The author of this post is Burcu Yüksel Ripley, who is a Senior Lecturer in law and the Director of the Centre for Commercial Law at the University of Aberdeen.
On 25 November 2021, the Law Commission of England and Wales announced, as part of an update on its work on smart contracts, that it has agreed with the Government to undertake a project on conflict of laws and emerging technology. This project will look at conflict of laws rules as they apply to emerging technology (including smart legal contracts and digital assets) and consider whether law reform is required. The Commission hopes to be able to begin work in the first half of 2022.
Conflict of laws and emerging technology was among the ideas for potential areas of law reform within the scope the Law Commission’s 14th programme of law reform. In the area of commercial and common law with a focus on emerging technology, the Commission has been working on three projects on smart contracts, digital assets and electronic trade documents which are, to some extent, interconnected. Its work on these projects has identified certain difficulties with the application of conflict of laws rules (covering both jurisdiction and applicable law rules in this context) in relation to emerging technology, including distributed ledger technology (DLT):
- In the context of its work on smart contacts, which the Commission concluded with a confirmation that the existing law of England and Wales is able to accommodate and support smart legal contacts, it devoted Chapter 7 of its advice to Government on smart legal contacts (published on 25 November 2021) to ‘Jurisdiction and smart legal contracts’. The Commission considered various issues concerning jurisdiction and applicable law in relation to smart contacts and assessed that “the problem of digital location – that is, the difficulty of ascribing real-world locations to digital actions and digital objects – is amongst the most significant challenges that private international law will have to overcome in relation to emerging technology, including smart legal contracts.” (see paragraph 7.145 of the advice).
- In the context of its work on digital assets, which seeks to support and facilitate the development of digital assets and ensure that the law recognises and protects them in a digitised world, conflict of laws is mentioned in the call for evidence (published on 30 April 2021) as an area which is likely to be affected by the issues covered by the call for evidence. The Commission therefore sought to hear more details from respondents on conflict of laws issues relating to digital assets (see para 2.80 of the call for evidence on digital assets). The digital assets project is currently at the pre-consultation stage, with the expectation that the consultation paper will be published in mid-2022. An interim update paper on this project is available here.
- In the context of its work on electronic trade documents, which seeks to make recommendations for law reform to allow for legal recognition of electronic trade documents (eg bills of lading and bills of exchange), some conflict of laws issues relating to electronic trade documents were highlighted in the consultation paper (published on 30 April 2021, see in particular pp.124-127 of the consultation paper on digital assets: electronic trade documents). There were two main questions specifically mentioned in the consultation paper: 1) “Where is an electronic trade document located at any given time (and related questions such as where does a transfer take place)?” and 2) “How will an electronic trade document issued in England and Wales be treated in a country that does not recognise the validity of electronic trade documents?”. The Commission, in this consultation paper, provisionally proposed to consider the private international law aspects of digital assets, including electronic trade documents, as part of a separate project that could be taken as part of its 14th programme of law reform. The electronic trade documents project is currently at the policy development stage.
The Commission’s new project on conflict of laws and emerging technology is a very timely project. The Law Commission of England and Wales can only make recommendations for the law of England and Wales. However, some of its recommendations might have a UK-wide impact. This project should also be seen as an opportunity to help facilitate the development of internationally widely accepted private international law rules in relation to emerging technology given the current work of the Hague Conference on Private International Law concerning private international implications of the digital economy, including DLT and its applications (including digital assets).