Blockchain Arbitration: A Supply Chain Perspective

Introduction

In recent decades, the world has become more open than before. The economic globalization process has accelerated international trade and the overall movement of products, information, and funds. Supply Chains, that are an integral part of every organization, had to adapt to the new competitive environment (Meixell & Gargeya, 2005). They have become more dynamic and complex in order to ensure the continuous transportation of goods worldwide and a high level of service that meets customer needs (Cohen & Mallik, 1997). Due to the complexity and geographical distribution, modern supply networks face critical challenges like lack of transparency, security, trust etc. (Sanders & Wagner, 2011). These difficulties motivate companies to look for the best supply chain management solutions and to integrate innovative technologies. One of the revolutionary technologies that now gets a lot of attention in the Supply Chain is Blockchain (Casado-Vara et al., 2018; Dutta et al., 2020; Živković et al., 2023).

The immutable and distributed blockchain technology is expected to provide undeniable advantages to globalized supply networks like transaction transparency, transaction security and higher level of trust between SC parties (Azzi et al., 2019; Hughes et al., 2019; Saberi et al., 2019). In addition, blockchain technology allows for Smart Contracts integration. These agreements are drafted in code can automate contract conclusion and execution (Prause, 2019). This is a substantial breakthrough compared to traditional contracts that require a lot of paperwork, manual labor and working hours to be drafted and monitored, are dependent on third parties for the execution (ex. banks for money transfers) and are very vulnerable to tampering (Lim et al., 2021).

Despite these benefits, the innovative nature of blockchain technology and Smart Contracts is not flawless and can create an absolutely new category of disputes related to the adoption and usage of these novel technologies (Buchwald, 2020; Schmitz & Rule, 2019). Disputes that arise from blockchain and Smart Contract adoption are a very recent phenomenon and existing dispute resolution methods (ex. litigation, Alternative Dispute Resolution or Online Dispute Resolution) are not prepared for resolving disputes arising from Smart Contracts and decentralized blockchain transactions (Guillaume & Riva, 2022; Michaelson & Jeskie, 2021; Schmitz, 2020). This regulatory uncertainty is dangerous for Supply Chain actors as they do not know how to address the new kind of disputes swiftly and efficiently (Guillaume & Riva, 2022; Živković et al., 2023).

The main objective of this book chapter is to contribute to this research lacuna by exploring Blockchain Arbitration – an innovative dispute resolution method specifically designed for blockchain and smart contract disputes – and to highlight its potential for the Supply Chain domain. The following research questions are addressed:

• 1.

  What is Blockchain Arbitration and what are its specificities?

• 2.

  What advantages can Blockchain Arbitration bring to the SC dispute resolution?

• 3.

  What are the challenges for the adoption of Blockchain Arbitration?

This book chapter explores the motivation of Supply Chain companies for blockchain and Smart Contracts adoption and the advantages these technologies bring. It also analyses the risk that SC disputes represent and the regulatory lacuna concerning blockchain and Smart Contract disputes. The Blockchain Arbitration method as well as the most developed Blockchain Arbitration platforms are discussed, and the main advantages and challenges of Blockchain Arbitration adoption are highlighted.