Smart contract and legal contract

Smart contract and legal contract
(Picture from internet)

For the law, cryptocurrencies have always been a headache (even a nightmare). Since Ross Ulbricht launched the Silk Road online market in February 2011, Bitcoin and its peers have been undermining the authorities' ability to regulate the world and ensure compliance with regulations, regulations and laws. For some time, some people thought that the smart contract written and executed by the blockchain was very similar to the law itself, and even potentially conflicted with the global legal system and our jurisdiction over the legal system.

However, in a blog at the end of January, law professor Giesela Ruhl believes that smart contracts do not necessarily conflict with traditional contract law, and international law – especially the European Union's Rome law – can apply to it. This is a rare affirmation that blockchain-based contracts can be seamlessly integrated into the existing legal framework around the world without major reforms to the framework.

However, while other legal experts agree with Ruhl's overall analysis, some are still questioning that they are still in the early stages of the smart contract life cycle, and now they are still deciding whether they will cause problems in the world's existing legal framework. Fashion is early. More importantly, international law includes not only EU contract law, but even within the EU, there are still individual countries that explain and formulate different issues for the Rome law.

Smart contract is a legal legal contract

Ruhl's main claim in her blog is that smart contracts are bound by international law, which is a legal clause that determines the legality of all civil and commercial contracts in the EU. More specifically, she believes that the Rome-based statute has the ability to assign smart contracts to specific national legal systems, which is clearly useful in some cases if the operation of smart contracts is not immediately clear.

“It is usually possible to assign smart contracts to a specific legal system, because the Roman law does not rely on the location or place of performance to determine the applicable law, but rather depends on the connection factor, ie the choice of the party and the habitual residence, which is global. Both in the digital and digital society, they work well."

In most cases, other legal experts agree with the subject of her analysis. Stephan Meyer and Martin Eckert, blockchain legal experts at Zurich and Zug MME, told Cointelegraph that if the smart contract is actually a legal contract, then the international legal framework such as the Rome law clearly applies to them.

“Professor Ruhl correctly pointed out that the Roman law applies only to contractual obligations in the legal sense,” they wrote by e-mail. “The decisive question is therefore whether smart contracts can become legal contracts.”

They pointed out that, in general, "smart contracts are computer programs that are recorded on a distributed ledger system and perform predefined operations." Legally, three different types of smart contracts can be distinguished. Both are regulated by the Roman law (and possibly other examples of international law).

“One: the code of the smart contract directly represents the content and terms of the agreement; in this case, the smart contract is a direct manifestation of the (legal) contract. 2. The smart contract is designed to implement a bilateral or multilateral contract in whole or in part in the blockchain. An agreement made outside (written, verbal or behavioral).

In other words, if a legally binding contractual clause is written directly into it, or if an agreement is reached between the parties, it intends to maintain and enforce such contract, Smart contracts are legally enforceable. Otherwise, the smart contract “just does not comply with the contractual procedure in the legal sense”, which means that the legal framework such as the Roman law does not apply to this.

Still, Meyer and Eckert said that even if they are not legal contracts, "smart contracts are not in a legal vacuum." This means that although there is no legally explicit provision for mutual interaction, if a smart contract results in a violation of such law, the contract will still be subject to applicable domestic or international law (not necessarily contract law). For example, an informal family gathering is clearly not a contract, but if someone on the party attacks another guest, then under various laws, this would constitute a crime.

Choose your legal

Ruhl made another key point is that it is a smart contract for international law there is no problem, because the principle of party autonomy (the principle of international arbitration in use) to allow the parties (smart) contracts specify the countries in the applicable contract legal. She wrote in a blog:. "Embodied in Article 3, a Roman regulations, it [principle of party autonomy] allow the parties to submit their contract to the legislation they want - and do not need to have contact with the local law".

but There is controversy about how to adhere to this principle in terms of smart contracts. Ruhl said it is difficult to see how the choice of law is expressed in an algorithmic way ('if-this-then-that'). Therefore, she suggested that a supplemental document or agreement was needed to indicate the national laws applicable to any smart contract, although Meyer and Eckert did not fully agree with her.

