics and Limitations of Judicial Courts in Blockchain Disputes

Judicial courts, as official and legal institutions, still hold great importance. However, in the blockchain domain, due to the unique characteristics of this technology, there are limitations to relying solely on these courts.

1. Jurisdictional Challenges

One of the main challenges in judicial courts is determining jurisdiction for blockchain-related disputes. The cross-border nature of blockchain makes it difficult to identify the competent court. For example, if a dispute arises in a smart contract between parties from two different countries, determining the proper jurisdiction can be legally complex.

2. Incompatibility of Traditional Laws with Emerging Technologies

Judicial laws in many countries, including Iran, have not been fully updated to address disputes related to emerging technologies like blockchain. This can lead to problems such as lack of clarity in laws and prolonged legal proceedings.

3. Formalities and High Costs

Formal courts, due to legal formalities and the need for specialized attorneys, are generally more expensive than alternative methods. These costs increase in blockchain-related disputes, which may involve specific technical complexities.

Critique of Utilizing Modern Dispute Resolution Methods in Legal Disputes

In legal disputes related to blockchain, such as those arising from smart contracts, breaches of agreements, or financial transaction disputes, alternative dispute resolution methods offer greater advantages. These methods allow a focus on the technical and specialized aspects of disputes and can leverage blockchain experts to provide more effective solutions. For example, in arbitration, involved parties can select arbitrators with expertise in blockchain, whereas in judicial courts, a judge may not be familiar with this technology.

On the other hand, judicial courts may face challenges in enforcing issued rulings, as digital assets or smart contracts may not fall under the legal jurisdiction of any particular country. In contrast, arbitration, through smart contracts, enables the automatic enforcement of rulings, which is a significant advantage in blockchain legal disputes.

Review and Analysis of Utilizing Modern Dispute Resolution Methods in Criminal Cases and Disputes

In criminal cases related to blockchain, such as fraud, money laundering, or hacking blockchain networks, judicial courts still play a central role. Due to the criminal nature of these cases and their impact on public rights, they require strict oversight by official courts. However, alternative methods can also serve as auxiliary tools in this domain. For instance, mediation can, in some cases, be used to compensate for damages or recover digital assets.

One of the main challenges in this area is the anonymity of blockchain transactions, which makes it difficult to identify the perpetrators of crimes. Judicial courts can address this issue using legal and technical tools, such as cooperation with international organizations and transaction analysis. However, alternative methods may provide faster solutions in specific cases where the involved parties agree to private dispute resolution.

Generally, alternative dispute resolution (ADR) methods in the blockchain domain offer advantages over judicial courts in civil disputes due to their flexibility, speed, and lower costs. However, in criminal cases, courts continue to play a primary role because such cases require legal oversight and authority. In Iranian law, developing specific regulations for blockchain-related disputes, particularly in arbitration and mediation, can enhance efficiency and reduce the burden on official courts. Internationally, using frameworks such as UNCITRAL rules and the New York Convention can help improve blockchain dispute resolution.

Ultimately, the choice between alternative methods and judicial courts should be based on the nature of the dispute, the needs of the involved parties, and the governing laws. A combination of these two approaches can improve the legal system and provide more appropriate solutions in the blockchain domain.

Considering the above interpretation and the technical complexities and decentralized nature of blockchain, traditional dispute resolution methods are often ineffective. If we summarize arbitration as a fast, cost-effective, and flexible approach for resolving disputes, it becomes evident that ADR methods are highly significant in the blockchain domain. This is because blockchain technology has unique characteristics that render traditional dispute resolution methods inefficient or time-consuming. Thus, considering the importance of this issue, if we weigh blockchain’s unique characteristics against the advantages of arbitration, we can achieve a balanced and proportionate approach in addressing blockchain-related disputes.

It is worthwhile to briefly and systematically review these two aspects once again:

Unique Characteristics of Blockchain

Decentralization: In blockchain, disputing parties often come from different countries or even have unknown identities. This issue makes traditional courts ineffective for handling both domestic and international disputes.
Lack of Legal Transparency: Many blockchain-related disputes arise due to the absence of comprehensive and clear regulations. ADR methods can help address these issues with greater flexibility.
Technology-Oriented Nature: Smart contracts are executed automatically and may lead to disputes that require a deep understanding of technology for resolution.

