Wednesday 4 November 2015

Difficulty of localisation in choice of law in other areas

In my earlier post, I have noted the difficulty of localising cryptocurrency for the purpose of choice of law for proprietary issues.
The difficulty of localisation in choice of law is not unique to blockchain. The high seas and outer space, too, present the same difficulty since no nation exercise sovereignty over such space. The difficulty does not solely concern proprietary issues but could also arise with respect to other issues such as tort, for which the applicable choice-of-law rules may specify the law of the place of the harmful event. I will discuss three approaches to get around this difficulty below.
One approach is to come up with an alternative connecting factor. Thus, where a ship is involved, its flag may be used as a connecting factor. In a case involving a collision of ships on the high seas, the Sendai District Court in its judgment on 19 March 2009 cumulatively applied the laws of the flag states to a tort claim for damages. It is not, however, easy to conceive of similar connecting factors for cryptocurrencies since their units are stateless by nature.
Another approach is to apply the law of the country with which the issue in question is most closely connected. This approach was taken by the Tokyo High Court in its judgment on 28 February 2013 when it determined the law applicable to a tort claim for damages caused by dangerous cargoes on board a ship while the ship was in transit on the high seas. Since a major (if not the most important) goal of choice of law rules is to ascertain the law of the country with which the issue is most closely connected, this approach pursues this goal directly without relying on other more concrete concept as a connecting factor. This approach could also be taken to determine the proprietary issues of cryptocurrency. But a drawback of this approach is the lack of certainty and predictability since all the relevant factors must be taken into account on a case-by-case basis.
A third approach is to unify the substantive rules of national legal systems. The unification of substantive rules, to the extent it is achieved, dispenses with the need for choice of law. The Cape Town Convention and its Space Protocol would offer many lessons when we consider proprietary issues of cryptocurrencies.

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