"According to the Rome Law, the applicable law is determined by the principle of party autonomy. For most contracts, there is no specific form to define the terms. Therefore, [...] should be technically and legally The choice of legal terms is included in the smart contract. The parties can even reach and implement specific smart contract functions, and if executed, reply to the following message: 'This contract has been selected according to its jurisdiction'.]

Meyer and Eckert acknowledge that the law Choices can also be included in agreements outside of any given smart contract, so any form of such a contract does not seem to constitute an international law with too much difficulty. That is, other legal experts believe that the decentralized nature of blockchains and smart contracts may make it difficult to determine the specific jurisdiction of such contracts. This is the view of James Coveman, the legal director of the UK's professional services firm RPC, who warned that smart contracts may eventually require international agreements that are agreed upon in their specific laws.

“Smart contracts usually mean you have an inherent international arrangement, no obvious contract location, no one is anywhere, everything is done through the blockchain or the cloud, without any physical location. Smart contracts don’t necessarily need Any manual execution or signing, and without the necessary contractual subject matter, it simply confirms that a piece of data is transferred from one place to another and does not require a specific place to sign the contract.

Again, given the blockchain and the cryptocurrency pseudonym or Anonymous, one or more parties to a smart contract may not be able to identify. As Lisa Cheng, founder of smart contract service provider Vanbex, said, this requires some adjustments to the legal and smart contract platforms.

“It is always difficult to apply the law to an anonymous party; in general, people do not sign an anonymous agreement (via blockchain or any other method) and expect the law to protect them. However, smart contracts can be used in some way. To make law enforcement difficult or impossible - the solution is to have a trusted smart contract platform control these uses."

As Cheng suggests, anyone who wants to defend his rights will not sign a smart contract anonymously, and will probably not enter into a smart contract with an anonymous party (although this may not always be avoided). This is agreed by Meyer and Eckert, while still acknowledging that it may still be difficult to determine the relevant place of residence and jurisdiction of the parties involved.

"Given the decentralization and pseudo-anonymity nature of most blockchain systems, determining the location of the closest connection and feature performance can be very difficult. However, when the two parties disagree, the issues of the relevant laws are usually relevant. If a lawsuit is filed in court for a contract (the lawsuit against an unidentified person is usually meaningless), at least the person’s residence should be known.

International and national law

However, even if Meyer, Eckert and Ruhl have already determined this, the smart contract has been adopted by international law. Coverage (at least in part), James Kaufman still questioned whether international law such as the Roman law has the ability to resolve issues that need to be decided in various countries.

“I never really understood what people (especially scholars) mean when they refer to “international law.” This sounds good and looks good in movies, but in the real world, there are very few truly internationally agreed The law is mainly because even in trade groups (such as the European Union), national sovereignty and existing jurisprudence means that even if different countries adopt the same rule text, independent legal systems and judicial institutions usually interpret the rules in different ways."

So even smart contracts may not be a problem for Rome, but this is not to say that they will not have problems with UK, French or German contract law." This does not mean that smart contracts will not cause problems outside the EU, such as in the US, Asia or Africa.

“When we use the term 'international law', are we talking about the 'law' of each country? Are we talking about some kind of UN law?” Kaufman asked. “If a smart contract may be subject to EU law, then it may be, but EU law has a certain degree of ambiguity because it has laws that are directly applicable, and those laws must be mediated through national regimes.”

Kaufmann also A point was made that despite some preliminary classification attempts, we still did not fully understand what the smart contract is. Therefore, Ruhl concluded early in the life cycle of smart contracts that they would not pose a problem with international law and was immature. This view was also supported by Lisa Cheng: “The legal world has not fully absorbed technology. New realities, including smart contracts. Therefore, the answer to this question will ultimately depend on individual legal procedures in jurisdictions around the world.”

However, despite warnings that the issues surrounding smart contracts must be answered on a country-by-country basis, Cheng is still certain To put it bluntly, the world's legal system will answer these questions sooner or later: "In every important concept and practice, we all think that smart contracts are contracts. The world only takes a while to be familiar with cocktail napkins. Familiar with them."