28th Feb 2017

Blockchain – New Technology; New Law?

Blockchain – the distribute ledger technology, the most well-known expression of which is Bitcoin – is increasingly being used by businesses and public bodies looking beyond cryptocurrencies to Blockchain as a route for solutions. In short, Blockchain is moving from buzzword to mainstream. 

Responding to emerging technology

One of the key features of Blockchain is its unregulated nature, but – at the same time – its security, achieved by the distributed nature of transactions.  Blockchain-based currencies, however are not regulated by banks and governments – whereby hangs a range of questions.

How does the law cope with emerging families of technology which re-write the existing ‘rule book’?  How did the law address the emergence of the world-wide web, electronic communications or indeed the rise of social media?

In most cases, and in the case of Blockchain, the answer is generally to create new law.  It would be a never-ending tail chase to follow every shift in applicable technologies, and generally, when legislators do legislate, try to do so in technology-neutral ways. Sometimes this is tempered by specific regulation or guidance (as with the FCA’s guidance on cloud computing), but rarely more than that.   What lawyers and courts tend to do is apply legal principles to new issues, and the benefit of that is to ensure that principles remain consistently applied.

Taking a tailored approach

We know, from our extensive experience in the technology sector, that if we are asked to advise or draft documents to deal with a different technology or different usage, we start off with developing a real understanding of the principle of the technology, its delivery, outcomes, risks and commercial proposition.

When we were advising on issues arising from e-commerce in the mid to late nineties, we’d initially say that it was a ‘Wild West’ – but actually it wasn’t.  The law applied. Contracts were being entered into, normal principles dictated if they were binding and the Unfair Contract Terms Act, from 1977, dictated if the contracts were fair.  So, when approaching Blockchain transactions or technologies, we’ll ask the same questions as we would always ask:

  • Who are the parties – it that clear?
  • Is the area regulated? By whom?
  • What existing compliance requirements are there?
  • Where is the contract made, and where does the transaction take place? Which country’s law applies?
  • Do all parties understand the risk? Are the parties savvy technology companies, or consumers who may not be aware of the underlying Blockchain infrastructure?
  • How are confidentiality, security and privacy assured? Who has ownership – and of what? Is there any intellectual property ownership to protect – or is any being infringed?

In part, what we’d be looking to ask is – what is this like? What type of transaction is it? Is it a licence, a supply of services, an IP assignment? 

And then from divining the nature of transaction, a contractual framework can be developed to meet the specific instance.  It’s technology, so IP will play a part; where there is delivery, especially of something new, there will need to be some acceptance process.  There is bound to be risk – that it won’t work, that it won’t deliver the hoped-for benefits, that it will cause loss or damage – how is that risk going to be shared?

It’s highly likely that data is going to be collected, and given the nature of the technology, shared.  So, where is the data?  Will the requirements of the General Data Protection Regulations be met?

Cooperating on constructive solutions

Almost inevitably, it’s new technology, and an application of existing law through an understanding of the issues created by the technology.  To achieve that, businesses and lawyers will have to work together.  Lawyers who will work to get their heads around the implications of the tech and those of us who do this stuff have got used to morphing – not just what we do but how we describe our selves – Digital lawyers? IT lawyers? ICT lawyers? IT/IP lawyers?

In any case – that was Blockchain, now we’re ready for the next thing …

Paul Berwin is a Commercial and Digital Law Specialist at Berwins Solicitors. He is an Accredited Member of the Society for Computers and Law and a Director of the Leeds Digital Festival.

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