Blockchain and Private International Law (Brill, forthcoming) offers different perspectives regarding blockchain technology, a complex area with many technicalities, explained through concrete examples from the evolving legal practice. It presents the debate regarding the expected evolution of blockchain technology and its challenges with respect to the application of Private International Law (PIL). Without imposing categorical answers, it points to some pressing issues that must be addressed.

Introduction

The book opens with an introduction by Professors Andrea Bonomi and Matthias Lehmann, as well as Dr. Shaheeza Lalani.

The introduction explains the book’s structure in five parts, which provide the essentials for the reader to understand the operation and applications of distributed ledger technologies (DLTs) in practice. Part one introduces the breadth and fundamental elements of DLT, followed in part two with an exploration of conflict of laws arising with respect to blockchain. Parts three and four respectively discuss special assets and transactions, and blockchain dispute resolution. Finally, part five has more comparative law content by giving the reader an overview of national approaches to conflict-of-laws issues related to blockchain technologies.

Part I – Introduction to the breadth and fundamental elements of DLT

Deputy Secretary General of the Hague Conference on PIL (HCCH), Gérardine Goh Escolar provides the reader with a preface of PIL challenges arising from the application of DLTs, with some specific case examples. Several significant legal texts are presented and explained to express the importance of legal harmonization with respect to DLTs, and the developments of texts at the HCCH, the United Nations Commission on International Trade Law (UNCITRAL) and the International Institute for the Unification of Private Law (UNIDROIT). The main PIL issues regarding DLTs touch upon: terminology evolution and harmonization; the question of applicable law and choice of law; the determination of jurisdiction and choice of court; and, finally, the recognition and enforcement of foreign judicial decision related to DLTs. These issues are illustrated with concrete examples and cases, which are helpful for the reader to ascertain the DLTs framework and identify questions arising from it.

Tetsuo Morishita provides a complex technical analysis and description of DLTs which, to a layman, may be inaccessible. Concepts such as the functioning of blockchain as a peer-to-peer network, the use of algorithms and the application of cryptography, and its practical application on the Bitcoin network or as a smart contract device are explored with great nuance and depth.

As explained in Gérardine Goh Escolar’s contribution, the world of crypto assets can be tremendously large and involves a broad palette of PIL solutions to respond to legal issues.
In this regard, Bruno Mathis’s contribution examines a striking question: “Should Crypto-Asset Regulation be Technology-Neutral?”. Continuously evolving, DLTs are mostly not legally apprehended in their entirety. The technology-neutrality principle is based on three arguments: the future-proofing argument, which tries to prevent the risk of change and obsolescence; the impartiality argument, to prevent discrimination between economic actors regarding their technical choices; and the functional equivalence argument, developed by U.S. federal law after the emergence of Bitcoin and all legal questions raised with it. This straightforward analysis and its implications for legislation are compellingly explained for the reader.

Taking a different perspective, Professor David Sindres discusses the application of PIL rules to legal relationships developed within the “Bitcoin” blockchain. The world-renowned cryptocurrency launched in 2008 raised many questions regarding its regulation, and Professor Sindres questions whether Bitcoin, as all other DLTs, has the ability to be self-regulated and not, therefore, subject to State laws. His chapter also highlights some of the complications encountered when applying PIL to blockchain technology.

Complementing the first chapters, Christiane Wendehorst analyses another issue: proprietary rights in digital assets and conflict of laws. She explains the two types of solutions that have been developed to resolve difficulties in localizing crypto assets and the fact that these assets do not give rise to specific “rights”. The first answer proposed by the author focuses on the localization of the holder, transferor or security provider of the crypto assets, or its intermediary. It also refers to the law governing the agreement between the intermediary and the other party. The second solution focuses on the localization of crypto assets to the extent this can be done in accordance with a choice of law. Both developments are interesting and result in various consequences and questions, which are further discussed Part II of the book.

In the final chapter of part one,  Anne-Grace Kleczewski highlights the increasing phenomenon of pseudonymization of parties to crypto transactions, thereby making the application of traditional PIL rules difficult in practice. She presents concrete consequences of pseudonymity on European PIL, especially for the determination of the applicable law. The concept of pseudonymity within the blockchain has evolved and been reformed over time, leading to more centralization of DLTs. The consequences of pseudonymous parties, however, will depend on other factors, such as whether the choice of law will be implemented on the blockchain, bringing even more difficulties regarding the recognition and application of a judicial decision if the defendant's pseudonymity cannot be overridden. This chapter opens the readers’ eyes to the issues of pseudonymization of parties and elucidates how PIL rules should evolve to offer a better legal framework adapted to DLTs.

