Sir Geoffrey Vos, the Master of the Rolls, was true to form when delivering his speech a few weeks ago for the launch of the LawtechUK government-backed Smarter Contracts Report where he emphasised the importance of seizing opportunities offered by emerging technologies. The Report aims to promote the transition from physical to digital media when drafting legally binding contracts by illustrating how smarter contracts and blockchain technology are currently being used. He drew an analogy between blockchain in its current form, to the internet in 1995: unstoppable, and yet widely misunderstood. Sir Geoffrey explained that soon blockchain will be omnipresent in all industrial and financial sectors given that its ability to immutably record data reduces friction in commercial transactions and narrows the scope for disputes as to what has occurred.
He described one of the main barriers to the rapid global uptake of smarter contracts and blockchain as a “credibility gap”, in that many fail to grasp their importance to transforming efficiency, smoothing services and transactions and improving regulation, and instead view them as transitory. Sir Geoffrey insisted that the technophobes must be converted as we have entered the digital decade: everyone must improve their understanding of these technologies and how the law facilitates their deployment. He prophesised how three key developments will trigger the on-chain revolution: the launch of wholesale/retail central bank digital currencies, the use of digital transferrable documentation (e.g. bills of lading), and the mainstream use of digital/smart commercial documentation instead of analogue applications (e.g. PDF and Word). The first development is already being explored, as are the remaining two albeit more timidly. However, before the revolution can begin, there remains the small issue of bringing the law up to speed.
Sir Geoffrey stressed that there is a "big prize" for the jurisdiction which becomes the law of choice for borderless blockchain technology in the future, and shared his hope for English law to seize it. The UK should, in his opinion, “be in the vanguard of these developments and be absolutely ready for them when they occur.” Modernising the law and converting the technophobes must happen urgently as other jurisdictions (typically smaller ones) are already well advanced in their adoption of these new technologies. Thankfully, work has already begun. Sir Geoffrey explained how the Law Commission is actively advising the government on preparing the UK’s legal infrastructure for the rise of blockchain technology and smarter contracts. For example, under new proposals in a draft bill, an electronic trade document will, under certain circumstances (namely, that it may be under the exclusive control of a single party at any one time and control must be fully divested on transfer), have the same status as a paper trade document, and can therefore be “possessed” in the same way.
In the context of litigation, Sir Geoffrey highlighted that the number of cases involving cryptoassets and smart contracts is increasing significantly, but these are difficult to litigate due to the complexities in applying certain historic analogue rules to the digital space. By way of an example, cryptoassets can be difficult to trace in cases relating to cryptocurrency fraud given the inherent lack of national barriers. The current grounds on which proceedings can be served out of the jurisdiction have impeded many claims aimed at tracing the proceeds of crypto fraud. Consequently, Sir Geoffrey explained that he assisted with the incorporation of a sub-committee of the Civil Procedure Rules Committee with a mandate to amend and expand the grounds to serve out of the jurisdiction. Developments such as this will make it easier to litigate issues that arise in relation to on-chain transactions and the tracing of cryptoassets. Elsewhere, Sir Geoffrey noted that the government is legislating for an Online Procedure Rules Committee with a view to providing high-level governance for the online justice system and the increasing number of pre-action portals.
In summary, he argues that these developments put English Law and the UK’s jurisdictions in a strong position to provide the legal foundation for borderless blockchain technology. With the UK’s tech ecosystem having recently become the third in the world to ever reach a landmark $1 trillion valuation, the UK’s legal infrastructure needs to stay ahead of the curve in order to remain on the podium.
Blockchain technology is not something that might happen in years to come; it is happening now. Our report collates some of the most accessible examples.