Law Commission Publishes Call for Evidence on Digital Assets and Electronic Trade Documents in Private International Law

The Law Commission, a U.K. body which makes suggestions for legislative reform, has published a call for evidence on the operation of English private international law (conflicts of law rules) in relation to digital assets and "electronic trade documents" (trade documents like bills of lading and bills of exchange that are in electronic form).

The Law Commission seeks input on the international jurisdiction (i.e., ability to hear a dispute) of the courts of England and Wales over private law disputes involving digital assets and decentralized documents. The location of such cases is difficult to determine given the decentralized nature of the assets involved. Areas for particular consideration include:

• how the courts should determine whether to accept a claim where a contract has been concluded by a machine or operation of a smart contract code and whether this could be determined by reference to the location of the real-world actor who is the contracting party;
• in deciding whether to accept a dispute relating to a digital asset, how to determine the location: (i) of any damage or detriment; (ii) where any unlawful act occurs; or (iii) of the asset itself, all of which can be used as gateways for determining England and Wales jurisdiction; and
• the types of claims and causes of action that may be relied upon when serving proceedings relation to crypto-tokens taken out of the jurisdiction.

The Law Commission is also seeking views on the law applicable to a dispute involving digital assets and electronic trade documents. There is a presumption in the courts of England and Wales that English law will be applied to the substantive matters brought in the English courts; a party wishing to have a matter governed by foreign law must plead that a foreign law applies, based on English conflicts of law rules, and then show on the balance of evidence that foreign law differs from English law on the relevant topic. This can be a high barrier. In disputes over digital assets and decentralized documents, there may be no obvious territorial connecting factor between the issue in dispute and a single applicable governing law. The Law Commission suggests various solutions to the problem, considering a range of different possible scenarios.

Responses to the consultation should be submitted by May 16, 2024. The Law Commission expects to publish a full consultation paper later in 2024.