Part II – Reflection on blockchain assets and conflict of laws

Part II starts with Felix Krysa’s essay on taxonomy and characterization of crypto assets. His crypto assets categorization and qualification educates the reader on the variety of crypto assets and how they can be handled before jumping into a legal approach. Secondarily, Krysa explores how the different characterizations of crypto assets developed on DLTs, within multiple areas of PIL, are affected by European regulations, such as Rome I and Brussels I bis though they are mostly related to contract law issues. This is followed by a review of how crypto assets can be involved in contractual relations within the blockchain and the PIL questions which are raised in this process. Specifically, Krysa holistically analyses the problematic nature of the blockchain ecosystem derived from the relationships between blockchain participants, the content of their contracts and the particular circumstances of acquisition and transfer of assets. Subsequent chapters also express other characterizations of crypto assets, such as those involved in non-contractual relations and other legal questions arising from international property law, security law, insolvency and inheritance.

From a different outlook, Amy Held raises the question of the role of the lex situs, or lex loci rei sitae in legal matters relating to crypto assets and decentralized ledgers. To apply this traditional approach of PIL to intangible assets, the notion of intangible has been reinterpreted to a broader understanding of acceptable artificial situs, which should be the relevant connecting factor in cross-border issues involving property. The challenges presented by crypto assets and DLTs are immense, however, and this chapter offers the reader an opportunity to understand the impact of the lex situs rule on DLTs-related claims, presenting a variety of remedies to resolve jurisdictional questions.

Burcu Yüksel Ripley and Florian Heindler examine the law applicable to crypto assets and future policy choices. Like Krysa, they detail the current crypto-asset landscape and its characterization in order to define the scope of choice-of-law rules or instruments available to respond to legal issues. Recalling the notion of technological neutrality, exposed by Mathis, Yüksel Ripley and Heindler go further by exploring different legal aspects of crypto assets, faulty parallel and detailing policy choices which develop suitable connecting factors for the determination of the law applicable to crypto assets.

Emeric Prévost’s analysis continues to expand the theme of conflict of laws but brings a wholly different legal perspective, as he examines the question of digital representations of off-chain assets. The notion of tokenized economy and tokenization are developed to explain how “classical” assets can be encoded in order to permit the transfer of their related rights to a distributed ledger. In reference to the diverse areas  concerned by tokenization, Prévost refers to NFTs, real estate development and public law applications such as blockchain used for public registries. This analysis of the expanded applications of DLTs outside the initial electronic cash system is very compelling. The applicability of law in the tokenized world is a critical topic and Prévost deftly outlines the conflict-of-laws implications in his contribution.

To end this part of the book, Francesca C. Villata contributes a cryptocurrency-centered piece related to the conflict-of-laws question. After a technical definition of cryptocurrencies and their specificities, she extends her research to national legal frameworks that apply to them. This comparative perspective gives the reader a wide picture of recent developments. Finally, Villata details the PIL regime applicable to cryptocurrencies as payment instruments and as property, with an engaging chapter on available options to resolve conflict-of-laws issues.

Part III – Special assets and transactions

This is the largest part of the book. Caroline Kleiner’s chapter starts in continuity with Villata’s cryptocurrencies analysis with a targeted approach that focuses on the law applicable to Central Bank Digital Currencies (CBDCs). After a theoretical explanation of CBDCs, which clarifies their differences from other types of privately developed cryptocurrencies seen in Villata’s paper, she explores the reasons for which these digital forms of Central Bank money are created and their impact on national monetary sovereignty, which is often directly protected by the controlled issuance of CBDCs. Thereafter, she explains the laws applicable to money depending on the manner in which money is used in practice. This last analysis enables Kleiner to link the existing rules to the CBDCs and emphasize new elements and risks that must be considered for future legal development regarding this specific type of digital money.

Co-editor Matthias Lehmann makes a few contributions to this book as well. His shared work with Hannes Meyle is on stablecoins. The value of various stablecoins (such as currency-linked, real-world assets or cryptocurrencies-linked stablecoins) is linked to an underlying asset, which can be off-chain or a “native” asset (one that exclusively exists on the blockchain). The rights of the token-holder regarding the asset depend on the specific design of the stablecoin, as demonstrated by examples in this paper. After providing a compelling perspective on stablecoin regulation in the national laws of Switzerland, Liechtenstein and Germany, Lehmann and Meyle continue their discourse on PIL principles that would be applicable to stablecoin tokens and their transactions.

