From Artificial Lawyer, November 25:
The UK’s Law Commission has today confirmed that ‘the existing law of England and Wales is able to accommodate and apply to smart legal contracts, without the need for statutory law reform’. In effect this gives smart contracts the green light to be used with confidence, and for lawyers to start drawing them up for clients without fearing they are in a legal grey area.
The Law Commission added that their analysis ‘demonstrates the flexibility of the common law to accommodate technological developments, particularly in the context of smart legal contracts. It confirms that the jurisdiction of England and Wales provides an ideal platform for business and innovation’.
These findings build on the conclusions reached by the UK Jurisdiction Taskforce’s legal statement on cryptoassets and smart contracts. The legal statement established that the current legal framework is sufficiently robust and adaptable so as to facilitate and support the use of smart legal contracts; a view reinforced by the Law Commission’s advice, they said.
The Law Commission also encouraged the market to ‘anticipate and cater for potential uncertainties in the legal treatment of smart legal contracts by encouraging parties to include express terms aimed at addressing them’.
Examples of such provisions include: clauses allocating risk in relation to the performance of the code, and setting out clearly the relationship between any natural language and coded components.
In addition, as smart legal contracts become increasingly prevalent, the Commission anticipates that the market will develop established practices and model clauses that parties can use to simplify the process of negotiating and drafting their smart legal contracts.
Professor Sarah Green, the Law Commissioner for the Commercial and Common Law Team, said: ‘Smart legal contracts could revolutionise the way we do business, particularly by increasing efficiency and transparency in transactions.
‘We have concluded that the current legal framework is clearly able to facilitate and support the use of smart legal contracts; an important step in ensuring increased recognition and facilitation of these agreements.’
Lord David Wolfson of Tredegar QC, Parliamentary Under-Secretary of State, Ministry of Justice, added: ‘I would like to thank the Law Commission for this important paper analysing the current law as it applies to smart legal contracts. We in Government are excited about the transformative potential of emerging technologies, including smart legal contracts. We want a world-leading legal services sector, and that means ensuring English law can accommodate the technologies of the future.
‘The Law Commission’s findings provide that all-important legal certainty for those seeking to use smart legal contracts. I also want to thank the Commission for their update paper on digital assets, as well as to highlight their new project on conflict of laws – both are essential to ensure English Law supports emerging technologies.’
However, it’s not all neat and tidy on a global basis, and the Commission highlighted conflict of laws – that is, the area of law that primarily determines where disputes should be adjudicated, and the law applicable to those disputes – as an area where further work is required, they added....
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