Under arbitration, the parties submit their disputes to an arbitral tribunal (or sole arbitrator) who rules on pre-hearing disputes, conducts the arbitration, and issues a binding award on the parties.  However, the desirability of arbitration as a dispute-resolution mechanism rests largely on the perception of the reputation of the arbitrators. On the one hand, the arbitrator has a reputational concern, in the sense that he/she wishes to appear competent, independent, and impartial to the parties. The reputational concern could stem from a desire to boost his/her prestige, his/her revenue, or his/her experience.  On the other hand, clients value arbitration when an independent, impartial, and correct decision is made.  Now, could a blockchain based reputation system be implemented for arbitration?

Effect of a Decentralized Reputation System in Arbitration

Maybe is not conceivable to create a completely decentralized reputational system for arbitrators. However, even by partially using blockchain technology, the parties could give immutable, public, and contextual information about arbitrators. Also, since reputation exists on a distributed ledger, it can follow the arbitrator from location to location.

Blockchain based reputational systems could help arbitration in two ways. First, competent arbitrators could have international exposure outside their small circle of colleagues. Furthermore, competent arbitrators could have more possibilities to serve as arbitrators in other markets. In other words, blockchain could get rid of the asymmetry of information in the market for arbitrators. Prosperity for arbitrators could come by interacting outside of their most trusted circles.

Second, we must protect arbitration from bad actors. Reputational concerns affect the credibility of arbitration. That is why blockchain based reputation is so critical. It gives the parties the ability to agree and provide a reputation score according to their own experience.

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