Tobias Lutzi’s contribution centers mainly on two aspects of the tort law applicable to crypto assets: firstly on interference occurring with crypto assets held by another participant on the blockchain, and secondly, on issues related to the crypto-assets network itself. Lutzi also discusses the scope of tort law application, which can be difficult to determine as contract law is closely connected to legal relationships occurring on a crypto network and may obfuscate the issue. The place of tort, or the lex loci delicti, is analysed by Lutzi, who highlights the importance of the place of the relevant act and the place of the damage within the PIL interpretation. The place with the closest connection with the damage, which is largely used in tort law, is also examined. Finally, he gives the reader specific tort rules and scrutinizes the importance of party autonomy for choice-of-law decisions against a complete submission to the lex cryptographia as unique regulator of the crypto-asset network.

Giovanni Maria Nori and Matteo Girolametti’s research is on international insolvency law and cryptocurrencies. After an introduction to cryptocurrencies in the EU regulatory framework, the co-authors discuss the Proposal for Regulation of the European Parliament and the Council on the “Markets in Crypto-assets, and amending Directive (EU) 2019/1937”, also called the MiCA proposal, which has since entered into force (see here for the Regulation). This analysis defines different kinds of tokens, qualified as utility tokens, investment tokens, asset-referenced tokens and electronic money tokens. Nevertheless, they conclude that the qualification of tokens in MiCA does not include virtual currency defined as a property, such as Bitcoin, which are therefore excluded from MiCA’s regulation. The chapter continues with a rich overview of actual case law on the qualification of digital assets and insolvency proceedings. The claims studied range from insolvency estate and property issues, in a case of insolvency of a cryptocurrency owner, to proprietary and contractual relationship disputes between exchanges and users. This practical presentation immerses the reader in the debate surrounding different legal approaches. Lastly, the chapter examines PIL issues regarding digital assets, specifically focusing on jurisdiction and applicable law in insolvency proceedings regarding cryptocurrencies.

Matthias Lehmann’s last contribution is a collaborative work with Matthias Haentjens, who co-chaired a working group at UNIDROIT in its Digital Assets and Private Law initiative since 2020. Their collective expertise is applied to an important theme of this collection of articles: “The Law Governing Secured Transactions in Digital Assets”. Firstly, this entails an examination of whether the law governing the requirements for the validity and effects of security rights in digital assets deserves a specific rule, or whether the same rule can be used as that which determines the law governing the relevant network. This reasoning will bring us to a distinction between the digital assets held by a crypto custodian and others. The question of control of the digital asset is central to the determination of the applicable law and the question of choice of law analyzed by the authors. Through its examination, the reader is provided with the core debates relevant to the law applicable to digital transactions.

Mehdi el Harrak addresses when new conflict-of-law rules are needed to regulate smart contracts. After a short characterization and a qualification of different types of smart contracts, he focuses on the two categories of smart contracts to be considered for the purposes of PIL: the ones used as legal contracts and the ones used as tools to execute legal agreements. This analysis denotes the most relevant connecting factors to determine the applicable law to smart contracts.

Koji Takahashi’s chapter continues on the blockchain transactions theme by analyzing the question of blockchain-based negotiable instruments, with a particular reference to bills of lading and investment securities. Blockchain-based instrumentalization of these elements is utilized despite the legal void within which  the technological evolution has occurred though this may undermine whether there can be the required confidence in this digitalized process. Takahashi, therefore, firstly tackles the emerging substantive rules within the two main subjects of the paper, bills of lading and investment securities, from a comparative law perspective. Then, he focuses on emerging choice-of-law rules and discusses them by establishing different issues whilst proposing various solutions. This chapter delineates the clear connections between the issues presented by technicalities in the DLT environment and legal systems or rules which respond to it.

Gregory Chartier concludes Part III with a contribution on legal considerations with respect to the use of DLTs in derivatives markets. Derivative transactions, specifically over-the-counter derivatives (OTC), are covered in the ISDA Master Agreement published by the International Swaps and Derivatives Association. Chartier’s chapter focuses on this agreement and its interplay with New York and English law as well as general PIL considerations. Two types of transactions on DLTs are analysed, uncollateralised and collateralised transactions. Although this is one of the chapters most based on technical data and specificities, the text remains accessible for the reader.

Part IV – Blockchain and dispute resolution

Florence Guillaume and Sven Riva’s contribution offers a very complete examination of Decentralized Autonomous Organizations (DAOs) as a tool for blockchain dispute resolution. Firstly, the notion of a DAO and its legal implications are detailed for unacquainted readers before the jurisdiction issue of DAOs is broadly analyzed, touching upon smart contracts, DAO governance, Maverick and regulated DAOs and contractual disputes involving DAOs. The chapter emphasizes the difficulties of enforcement of court decisions on the blockchain and proposes solutions in this regard. One such solution involves Alternative Dispute Resolution (ADR) in the form of arbitration, the description of which forms the basis of a separate chapter including an explanation of the implementation of Blockchain Dispute Resolution (BDR) and its enforceability. Finally, in chapters 6 and 7 of the contribution, clarity is given to issues derived from resolving disputes involving DAOs with the application of BDR and the efficiency and fairness of justice issues within the crypto economy.

