In the Fourth Jonathan Hirst Commercial Law lecture at the beginning of November, entitled 'what is the point of commercial law?', Lord Leggatt explained his view that the point of laws which govern commercial transactions is to facilitate commerce. Laws can do that by guarding against the risk or fear that one party to a transaction will not carry out its side of the bargain or will otherwise fail to honour the agreement.
Trade, he said, ''takes place within a system of norms and expectations of honesty, reliability and fair dealing" and a robust legal system is one way of creating the requisite trust between counterparties. That said, the law is by no means the only way of creating that trust, and self-regulating markets can rely on non-legal concepts such as long term commercial relationships, the importance of maintaining reputation, and social ties and pressures to have the same effect. He concluded, that "trust-based exchange without the support of law is difficult to achieve and maintain in modern commerce."
That brings us to cryptoassets.
Applying Lord Leggatt's commentary, how do the Courts create an environment whereby the norms of honesty, reliability and fair dealing can be upheld when addressing transactions taking place in such an innovative environment, often on an international scale, all in a largely unregulated space?
The answer, at present, is that the traditional tools available to a commercial lawyer are fast being applied to this burgeoning field: whether that be enforcing straight-forward contractual claims, applying the principles of unjust enrichment, or aiding recovery through freezing injunctions and disclosure orders. These tools will ultimately be assisted by appropriate regulation, but while progress is being made on that front - for example, the Financial Stability Board recently published a report on the regulation, supervision and oversight of global stablecoin regulation; that will take some time.
The English Courts have been quick to adapt, but need to keep pace with the fast moving technology and, perhaps more importantly, the novel ways in which it is being applied in order to generate the requisite confidence in cryptoasset transactions. In doing so, English commercial law can continue to achieve what Lord Leggatt views as their point - to facilitate commerce.
Find out more
You can read more about a recent high-profile case of cryptoasset fraud here. To discuss the issues raised in more detail, please reach out to a member of our Disputes & Investigation team.