Advantages of ADR Methods in Blockchain

High Speed: Methods such as mediation and arbitration are faster than court proceedings due to their simplified processes.
Lower Costs: Court expenses are generally high, whereas ADR methods are significantly more economical.
Flexibility: Parties can agree on dispute resolution rules and processes that align with blockchain conditions and smart contracts.
Specialization: In ADR, arbitrators or mediators can be blockchain and technology specialists, leading to fairer decisions.
Preserving Business Relationships: ADR methods typically resolve disputes in a more amicable manner, increasing the likelihood of maintaining relationships between involved parties.

Commonly Used ADR Methods in Blockchain

Arbitration: Utilizing specialized arbitrators in blockchain technology for resolving complex disputes.
Mediation: Employing a mediator to facilitate agreement between parties.
Online Dispute Resolution (ODR): This method uses digital tools for dispute resolution and is particularly suitable for the inherently digital nature of blockchain.

Practical Applications of ADR in Blockchain

• Disputes related to smart contract execution.
• Disputes between users on decentralized exchanges.
• Legal issues concerning the ownership of digital assets.
• Managing disputes between blockchain project developers and investors.

Examining Mediation in Blockchain Dispute Resolution

Concept and Characteristics of Mediation

After a thorough analysis of arbitration, it is time to take a closer look at mediation.

As briefly mentioned, mediation is a modern and effective dispute resolution method conducted voluntarily in the presence of disputing parties and a neutral mediator. Mediation helps parties resolve existing issues through negotiation and mutual understanding.

In Iranian law, mediation is particularly recognized in criminal and family disputes. According to the Islamic Penal Code and the Family Protection Act, mediation is considered a means to reduce conflicts and maintain social peace. This method is commonly used in family disputes, unintentional crimes, and cases that are amenable to reconciliation.

In international law, mediation is defined as an informal and non-binding process for the involved parties. It is used in resolving commercial, service, and legal disputes. Important laws in this field include regulations related to international commercial dispute resolution, such as UNCITRAL law.

In the blockchain domain, mediation is crucial for resolving disputes in smart agreements and digital economies. In Iranian law, the use of mediation in modern fields has not yet been fully developed. However, existing laws allow its application as a tool for digital dispute resolution. Internationally, mediation is growing within intelligent systems and blockchain agreements, actively resolving commercial and technological disputes.

Thus, mediation is a vital modern dispute resolution method in blockchain. Given blockchain’s decentralized nature, disputes typically involve smart contracts, financial transactions, privacy violations, or digital asset ownership. Mediation can be an effective tool for reducing costs and resolution time since involved parties can reach an agreement through a neutral mediator instead of resorting to official courts.

In Iranian law, mediation in criminal cases is accepted under the Criminal Procedure Code of 2013. In civil disputes, mediation can occur through private agreements and arbitration referrals. However, there are no explicit regulations for blockchain-related disputes, which could be linked to general contract law or international arbitration principles. Given blockchain’s inherently international nature, Iran could adopt international conventions such as the New York Convention for recognizing and enforcing arbitration awards or UNCITRAL principles to establish mediation frameworks in this field.

Internationally, blockchain dispute mediation is often conducted under UNCITRAL laws and digital mediation platforms. This method is used in various cases, such as smart contract disputes or intellectual property violations. Digital mediation, especially in technology-based platforms, utilizes AI-driven tools and blockchain security protocols to enable faster and more transparent interactions between parties.

Comparing Iranian and international laws, it is evident that international laws are more advanced in this regard, offering more comprehensive frameworks. However, Iran can adapt and develop its e-commerce and arbitration laws to align with these changes. It is recommended that Iran establish standardized mediation contracts, train mediators specialized in emerging technologies, and develop local platforms for blockchain dispute resolution.

Overall, mediation in blockchain, by integrating technology and law, can pave a new path for fast and efficient dispute resolution. Adapting domestic laws to international standards can enhance this field within the country.

Conclusion

The development of blockchain technology and its widespread application in various fields, from smart contracts and digital currencies to DeFi (decentralized finance) projects, highlight the necessity of revising and adapting legal systems to resolve disputes related to this technology. Alternative dispute resolution methods, particularly arbitration and mediation, are recognized as effective tools due to their flexibility, speed, and lower costs. These methods have gained significant importance, especially in the field of private international law and Iranian domestic law, yet there are still challenges and opportunities for their further development and optimal utilization.

The role of arbitration in resolving blockchain disputes should not be overlooked or treated with negligence. Arbitration, as a private, informal, and specialized method of dispute resolution, is particularly important in technical subjects like blockchain. Disputing parties can choose the governing laws, the place of arbitration, the language, and even arbitrators specialized in blockchain technology. This flexibility is a major advantage in complex international disputes where national laws may not adequately address technical issues. In private international law, UNCITRAL arbitration rules, the New York Convention on the Recognition and Enforcement of Arbitral Awards, and international arbitration centers such as ICC and LCIA provide infrastructures that can be effectively utilized for resolving blockchain-related disputes.

