Smart contracts can be implemented in England and Wales without the need for legal reform, according to the Law Commission. This independent body ensures that the law is as fair, modern, simple and cost-effective as possible. The Commission notes in acomunicado that, in some contexts, all that is required to facilitate the use of smart contracts is an incremental development of customary law. That is to say, of the uses and customs. In this sense, it confirms that the jurisdiction of England and Wales provides an ideal platform for business and innovation.
England, Wales and smart contracts
The agency notes that its analysis demonstrates the flexibility of customary law to adapt to technological developments. Particularly in the context of smart contracts. These findings are based on the conclusions reached by the legal statement of the UK Jurisdiction Working Group on Crypto Assets and Smart Contracts. The legal statement established that the current legal framework is robust and adaptable enough to facilitate and support the use of smart legal contracts.
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The Legal Commission estimates that as smart contracts become more and more prevalent, the market will develop established practices and model clauses that the parties can use to simplify the process of negotiating and drafting their smart legal contracts.
Sarah Green, Legal Commissioner for the Common Law and Business Law team, believes that smart contracts could revolutionize the way we do business. Above all, by increasing the efficiency and transparency of transactions. Green states that the current legal framework is clearly capable of facilitating and supporting the use of these types of contracts. Green believes that this development will further establish England and Wales as world leaders in technological innovation in the digital sphere.
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Lord (David) Wolfson, undersecretary of state at the Ministry of Justice, showed his enthusiasm for the transformative potential of smart legal contracts. “We want a world-leading legal services industry, and that means ensuring that English law can adapt to the technologies of the future. The findings of the Legal Commission provide that extremely important legal certainty for those looking to use smart legal contracts.
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Smart contracts are ever more prevalent in global business and I’m extremely grateful for the Law Commission’s timely report with a thorough analysis of the law in this area.
Their findings provide certainty to those using this innovative technology. https://t.co/sYePR6guhx
— David Wolfson (@DXWQC) November 25, 2021
In conducting its analysis of the application of existing legal principles to smart legal contracts, the Legal Commission identified a conflict of laws. That is, the area of law that determines where disputes must be resolved and the law applicable to such disputes.
The problem of digital location, that is, the difficulty of attributing real-world locations to digital actions and digital objects, is among the most important challenges that private international law will have to overcome in relation to emerging technology, including contracts. Smart legal systems, says the Commission.
Conflicts of laws and emerging technology
In this regard, the Commission has agreed with the government to undertake a project that analyzes the rules related to conflicts of laws that apply to emerging technology. Including smart legal contracts and digital assets, to study whether a reform is necessary.
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In addition, the Commission has also released a short update document related to its work on crypto and other digital assets. The Commission’s digital assets project will consider whether digital assets may be subject to property rights and the consequences of such legal treatment. The Legal Commission said that the market should “anticipate and address possible uncertainties” in the treatment of smart contracts “encouraging the parties to include express terms intended to address them.”