With the development of technology innovations it becomes possible to regulate relations between the parties through smart-contracts. Smart contracts are based on blockchain technology, which is a decentralized distributed ledger system consisting of a chain of computers connected to one server. This technology is so convenient for parties to the treaty, because it gives the participants of smart contract an opportunity to exchange property values without intermediaries such as notaries, guarantors, etc. It is to be noted that smart contracts are not resolved in most countries. Now in many countries, however, there is a formation of the legislative framework in the sphere of the smart contracts by considering a smart contract like an element of a legal transaction with the introduction of blockchain technology, which is explained by the desire to keep up with technical progress. There were some attempts in the International Private Law to conclude smart-contracts. As is well known the traditional question in the International Private Law is a conflict of law that is so popular now for smart contracts that using blockchain technology involve multiple jurisdictions. That’s why the choice-of-law issues in the regulation of relevant relations, including the projection concerning choice of law in those States where super-priority is adjusted for those innovations, requires further research. In this article the authors have analyzed the concept and essence of smart contracts (Smart Contracts), researched the problem of conflict of law, applicable to such contracts. In particular analysis focused specifically on the Rome I Regulation in the aspects of smart contract management. The paper also touches upon problematic aspects related to choice of law applicable to the smart contracts in Ukraine. In conclusion, the prospects for the use of smart contracts in International Private Law.
The aim of a contract is to provide legal certainty to the parties and to define the toolkit of remedies available in the event of a dispute. In modern business practice, the ultimate goal of a contract is to eliminate or reduce the possibility of legal liability; the issue of efficiency and effectiveness of contract implementation is not the primary goal. The impact of technology in the concept of contract creation, implementation and control has redefined the traditional approach which implies that contracts are written by "lawyers for lawyers". The contemporary practice bears witness of the correlation and intertwining of law and technology in a way that exceeds the scope and goes beyond the relationship between the regulator and the regulated object; in effect, technology becomes an organic element of law, its origin, application, control and development. A smart contract, as an example of the influence of technology in the field of regulating contractual relations, automatically activates the obligation, in accordance with the terms and conditions that the parties agreed upon and entered in the program code. Based on the Blockchain technology, a smart contract profoundly changes the paradigm of trust in a person with the paradigm of trust in a program code. The basic limitation of smart contracts is their capacity to convert complex legal concepts into the computational form readable by a program code. Thus, they cannot function in a pure form (entirely defined by a program code). The code needs to be complemented by text. The legal form that should bridge the gap between the smart contract and the traditional contract is the Ricardian agreement. The Ricardian contract uses the best from both worlds. On the one hand, the key terms of the contract are in software-readable program code format; on the other hand, more complex provisions that are not suitable for conversion into an algorithm are contained in additional instructions that are part of the Ricardian agreement. In terms of legal obligation, the Ricardian contract reflects exclusively and only the intention of the parties, without implying a legal obligation that could be formally established only by concluding the intended future agreement. As such, the Ricardian contract can play the role of a guide for the interpretation of the prospective agreement, which gives it a certain value in case of a dispute.
Legal norms contained in text-driven contracts (as well as in statutes and bylaws), which are written in natural language, can be subject of algorithmic conversion in certain phases of the contract circle (implementation, monitoring, control, interpretation). The application of the blockchain concept as a structural pattern opens the possibility of creating a code-driven contract with automated execution: a "smart" contract. Algorithmization is understood as a process which enables the text of the contract to be translated into a format that is understandable to software developers. To this end, the use of the following methodologies is proposed: design of a pseudocode, application of formal logic symbols and the use of flowcharts. Successful conversion of legal prose into a code calls for cooperation between lawyers and programmers. The framework of that cooperation is the establishment of the so-called "Legal Expert System" (LES). Originally conceived by lawyers, LES is a program which allows the algorithm to solve the problem of contract execution. Contract algorithmization should convert contracts from prose to a code, while preserving contract validity and efficiency. For the time being, smart contracts cannot regulate commercially complex scenarios; thus, the de lege lata application of smart contracts as a complete replacement for traditional (analogous) contracts is excluded. A potential object of algorithmization are the primary instructions aimed at executing the characteristic performance of the contract. Contract algorithmization is an ongoing process, which is here to stay. The significance of this process is indisputable but its scope, dynamics and assumptions are still only partially defined and tested. The necessary condition (but hardly a sufficient one) is to legitimize the conception of a contract as an algorithm in the process of defining contractual provisions. Further development of this concept will depend on the functioning of other elements in the environment where code-driven contracts would be used and, above all, on the commercial response to the entire process of contract algorithmization. In effect, in order to be widely applied, contract algorithmization must become a commercially viable activity.
