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English judge says ya boo sucks to codified legal systems.

Publication: 
Nigel Morris-Co...
chiefofficersnet

The headline may be intemperate but the point should not be easily overlooked. The English Common Law has something that codified legal systems, such as those across much of the EU, do not have - flexibility. That is an extraordinary strength that is being eroded in many areas of law. In this case, the point is to solve a problem without codification. Even so, it's odd that, in the specific instance, it's taken so long to come to a consensus - after all, common law is generally common sense. In this case, it's all about cryto-assets and smart contracts in respect of which the UK Jurisdiction Task Force has issued a statement. It's not binding on courts but it's highly persuasive, as Nigel Morris-Cotterill explains.

Lord Burnett of Maldon, the Lord Chief Justice of England and Wales says that a statement from the Lawtech Delivery Panel on the enforceability of SmartContracts demonstrates the ability of English Common Law to adapt to new concepts. That, on every reasonable analysis, is the primary strength of the Common Law as against codified systems. Maldon's statement should be required reading for legislators and regulators across the spectrum of industry because there is a drive towards ever greater prescription and codification.

The circumstances were the release of a statement by the LawTech Delivery Panel - available here: https://technation.io/about-us...

The strength of the Common Law is, indeed, its flexibility: The Common Law is a concept that many countries adopt but not many people understand. Essentially, taking a fix on a notional date in the 12th century it was said that it was presumed that the law today is the law as it was then. Although the concept has been modified since, the phrase "since time immemorial" now means, basically, "beyond living memory." But here's the clever bit: when a novel case comes before the Courts, the judge's decision creates new law but there is a legal fiction that he is not actually creating new law but stating what the law has been since time immemorial.

Because the Courts can decide on novel cases without the intervention of the legislature, it is not necessary for every new development to be covered by legislation.

The end result of that is an agile system of law (actually agile, not the current management fad use of the term which often demands systems which are the opposite of agile). It also means that novel issues can be legally resolved quickly, if court time can be made available. An example of how quickly the courts can move when it's needed was the recent case about prorogation of Parliament in which a case reached the Supreme Court within a matter of days of issue and was decided after only two days' argument. The Supreme Court made new law in that case.

This statement is not the result of a court case: in fact, it seeks to pre-empt such cases. Frankly, it all seems a bit otiose: if the English Common Law is as flexible as it really is, then a statement of this type might be seen as a fetter on the judges who may hear the first case on the subject of the enforceability of smart contracts and crypto-assets. But while that is true, it serves a valuable purpose: it deals with matters that, under the current approach of legislating for everything, it makes public the attitude of those judges before whom a case will eventually appear as it rises through the appeals process. In short, it tells potential litigants that there is no point in appealing a decision that the statement supports because on appeal, this is the view that the Judges tend towards. It will be a brave, if not foolhardy, litigant who will risk appearing before a Judge who has publicly supported this statement and to tell him that he's wrong. Therefore, while not binding on the Courts, it makes clear what the attitude of senior judges in higher fora will be if such a case were to come before them.

Is there a downside to this approach? Yes - Common Law depends on a system of precedent i.e. courts making decisions that later courts are expected to follow unless they find a reason to "distinguish" a current case from a past case. If this statement results in no cases coming before a Court to decide on the fundamental issues that are stated in the statement, there can be no precedent on those points. But the Judges involved are sufficiently senior to be able to apply a patch to that particular hole: they are able in their judgments to make statements that are called "obiter dictum" which means "on a parallel note." While obiter points are not strictly precedent, they are often given considerable weight in future cases. So it is open to a senior judge to make an obiter statement in an action on the facts relating to a smart contract, for example, that makes clear the view of the Court on the question of enforceability even if it is not a live issue in that case.

It is possible that the statement was prompted by a previous issue - that of electronic signatures. The English Parliament still can't make its mind up fully on that and contracts formed in e-mails although the courts have said that such contracts are fully enforceable and that the medium (i.e. email v paper) does not affect the legal position. That took several years before a definitive result was obtained during which time there was much debate in the legal press and much confusion in commerce and industry. That's what I mean about the common law being about common sense: it is obvious that the medium is not the message but some people decided they would argue the toss.

The debate over the legal status of what are now being termed "crypto-assets" (the term crypto-currencies remains in use for those things but there are things other than currencies that fall within the crypto-asset range) has been raging in a variety of fora for years. In my camp, which is a financial crime risk and compliance model, it really is simple: if it has a value and it can be exchanged or traded, it's an asset for money laundering etc. purposes and those using it should be regulated as such. Also, if it's a medium of exchange, it should be regulated as such as should all activities that are regulated in relation to fiat currency). Incredibly, that is still being debated in many countries however there is an increasing acceptance of my position. The other camp is that all new tech must be regulated as tech.

Phooey: that's a narrow minded, restrictive view. It's the view of those who think that the law must be defined to the smallest point. But, ironically, those are often the people who are arguing for new developments to be excluded from the current law. Take Uber as an example: in country after country it turned up, said that its tech differentiated its services from e.g. taxis and private hire cars. But the function was no different from a telephone booking service for cars driven by independent (i.e. not employed) "private hire" drivers. Even so, it has taken several years for laws to be passed in relation to services such as Uber where, common sense would say, the position is already covered.

In codified law countries, they have to adopt one of two polarised positions: everything is illegal unless specifically allowed or everything is legal unless specifically banned and the equivalent in relation to civil law i.e. "lawful" and "unlawful" rather then "legal" and "illegal." This leads to a very specific problem. In relation to money laundering, for example, several years ago, when Kenya was struggling to get a law through its Parliament, the sticking point was whether proceeds of corruption should be included in the list of predicate offences. The fact is that as, at its heart, a Common Law country Kenya should not have been even thinking about producing a list of predicate offences. It should have adopted the flexible approach of saying "all offences for which a person may be jailed, upon conviction, for a term of more than x [usually 12] months." Sold as a compromise, those trying to promote a comprehensive Bill surrendered and removed corruption from the list.

However, the constant drive towards codification comes from, in particular, EU countries which have had codified legal systems, based in Roman law, for a couple of thousand years. But the USA and Australia, both notionally Common Law countries have also been pushing towards codification and it has been their influence that, in relation to counter-money laundering laws, has led to the adoption of a lists approach in much of self-east Asia although Malaysia, in particular, quickly noticed its error and produced a hybrid system. Even so, it's not as good as what is often called an "all crimes" approach.

The dangers of codification have spread into many forms of regulation, even in Common Law countries.

The statement, then, overcomes many of the problems of codified systems while preserving the important aspects of the Common Law:

"In May 2019, the UK Jurisdiction Taskforce issued its Consultation Paper (at Appendix 1) on the status of crypto-assets, distributed ledger technology and smart contracts in English private law. The paper noted that the well-developed common law system of England and Wales was able to adapt to deal with such fast-changing technologies and was well positioned to provide a sound legal foundation for their development...The great advantage of the English common law system is its inherent flexibility. Rather than depending on the often cumbersome, time-consuming and inflexible process of legislative intervention, judges are able to apply and adapt by analogy existing principles to new situations as they arise. In commerce, the law is there to support and fulfil reasonable expectations."

So, there. as the headline says - ya, boo, sucks to codified legal systems. Read it to learn just how much. https://35z8e83m1ih83drye280o9...

What, then, does it say?

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