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English legal system must keep pace with crypto and AI, say lawyers

A top technology adviser to the judiciary has proposed the creation of a new institute of legal innovation that would spot gaps in the law thrown up by technologies such as crypto assets and AI, and promote the greater use of English law in global business contracts.

Professor Richard Susskind, technology adviser to the Lord Chief Justice and a director of think-tank LegalUK, believes an independent body, along the lines of the Alan Turing Institute, which pioneers research into artificial intelligence, would highlight areas of law that had failed to keep up with innovation.

The institute would also promote English law to global companies as the law of choice to govern transactions in new areas such as blockchain.

The proposal comes as some lawyers are concerned that England’s legal sector, which employs 365,000 people, could lose out to rival centres such as Singapore and Dubai if its legislation fails to keep pace with advancing tech.

“The business world will be changed by technology and a challenge will be providing a platform for the supporting law for these new technologies,” Susskind said.

He added that a research centre would fit with the government’s UK innovation strategy, published in July, which is aimed at making the country an international leader in areas such as AI.

This week Tech London Advocates, a network of tech leaders and entrepreneurs, published authoritative guidance on the legal and regulatory aspects of Blockchain and how it affects litigation.

At a launch event Sir Geoffrey Vos, master of the rolls, said that he believed every lawyer would require familiarity with the blockchain, “smart” legal contracts, agreements where contractual obligations are laid down in computer code rather than in words, and cryptoassets.

Legal services contributed £29.6bn to the UK economy in 2019, according to CityUK, a professional body.

English law is already widely used in global company transactions for the financial, maritime and insurance sectors, including €661.5tn of derivatives trading contracts in 2018, according to a report by consultants Oxera.

The UK’s reputation as a leading centre for global litigation is a strong driver for companies to opt for legal contracts that are governed by English law.

But the Social Market Foundation think-tank concluded in a recent report that “there is growing evidence that English law, is in some areas, in desperate need of modernisation” and is “falling short”.

Richard Hyde, the report’s author, said: “If businesses can’t use English law to draw up contracts for cryptocurrencies, AI or green investment they’ll use another system.”

He added that a failure to modernise could drive international businesses towards other countries where there is more certainty about how the law treats technologies such as AI.

However, work is already under way in England and Wales to help legal services adapt.

The Lawtech delivery panel, an industry group chaired by Vos, issued a groundbreaking statement in 2019 which clarified that crypto assets could be treated in law like any other kind of physical property.

Meanwhile, the Law Commission, an independent body that looks at whether legislation needs to be overhauled, is examining the law concerning self-driving vehicles, for example.

Separately, it recently concluded that the adoption of smart contracts would not require changes to the legal code.

The commission is also looking at digital cross-border assets, including cryptocurrencies, where it is working alongside other jurisdictions, such as the US-based Uniform Law Commission. It is due to report in 2022.

The Ministry of Justice said the government kept legislation under review and worked with the Law Commission on specific reform projects “to ensure English law is fit for the future”.

But there are still many areas of legal uncertainty. These include whether existing intellectual property, tax and data protection laws apply to information stored on the blockchain, or whether existing limited liability laws covering companies also apply to blockchain-related projects.

In some cross-border crypto asset disputes it is not clear which country has jurisdiction to decide on lawsuits, given the intangible assets are held virtually.

In AI technology, legal issues include lack of clarity over liability for damage, and whether existing anti-discrimination laws are sufficient to deal with bias caused by algorithmic decision-making.

Courts in England and Wales are already brushing up against disputes involving technologies where the law is unclear.

In September, London’s Court of Appeal ruled that an AI system nicknamed Dabus could not be classed as an inventor on UK patent applications under English law because it was not a person. The decision contrasted with rulings on the same case from other courts including Australia’s Federal Court.

Recently, a High Court lawsuit believed to be one of the first cases concerning the sale of non-fungible tokens, digital tokens that represent assets such as artwork, was filed by Liverpool art collector Amir Soleymani against NFT marketplace Nifty Gateway over the terms of a recent auction.

Miles Geffin, legal director at law firm Mishcon de Reya, said there had been a “long period of legislative inertia” in recent years and that more clarity was needed over gaps in the law relating to new technologies.

Progress is “currently quite piecemeal,” he said, adding that “a coherent vision” and a “plan for delivery and political will” were needed.

Professor Ryan Abbott of the University of Surrey, who is lodging legal challenges worldwide involving Dabus, believes more progress is needed to address legal challenges thrown up by disruptive technologies.

“Industry strategy, policy and law all have to be co-ordinated. There is more work to be done, but there are some promising things and I think the UK is on the right track.”

Susskind said: “An institute would be a natural focal point for imaginative thinking about new areas of technology.”

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