Remedies: In Principle
The original Bitcoin White Paper stressed the importance of transactions not being reversible. Irreversibility is a function of Bitcoin, deliberately designed to reduce transaction costs and improve efficiency.
Tatiana Cutts of the London School of Economics and Political Science (in 'Modern Money Had and Received', Oxford Journal of Legal Studies) sets out the nature of remedies in relation to “bank money” (contrasted with physical cash) which provides very useful analytical background to this topic in its widest sense.
Tendon and Ganado (in 'Legal Personality for Blockchains, DAOs and Smart Contracts') note that consumers could be protected under the mooted Maltese system by requiring the innovative technology arrangements to meet certain requirements (including, for example, insurance) before being registered as a legal person.
Remedies: Torts Relating to Digital Assets
As the law develops the courts may be asked to find remedies for perceived wrongs inflicted by or in connection with the systems. These may include duties of care that could address questions of implications of the systems for those established by contract.
Remedies: Equity, Unjust Enrichment
In a permissionless system, there is no contract framework to address unexpected outcomes. Lord Hodge (in a speech made at East China University of Political Science and Law in October 2018) sees a case for unjust enrichment to provide a remedy: “it is unlikely a court could interfere with the running and performance of self-operating code, the law of unjust enrichment is suggested as a possible remedy”. There may be other equitable remedies, or extensions of equitable remedies that could be applied to the question of these systems, for example, in the nature of trusts arising by operation of law, equitable tracing, rectification, fiduciary obligations or equitable compensation, for example. But, of course, not all jurisdictions recognise such remedies.
Professor Sarah Green suggests that the equitable remedy of rectification is likely to become more significant (Sarah Green, 'Smart contracts, interpretation and rectification' (2018) 2 Lloyd's Maritime and Commercial Law Quarterly 234-251).
Property Rights and Digital Assets
The status of digital assets generally and in the context of property laws is not settled but is coming to the top of the list of issues for policymakers.
Lord Hodge notes that it will be necessary to achieve a degree of international legal consensus on the nature of digital assets as property rights.
Cutts argues that recognition of digital assets would enable clearer analysis of remedies.
Bacon, Michels, Millard and Singh consider the legal classification of digital assets and suggest that until this question is settled by case law or legislation, it will cause consternation for lawyers in a wide range of cases (in 'Blockchain demystified: a technical and legal introduction to distributed and centralised ledgers' (2018) 25(1) Richmond Journal of Law & Technology).
In the recent decision in B2C2 v Quoine Pte Ltd [2019] SGHC (I) 03 (concerning the reversal of crypto currency trades), the parties appear to have been prepared to assume that both Bitcoin and Ethereum should be treated as property. Simon Horley LJ said that he considered that was the correct approach, considering the definition of a property right in National Provincial Bank v Ainsworth [1965] 1 AC 1175. However, given that this was not disputed by the parties, the judge did not need to consider the question further.
As published in Butterworths Journal of International Banking & Financial Law, May 2019.
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