Dispute Resolution in the AI Age

Contractors, design professionals and others in the construction industry are using AI tools in their work more frequently. As artificial intelligence (AI) becomes more widely used in all areas of business and in day-to-day living, we can expect disputes involving this complex technology to increase. The complexities of these systems make specialized rules for dispute resolution necessary. JAMS has drafted arbitration rules specifically designed for AI-related disputes. The new rules capitalize on arbitration’s hallmarks: speed, flexibility and efficiency, which are necessary to resolve AI-related disputes. With tailored AI arbitration rules for use in construction and other types of commercial disputes, JAMS shows its commitment to staying ahead of technological changes.

The Need for Tailored AI Rules

AI continues to develop at warp speed, creating competition, raising ethical questions and pushing the boundaries of regulation. AI’s rapid development and high stakes lead to disputes at different levels: between competitors, service providers, consumers and those allegedly injured by AI systems. These disputes may be complex, requiring understanding of technical and legal issues.

Courts and ADR professionals may find AI’s evolving landscape is a formidable challenge. Judges and arbitrators are already facing disputes over algorithmic transparency, AI biases and data privacy. Dispute resolution methods must anticipate issues that AI and technology will raise to remain ahead of the curve. The JAMS AI Rules provide tools to assist advocates and arbitrators in resolving AI-related disputes.

The JAMS AI Clause and Rules Address Challenges With AI-Related Disputes

The JAMS Artificial Intelligence Dispute Clause and Rules (effective June 14, 2024) apply to binding arbitration if the parties agree to use them, either in a contract or when an AI-related dispute arises. Developed by JAMS neutrals Ryan Abbott, M.D., Esq., FCIArb, and Daniel B. Garrie, Esq., the rules address some of the challenges AI-related disputes pose.

“AI systems have the potential to result in massive social benefits and value, but they also involve significant risks. When problems happen—and they will happen—it is important to be able to resolve disputes in a fair, efficient and just manner. Unfortunately, conventional litigation may not achieve that type of outcome and may involve extensive delays, high
discovery costs and burdens, and the loss of confidentiality.” Abbott and Garrie, “How the JAMS AI Rules Will Improve Dispute Resolution,” JAMS ADR Insights, May 3, 2024

The JAMS Rules Don’t Address Lawyers’ or Neutrals’ Use of AI

However, the JAMS rules don’t address the use of AI in the process of dispute resolution itself (e.g., neutral and advocate use of generative AI systems). The Silicon Valley Arbitration and Mediation Center (SVAMC) published Guidelines on the Use of Artificial Intelligence in Arbitration on April 30, 2024, which discusses AI use by all participants in an arbitration.

The JAMS AI Rules Require All Parties and Counsel to Maintain Confidentiality

Unlike other arbitration rules, Rule 16(b) of the JAMS AI Rules requires “all parties and counsel to maintain confidentiality of the proceedings and the award.” In contrast, the JAMS Comprehensive Arbitration Rules require only JAMS and the arbitrator to maintain confidentiality. (See Rule 26(b).)

The JAMS AI Rules Include an Automatic AI Disputes Protective Order

Additionally, the AI Rules include an AI Disputes Protective Order (Appendix A), which automatically applies to protect confidential information. The protective order provides, “All information produced or disclosed in the Action shall be used solely for the prosecution or defense (including any appeal therefrom) of the Action and shall not be used for any other purpose.”

The protective order broadly defines “discovery material” and “documents.” It allows information to be designated as confidential or highly confidential. Disclosure of such information is limited. Anyone possessing such information must maintain it in a reasonably secure manner and not disclose the information or any extracts, excerpts or summaries, or any testimony, conversations or presentations.

The Protective Order May Include Nonparties

Nonparties producing such information may be included in the protective order. All experts, advisors, consultants, fact witnesses or potential fact witnesses who receive confidential or highly confidential information shall execute a written acknowledgment of the protective order.

The JAMS AI Rules’ automatic protection of confidential information is more efficient and cost-effective than obtaining a protective order in state or federal court. This may require filing a motion, a memorandum of law or, in some cases, scheduling and attending a hearing with the judge or magistrate before a protective order is entered.

The JAMS AI Rules Have a Unique Information Production Process

Another major distinction between the AI Rules and other arbitration rules is the information production process. Under Rule 16.1(b), production and inspection of any AI systems or related materials (including hardware, software, models and training data) is limited to the disclosing party making the materials available to one or more experts in a secured environment the disclosing party establishes. The materials shall not be removed from this environment.

The arbitrator shall designate expert(s) to inspect AI systems or related materials at the parties’ joint request. The arbitrator shall use JAMS’ list of third-party experts first in designating experts. However, the JAMS expert list has not been published yet, so parties must designate experts to do the inspections.

To prevent “fishing expeditions,” production requests are limited to documents “directly relevant to the matters in dispute” and must be “reasonably restricted” in time frame, subject matter, and persons or entities. Broad phraseology and extensive definitions are prohibited, and the arbitrator may edit or limit the number of requests.

Expedited Discovery and Hearing Schedule

There is an expedited schedule for completing discovery (75 calendar days after the preliminary conference for fact discovery and 105 calendar days after the preliminary conference for expert discovery). The hearing is to commence within 60 calendar days after the fact discovery cutoff. The arbitrator may extend these deadlines (or any procedures in the rules) for good cause.

Contractors and Design Professionals May Have AI Disputes

AI development and use can involve complex ecosystems and numerous stakeholders, such as parties building AI models (including open-source models), training models (or generating, collecting or curating training data), integrating models into broader systems or with sophisticated hardware, or using AI systems directly (as individuals or enterprises) or licensing platforms.

Problems can arise at all stages between different types of stakeholders, and complex systems can break down in complex ways. For example, a design professional might sue a generative AI system provider if a third party sues the design professional for copyright infringement based on AI-generated content. A multinational general contractor might sue a platform provider for providing a system that allegedly violates privacy laws and regulations, such as the EU AI Act.

Takeaways

Contractors, design professionals, and other construction industry professionals are increasingly incorporating AI tools into their work. Given the complexities of these systems, specialized dispute resolution rules are essential. Counsel for design and construction companies can advise clients to integrate the JAMS AI Rules into their contracts with AI providers and platforms. Neutrals should familiarize themselves with the unique provisions of the JAMS AI Rules to effectively manage AI-related disputes.