The scientific research study is about the approach to crypto assets in property law. The cryptocurrency, possessing the signs of many civil rights, at the same time does not belong to any of them and does not correspond with anyone in a complete way. This is due to the uniqueness of cryptocurrency as a phenomenon itself. Cryptocurrencies can also represent different types between cryptocurrency holders, as well as between holders and creators of the platform, which have been concluded by implicit actions. The authors propose new definition for cryptocurrency through the cryptographically protected property concept, which has the feature of cryptographic authentication, decentralization, management through consensus, the use of distributed ledgers. According to the authors, the starting point for determining the ownership of the cryptocurrency should be that the subject of the right will be the asset’s owner if he or she legally gained access to the private key, by analogy as the subject acquired the ownership of a tangible asset on a legal basis.
Smart contracts and their promise of automatic performance capture legal and entrepreneurial imaginations. But the excitement around the technology led to some confusing legal responses. Several legal scholars use chronology to help reduce the confusion and place smart contracts within what is already familiar about computational contracting. According to this line of thinking, blockchain-based smart contracts simply represent the next technological advancement in a long history of computable contracting technologies. However, other scholarly work suggests that such a chronological explanation under-simplifies the nature of the linkages between smart contracts and other forms of code-connected contracts. This Article offers a unified theory of code-connected contracts as a tool for guiding risk allocation and design trade-off discussions when considering whether to use one or more forms of code-connected contracts. Specifically, this Article argues that the many variations of code-connected contracts should be viewed along an axis of state transition complexity. Doing so brings to the forefront the fact that the issues facing smart contracts used to merely automate performance of contractual obligations differ in terms of both magnitude and novelty from algorithmic decision-making tools used by parties to fill gaps in contractual terms and other computational contracting tools. In other words, the state transition complexity theory of code-connected contracts set out in this Article offers an analytical tool for anticipating legal and business risk when using computational contracts. Ultimately, the state transition complexity theory of code-connected contracts demonstrates that getting to the core legal issues presented by code-connected contracting requires an analysis of the details of each specific implementation. As with most legal questions, proper analysis depends on facts and circumstances. Nevertheless, many of the core legal issues will arise because emerging technology, like all technology, is social technology. Thus, the implications of the state transition complexity theory of code-connected contracts are that many of the legal issues are not terribly new, and we should not forget to look to existing jurisprudence and scholarly work in contract law and corollary disciplines.
Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Do smart contracts offer a superior solution to the problems that contract law addresses? In this article, we aim to understand both the potential and the limitations of smart contracts. We conclude that smart contracts offer novel possibilities, may significantly alter the commercial world, and will demand new legal responses. But smart contracts will not displace contract law. Understanding why not brings into focus the essential role of contract law as a remedial institution. In this way, smart contracts actually illuminate the role of contract law more than they obviate it.
Abstract Various states have started providing private law frameworks for blockchain transfers and crypto assets. France and Liechtenstein have adopted the first acts, while a commission of the British government sees no difficulties in extending property protection under the common law to crypto assets. In the USA, an amendment to the Uniform Commercial Code has been suggested, which has not stopped some states going their own, different way. The aim in all cases is to promote the use of modern distributed ledger technology and enhance investor protection. While these initiatives will increase legal certainty, they differ significantly. This has an important downside: there is a strong risk that the blockchain will be made subject to diverging legal rules. Similar to the world of intermediated securities, various national laws will need to be consulted to determine the rights and privileges of investors. This may increase transaction costs, thwart interoperability, and produce thorny conflict-of-laws problems. Markets risk being fragmented into national segments, with an inevitable diminution of their depth and liquidity. As a remedy, this article suggests developing uniform rules for the blockchain. Before national legislators and judges once again divide the world through idiosyncratic rules, the private law of crypto assets should be harmonized to the highest degree possible. Uniform rules should ideally be forged at the global level, by fora like the International Institute for the Unification of Private Law (Unidroit), the United Nations Commission on International Trade Law (UNCITRAL), and the Hague Conference on Private International Law. In the absence of worldwide rules, uniformization of private law should take place at the regional level—for instance, by the European Union. The article makes specific suggestions as to how this can be achieved and what the content of those rules should be.