Following this, Pietro Ortolani adds to the previous conclusions made on the theme of recognition and enforcement of blockchain-based dispute resolution and raises some new arguments, as explained in the University of Lausanne Legal Tech News published last year.

Part V – National approaches to conflict-of-laws issues on the blockchain

This part presents a comparative law perspective on some well-developed national regulations on DLTs.

Pascal Favrod-Coune and Kévin Belet open this part with their chapter on Swiss rules and the law applicable to tokens. Starting with technical information about tokens, they define their taxonomy and the regulatory framework of Swiss financial regulations and PIL. Thereafter, the co-authors focus on the Swiss International Private Law Act (PILA) and detail its evolution regarding the adoption of the DLT Act, which entered into force in the summer of 2021. Favrod-Coune and Belet’s overview of the Swiss law application to DLTs is distinctly accessible, with a coherent summary of the main subject.

Frank Emmert gives us a perspective of the United States (U.S.) PIL approach to blockchain, which differs significantly from the European mode of application. One challenge is predicated upon inter-state conflict-of-laws issues being treated with the same rules applying to international conflicts, though they are mostly state laws referring to case law rather than proper statutes. Financial service providers are subject to a variety of regulations, requirements, and oversight by a number of agencies and authorities in the U.S. Professor Emmert offers a compelling summary of the implementation of these federal and state regulations, agencies, and laws.

Felix M. Wilke analyses the German approach as a lex supervisionis registri and its subordinate connecting factors. Although Germany has not yet adopted specific legislation targeting blockchain technology, Wilke analyses the 2021 e-Securities Act designed by legislators with DLTs in mind and its application with other legal regulations such as the Securities Account Act, the Securities Prospectus Act, the Banking Act, the Supervision of Financial Services Act and the Capital Investment Code. A distinct emphasis is given to the importance of  §32 of the e-Securities Act and §17 of the Securities Account Act for blockchain transactions before a continuation of the analysis of other German PIL rules and their connecting factors, which offers a  holistic study of the German approach.

Francesco A. Schurr and Angelika Layr’s piece gives the reader a precise overview of  Lichtenstein’s PIL regulations of DLTs. Liechtenstein attempted to develop, in 2019 the Act on Tokens and TT Service Providers (TVTG) often called the “Blockchain Act”, a comprehensive and technologically neutral legal framework for transaction systems based on so-called “Trustworthy Technology (TT)”. After a short presentation of the Blockchain Act, the co-authors focus on Liechtenstein’s PIL relating to tokens specifically, as the predictability of law is not always guaranteed, a clear explanation of the importance of the choice of law is demonstrated and clearly explained.

Tetsuo Morishita’s second contribution in this book focuses on the Japanese PIL applicable to blockchain transactions, which focuses on three principal issues regarding DLTs. Firstly, Morishita examines the question of international jurisdiction of Japanese courts on blockchain's cross-border legal issues. Thereafter, he analyses the extent to which Japanese regulation should or could be applied in an extraterritorial way. Finally, he addresses the question of the applicable law, which is a main tenet of PIL. These three perspectives denote the framework of Japanese PIL and informs the reader in a broad sense as to its application to blockchain technology.

In sum, the book delineates the key issues and modalities derived from the functioning of the blockchain, the evolution of DLTs within different applications and the difficulties for the existing legal systems to regulate this technology. As demonstrated in many contributions of this book, blockchain technology has already evolved and will continue to adapt to new challenges as it seeks to offer new services to users. This quick evolution of DLTs has already reshaped legal frameworks over the last ten to fifteen years; therefore, we can presume that national laws and PIL will continue to evolve to respond to political and social demands. The authors raise significant questions though and, fortunately, supplement them with some answers and hypotheses that will help us to understand the role of PIL in blockchain-related legal conflicts. Central to PIL perspectives will always be the conflict-of-law question; consequently, this collaboration of authors offering their legal and technical expertise, provides invaluable theoretical and practical reflections for researchers on PIL’s role with respect to blockchain technology. The editors have done an incredible job of collecting an assortment of prescient articles, adding to the debate of DLTs’ implications for PIL, giving interested scholars an important tool for the future.