The Law Commission of England and Wales has, for the last four years, been heavily focussed on addressing the legal issues that arise in the context of emerging technologies.[1] It has now started work on a new project to examine and clarify how existing private international law does and should apply to emerging technologies – specifically, digital assets and electronic trade documents. It has issued a call for evidence from stakeholders, with responses to be submitted by 16 May 2024.
Private international law determines the jurisdiction and governing law applicable to disputes where the facts and issues in a case cross national boundaries and/or where the parties involved are based in different jurisdictions.
It is of vital importance that those who engage with emerging technologies – businesses, investors and consumers – have clarity regarding how these fundamental questions as to jurisdiction and governing law will be answered. Without such clarity, parties could waste time and costs on bringing claims in the wrong jurisdiction, or find themselves legally exposed due to a mistaken belief as to the law applicable to their activities.
The issue is that both jurisdiction and applicable law are determined by reference to the connection between the parties and/or the issues in dispute to a particular sovereign territory – but information technology, most obviously the internet, allows us to conduct our affairs in real time across multiple territorial boundaries as a matter of course. While this conduct does not lend itself easily to traditional private international legal analysis, the law has over the last three decades found ways to connect acts, events and transactions occurring online to ‘real world’ territories. However, the rise of distributed leger technologies (DLT), which are specifically designed to avoid being tied to any central territory or authority, represents a thornier problem.
The Law Commission is not, however, unduly alarmist, and it considers that the way technology is applied in commercial practice means that the private international law as it currently stands is likely to be able to cope in many cases without undue difficulty. Further, it has sensibly taken the view that there would be limited practical value in focussing on areas that may be theoretically problematic but are highly unlikely to arise in practice. Accordingly, it has proposed the following questions to be answered in relation to each issue that arises from the use cases:
- To what extent can the issue be accommodated by the existing law?
- If the issue cannot be accommodated, or can only be accommodated with significant difficulty, what are the possible solutions?
- If the issue can be accommodated easily or without undue difficulty, are there any areas that would benefit from further clarification?
- To what extent does the issue cause problems in practice (or is likely to in the future)? If the issue is prevalent, what would be the consequences if the issue is not adequately resolved as a matter of law?
With regards to specific issues in respect of jurisdiction, the commission is focussing on what it considers to be the more problematic issues that have arisen in crypto-token cases that have come before the courts of England and Wales, namely:
- The special international rules that apply to consumer contracts.
- Jurisdiction over claims made under smart contracts.
- Jurisdiction over claims arising from international online fraud and other scams, and claims for breach of confidence, which require the court to consider where damage or detriment has occurred.
- Jurisdiction over claims to crypto-token as property, which require the court to consider where the token is situated and the point in time at which this is relevant.
In each case, the commission seeks stakeholders’ views and evidence on the courts’ approach, as well as on the issues’ prevalence (now or in the future) in legal and commercial practice.
With regards to applicable law, the commission is looking at the rules and particular issues that arise in respect of them in the following areas:
- Contracts.
- Consumer contracts.
- Torts and delicts.
- Bills of lading and other negotiable instruments.
- Bills of exchange, cheques and promissory notes.
- Property.
Notably, in respect of the law applicable to contracts, the commission is of the view that disputes that might arise in a fully decentralised context will not be litigated frequently, due to the anonymity of participants. Accordingly, it is focussing on centralised applications of DLT – in particular, contracts relating to crypto-tokens that involve an identifiable intermediary (e.g., a crypto exchange) that provides a point of centralisation.
Stakeholders have until 16 May 2024 to provide responses to the Law Commission via an online form, by email or by post to the Commercial and Common Law Team, Law Commission, 1st Floor, Tower, 52 Queen Anne’s Gate, London, SW1H 9AG.
[1] We have previously written about the Law Commission’s report on digital assets.
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