Bureau for Coordination of Combating Organized Crime and Other Dangerous Types of Crimes on the Territory of CIS Member States, A.G. Kuznetsov
The concepts of cryptocurrency and blockchain technology are interpreted, their nature and content are researched. Various approaches to the regulation of digital currencies in foreign jurisdictions and CIS member states are analyzed. The results of comprehensive analysis of the main criminal risks associated with cryptocurrencies use are presented. Characteristic features of these criminal acts are summarized and systematized.
While the previous Chapter explores the origins of cryptography and explains the functional features of Blockchain, this Chapter provides a robust discussion of the various legal challenges and arguments surrounding this novel technology. While self-regulating markets have some desirable aspects, the anonymous or pseudonymous feature of cryptocurrency has its drawbacks which can lead to more fraud and corruption if left completely unchecked. Primarily, this Chapter focuses on administrative law implications and addresses the question of who could (and should) regulate cryptocurrency markets. The answer depends on how digital assets are classified. For example, if the digital asset is labelled a security, it will fall under the regulatory authority of the SEC but will be limited by the Supreme Court’s decision in SEC v. Howey. Further, this Chapter analyzes the constitutional implications of cryptocurrency–do people have a constitutional right to privacy when making financial transactions? This Chapter discusses the various constitutional rights that may be implicated and the arguments that may be used in future litigation.
Marcelo Corrales Compagnucci, Mark Fenwick, Stefan Wrbka
Smart contracts-self-executed, autonomous agreements in the form of computer code hosted on a blockchain-are, according to many observers, poised to disrupt the theory and practice of contracting. The perceived advantages of smart contracts are manifold. They can facilitate the performance and execution of agreements without the necessity of intermediaries and are said to provide better security, enforcement and verification systems than traditional contracts. Moreover, they seem to be immutable, irrevocable and cost-efficient. This makes smart contracts an attractive and convenient option for many different types of agreement, particularly in a business context. <br/><br/>A smart contract is a tamper-proof, digital agreement that runs on a decentralised blockchain. As such, smart contracts have two obvious advantages over traditional arrangements. First, smart contracts are shared records, meaning that the parties do not need to keep a personal copy. This is a significant advantage, especially for modern companies where departments operating as silos may have conflicting working procedures resulting in no single or reliable record of truth. <br/><br/>Second, smart contracts are reliable, and execution can be relied upon to a greater degree than in the past. In traditional agreements, the deal might not be implemented as initially agreed by the parties, either due to a choice or mistake. Smart contracts operate in the blockchain environment where they are executed exactly as written and do not require any approval at each step. If the predetermined conditions are fulfilled, then the agreement is performed automatically. <br/><br/>Today, many transactions include a third party to handle the counter party risk that another party defaults on their obligations. The parties may be reluctant to perform their obligations if there is no guarantee that the counter party will reciprocate. One way to think about the emergence of platforms, such as Uber or Airbnb, is that they provide structural mechanism to solve this problem of counter party risk. <br/><br/>Blockchain's decentralised infrastructure, however, generates and guarantees trust without the need for intermediaries. According to advocates of these technologies, blockchain replaces trusted third parties with an open and secure protocol that all parties can trust. And, crucially, neither party can control or change the contents of the blockchain ledger as it is decentralised. Central servers are replaced with a decentralised network of computers that record all transactions in the shared ledger. In this way, distributed computing ensures the ledger is always accurate, and the decentralised network keeps the ledger secure. <br/><br/>As such, smart contracts are a scripting language overlaid on the blockchain that enables transactions on a blockchain that mirror 'real life' contracts by defining if/then conditions. For example, if an asset hits a certain price on a specific date, then a payout should be made to the other party (or parties) to the contract. A smart contract developer could programme the contract conditions according to any specifications. The if/then parameters are then tied to inputs and outputs of the smart contract. To take a simple example, consider a smart contract in the case of a car loan. If the borrower misses a payment (tracked via a blockchain-like technology) then the contract/code would not allow the use and operation of the car, ie, the contract would be automatically 'enforced ' via network technologies that disable the vehicle, rather than through the use of a third party. Such contracts may produce efficiency, timing and performance improvements as a result of the automation of the contract's terms. This automation is achieved by computer code, which controls the automated performance in the context of an Internet of Things environment where digital devices are interconnected. <br/><br/>As this simple example shows, a smart contract utilises code to execute an agreement. In addition, the term 'smart contract ' is also often used to refer to traditional text-based contracts in which the ordinary language text references the use of such a 'code-only contract' to effect some (but not necessarily all) of the provisions. <br/><br/>While smart contracts can be applied in many different situations, they are still in an early phase of development-they are a relatively new and untested technology and the range of possible and effective use cases is still being worked out. At present, the actual tasks that smart contracts can perform are relatively basic and straightforward. However, as the adoption of blockchain-based platforms and applications accelerates, the expectation is that smart contracts will become increasingly sophisticated and capable of handling more complex and diverse transactions. <br/><br/>However, the deployment of smart contracts in the real world still needs further testing. The relative immaturity of the technology makes them potentially vulnerable to hacking. The lack of regulation is also a bottleneck for the development of more sophisticated forms of contract. This means that we need a more integrated or interdisciplinary approach to such contracts. There are still multiple concerns to be resolved relating to the technology, business models, appropriate markets, consumers and the law. Moreover, such contracts inevitably raise regulatory issues that need to be addressed by policymakers. Several countries have already started to develop new regulatory approaches, as legal commentators identify issues with such agreements. <br/><br/>Addressing the many challenges created by smart contracts requires going beyond a single disciplinary perspective or frame of reference. In particular, integration of technological, business and legal issues is crucial. This edited volume brings together a series of contributions by leading scholars and practitioners currently working in this space to examine the main issues that are driving the development of smart contracts, as well as the current response of key stakeholders in technology, business, government and the law. As such, the book explores the critical technical, business and legal challenges created by these potentially game-changing technologies and attempts to devise sound practical solutions in a broader scope regarding the functional and non-functional requirements of such contracts.
