A research project has been launched by the UK Law Commission that will seek to bring legal certainty to the use of smart contracts based on the blockchain.

The agency has already started to carry out research on the topic and a more formalised project is in the works to start this summer. The Law Commission stated that the work is required to “ensure that the law is sufficiently certain and flexible to apply in a global, digital context, and to highlight any topics which lack clarity or certainty.”

The Commission believes that smart contracts have the potential to increase trust and certainty as well as the ability to increase transaction efficiency in the business world. At the moment, the current legal framework should adapt to the developing technology in order to make the UK an attractive jurisdiction for enterprises, the commission argued.

The working paper states:

“It is important to ensure that English courts and law remain a competitive choice for business. Therefore, there is a compelling case for a Law Commission scoping study to review the current English legal framework as it applies to smart contracts.”

This latest development follows a report which was published by the Commission at the end of 2017 which highlighted 14 areas for possible reform, including the use of smart contracts. At the time, the commission said that the process of researching the various topics was expected to take between 9 and 18 months.

“There are questions about how this feature (smart contract) would interact with contract law concepts such as implied terms or contracts which are held to have been void from the outset. There are also questions about data protection law.”

Last year, a top judge for England and Wales, John Thomas noted that British law would need to be significantly updated in order to cater for blockchain-based smart contracts.


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