In Iran, although the Civil Procedure Law and the International Commercial Arbitration Law outline the general framework for arbitration, no specific regulations have been enacted for technology-driven issues like blockchain. Nevertheless, the flexibility of these laws allows for the use of arbitration in blockchain disputes. Additionally, Iran’s membership in the New York Convention strengthens the recognition and enforcement of international arbitral awards within the country. On the other hand, the lack of clear and codified procedures for using smart contracts in arbitration remains a weakness in Iran’s legal system.

Mediation, as an efficient method for resolving blockchain disputes, has the capability to facilitate agreements between the disputing parties, offering a flexible and cost-effective solution. This method is particularly important in cases related to breaches of smart contracts, financial disputes in blockchain projects, and international interactions that require trust and cooperation between parties. At the international level, regulations and standards such as the UNCITRAL Model Law on Mediation and the Singapore Convention on Mediation provide a suitable framework for applying this method in blockchain disputes.

In Iranian law, mediation has a limited but growing role in commercial and civil disputes. Although a comprehensive legal framework for using mediation in technology-related disputes, including blockchain, has not yet been developed, the general principles of Iranian law allow for its application. However, there is an urgent need to train mediators who specialize in technology and to draft specific regulations in this field.

Taking a deeper look at the impact of private international law on resolving blockchain disputes reveals that the transnational nature of blockchain and the absence of clear geographical boundaries for transactions and contracts underscore the critical role of private international law in addressing blockchain-related disputes. In international disputes, key issues include determining the applicable law, identifying the competent court, and recognizing and enforcing judicial and arbitral decisions. In this regard, arbitration is one of the most effective tools for resolving disputes, as it allows parties to choose the governing law and specialized arbitrators. Additionally, mediation, as a flexible and informal approach, can facilitate faster and more effective dispute resolution at the international level.

The New York Convention and the Singapore Convention play a crucial role in the recognition and enforcement of arbitral awards and mediated settlements. However, one of the main challenges in this field is the legal differences between countries and the absence of global standards for technical issues related to blockchain. This calls for international cooperation and the development of harmonized regulations.

Regarding the challenges and opportunities in Iranian law, while general legal frameworks for arbitration and mediation exist, adapting these methods to the specific issues of blockchain technology requires legal reforms and further development. One of the main challenges is the lack of sufficient expertise among arbitrators and mediators in understanding and resolving technical blockchain issues. Moreover, smart contracts, which are an integral part of blockchain technology, have not yet been formally recognized in Iran’s legal system. Nevertheless, there are significant opportunities for development in this field. Drafting specific regulations for arbitration and mediation in blockchain disputes, establishing specialized arbitration centers, and training arbitrators and mediators with a focus on emerging technologies can position Iran as a leader in this area. Furthermore, leveraging international frameworks such as the New York Convention and the Singapore Convention can strengthen Iran’s role in resolving international disputes.

Final Remarks

The resolution of blockchain-related disputes through arbitration and mediation, with a focus on Iranian law and private international law, highlights the importance of adapting legal systems to the needs of emerging technologies. Alternative dispute resolution methods offer significant advantages over judicial courts in blockchain-related cases due to their flexibility, speed, and specialization. However, challenges such as the absence of specific regulations in Iranian law, legal differences between countries, and the technical complexities of blockchain technology require special attention.

By reforming existing laws, establishing specialized frameworks for arbitration and mediation in blockchain-related cases, and collaborating with international institutions, Iran can play a significant role in resolving disputes related to this technology. At the international level, developing harmonized standards and strengthening legal cooperation among countries can help reduce challenges and enhance the efficiency of alternative dispute resolution methods in blockchain disputes. Ultimately, the choice between arbitration, mediation, or a combination of both should be made based on the nature of the dispute, the needs of the involved parties, and the governing laws. Creating a dynamic legal system that aligns with technological advancements will be the key to successfully resolving blockchain-related disputes both nationally and internationally.

Sources:

International Commercial Arbitration – Abdolhossein Shiravi

Recognition and Enforcement of International Commercial Arbitration Awards – Laya Joneydi

International Trade Law – Mohammad Ali Alaeefard

The Code of Civil Procedure for Public and Revolutionary Courts (in Civil Matters)

The Code of Criminal Procedure