Ирина Владимировна Сазонова, Vladlena S. Mazhaeva, Alexandr A. Potkin, Marina A. Kuznetsova
The evolution of digital technologies leads to a tectonic transformation of all spheres of society. Law, as a system of regulating public relations, is changing dynamically along with the development of public relations in different spheres. The development of IT led to the emergence of blockchain technology, which, in turn, became the basis for the development of smart contracts. Smart contract technology, as it develops, causes changes not only in the legislation, but also in the model of interaction between the state and business. Due to smart contracts, a significant part of the rules can be algorithmized, and the regulation can become machine-readable. Purpose of the research: Legal research of the current legislation, the synergy of business, law and economy in the implementation of smart contract technology, determination of theoretical concepts in relation to smart contracts, the content and problems of the application of smart contracts, and identification of the most significant proposals for improving legislation. Methods: The authors of the research used general and specific scientific methods. In the study of the technological foundations of the smart contract, the main methods were analysis, synthesis, analogy, and a system-structural approach.
Employment contracts recorded on blockchain have the strength to make it impossible to falsify or modify the agreements between employers and employees. The fact is that the work input through the application remains on the blockchain, and the manager shares it, which is expected to significantly improve the disadvantaged position of part-time workers. As a way to recognise and solve recent problems with employment contracts and wage problems, this paper proposes to store employment contracts in blocks using blockchain technology, enable accurate wage payments using smart contracts, and also store wage information in blocks. In addition, it can be proved by using the contents stored in the block when problems occur later.
У статті досліджено поняття смарт-контрактів. Проаналізовано його правову природу. Надано наукові \nпогляди, що склалися в юридичній науці стосовно поняття смарт-контрактів. У статті також розглянуто поняття «електронний договір» в українському законодавстві. Визначено відмінності між смарт-контрактом та електронним договором. А також досліджено їхні спільні риси. Здійснений аналіз поняття «технології блокчейну» як основи функціонування смарт-договорів. У статті також запропоновано визначення смарт-контракту на основі чинного законодавства. Виділяються особливості блокчейну, його переваги і водночас недоліки, які можуть виникати під час укладання \nсмарт-контрактів. Проаналізовано основну проблему цієї інноваційної технології, а саме обробка персональних даних \nкористувачів, які використовують смарт-контракти для договірних відносин. Здійснено аналіз українського законодавства щодо захисту персональних даних під час електронних операцій, визначено його прогалини, які формують думку про потребу нововведень для регулювання процесу використання блокчейну в Україні. Розглянуто практику Європейського Союзу щодо актуальності смарт-контрактів. Визначено основні принципи, на основі яких здійснюється обробка персональних даних у європейських країнах. Досліджено практику використання блокчейну в Україні. Детально проаналізовано законодавство стосовно захисту персональних даних, виділено статті, які суперечать існуванню та функціонуванню смарт-контрактів в Україні. У статті зроблено висновок щодо необхідності вдосконалення українського законодавства, пов’язаного із процесом створення смарт-контрактів та захистом персональних даних користувачів із метою їхньої безпеки і конфіденційності. Запропоновано ідеї для впровадження нових понять для правомірного використання інформаційних технологій на законодавчому рівні.