Token-Based Justice and the Legitimacy Crisis: Refracting Private International Law

This post was contributed by Dr. Mohammed Rakib-ul-Hassan who is currently serving as a Professor at Geneva Business School.

The digitalisation of commerce has fundamentally altered the landscape of cross-border disputes. Traditional private international law (PIL), built upon territorial connecting factors such as domicile, habitual residence, and place of performance, is increasingly strained in addressing disputes arising from decentralised digital environments. In response, decentralised dispute resolution (DDR) mechanisms, most notably Kleros, have emerged as technologically innovative alternatives. These platforms aim to deliver fast, borderless justice through blockchain-based systems. However, a critical question arises: can justice be legitimately delivered by anonymous, token-selected jurors?

At the core of platforms such as Kleros lies a token-based adjudication model. Individuals become jurors by acquiring and staking tokens (PNK), after which they may be randomly selected to decide disputes. Decisions are incentivised through economic rewards aligned with game-theoretic concepts, particularly the ‘Schelling point’, where jurors are rewarded for aligning with the majority outcome. While this model promotes efficiency and decentralisation, it raises serious concerns regarding competence, legitimacy, and procedural fairness. More information on the platform’s structure can be found in Kleros: A Decentralized Justice Protocol for the Internet.

In most jurisdictions, including England & Wales, Switzerland and the European Union, adjudicators are trained professionals subject to institutional safeguards and ethical obligations. Even in arbitration, decision-makers are typically selected based on expertise and reputation. By contrast, decentralised platforms allow participation based purely on token ownership. This creates a risk that complex cross-border disputes, particularly those involving nuanced questions of private international law, may be decided by individuals who lack the necessary legal understanding.

Academic literature on online dispute resolution (ODR) underscores that legitimacy depends not only on accessibility but also on trust and expertise. As Katsh and Rabinovich-Einy in Digital Justice: Technology and the Internet of Disputes argue, digital justice systems must maintain procedural integrity to gain user confidence. Similar themes are reflected in the UNCITRAL Technical Notes on Online Dispute Resolution, which emphasise fairness, transparency and accessibility in digital dispute resolution processes. Without such safeguards, efficiency alone cannot justify the authority of decisions rendered.

Secondly, the incentive structure embedded in token-based systems raises further concerns. Jurors are rewarded for aligning their decisions with the majority, where the majority is determined by comparing the votes cast by the jurors selected for that dispute, with the outcome receiving the highest number of votes becoming the majority view, rather than necessarily reaching outcomes grounded in sound legal reasoning. This creates a framework in which economic incentives may override principled adjudication. As Clack, Bakshi, and Braine in Smart Contract Templates: Foundations, Design Landscape and Research observe, automated and incentive-driven systems may prioritise predictable or coordinated outcomes over fairness, particularly in contexts requiring interpretation and discretion.

Thirdly, the anonymity of jurors significantly weakens accountability. In traditional legal systems, judges and arbitrators are identifiable and subject to review, appeal, and challenge. In decentralised systems, however, jurors often operate pseudonymously, making it difficult to ensure transparency or challenge bias. This raises fundamental concerns regarding due process and the rule of law, particularly in high-value or complex disputes.

Fourthly, recent official developments in the United Kingdom have highlighted the increasing legal and technical complexity of digital asset disputes. The UK Jurisdiction Taskforce, in its Report on Control of Digital Assets (2026), explains sophisticated questions concerning control, custody, delegated authority and smart contract-based arrangements. This reinforces a broader concern regarding token-based adjudication systems: disputes of this nature may require decision-makers with demonstrable legal and technical competence.

A further limitation of decentralised dispute resolution systems is that they are not all-embracing. Platforms such as Kleros are primarily designed for disputes arising within blockchain-based environments, including token transactions, decentralised governance, and smart contract execution. However, a significant portion of digital commerce takes place outside these ecosystems. Disputes involving e-commerce platforms, social media interactions, ride-sharing services, cloud computing, and artificial intelligence systems often require contextual legal analysis, regulatory interpretation, and fact-sensitive assessment. Such disputes are not easily reducible to binary or crowd-based decision-making models. As a result, decentralised platforms remain limited in scope and cannot adequately address the full spectrum of digital economy disputes.

From a private international law perspective, these issues are further amplified. Cross-border disputes frequently involve questions of jurisdiction, applicable law, and recognition and enforcement of foreign judgments. The current framework in England reflects a hybrid approach, combining common law rules on jurisdiction with retained EU instruments such as Rome I and Rome II on applicable law, alongside emerging international commitments such as the Hague Judgments Convention 2019. Recent UK legal developments, particularly the UK Jurisdiction Taskforce Legal Statement on Cryptoassets and Smart Contracts, also demonstrate that established legal systems are capable of adapting to digital assets and smart contracts. Within the European Union, instruments such as the Brussels I Recast Regulation and Rome I and II Regulations provide structured solutions, while Switzerland relies on its Private International Law Act (PILA). However, decentralised decisions do not neatly fit within these frameworks, creating a legal lacuna in terms of enforceability.

A related question arises as to whether these concerns could be mitigated if such platforms were implemented on a private blockchain or permissioned DLT system. In theory, a private infrastructure could allow for identity verification, qualification requirements, and greater institutional control over the selection of adjudicators. This would partially address concerns regarding anonymity and competence. However, such a shift would fundamentally alter the nature of decentralised justice. Rather than resolving the legitimacy problem, it would move the system closer to a form of digital arbitration. Moreover, issues relating to legal authority, enforceability, and normative legitimacy would remain unresolved, as these ultimately depend on recognition by states rather than technological design alone.

It is therefore essential to distinguish between private dispute resolution mechanisms and institutional adjudication. Platforms such as Kleros represent a form of private ordering, suitable primarily for low-value or platform-specific disputes. They do not, and arguably cannot, provide the same level of authority and legitimacy as state-based or supranational judicial systems.

This distinction highlights the need for a more coherent solution. As I have argued in my doctoral thesis,  A Critical Appraisal of the Jurisprudential Role of Connecting Factors in Private International Law with an Emphasis on Commercial Contracts,  a supranational judicial system based on ODR offers a viable pathway forward. Such a system would operate through a structured four-stage model: first, the characterisation of disputes by experts and/or artificial intelligence; second, the use of mandatory ADR mechanisms; third, online adjudication by qualified judges; and finally, an appeal stage limited to questions of law. Unlike decentralised platforms, this system would be grounded in prior state consent particularly as regards jurisdiction and recognition and enforcement of foreign judgments, similar to institutions such as International Centre for Settlement of Investment Disputes (ICSID), thereby ensuring both legitimacy and enforceability, see Article 54 ICSID.

In conclusion, decentralised dispute resolution platforms demonstrate the transformative potential of technology, but they also expose its limitations. Token-based adjudication may offer efficiency, but without safeguards ensuring competence, accountability, and legal authority, it cannot fully satisfy the requirements of justice. The future of private international law in the digital age lies not in replacing legal institutions with technology, but in integrating technological innovation within a legitimate and structured legal framework.